Luxembourg moves forward with transposition of AIFMD II and UCITS VI: what you need to know

On 3 October 2025, the Luxembourg government submitted draft bill n°8628 (the "Bill") to Parliament, aiming to transpose Directive (EU) 2024/927 amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity management, supervisory reporting, the provision depositary and custody services and loan origination by alternative investment funds ("AIFMD II") into national law. The Bill amends the Luxembourg law of 17 December 2010 on undertakings for collective investment (the "UCI Law") and the Luxembourg law of 12 July 2013 on alternative investment fund managers (the "AIFM Law"), therefore impacting both alternative investment funds ("AIFs") and undertakings for collective investment in transferable securities ("UCITS").

Below, we highlight some key features and practical implications of this legislative development, with a focus on what it means for fund managers, service providers, and investors in Luxembourg.

Direct transposition with a Luxembourg touch

Luxembourg’s approach is to implement the new EU rules faithfully, avoiding unnecessary “gold-plating.” However, the Bill introduces a number of flexibilities and clarifications, tailored to the needs of the local market and designed to maintain Luxembourg's leading position in the European and global fund industry.

Key changes

Liquidity management tools (Relevant for open-ended AIFs and UCITS)

Both open-ended AIFs and UCITS will benefit from a harmonised set of liquidity management tools (LMTs). For each open-ended AIF and UCITS they manage, AIFMs and UCITS management companies respectively will be required to select at least two LMTs (according to ESMA at least one quantitative LMT and at least one qualitative LMT) from a harmonised list (with the exception of money market funds, which may select only one) which includes redemption gates, the extension of notice periods, swing pricing, anti-dilution levies, and side pockets, whereas the possibility to suspend subscriptions and redemptions is mandatory. Importantly, the Bill allows funds to use additional liquidity management tools beyond those listed, provided they are properly disclosed and managed. This flexibility is designed to help funds to respond more effectively to market stress and protect investors' interests. The new regime also introduces clear governance, disclosure, and notification requirements.

Clear stance on consumer loans (Relevant for AIFs only)

Luxembourg has chosen to exercise the option under AIFMD II to prohibit AIFs from granting loans to consumers within its territory. The Bill also prohibits AIFs from servicing such loans. This means that, while Luxembourg AIFs cannot offer loans to consumers in Luxembourg, they may still engage in such activities in other EU countries where permitted by local law. This approach balances investor protection with the ability for Luxembourg AIFs to remain active in cross-border lending markets.

The commentaries of the Bill clarify that a Luxembourg AIFM, regardless of the above prohibition, may, however, manage an AIF which has acquired on the secondary market a portfolio including consumer loans – after a third party has granted such loan – and to service such consumer loans.

Exemption from auditor’s report for contributions in kind (Relevant for UCITS only)

A notable innovation (not included in AIFMD II) is the exemption to the Luxembourg corporate law (which does not apply to common funds (fonds commun de placement) -FCP) of the requirement to obtain a report by an approved statutory auditor for the issuance of shares against contributions in kind by UCITS set up as investment companies with variable capital (SICAVs) provided that shareholders are treated fairly.

This change is particularly relevant for UCITS ETFs.

Broader scope for authorised activities (Relevant for UCITS management companies and AIFMs)

The Bill expands the range of authorised activities that AIFMs and UCITS management companies can provide. Managers will also be able to offer, as ancillary services, reception and transmission of orders (new for UCITS management company), benchmark administration (relevant for both AIFMs and UCITS management companies) and credit servicing (relevant for AIFMs).

Importantly and with a view of increasing their competitivity and efficiency, AIFMs and UCITS management companies may provide their services not only to the funds they manage, but also to a wide array of third parties, including (without being exhaustive) other funds, intermediate vehicles, co-investment vehicles or carried interest vehicles (whether linked to funds managed by the AIFM or UCITS management company, to funds initiated, managed or advised by another entity belonging to the same group as the UCITS management company or AIFM, or other legal structures such as pension funds, securitisation vehicles or insurance vehicles).

Substance requirements (Relevant for UCITS management companies and AIFMs)

The Bill introduces minimum substance requirements for UCITS management companies and AIFMs, notably the obligation for at least two full-time individuals, domiciled in the EU, to be responsible for the management of the entity. This reflects existing Luxembourg practice and should not require significant changes for most market participants.

Depositary services (Relevant for AIFs only): no change for Luxembourg funds

While AIFMD II allows Member States with limited depositary options to permit the appointment of a depositary in another EU member state, Luxembourg has not taken up this option, given its robust and competitive depositary market. However, Luxembourg-based depositaries may still be appointed by AIFs domiciled in other EU Member States that have made use of this flexibility.

Next steps

The Bill is currently under review in Parliament and may be amended during the legislative process. Once adopted, the new law is expected to take effect on 16 April 2026, with certain reporting requirements applying from 16 April 2027.

For more details, feel free to contact our Luxembourg Investment team.