🇱🇺Luxembourg Funds: UCITS, SIF and RAIF

Ask where a European private equity or private debt fund should live and the default answer is Luxembourg. The real questions come next: SIF or RAIF, what role is left for UCITS, and who actually supervises what. Here is how the three wrappers relate, what they cost in tax, and where the regime is heading.

Concept

Luxembourg is Europe's largest fund domicile and the world's second after the United States. Alternative strategies — private equity, private debt, real estate, hedge — use two main wrappers: the SIF and the RAIF. Both are tax-efficient and open only to well-informed investors, but they differ in the supervision regime and in speed to market.

To see where the SIF and RAIF sit, a bit of history helps. Luxembourg built its fund industry back in the late 1980s: the law of 1988, the first in Europe to transpose the UCITS directive, made the country the shopfront for cross-border distribution of retail funds. By the end of 2025 assets in Luxembourg-domiciled funds had passed 8 trillion euros — about €8.3 trillion on industry (ALFI) figures, and by public data roughly €8.6 trillion in early 2026, of which some €3.1 trillion sits in alternative funds. That makes Luxembourg the world's second fund domicile after the US, with distribution to more than 80 countries. Alternative strategies — private equity, private debt, real estate, infrastructure — long lived inside Part II UCIs or the narrow SICAR. The SIF appeared to give them a flexible yet regulated wrapper for qualified investors; the RAIF, nine years later, removed the prior regulatory approval step from that wrapper.

UCITS: The Retail Half

Before turning to the alternative SIF and RAIF, the retail half of the industry deserves its name-check. UCITS (Undertakings for Collective Investment in Transferable Securities) is Luxembourg's flagship export: the UCITS directive gives a fund a passport for sale across the entire EU and recognition far beyond it — in Switzerland, Hong Kong, Singapore, Latin America. UCITS account for the bulk of the roughly €6.2 trillion in net assets of regulated Luxembourg funds (end of 2025).

In exchange for retail access, UCITS live under strict rules: only liquid and diversified assets (equities, bonds, money market instruments, derivatives within set limits), concentration limits, daily valuation and the investor's right to redeem at any time. The fund is run by a licensed management company (ManCo), and the depositary must be located in Luxembourg. For illiquid and alternative strategies — real estate, private equity, private debt — UCITS does not work: that is exactly what the SIF and RAIF below are for.

SIF: The Regulated Fund (2007)

The Specialised Investment Fund arrived with the law of 13 February 2007. It is a regulated product: launch requires prior authorisation by the CSSF, and the regulator then exercises ongoing prudential supervision. The SIF is flexible as to assets and strategies, can be an umbrella with multiple compartments and can take different legal forms (SICAV/SICAF, partnerships). It is chosen by investors for whom directly regulated status matters.

Legally a SIF is an umbrella construction: a common fund (FCP, without legal personality) or an investment company (SICAV/SICAF in the form of an SA, SCA, Sàrl, SCS or the transparent SCSp), inside which compartments are opened, each with its own strategy and segregated assets and liabilities. Access is restricted to well-informed investors: institutional and professional investors, or those who confirm the status in writing and invest at least €100,000 (the threshold was lowered from €125,000 by the law of 21 July 2023) or pass a competence assessment with a bank, investment firm or management company. Net assets must reach €1,250,000 (at least 5% paid up at subscription) — previously within 12 months, and since that same 2023 law within 24 months. A risk diversification requirement applies (CSSF circular 07/309 — as a general rule no more than 30% in a single asset), a Luxembourg depositary and administrator are mandatory, and the fund itself receives prior CSSF approval and remains under its supervision.

RAIF: The Semi-Regulated Fund (2016)

The Reserved Alternative Investment Fund was introduced by the law of 23 July 2016 to speed up time to market. A RAIF does not go through CSSF product authorisation and is not under its direct supervision; instead it must appoint a licensed external AIFM subject to the law of 12 July 2013 on alternative investment fund managers. Supervision is indirect, through that AIFM. Launch takes weeks, against months for a regulated SIF.

A RAIF is set up by notarial deed, entered in the Registre de Commerce et des Sociétés and in a separate electronic RAIF list — that list is the public point of control instead of a CSSF file. The key condition: the fund must appoint a fully licensed external AIFM; the lighter sub-threshold regime for small managers is not available here — supervision arrives precisely through the AIFM. In its range of legal forms, the circle of well-informed investors and the €1,250,000 threshold over 24 months, the RAIF mirrors the SIF, including the umbrella structure with compartments. The main win is time-to-market: launch does not wait for product approval and is measured in weeks. Conversion works both ways: a SIF can be re-papered into a RAIF and vice versa. The base act is the law of 23 July 2016.

Tax Regime

SIFs and RAIFs are exempt from corporate income tax, municipal business tax and net wealth tax. In their place sits the subscription tax (taxe d'abonnement) — 0.01% of net asset value per year, paid quarterly. If a RAIF invests exclusively in risk capital, it can elect the SICAR regime and then pays no subscription tax. Distributions to non-residents are, as a rule, free of withholding tax.

Tax neutrality at fund level does not settle the questions at deal level. Treaty access for SICAVs and RAIFs is uneven and depends on whether the source country recognises the specific form as a treaty resident — which is why holding SPVs beneath the fund are structured separately, with an eye on substance and ATAD. The fund and its companies are subject to automatic exchange under CRS and FATCA, beneficial ownership disclosure in the RBE register, and cross-border arrangements are reportable under DAC6. The EU initiative against shell companies (Unshell / ATAD 3) was formally taken off the agenda by ECOFIN in June 2025: a single substance regime could not be agreed, and part of its logic is expected to migrate into the coming DAC6 reform. It never targeted the funds themselves — the concern was intermediate holdings — and that risk is now off the table.

AIFM and the EU Passport

Both the SIF and the RAIF operate in the logic of the AIFMD. The appointed AIFM obtains the right to market interests to professional investors across the EU under a single passport, which makes Luxembourg a convenient platform for raising institutional capital. The subscriber base is limited to the same well-informed investors as for the SIF (entry threshold €100,000); retail distribution is closed to these wrappers, and the route to retail runs through the separate ELTIF regime.

The AIFMD threshold logic is simple: a manager below €100 million with leverage, or below €500 million without leverage and with a five-year lock-up, can settle for light registration; anything above requires full authorisation. A fully licensed AIFM receives the European passport: the right to offer interests to professional investors across the EU under a notification procedure. Without the passport there remains the NPPR — national private placement regimes, cleared country by country. The AIFM may delegate portfolio management, including outside Luxembourg, while retaining responsibility and control; many sponsors simply rent this function from a third-party ManCo.

Regulation and Supervision

The split of supervision is the main practical difference between the regimes. A SIF is approved by and directly answerable to the CSSF, plus controlled by its AIFM; a RAIF has no product approval, and the whole regulatory loop closes on the licensed AIFM and the depositary. A Luxembourg depositary is mandatory in both cases: it safekeeps assets, monitors cash flows and performs oversight duties under the AIFMD. Then come the independent auditor (réviseur d'entreprises agréé) and the annual report, Annex IV regulatory reporting, AML/KYC procedures under the 2004 law and CSSF regulation 12-02, and beneficial ownership data in the RBE register. For an investor this means the RAIF's 'unregulated' label concerns only the launch stage — not ongoing compliance.

Where They Are Used

The RAIF has become the default instrument for new private equity and private debt funds that value speed and do not need directly supervised CSSF status — by public estimates it now accounts for more than half of Luxembourg's PE funds. The SIF is chosen where regulated status is a matter of principle for investors or for the mandate. A fund is often structured as an SCSp (special limited partnership) under a RAIF umbrella, replicating the familiar Anglo-Saxon limited partnership model.

In practice almost any alternative strategy goes into these wrappers: buyout and venture funds, private debt, real estate and infrastructure, fund-of-funds, sometimes digital assets. A frequent configuration is master-feeder or a parallel fund: a Luxembourg RAIF for European investors runs alongside a Cayman ELP for US ones, investing into a common portfolio. The umbrella structure lets a single fund entity run several compartments for different strategies and investor classes, and an ELTIF label can be added on top of a RAIF to obtain a semi-public product with retail access. Family offices use compartments to pool capital of different family branches under single management and reporting.

Evolution

The regime keeps being fine-tuned. The law of 21 July 2023 modernised the product laws: it extended the ramp-up period for minimum assets from 12 to 24 months and lowered the well-informed investor threshold from €125,000 to €100,000. ELTIF 2.0 (EU Regulation 2023/606), applicable since 10 January 2024, opened the retail route for alternative funds and sits naturally on the RAIF as the base wrapper — by public data, at the end of 2025 some 150 of the 272 ELTIFs established in the EU were domiciled in Luxembourg. The biggest change of the latest cycle is AIFMD II (Directive (EU) 2024/927): Luxembourg transposed it by the law of 3 March 2026 — among the first in the EU and ahead of the general deadline of 16 April 2026. The directive introduces the first pan-European regime for loan-originating funds: such a fund must as a rule be closed-ended, retain 5% of the notional of loans it originates and sells, and observe leverage limits, with the originate-to-distribute strategy banned; requirements on liquidity management tools (fixed by CSSF circular 25/901), delegation and reporting are added. On the tax side, the carried interest reform adopted in January 2026 (applicable from the 2026 tax year) sharpened Luxembourg's pitch to fund managers themselves. Against this backdrop the RAIF keeps taking share from the SIF on speed to market, and the main competitor for the same demand remains the Irish ICAV.

This material is of an expert, informational nature and does not constitute individual tax or legal advice.

Sources

• AIFMD II (Directive (EU) 2024/927)
• law of 23 July 2016
• CSSF
• Taxe d'abonnement (
• Guichet