Luxembourg To Offer Compartments For Unregulated Alternative Investment Funds Formed As SCS Or SCSp

On 30 July 2026, the Luxembourg Government submitted a bill proposing amendments to the Luxembourg law of 12 July 2013 on alternative investment fund managers (the AIFM Law).

The stated objective is to further expand Luxembourg's investment fund structuring toolbox by allowing alternative investment funds to establish legally segregated compartments without having to establish a vehicle under a Luxembourg product regime such as a RAIF, a SIF or a SICAR.

What Is Changing?

Under the current framework, an alternative investment fund may adopt a multi-compartment (umbrella) structure only if it falls within one of Luxembourg's dedicated investment fund product regimes, such as those applicable to SIFs, RAIFs, SICARs or Part II UCIs.

The bill introduces a new provision into the AIFM Law enabling common limited partnerships (sociétés en commandite simple - SCS) and special limited partnerships (sociétés en commandite spéciale - SCSp), that qualify as alternative investment funds to operate as umbrella structures with multiple compartments.

The proposed framework is largely inspired by the compartment regimes already available under the existing Luxembourg product laws.

Under the new regime, an alternative investment fund would be permitted to establish multiple compartments provided that:

• It is subject to the AIFM Law and, in particular, appoints an authorised alternative investment fund manager established either in Luxembourg or in another EU Member State, meaning that sub-threshold AIFMs would not benefit from this regime.
• It expressly provides for the compartment structure in its constitutional documents; and
• It defines the investment policy applicable to each compartment before investors commit capital; information disclosure rules set by article 21 of the AIFM Law will remain required.

The proposed regime notably provides for:

• a statutory segregation of assets and liabilities between compartments, mirroring the compartment segregation rules currently applicable to RAIFs, SIFs and SICARs; being noted that this segregation applies by default and may be disapplied by the constitutive documents.
• the ability to liquidate a compartment independently without affecting the continued existence of other compartments and the umbrella fund itself;
• the possibility to make cross-investments between compartments, subject to safeguards consisting in preventing the target compartment to in turn invest in the compartment that has made the investment and in suspending the voting rights attached to the interests in the target compartment; and
• the possibility of preparing a separate annual report for each compartment, provided that aggregated accounts are also prepared at the umbrella fund level.
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Why This Reform Enhances Luxembourg's Attractiveness

1. Greater Structural Flexibility

Fund sponsors will be able to benefit from the advantages of umbrella structures without having to opt for a Luxembourg product regime whose specific requirements may not be aligned with the needs of a particular investment strategy or investor base. In particular, no issuing document is required.

2. A More Competitive Alternative to Foreign Structures

The bill expressly targets situations where fund managers seek to establish Luxembourg-based vehicles operating alongside foreign structures, notably U.S. Series LLCs, whose internal organisation relies on a compartment-like segregation mechanism.

Luxembourg will therefore be able to offer a domestic vehicle that more closely replicates the features of such international structures without imposing the additional requirements associated with Luxembourg product laws.

3. Cost Reduction and Operational Efficiency

Using a single SCS or SCSp with multiple compartments makes it possible to accommodate several investment strategies, investor groups or investment vintages within the same legal entity while maintaining full segregation of assets and liabilities between compartments.

This approach may significantly reduce structuring, administration and maintenance costs compared with establishing multiple stand-alone vehicles.

Key Takeaway

This reform could prove highly significant for the Luxembourg funds industry. It will enable sponsors to replicate more closely certain foreign fund structures, particularly U.S. Series LLCs, without having to adopt a RAIF, SIF or SICAR status and the associated requirements that accompany those regimes, such as specific offering documentation, regulatory constraints, investment rules or governance requirements.

By introducing umbrella structures for SCSs and SCSps qualifying as alternative investment funds, Luxembourg would substantially enhance the flexibility of its fund structuring platform and further strengthen its position as a leading jurisdiction for international alternative investment funds.

As a final note, it may be worth noting that, while the Bill does not contain any tax-related measures, the interaction between the proposed compartmentalisation framework and Luxembourg tax rules applicable to transparent entities may require further clarification. In particular, guidance on whether an umbrella SCS/SCSp should continue to be analysed as a single entity for Luxembourg tax purposes or whether individual compartments could require a separate analysis would be welcome. This may be relevant when applying rules that rely on the identification of the relevant entity or collective investment vehicle, such as the Luxembourg reverse hybrid entity rules and the collective investment vehicle carve-out (for further details, see our previous newsletter). Such clarifications would further enhance tax certainty for fund sponsors and investors.

The Bill remains subject to the legislative process, including the opinion of the Conseil d’État.