New CSSF Circular and Concepts Compilation for funds other than UCITS/MMF

CSSF Circular 25/901 consolidates rules for Luxembourg investment funds

The CSSF’s new circular and technical document, applicable from 19 December 2025, update the regulatory framework and provide insight into the CSSF’s interpretation of key fund concepts.

On 19 December 2025, the Commission de Surveillance du Secteur Financier (CSSF) issued a comprehensive new circular that significantly consolidates the regulatory framework for Luxembourg specialised investment funds (SIFs), investment companies in risk capital (SICARs) and Part II undertakings for collective investment (Part II UCIs) (Circular).

The Circular is supplemented by a technical document setting out key concepts used in the investment funds sector, excluding UCITS and money market funds (MMFs), and explaining how the CSSF interprets them (Concepts Compilation).

1. CSSF circular 25/901

1.1 Key regulatory changes

The Circular represents a major consolidation effort, repealing multiple existing circulars, including Circulars CSSF 02/80, 07/309 and 06/241 as well as chapters G and I of Circular IML 91/75, and disapplying Circular CSSF 08/356 and chapter H of Circular IML 91/75 from Part II UCIs. This streamlined approach eliminates regulatory fragmentation while preserving fundamental principles and flexibility that guide the fund industry.

1.2 Scope of Circular

The Circular applies to all SIFs, SICARs and Part II UCIs and to sub-funds of all three fund types, thus excluding unregulated funds. However, it does not apply to funds or sub-funds qualifying as ELTIFs, MMFs, EuVECAs or EuSEFs, or where a SIF, SICAR, Part II UCI or sub-fund is closed to redemption and authorised before the date of application of the Circular.

The Circular does not impact the rules adopted by funds or sub-funds approved by the CSSF prior to the date of entry into force of the Circular.

1.3 Enhanced investment limit flexibility

The Circular introduces a more nuanced approach to risk spreading requirements.

Funds marketed to retail investors: maximum 25% investment in a single entity or person, with specific exceptions e.g. for (i) vehicles through which the fund or sub-fund makes its investments (but applying to investments made through such vehicles), (ii) OECD country government securities, and (iii) properly diversified collective investment undertakings or other investment vehicles.

Funds marketed to sophisticated/professional investors: increased limits up to 50% for most investments and 70% for infrastructure investments.

Derogation mechanism: the CSSF may grant additional derogations based on duly substantiated justifications.

1.4 Risk capital requirements for SICARs clarified

Whilst the CSSF’s administrative practice remains unchanged, the Circular provides detailed guidance on what constitute eligible risk capital investments, emphasising two key criteria:

• Development objective: active steps to create value at the target entity level, beyond passive holding.
• High risk profile: specific risks beyond mere market risk, assessed through factors such as entity maturity, development projects and planned holding periods.

Exit strategy is another criterion taken into consideration when assessing the investment in risk capital. The SICAR must also have a certain degree of control (supervision) to ensure that the amounts invested will ultimately be used to develop the target entity. This can be done via active involvement of the SICAR in the management of target entities, through representation on their management bodies or otherwise.

1.5 Borrowing and leverage rules

New borrowing limits have been established:

• Retail investor funds: maximum 70% of assets or subscription commitments.
• Professional investor funds: no prescribed limits, allowing self-determination of maximum borrowing levels.

1.6 Transparency and disclosure requirements

The Circular mandates comprehensive disclosure in sales documents, including (i) detailed investment policies and risk descriptions, (ii) clear subscription terms, as well as clear redemption rights and procedures and (iii) specific warnings for private equity investments marketed to retail investors.

2. CSSF concepts COMPILATION

The Concepts Compilation covers investment fund concepts and reflects general legal and regulatory developments, administrative practice and evolutions in the fund industry. It explains various investment strategies, methods and models used in alternative investment funds (AIFs) that are not UCITS or MMFs.

Purpose: clarify common investment fund concepts and explain how the CSSF interprets them to promote better understanding and facilitate exchanges with the regulator. However, the document is not exhaustive.

Scope: investment funds other than UCITS and MMFs, particularly those using innovative investment strategies, methods and subscription/redemption models.

Key focus areas: (i)private investments (investments made outside regulated markets), (ii) investment strategies with low correlation to public markets, (iii) complex investment structures with relatively long investment horizons, and (iv) sophisticated selection criteria and specific risk profiles.

Target audience: investment fund managers, investors and market participants seeking clarity on the CSSF’s interpretation of alternative investment fund concepts.

3. What This Means for You

For fund managers: as indicated above, the Circular does not call into question the rules adopted by funds or sub-funds approved by the CSSF prior to the date of entry into force. However, documentation for new regulated funds must comply with the new consolidated requirements. The Circular provides greater flexibility for sophisticated investor funds while maintaining appropriate protections for retail investors.

Timeline: the Circular enters into force from 19 December 2025. Existing funds will be allowed to operate under current arrangements, but new authorisations must comply with the updated framework.