AIFMD II: a practical guide to implementation in Luxembourg

Insight

13 March 2026

Luxembourg - Legal Services

AIFMD II introduces significant new requirements for alternative investment funds managers operating in or from Luxembourg, with new rules affecting liquidity management, loan origination strategies, delegation arrangements, governance expectations and reporting timelines.

This guide explains the key changes, what they mean in practice, and sets out the actions AIFMs should take now to ensure timely compliance.

When does AIFMD II come into force?

Luxembourg has transposed EU directive 2024/927, amending both the UCITS directive (UCITS VI) and the AIFM directive (AIFMD II), through Bill No 8628. This law was adopted by the Luxembourg Parliament and published in Memorial A of the Official Journal of the Grand Duchy on 9 March 2026, introducing amendments to the UCI Law and the AIFM Law (the Amended AIFM Law).

The Amended AIFM Law will enter into force on 16 April 2026 in compliance with EU directive 2024/927, with certain enhanced reporting obligations deferred until 16 April 2027.

Key takeaways

AIFMD II marks a significant evolution of the EU regulatory framework for alternative investment funds, with direct operational consequences for AIFMs. Luxembourg's Amended AIFM Law implements these changes, with three principal areas of reform.

Liquidity management tools (LMTs): mandatory implementation, for open-ended AIFs, of at least two LMTs selected from a harmonised EU list, to better align redemption terms with fund liquidity and protect investors in stressed market conditions.
Loan origination: introduction of a comprehensive regulatory regime for loan-originating AIFs (LO-AIFs), including concentration limits, leverage caps and risk retention requirements, with stricter rules for open-ended [1] structures.
Delegation: codification of stricter rules on delegation arrangements, together with enhanced oversight over delegates and accountability obligations for AIFMs.

In addition, AIFMD II introduces several further reforms, including, but not limited to, the following:

extension of permitted activities an AIFM may conduct
enhanced requirements relating to the appointment and responsibilities of conducting officers
requirement in relation to the composition of management body
clarification of depositary regime in respect of central securities depository (CSD) settled financial instruments
introduction of EU passport for EU depositaries (not activated for Luxembourg-domiciled AIFs)
restrictions on third countries, in particular high-risk countries, regarding safekeeping and marketing in the EU

What fund managers and AIFMs need to do to ensure compliance with AIFMD II?

Loan origination

Item	The AIFMD II check	Why it matters	Action required
Loan-originating AIF classification	Does the AIF’s main investment strategy consist of originating loans or do originated loans represent at least 50% of the AIF's net asset value (notional value basis)	The LO-AIF status entails stricter regulatory requirements on concentration risk, leverage, transparency and operational process. Early status assessment is essential to avoid misclassification and non-compliance.	Assess and document the AIF’s investment strategy and the notional value of originated loans to confirm LO-AIF status. Update fund documentation as needed.
Concentration limits	Does the LO-AIF comply with the 20% concentration limit for loans originated to any single borrower that qualifies as a financial undertaking [2], a UCITS, or an AIF?	To prevent excessive risk concentration, regulatory caps require diversification of the credit portfolio towards eligible borrowers.	Review the loan portfolio and the concentration limits in the AIF's articles of association and/or offering document. Update fund documentation as needed. To be noted that the concentration limits do not apply to small and medium-sized enterprises (SMEs).
Leverage limits	Does the offering document clearly disclose the applicable leverage cap for the LO-AIF?	The AIF shall now comply with stricter regulatory boundaries: 175% for open-ended or 300% for closed-ended structures.	Review the leverage limits in the AIF's articles of association and / or offering document. Update fund documentation as needed.
Shareholder loans exemption	Does the AIF exclusively grant loans to portfolio companies in which it holds an equity participation (i.e., shareholders' loans [3])?	If shareholder loans remain below 150% of the AIF's capital, certain regulatory requirements would not apply to the AIF.	Audit your loan-to-capital ratio. If shareholders' loans are up to 150% of AIF's capital, the leverage limits set out above do not apply.
Open-ended LO-AIFs	Are redemption policy, investment strategy and liquidity management policy compatible?	AIFM are expected to demonstrate adequacy to competent authority.	Review fund documentation to update redemption policy (frequency, lock-up, notice and settlement period) in accordance with Article 3 of the loan origination RTS published by the European Securities and Markets Authority (ESMA) on 21 October 2025, revise liquidity rules (cash flow, LMTs), and adjust investment policy (target credit quality of loans, diversification, liquidity pocket). Conduct at least yearly stress test in accordance with Article 5 LO-RTS and ensure ongoing monitoring of liquidity management system.
Risk retention	Does the AIFM ensure that the AIF retains at least 5% of the notional value of each originated loan on an ongoing basis	"Originate-to-distribute" models are prohibited. The 5% "skin in the game" becomes mandatory.	Liaise with the AIFM to ensure the 5% risk retention is maintained throughout the life of each loan. AIFM's internal valuation and risk policies to be updated as needed [4].

Liquidity management tools (LMTs)

Item	The AIFMD II check	Why it matters	Action required
Selection	Has the AIFM selected and implemented at least two LMTs from the harmonised list? (Excluding reliance solely on (i) suspension of subscriptions, repurchases and redemptions, and (ii) side pockets, or (iii) the combination of swing pricing and dual pricing).	Robust LMTs are critical to align redemption rights with fund liquidity, protecting investors.	Select with the AIFM at least two LMTs from the harmonised list to ensure the AIF can handle stressed market conditions. The selection of the LMTs should be made in compliance with the LMT RTS and the LMT Guidelines.
Disclosure	Are the selected LMTs, their mechanics, and potential impact on investors adequately described in the offering document?	Disclosure to LMTs via the offering document is fundamental for the interest of the AIFs investors, as it may impact their redemption rights.	Formalise the mechanics and impacts of each selected LMT to ensure clear investors' disclosures within the AIF's documentation.
Activation / Deactivation Policy	Has the AIFM established documented procedures governing the activation, deactivation, and calibration of LMTs, including notification protocols to the competent authority?	The AIFM has a regulatory requirement to establish such policy and procedure and a reporting / communication requirement towards the AIFM's home member state national competent authority (NCA) (i.e., the Commission de Surveillance du Secteur Financier in Luxembourg – (CSSF).	Standardise LMT monitoring within the AIFM’s policy and procedure framework to ensure seamless activation and deactivation of LMTs, in compliance with the LMT RTS and the LMT Guidelines.

Oversight of third parties

Item	The AIFMD II check	Why it matters	Action required
Distributors	Does the AIFM maintain ongoing oversight and due diligence over any delegate or sub-delegate?	Does the AIFM maintain ongoing oversight and due diligence over any delegate or sub-delegate?	Review of the AIFs / AIFMs of their own delegation framework. Assessment of the compliance of the agreements in place.
Conflict of interest	Has the AIFM implemented policies and procedures to identify, prevent, manage, and disclose conflicts of interest, particularly those arising from delegation arrangements or third-party initiators relationships?	Additional regulatory scrutiny has been placed to protect investor interests and AIFM integrity.	Review and / or update conflict management policies by ensuring that clear documentation and appropriate disclosures are made (e.g., third-party initiators).

Operational and governance

Item	The AIFMD II check	Why it matters	Action required
Substance	Does the AIFM satisfy the minimum substance requirements, including sufficient senior management, staff resources, and operational infrastructure in its home Member State?	Local effective management and good corporate governance.	Verify that the AIFM maintains sufficient EU-based staff supported by appropriate documentation and reporting to the CSSF – no requirement to be included in the AIF's legal or contractual documentation.
Cost transparency to investors	Does the offering document provide a comprehensive itemised list of all fees, charges, and expenses (whether direct or indirect) that may be allocated to or borne by the AIF?	Shift in the disclosure obligations for the AIFMs from "maximum fees" to broader disclosure obligations (i.e., list of fees, charges and expenses that are borne by the AIFM in connection with the operation of the AIF and that are to be directly or indirectly allocated to the AIF).	Itemise every direct and indirect fee, charge, and expense category within the offering document to move beyond "maximum fee" ceilings and provide investors with a comprehensive view of the AIF's total cost burden.
Custody (CSDs)	Does the depositary appropriately distinguish between issuer CSDs and investor CSDs for purposes of its delegation and liability framework?	The distinction between Issuer and Investor CSDs impacts the delegation liability of depositaries.	Review depositary agreements to ensure that the depositary is responsible for the oversight of the investor CSDs.

Does the Amended AIFM Law include gold-plating?

Luxembourg's Amended AIFM Law does not include any gold plating. However, two options provided for in AIFMD II have been clarified in the Amended AIFM Law.

First, loan originating AIFs are not allowed to grant loans to Luxembourg consumers within the meaning of Article L. 010-1 of the Luxembourg consumer act (code de la consommation). This restriction, however, does not preclude Luxembourg AIFMs acting on behalf of LO-AIFs from granting consumer loans in other jurisdictions where such activity is permitted under local law.
As pre-empted, Luxembourg is not eligible to activate the depositary EU passport in relation to Luxembourg-domiciled AIFs in accordance with the new Article 21 (5a) AIFMD, as the aggregate amount of assets entrusted for safe-keeping on behalf of EU AIFs authorised or registered in Luxembourg and managed by an EU AIFM exceeds EUR 50 billion. However, the bill provides for the possibility, where the relevant home jurisdiction of an EU AIF opts to activate the depositary EU passport:

for Luxembourg AIFMs to manage such EU AIF having a depositary established in a different member state
Luxembourg depositaries to be entrusted with the safekeeping on behalf of such EU AIFs under the EU passport

What are the next steps?

With the April 16 2026 deadline fast approaching, the Amended AIFM Law is no longer a future consideration – it is a current operational priority for all Luxembourg-based AIFMs and fund managers. Beyond regulatory compliance, this development is an opportunity to further strengthen governance, transparency and the operational resilience of AIFs.

We recommend that fund managers and their boards, in consultation with the appointed AIFM, undertake a thorough review of internal policies, legal and contractual documentation as soon as possible to identify and implement any necessary adjustments.

As these amendments may require careful consideration and tailored adjustments, our Investment Funds team in Luxembourg and Ireland can provide pragmatic assistance throughout the implementation of AIFMD II, helping you navigate these new regulatory requirements.

Footnotes

[1] In accordance with the Commission Delegated Regulation (EU) No 694/2014 of 17 December 2013 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards determining types of alternative investment fund managers (the CDR 2013), the distinguishing factor in determining whether an AIFM is managing AIFs of the open-ended or closed-ended type should be the fact that an open-ended AIF repurchases or redeems its shares or units with its investors, at the request of any of its shareholders or unitholders, prior to the commencement of its liquidation phase or wind-down and does so according to the procedures and frequency set out in its rules or instruments of incorporation, prospectus or offering documents.

[2] Any of the following entities: (a) a credit institution, a financial institution or an ancillary banking services undertaking within the meaning of Article 4(1), (5) and (21) of Directive 2006/48/EC respectively; (b) an insurance undertaking, or a reinsurance undertaking or an insurance holding company within the meaning of Article 212(1)(f); (c) an investment firm or a financial institution within the meaning of Article 4(1)(1) of Directive 2004/39/EC; or (d) a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC.

[3] A shareholder loan is a loan which is granted by an AIF to an undertaking in which it holds directly or indirectly at least 5% of the capital or voting rights, and which cannot be sold to third parties independently of the capital instruments held by the AIF in the same undertaking.

[4] This rule applies similarly to securitisation vehicles in the scope of the Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation.

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This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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