An interesting development for Luxembourg fund structuring

The proposed amendment to the law of 12 July 2013 on alternative investment fund managers, which would allow certain unregulated Luxembourg SCS and SCSp AIFs to use legally segregated compartments, is a relatively targeted change — but a useful one.

It will not replace the RAIF. For many flagship institutional funds, the RAIF will remain the obvious and well-recognised choice.

But for sponsors already operating within a full-scope AIFMD framework, the reform creates more flexibility to decide when a Luxembourg product regime is actually necessary.

In particular, it could be a compelling option for dedicated funds, feeders, co-investment vehicles and bespoke platform structures where statutory compartment segregation is desirable, but the additional RAIF framework is not.

A good example of Luxembourg continuing to refine its fund toolbox in a pragmatic way.