A proposed new structuring option for alternative investment fund managers

On 30 July 2026, the Luxembourg government submitted Bill of Law No. 8814 to the Luxembourg Chamber of Deputies. The bill proposes a targeted amendment to the Luxembourg Law of 12 July 2013 on alternative investment fund managers (the “AIFM Law”).

Its principal purpose is to permit certain Luxembourg alternative investment funds (“AIFs”) established as a société en commandite simple (“SCS”) or a société en commandite spéciale (“SCSp”), and which are not subject to a Luxembourg fund product law, to operate with statutory compartments.

The proposal is narrow in scope. It would not create a new Luxembourg fund product, nor would it remove the AIF from the regulatory framework applicable under the AIFM Law. Rather, it would make a statutory compartment regime available to an eligible partnership-based AIF where that AIF is managed by an authorised Luxembourg alternative investment fund manager (“AIFM”) or an AIFM authorised in another Member State of the European Union.

If enacted substantially in its current form, the reform may provide sponsors with an additional option where statutory segregation between strategies, investor groups or investment programmes is desired, but the use of a Investment company in risk capital (“SICAR”), specialised investment fund (“SIF”), reserved alternative investment fund (“RAIF”) or Part II undertaking for collective investment is not otherwise considered appropriate.

Key takeaways

• Eligible Luxembourg SCS and SCSp AIFs outside the SICAR, SIF, RAIF and Part II UCI regimes could establish one or more statutory compartments. • The regime would be available only where the AIF is managed by an authorised Luxembourg AIFM or an authorised EU AIFM. A structure managed only by a registered or sub-threshold AIFM, or by a non-EU AIFM, would not fall within the proposed wording. • The constitutional documents would need expressly to provide for the creation and operation of compartments and the investment policy of each compartment would need to be disclosed in accordance with Article 21 of the AIFM Law. • As a default rule, the rights of investors and creditors relating to a compartment would be limited to the assets of that compartment. The constitutional documents could, however, provide otherwise. • Each compartment could be liquidated separately. The AIF itself would enter liquidation only upon liquidation of the final compartment, subject to the detailed terms of the proposed regime. • One compartment could invest in another compartment of the same AIF, subject to safeguards intended to prevent circularity and duplicate voting influence. • A separate annual report may be prepared for each compartment, provided that it also includes aggregated information covering all compartments of the AIF. • The proposal would supplement, rather than replace, the existing Luxembourg fund product regimes.

1. What would Bill 8814 change?

Luxembourg fund product laws already permit umbrella structures with legally segregated compartments. This is the case, subject to the conditions of the relevant statute, for SICARs, SIFs, RAIFs and undertakings for collective investment governed by Part II of the Law of 17 December 2010.

By contrast, an SCS or SCSp qualifying as an AIF but established solely under the Luxembourg Law of 10 August 1915 on commercial companies and the AIFM Law does not currently benefit from an equivalent general statutory compartment regime. Contractual allocation mechanisms may be included in the limited partnership agreement and related documentation, but those mechanisms do not provide the same statutory framework as a product-law umbrella structure.

Bill 8814 proposes to introduce a new Article 28bis into the AIFM Law. Under that provision, an eligible Luxembourg SCS or SCSp AIF could comprise one or more compartments, each corresponding to a distinct part of the AIF’s assets.

The proposal would therefore extend the availability of statutory compartmentalisation to a defined category of partnership-based AIFs outside the Luxembourg product laws. It would not alter the compartment regimes already available under those laws. Where an SCS or SCSp is constituted as a SICAR, SIF, RAIF or Part II UCI, the specific rules of that product regime would continue to apply.

These structures are sometimes described as “unregulated” funds. That description should be used cautiously. Although the AIF would not be authorised or directly supervised by the CSSF as a Luxembourg fund product, it would remain an AIF managed within the AIFMD framework by an authorised AIFM.

2. Eligibility and regulatory perimeter

Eligible legal forms and AIF status

The proposed regime would apply only to a Luxembourg AIF established as an SCS or SCSp. It would not, on its current wording, be available to other Luxembourg corporate or contractual forms outside the product laws.

The vehicle would also need to qualify as an AIF. The availability of compartments would therefore not determine whether the structure is an AIF; that assessment would continue to depend on the factual and legal characteristics of the undertaking under the AIFM Law.

Authorised AIFM requirement

The AIF must be managed by either an AIFM authorised in Luxembourg or an AIFM authorised in another EU Member State. This condition is material. A Luxembourg SCS or SCSp managed only by a registered or sub-threshold AIFM would not appear to qualify. Nor would the proposed regime, on its present wording, extend to an AIF managed by a non-EU AIFM.

Where the AIFM is established in another EU Member State, its management of the Luxembourg AIF would need to be considered within the applicable AIFMD passporting and notification framework. The precise notifications and operational arrangements would depend on the manner in which the AIFM provides its services and should be confirmed for the relevant structure.

3. How would the compartment regime operate?

Constitutional documentation and investor disclosure

The use of compartments and the rules governing them would need to be expressly provided for in the AIF’s constitutional documents. For an SCS or SCSp, the limited partnership agreement should therefore establish a sufficiently complete framework for the creation, operation and termination of compartments.

The investment policy of each compartment would also need to be described in accordance with the investor disclosure requirements under Article 21 of the AIFM Law. The explanatory materials do not appear to prescribe a particular form of offering document, thereby preserving flexibility as to how the required information is provided to investors before they invest.

In practice, the limited partnership agreement and associated disclosure documentation should address, among other matters, the creation and closure of compartments; allocation of assets, liabilities, income, gains, losses and expenses; compartment-specific investment policies; investor admission and default provisions; management fees and carried interest; governance and voting arrangements; conflicts of interest; borrowing, guarantees and security; valuation and accounting; cross-compartment transactions; and the consequences of a compartment liquidation.

Segregation of assets and liabilities

Under the proposed default rule, the rights of investors and creditors relating to a particular compartment would be limited to the assets of that compartment. The assets of one compartment would respond exclusively for the liabilities arising in connection with that compartment. Each compartment would also be treated as a separate entity in relations between investors.

The proposed legislation would, however, permit the constitutional documents to provide otherwise. This point is significant. The existence and extent of ring-fencing should therefore be reviewed against the actual wording of the limited partnership agreement and the contractual arrangements entered into by the AIF.

Financing documents, guarantees, security packages, service-provider agreements, indemnities, cost-allocation provisions and any contractual cross-compartment support should be drafted consistently with the intended segregation. Creditors and counterparties should not be assumed to have recourse limited to a compartment unless the statutory and contractual position supports that conclusion.

Separate liquidation

Each compartment could be liquidated separately without, by itself, causing the liquidation of the other compartments. The AIF would enter liquidation only upon liquidation of the final compartment.

Separate liquidation may be useful where different compartments pursue different investment strategies or are expected to have different lifecycles. It does not, however, eliminate the need to analyse shared arrangements, contingent liabilities, common service-provider costs and any cross-compartment exposures.

Investments between compartments

Subject to the constitutional documents, one compartment could subscribe for, acquire or hold partnership interests issued by one or more other compartments of the same AIF.

The proposed safeguards would prohibit the target compartment from investing back into the investing compartment. Voting rights attached to interests held by the investing compartment would also be suspended for so long as those interests remain held. Appropriate accounting and periodic reporting treatment would be required.

Such arrangements may be relevant for feeder, aggregation or internal allocation structures. They would nevertheless require careful consideration of valuation, conflicts of interest, transparency, liquidity, leverage, concentration and tax consequences. The AIFM should also assess whether the arrangement is consistent with the investment policies and interests of the investors in each affected compartment.

Annual reporting

The proposed regime would permit a separate annual report to be prepared for each compartment, provided that each such report also includes aggregated information covering all compartments of the AIF.

Where this option is used, accounting records, valuation processes, audit arrangements, expense allocation and data supplied by portfolio managers and administrators would need to support compartment-level reporting as well as the required aggregate information.

4. Potential use cases

Parallel fund structures

The explanatory materials identify parallel fund structures as a principal potential use case. Luxembourg SCS and SCSp vehicles are often established alongside funds or vehicles in other jurisdictions. Where the non-Luxembourg structure operates through separate series or segregated portfolios, a Luxembourg parallel vehicle may need to reproduce that economic allocation.

Subject to the final legislation and the terms of the relevant documents, the proposed regime could permit that allocation to be reflected through compartments of a Luxembourg SCS or SCSp AIF without placing the partnership under a Luxembourg fund product law.

Multi-strategy and multi-vintage platforms

A sponsor could consider a single partnership platform with compartments pursuing different strategies, asset classes, geographic mandates or investment vintages. Separate compartments could, for example, be established for buyout and growth investments, private credit strategies, infrastructure sectors, real estate strategies or successive investment programmes.

The extent to which compartments may have distinct investors, economic terms and governance arrangements would depend on the constitutional and offering documentation and on the ability of the AIFM and service providers to manage the resulting conflicts and operational complexity.

Co-investment and dedicated investment arrangements

Statutory compartments may also provide a suitable structure for co-investment opportunities or dedicated investment arrangements for particular investors or investor groups. This may be attractive where a sponsor wishes to maintain a single partnership platform while benefiting from statutory segregation between compartments.

Whether a compartment structure is preferable to establishing separate vehicles should be assessed on a case-by-case basis.

5. Multi-compartment SCS or SCSp AIF, or RAIF?

Bill 8814 should not be viewed as replacing the RAIF or making that regime unnecessary. The proposed Article 28bis structure and a RAIF would remain legally distinct options with different product-law, investor-eligibility and operational features.

A RAIF is a Luxembourg fund product governed by the Law of 23 July 2016, as amended from time to time. It must be reserved to well-informed investors, managed by an authorised external AIFM and operated with the service providers and documentation prescribed by the RAIF Law. A RAIF formed under the regime corresponding to a SIF is subject to the applicable risk-spreading framework. A RAIF investing exclusively in risk capital may instead elect the SICAR-type regime, under which the statutory risk-spreading principle does not apply.

An SCS or SCSp using the proposed Article 28bis regime would not be subject to the RAIF Law and would not thereby acquire the characteristics or market designation of a RAIF. It may be relevant where statutory compartments are required but the sponsor does not consider a Luxembourg product-law framework appropriate for the particular project.

The analysis should not be reduced to which structure is “more flexible”. Relevant considerations include the intended investor base; investor eligibility restrictions; investment policy and diversification requirements; the status and location of the AIFM; marketing strategy; depositary and other service-provider requirements; disclosure and annual reporting; financing arrangements; tax analysis; operational capability; market familiarity; and whether separate vehicles would provide preferable risk isolation.

6. Structuring considerations

Although the proposed statutory framework is concise, its effective use would depend heavily on the quality and consistency of the legal and operational arrangements.

The limited partnership agreement should define the compartment architecture with sufficient precision and should be aligned with the offering documentation, subscription materials and investor side arrangements. Particular care should be taken where investor rights, management fees, carried interest, excuse and exclusion rights, defaults, key-person provisions, transfers or advisory committee arrangements differ between compartments.

The AIFM’s policies and procedures should address the allocation of investment opportunities, expenses and liabilities; conflicts between compartments; valuation of cross-compartment holdings; risk and liquidity management; leverage and borrowing; and reporting. The governance process for creating a new compartment or materially changing an existing compartment should also be clear.

Depositary, administration, registrar and transfer agency, audit and other service-provider arrangements should be reviewed to ensure that each provider can identify and administer assets, liabilities and investor records at the required level. The use of common bank accounts, omnibus arrangements or shared contracts should be assessed against the intended segregation.

Financing arrangements deserve particular scrutiny. A lender may seek recourse, guarantees or security extending beyond one compartment. Any such arrangement should be considered against the constitutional documents, investor disclosures and the interests of investors in the affected compartments.

Finally, any required AIFMD notifications, regulatory filings or service-provider updates should be identified before implementation. The availability, form and timing of any filing or notification should be confirmed in light of the final legislation and the relevant facts; no regulatory outcome should be assumed.

7. Conclusion

Bill 8814 proposes a focused extension of Luxembourg’s statutory compartment framework. Its defining feature is not the creation of a new investment fund product, but the possibility for an eligible Luxembourg SCS or SCSp AIF managed by an authorised Luxembourg or EU AIFM to operate with statutory compartments outside the existing Luxembourg product laws.

If enacted substantially in its current form, the regime may be relevant for parallel funds, multi-strategy or multi-vintage platforms, co-investment programmes and other structures requiring segregation within a single partnership framework.

The structure would not be appropriate in every case. The statutory segregation is subject to the constitutional documents, and a multi-compartment platform may create governance, operational, financing and conflict issues that would not arise or would arise differently with separate standalone vehicles.

The practical value of the proposal will therefore depend on careful structuring, precise constitutional and disclosure drafting, alignment across service-provider and financing arrangements, and continued compliance with the AIFMD framework applicable to the authorised AIFM and the AIF.

Status note: This article discusses Bill of Law No. 8814 as submitted on 30 July 2026. The legislative text may be amended during the parliamentary process. The analysis should therefore be revisited once the final legislation and any related guidance are available.