CSSF Circular 25/901: Consolidated supervisory framework for SIFs, SICARs and Part II UCIs in Luxembourg

Executive Summary (at a glance)

• Scope:
  Applies to SIFs, SICARs and Part II UCIs (and their compartments), excluding ELTIFs, MMFs, EuVECAs, EuSEFs and certain closed-ended funds or compartments authorised before 19 December 2025.
• Continuity:
  The circular does not call into question the rules adopted by the funds or compartments authorised by the CSSF before 19 December 2025.
• Application going forward:
  New funds, new compartments and material changes are expected to comply with Circular 25/901 as from 19 December 2025 (except for those outside the scope of the Circular).

• Risk-spreading:
  Investment limits and borrowing parameters are calibrated to the target investor base, with higher flexibility for funds reserved to well-informed or professional investors.

• SICARs:
  The criteria for qualifying investments as risk capital are consolidated and clarified.

• Single reference text:
  Circular 25/901 replaces several prior CSSF and IML circulars, consolidating the supervisory framework.

1. Introduction / Background

On 19 December 2025, the CSSF published (i) Circular CSSF 25/901 (the “Circular”) and (ii) a separate Concepts Compilation (the “Concepts Compilation”).

The Circular consolidates and modernises the CSSF’s supervisory expectations applicable to specialised investment funds (SIFs), investment companies in risk capital (SICARs) and undertakings for collective investment subject to Part II of the Law of 17 December 2010 (Part II UCIs), including their compartments. It brings together, in a single reference text, a number of existing supervisory positions previously set out in separate CSSF and IML circulars.

2. Scope and continuity

 Circular 25/901 applies to SIFs, SICARs and Part II UCIs and their compartments, with exclusions notably for funds/compartments that qualify as ELTIFs, MMFs, EuVECAs or EuSEFs, as well as certain closed-ended funds/compartments authorised before 19 December 2025.

Importantly, the Circular expressly states that it does not call into question the rules already adopted by funds or compartments authorised by the CSSF prior to its entry into force, which may continue to apply those rules.

Below you can see a recap table:

In scope of Circular 25/901	Out of scope of Circular 25/901
·       SIFs (and their compartments) ; ·       SICARs (and their compartments) ; and ·       Part II UCIs (and their compartments)	·       UCITS ; ·       Money Market Funds (MMFs) ; ·       ELTIFs ; ·       EuVECA ; ·       EuSEF ·       Closed-ended funds or compartments that were authorised before 19 December 2025.
NOTE ·       While the Circular does not apply to closed-ended funds or compartments authorised before 19 December 2025, it also confirms, more broadly, that the rules already adopted by funds or compartments authorised prior to its entry into force are not called into question; ¨ ·       RAIFs are not within the scope of Circular 25/901; however, as further discussed in Section 10 below, the parliamentary works of the RAIF Law indicate that the principles applicable to SIFs and SICARs should be taken into account when interpreting the risk-spreading requirement for SIF like RAIFs under the RAIF regime and the risk capital concept for SICAR like RAIFs.

3. Concept of assets (SIFs and Part II UCIs)

The Circular clarifies the concept of “assets” referred to in the SIF Law and the UCI Law. In principle, the concept of assets encompasses any type of investment that may be entrusted to the depositary of the SIF or of the Part II UCI for safekeeping.

Where the main objective of a SIF or a Part II UCI is to invest in assets eligible under the UCITS Directive, the Circular specifies that such fund must have an investment and borrowing policy that is different from that of a UCITS, in order to fall within the exemption provided for under the UCITS Directive.

4. Risk-spreading and diversification calibrated to the target investor base

The Circular sets out a differentiated approach to risk-spreading depending on whether a fund/compartment may be marketed to unsophisticated retail investors or whether its securities are reserved to well-informed or professional investors.

While Circular 25/901 formally applies to SIFs, SICARs and Part II UCIs, the situation where securities may be marketed to unsophisticated retail investors will, in practice, primarily concern Part II UCIs, given that SIFs and SICARs are reserved to well-informed investors under their respective product laws.

In principle, concentration limits are set at:

• 25% per issuer/undertaking for collective investment/other asset for funds or compartments whose securities may be marketed to unsophisticated retail investors; and
• 50% per issuer/undertaking for collective investment/other asset for funds or compartments whose securities are reserved to well-informed or professional investors.

For a single infrastructure investment, higher thresholds apply (up to 50% and 70% respectively), and the CSSF may grant further derogations on the basis of a duly motivated justification.

For funds or compartments whose securities may be marketed to unsophisticated retail investors, the Circular specifies that, when using financial derivative instruments, a comparable level of risk-spreading must be ensured through an appropriate diversification of the underlying assets and that counterparty risk which is not cleared by a clearing institution or not mitigated by collateral must be limited having regard to the quality and qualification of the counterparty.

Where investments are made through intermediary vehicles, regardless of their legal form, the investment limits apply to the investments made through such vehicles and not to the vehicles themselves.

5. Ramp-up and wind-down periods for private investment strategies

 Recognising the realities of portfolio construction and realisation, the Circular confirms that the sales document may provide that investment limits do not apply during certain periods.

In principle:

• where the main objective of the fund or compartment is to invest in UCITS-eligible assets, the ramp-up period may last up to 12 months from launch; and
• where the fund or compartment pursues private investment strategies, the ramp-up period may be longer but may not, in principle, exceed four years, subject to a possible duly justified extension accepted by the CSSF.

Where the objective of the fund or compartment is to make private investments, the sales document may also provide that investment limits cease to apply during the wind-down period.

During these periods, the fund or compartment must not be exposed to excessive risks or conflicts of interest that had not been previously identified, and available cash may only be invested in accordance with the sales document.

6. Borrowing

SIFs and Part II UCIs may borrow cash to make investments, cover costs and expenses or meet redemptions, and may encumber assets when borrowing.

Where a fund or compartment may be marketed to unsophisticated retail investors, borrowing for investment purposes must, in principle, not exceed 70% of assets or commitments to subscribe. Where securities are reserved to well-informed or professional investors, no fixed borrowing cap applies, and the fund or compartment sets its own maximum borrowing limit.

Temporary borrowing arrangements that are fully covered by investors’ capital commitments are, in principle, not regarded as borrowings.

Any intended borrowing must be disclosed in the sales document, including the applicable borrowing limit.

7. SICARs: clearer articulation of the “risk capital” assessment

For SICARs, the Circular consolidates and clarifies the CSSF’s approach to assessing whether investments qualify as risk capital, including:

• an intention to contribute to the development of the target entity;
• the existence of a specific risk exceeding mere market risk;
• an exit strategy; and
• where appropriate, a degree of control or supervision over the target entity.

The Circular emphasises that a purely passive holding approach is not acceptable and that the assessment of risk capital is driven by the economic substance of the investment and the development objective, rather than by purely formal or legal criteria.

8. Consolidation: fewer legacy references, one supervisory point of reference

Circular 25/901 repeals and replaces several earlier CSSF and IML circulars, consolidating the relevant supervisory expectations into a single reference text for these regulated fund regimes.

9. The Concepts Compilation – explanatory reference

As stated in Circular CSSF 25/901, for the illustration of the general concepts underlying the Circular, reference is made to the document entitled “Compilation of the key concepts and terms used in the area of investment funds other than UCITS and MMFs and how the CSSF understands them”, which is updated on a regular basis.

The Concepts Compilation is an explanatory document published by the CSSF that clarifies certain commonly used concepts and terms and explains how the CSSF understands them. It is neither a regulation nor a CSSF circular, does not purport to be exhaustive and does not prejudge the acceptability of any application for authorisation, without prejudice to the applicable European and Luxembourg legal and regulatory framework and to the relevant sales documents.

10. Considerations for Luxembourg RAIFs

Reserved alternative investment funds (RAIFs) are not within the scope of Circular CSSF 25/901, as they are not subject to prior authorisation or direct supervision by the CSSF.

That being said, the Law of 23 July 2016 on reserved alternative investment funds (the “RAIF Law”) was drafted by reference to the SIF and SICAR regimes and incorporates the same core product concepts.

SIF-like RAIFs – Risk-spreading

Article 1(1)(b) of the RAIF Law provides that a RAIF must have as its sole object the collective investment of its funds in assets “with the aim of spreading the investment risks and giving investors the benefit of the results of the management of their assets.”

The RAIF Law does not further define the concept of spreading investment risks.

The parliamentary works clarify that, in the absence of specific statutory guidance, RAIFs and/or their representatives may refer to the framework developed for SIFs, notably the diversification guidance previously set out in Circular CSSF 07/309, for the interpretation of this concept.

SICAR-like RAIFs – Risk capital

Article 48(1) of the RAIF Law provides that a RAIF may state in its constitutive documents that its exclusive object is the investment of its funds in assets representing risk capital. In that case, by way of derogation from Article 1, the RAIF is not required to spread investment risks.

Investment in risk capital is defined, in wording identical to Article 1(2) of the SICAR Law, as the direct or indirect contribution of assets to entities in view of their launch, development or listing on a stock exchange.

The RAIF Law does not provide further clarification of this notion. The parliamentary works indicate that RAIFs, their representatives and their approved statutory auditor may refer to the framework developed for SICARs, notably Circular CSSF 06/241, for the interpretation of the concept of risk capital.

Relevance of Circular 25/901 for RAIFs

Circular CSSF 25/901 repeals and replaces, inter alia, Circulars 07/309 (SIF risk-spreading) and 06/241 (SICAR risk capital), consolidating the supervisory framework applicable to SIFs and SICARs into a single reference text.

Although Circular 25/901 does not formally apply to RAIFs, the legislative structure of the RAIF regime which mirrors the substantive product concepts of the SIF and SICAR frameworks while dispensing with product-level CSSF authorisation  suggests that the interpretation of the notions of risk-spreading and risk capital under the RAIF Law is expected to remain aligned with the consolidated framework now applicable to SIFs and SICARs.

 11. Practical implications for fund sponsors and managers

Circular CSSF 25/901 aims to provide greater clarity and consistency in the supervisory framework applicable to SIFs, SICARs and Part II UCIs.

As expressly stated in the Circular, funds and compartments authorised by the CSSF prior to 19 December 2025 are not required to amend their existing arrangements and may continue to apply the rules previously approved by the CSSF.

As from 19 December 2025, the Circular will serve as the primary supervisory reference for the CSSF. In practice, it will be particularly relevant in the context of:

• the launch of new SIFs, SICARs or Part II UCIs;
• the creation of new compartments; and
• material changes implemented after that date, including changes to investment policies, risk-spreading parameters, borrowing arrangements or related disclosures.

The Circular also confirms a calibrated approach based on the target investor base, allowing greater flexibility for products reserved to well-informed or professional investors, while setting clearer parameters where a fund or compartment may be marketed to unsophisticated retail investors.

Overall, Circular CSSF 25/901 should be viewed as a consolidation and clarification exercise, preserving continuity for existing structures while providing a clearer supervisory framework for future developments.

12. How can we assist you?

We would be pleased to assist you in assessing the implications of Circular CSSF 25/901 for your existing or planned structures, including in the context of new fund launches, the creation of new compartments or changes to existing products, and in aligning documentation and operational policies with the CSSF’s consolidated supervisory framework.

Please feel free to contact our Investment Management team should you wish to receive further information or discuss the impact of Circular CSSF 25/901 on your structures.