Three Luxembourg fund structures, and how to choose between them

Most conversations about a Luxembourg fund start in the wrong place. They start with the vehicle - someone has heard that a RAIF is the right answer, or that an SCSp is cheaper - rather than with the mandate.

The vehicle is the last decision, not the first. What determines it is the shape of the investment: one asset or several, one investor base or many, capital that has to be deployed in six weeks or in six months. Get those straight and the structure follows almost on its own.

Three routes cover the large majority of cases, and none of them requires product-level approval by the CSSF.

Structure one: a single-asset SCSp

A société en commandite spéciale is a Luxembourg special limited partnership. Managed by an authorised AIFM, it qualifies as an alternative investment fund without being subject to a Luxembourg product law.

It is the fastest standalone route - a target of six to eight weeks, provided the client meets its obligations on time - and the simplest. There is no statutory minimum capital, no mandatory risk spreading and no obligation to produce an issuing document, although a private placement memorandum is strongly advisable in practice. The partnership is tax transparent, so investors are taxed at home as if they had invested directly.

That combination makes it the natural choice for a dedicated mandate: a single real estate asset, a co-investment vehicle, a club deal, a first-time fund.

Two things deserve attention before committing. A plain SCSp falls within the scope of the EU Anti-Tax Avoidance Directive; where more than half the investor base sits in jurisdictions that do not recognise its transparency, the fund can become taxable in Luxembourg. The investor base should be reviewed by tax counsel before launch, not after.

And under current law a plain SCSp cannot create legally ring-fenced compartments. A bill tabled on 30 July 2026 would change that, allowing SCS and SCSp partnerships managed by an EU-authorised AIFM to operate as umbrella structures without a product-law wrapper. As at October 2026 the bill sits with the Finance Committee of the Luxembourg Parliament and may change before adoption.

Structure two: a multi-compartment RAIF

A Reserved Alternative Investment Fund is registered under the 2016 RAIF Law. It needs no product authorisation of its own because it is indirectly regulated through its AIFM, which carries full responsibility for AIFMD compliance.

The point of a RAIF is the umbrella. Each compartment has its own investment policy, fee structure, investor base and distribution waterfall, and the assets and liabilities of one are ring-fenced from the others. Creditors of one compartment have no claim on another.

Additional compartments are added by amendment to the constitutional documents. No new fund entity, no new notification, no new depositary or administrator.

That matters more over time than at launch. As compartments are added, the fixed costs of the platform spread across more assets, and the cost per strategy falls materially.

The trade-offs are concrete. A RAIF pays an annual subscription tax of 0.01 per cent of net asset value. It must reach subscribed capital equivalent to EUR 1.25m within twenty-four months. It is subject to statutory risk diversification unless it invests exclusively in risk capital securities. And it must produce an issuing document, which typically adds two to four weeks compared with a standalone SCSp - eight to ten weeks in total, provided the client meets its obligations on time.

In exchange, a RAIF is in principle outside the scope of ATAD, which removes the hybrid mismatch question that applies to a plain partnership.

Structure three: a white-label sub-fund

The third route is not a new fund at all. A sub-fund is added to an AIFM's existing RAIF platform: branded independently, marketed as its own product, but operating inside an existing regulatory perimeter with existing constitutional documents and existing service providers.

Because nothing has to be incorporated and nothing has to be registered, this is the fastest route of the three - two to four weeks from instruction, provided the client meets its obligations on time - and the cheapest. From day one the sub-fund has a CSSF-authorised manager, a depositary, an administrator and an auditor already in place.

What a sponsor gives up is a degree of control at platform level. The depositary, the auditor and the risk policy are decided for the umbrella rather than for the individual sub-fund. In practice that alignment is part of the onboarding, not an obstacle to it.

It is the obvious structure for a sponsor who wants to be in the market quickly, and for anyone who would rather test a strategy inside a regulated framework before committing to a vehicle of their own.

Choosing

*Provided the client meets its obligations on time.

Read across the table and the decision usually makes itself. One asset and a tight timetable point to the SCSp. A platform that will hold several strategies over the next five years points to the RAIF, and the earlier it is set up as one, the less it costs to grow. A sponsor who needs to be live this quarter points to the sub-fund.

What none of the three decides is whether the fund is any good. The structure is the container. The work that determines the outcome - underwriting, operator selection, financing, governance - happens inside it.

This article is for general information only. It is not an offer of interests in any fund and does not constitute legal, tax or regulatory advice. Advice on a specific structure should be obtained from qualified Luxembourg counsel.