In recent years, Luxembourg has fortified its position as one of Europe’s premier domiciles for private debt structures. Driven by demand from borrowers seeking alternatives to bank financing, investor appetite for yield and diversification as well as regulatory reforms, have made private debt one of the fastest‑growing alternative asset classes in Europe, and Luxembourg regulatory toolbox offers sophisticated and attractive options through securitisation vehicles and alternative investment funds.

Market context

Luxembourg private debt funds exceed over € 500 billion in assets under management with a steady growth of 21% in just six months from 2023 to 2024 period, with a forecast growth of 53% between 2024 and 2029 due to anticipated private debt fund launches and the injection of new capital into already existing debt funds. Experts are confident that the gained momentum will perdure as markers continue to give positive results.

AIF and Securitisation flexible legal framework

Such growth cannot be achieved without the flexible AIF and securitization legal framework. Vehicles such as the SCSp (Special Limited Partnership) representing more than 86% of private debt funds alongside the Reserved Alternative Investment Fund (RAIF) accounting for 60% of the regulated funds offer comfortable and customizable and scalable solutions. While SCSp offers contractual flexibility, no legal personality, and no investment restrictions, making it ideal for debt fund structuring and investor customization, the RAIF benefits from a fast time-to-market with no CSSF approval required, and can be structured as an SCSp, combining regulatory efficiency with investor protection under the AIFMD regime.

Moreover, securitisation vehicles (SV) since 2022 are now permitted to actively manage portfolios of debt instruments, such as loans or bonds, provided the instruments are issued via private placement and not offered to the public. Paired with the already advantageous SV regime that  allows flexible structuring and bankruptcy-remote vehicles for efficient debt origination and transfer, this change facilitates the establishment of debt instruments in Luxembourg as well as opening the doors for fund managers and investors seeking exposure to private credit, direct lending, mezzanine, infrastructure debt and similar strategies.