{"id":139242,"date":"2026-04-22T09:05:43","date_gmt":"2026-04-22T09:05:43","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=139242"},"modified":"2026-04-22T09:05:43","modified_gmt":"2026-04-22T09:05:43","slug":"luxembourg-real-estate-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/luxembourg-real-estate-funds\/","title":{"rendered":"Luxembourg: Real Estate Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-139242","comparative_guide","type-comparative_guide","status-publish","hentry","guides-real-estate-funds","jurisdictions-luxembourg"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Goodwin<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/Goodwin-PNG-1.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Goodwin<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/Goodwin-PNG-1.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Real Estate Funds laws and regulations applicable in Luxembourg<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for investment in real estate (e.g., limited partnerships and other fund vehicles, real estate investment companies, real estate investment trusts\/ unit trusts)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg does not have a dedicated real estate investment trust (REIT) regime. Real estate funds are instead generally established using the general Alternative Investment Fund (AIF) framework.<\/p>\n<p>In practice, the most commonly used regimes for real estate funds are:<\/p>\n<ul>\n<li><strong>RAIFs (Reserved Alternative Investment Funds)<\/strong>: the dominant structure in the current market, offering flexibility and speed to market, with indirect supervision through an authorised AIFM. RAIFs used for real estate strategies are typically established on a SIF-like basis (i.e. subject to risk-spreading requirements). While RAIFs may also be structured under the SICAR regime (i.e. limited to risk capital), this approach is more limited in practice and generally confined to higher-risk or development-oriented real estate strategies that can meet the \u201crisk capital\u201d qualification, and is therefore not typically used for core or core-plus strategies.<\/li>\n<li><strong>Unregulated AIFs<\/strong>: typically structured as limited partnerships, offering maximum contractual flexibility and widely used for institutional strategies, co-investments, joint ventures and parallel vehicles. These structures are often used alongside RAIF platforms in master-feeder or parallel fund configurations.<\/li>\n<li><strong>Part II UCIs<\/strong>: fully regulated vehicles that may be marketed to retail investors and are increasingly used in combination with ELTIF status for semi-liquid real estate strategies.<\/li>\n<li><strong>SIFs (Specialised Investment Funds)<\/strong>: while historically widely used, SIFs have increasingly been <strong>supplanted by RAIFs<\/strong> for real estate strategies due to the latter\u2019s faster time to market and absence of direct CSSF product approval. SIFs continue to be used in specific cases where direct regulatory supervision or investor requirements make a regulated product preferable.<\/li>\n<\/ul>\n<p>In addition, certain real estate funds may be structured to qualify as ELTIFs, providing a European framework for long-term investments and facilitating access to retail investors.<\/p>\n<p>From a legal form perspective, real estate funds are most frequently structured as:<\/p>\n<ul>\n<li><strong>SCSp\/SCS (limited partnerships)<\/strong> \u2013 the market standard for closed-ended strategies; or<\/li>\n<li><strong>corporate vehicles (mainly SCA or SA)<\/strong> \u2013 more common for open-ended or semi-liquid strategies.<\/li>\n<\/ul>\n<p>Intermediate holding structures are typically used to hold underlying real estate assets.<\/p>\n<p>The choice of structure is primarily driven by investor base, tax considerations, liquidity profile and distribution strategy, rather than by the underlying real estate sector.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do all these structures provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, Luxembourg real estate fund structures generally provide limited liability to investors, although the mechanism varies depending on the legal form.<\/p>\n<p>For corporate vehicles (such as SA or SARL), investors benefit from limited liability as shareholders under Luxembourg company law, with their exposure limited to their subscribed capital.<\/p>\n<p>For partnership-type structures (including SCS, SCSp and SCA), investors typically participate as limited partners or shareholders whose liability is limited to their investment, while a general partner assumes unlimited liability. As a matter of Luxembourg law, this limitation of liability is conditional: investors may incur unlimited liability if they intervene in the management of the entity vis-\u00e0-vis third parties, although a number of safe harbour activities (e.g. advisory, monitoring or approval rights) are expressly permitted.<\/p>\n<p>In practice, the general partner of partnership structures is typically a Luxembourg limited liability vehicle, ensuring that unlimited liability is economically ring-fenced.<\/p>\n<p>Beyond statutory protections, liability is also structured contractually through the fund documentation (e.g. limited partnership agreement or articles), including provisions on investor obligations, default remedies and limitations on recourse.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does structure depend on sector (residential, industrial\/logistics, office, living, retail) or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In practice, the choice of structure is not driven by real estate sector, and only to a limited extent by investment strategy.<\/p>\n<p>Luxembourg real estate funds across core, core-plus, value-add and opportunistic strategies are most commonly structured using the same toolkit (in particular SCSp-based AIFs, often under the RAIF regime), with the key structuring drivers being liquidity profile, investor base and distribution strategy rather than the underlying asset class or strategy itself.<\/p>\n<p>More regulated structures (such as Part II UCIs or ELTIFs) are typically used where retail or semi-liquid distribution is envisaged, rather than being linked to a particular real estate sector or strategy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory framework distinguish between different types of real estate funds (e.g., REITs vs. private real estate funds, development funds vs. income-generating property funds, open-ended vs closed-ended) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg real estate funds are typically structured as AIFs and are therefore subject to the AIFM framework, with some structures also operating under specific product regimes (such as RAIFs, SIFs or Part II UCIs).<\/p>\n<p>While Luxembourg does not have a real estate-specific regulatory regime, the framework distinguishes between funds along several key dimensions:<\/p>\n<ul>\n<li>Regulated vs. unregulated funds: Part II UCIs and SIFs are subject to CSSF authorisation and supervision, whereas RAIFs and unregulated SCSp structures are not directly supervised and are instead regulated through the AIFM. Other regulated regimes (such as SICARs) exist but are less commonly used for real estate strategies.<\/li>\n<li>Retail vs. professional access: Retail access is only available through specific regulated regimes (in particular Part II UCIs or ELTIFs). Other structures, including SIFs, RAIFs and unregulated AIFs (e.g. SCSp), are generally limited to well-informed (which may include certain retail investors meeting certain eligibility criteria \u2013 see question 25) or professional investors. Any marketing to investors remains subject to applicable distribution rules in the relevant jurisdictions.<\/li>\n<li>Open-ended vs. closed-ended structures: Luxembourg law accommodates both, but open-ended real estate funds are subject to enhanced liquidity management requirements. Following the implementation of AIFMD 2.0, there is increased supervisory focus on the alignment between redemption terms, valuation processes and underlying asset liquidity, including the calibration and use of liquidity management tools.<\/li>\n<\/ul>\n<p>Overall, the Luxembourg framework offers significant flexibility, with structuring choices driven primarily by investor base, liquidity profile and distribution strategy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the regulatory calculation of leverage apply to alternative investment funds that acquire real estate assets indirectly through non-listed companies? Are there any leverage limits that apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Where real estate assets are held indirectly through non-listed companies (as is standard in Luxembourg real estate structures), borrowings at the level of the underlying property-holding vehicles may be relevant for AIFMD leverage purposes, depending on the nature of the financing and the applicable methodology. In particular, temporary borrowing covered by investors\u2019 capital commitments is generally excluded from leverage calculations under the AIFMD framework, while non-recourse borrowing at subsidiary level may not expose the fund beyond its equity investment in the relevant entities.<\/p>\n<p>Luxembourg does not impose statutory leverage limits for real estate AIFs. However:<\/p>\n<ul>\n<li>the AIFM is required to define, monitor and disclose leverage;<\/li>\n<li>leverage is subject to regulatory reporting; and<\/li>\n<li>additional constraints may arise under the applicable product regime, in particular for regulated vehicles such as Part II UCIs, or under the fund\u2019s governing documents.<\/li>\n<\/ul>\n<p>In addition, AIFMD 2.0 introduces leverage limits for loan-originating funds, which may be relevant for certain real estate debt strategies.<\/p>\n<p>In practice, leverage in real estate funds is typically structured at asset level, with AIFMD leverage calculations operating primarily as a regulatory and reporting framework rather than a structuring constraint.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there specific reporting requirements for property-level performance metrics (net operating income, cap rates, occupancy rates)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg law does not impose specific statutory reporting requirements for real estate funds at the property level (e.g. NOI, cap rates or occupancy rates).<\/p>\n<p>However, AIFMs are subject to AIFMD reporting and disclosure requirements, including periodic regulatory reporting (Annex IV) and annual financial statements. While these frameworks do not mandate specific real estate metrics, they require transparency on portfolio composition, risk exposure and performance, and include real estate-relevant asset classifications.<\/p>\n<p>In practice, reporting for Luxembourg real estate funds is highly standardised and driven by investor expectations. Institutional investors typically expect detailed property-level and portfolio-level reporting, often aligned with INREV guidelines, including standardised financial and operational metrics (e.g. NOI, occupancy, valuation movements and LTV). Compliance with INREV is frequently required in side letters or subscription documentation.<\/p>\n<p>ESG reporting has also become a core component of real estate fund reporting. For funds within the scope of SFDR, pre-contractual and periodic disclosures must include sustainability-related information, and for Article 8 and Article 9 funds, principal adverse impact (PAI) indicators must be reported, some of which have direct property-level relevance (e.g. energy consumption and greenhouse gas emissions). The CSSF has also increased its supervisory focus in this area, including through recent supervisory communications and thematic reviews setting out good practice expectations for SFDR disclosures.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are any disclosures required when properties are marked to market versus held at cost?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg law does not prescribe specific disclosure requirements distinguishing between assets held at fair value and those held at cost for real estate funds.<\/p>\n<p>However, under AIFMD, AIFMs are required to ensure that assets are properly valued and that the valuation methodology is clearly disclosed to investors. This includes transparency on the basis of valuation, key assumptions and any changes to valuation policies.<\/p>\n<p>In practice, real estate assets held by Luxembourg AIFs are typically valued at fair value, with valuations carried out in accordance with recognised industry standards. Where assets are not marked to market (for example, during development phases or in specific accounting contexts), the applicable valuation approach and its impact on NAV are disclosed to investors.<\/p>\n<p>Overall, the focus is on consistency, transparency and appropriateness of the valuation methodology, rather than on prescribing a specific valuation basis.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who can perform the valuation function for real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under AIFMD, the valuation function may be performed either by the AIFM itself or by an independent external valuer, provided that the valuation function is functionally independent from portfolio management.<\/p>\n<p>Where the AIFM performs the valuation internally, it must ensure appropriate segregation of functions and conflicts management. Alternatively, an external valuer may be appointed, in which case the valuer must be independent and professionally qualified.<\/p>\n<p>In all cases, the AIFM retains ultimate responsibility for the valuation of the AIF\u2019s assets, even where an external valuer is appointed.<\/p>\n<p>In practice, Luxembourg real estate funds typically appoint independent external valuers, applying recognised industry valuation standards, reflecting the nature of real estate assets and investor expectations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How often must valuations be performed and how does this differ between closed-ended and open-ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFMD requires that assets be valued at least annually. Beyond this minimum, the frequency of valuations depends on the fund\u2019s structure and liquidity profile:<\/p>\n<ul>\n<li>Closed-ended real estate funds typically perform valuations on a quarterly or semi-annual basis, reflecting investor reporting cycles and the illiquid nature of the underlying assets.<\/li>\n<li>Open-ended or semi-liquid funds generally perform valuations in line with NAV calculation and subscription\/redemption cycles, which are typically quarterly but may be more frequent.<\/li>\n<\/ul>\n<p>Following the implementation of AIFMD 2.0, there is increased regulatory focus on ensuring that valuation processes and frequency are appropriately aligned with the fund\u2019s liquidity profile and redemption terms, particularly for open-ended structures.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the liquidity management tools you would typically expect a manager to deploy for an open-ended real estate fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Open-ended real estate funds typically deploy a combination of liquidity management tools designed to address the mismatch between illiquid underlying assets and investor redemption rights.<\/p>\n<p>Commonly used tools include:<\/p>\n<ul>\n<li>redemption notice periods;<\/li>\n<li>limits on dealing frequency;<\/li>\n<li>redemption gates;<\/li>\n<li>suspension of redemptions;<\/li>\n<li>side pockets; and<\/li>\n<li>anti-dilution mechanisms (such as swing pricing or redemption fees).<\/li>\n<\/ul>\n<p>Under AIFMD 2.0, as implemented in Luxembourg, AIFMs managing open-ended AIFs are required to select and make available at least two liquidity management tools from the prescribed list.<\/p>\n<p>CSSF Circular 25\/901 further strengthens the regulatory framework by requiring AIFMs to ensure that liquidity management tools are appropriately calibrated, operationally ready and embedded within a broader liquidity risk management framework. This includes documented activation policies, governance procedures and consistency between the fund\u2019s redemption terms, valuation processes and underlying asset liquidity.<\/p>\n<p>Although RAIFs remain formally outside the scope of Circular 25\/901, the concepts it develops are expected to influence market practice for SIF-like and SICAR-like RAIFs, in line with the long-standing legislative intent that RAIFs mirror the corresponding regulated regimes.<\/p>\n<p>In practice, the choice and calibration of liquidity management tools is a key structuring consideration for open-ended real estate funds, reflecting the inherently illiquid nature of the asset class.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions in open ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg law does not impose fixed statutory limits on a manager\u2019s ability to restrict redemptions in open-ended real estate funds. The availability and use of such mechanisms are primarily governed by the fund\u2019s constitutional documents and offering materials.<\/p>\n<p>For these purposes, the CSSF takes a broad view of what constitutes an open-ended fund, generally capturing any fund that offers redemption rights during its lifetime, even where such rights are subject to significant limitations (e.g. lock-ups, notice periods or gates).<\/p>\n<p>However, AIFMs must ensure that any restrictions on redemptions are consistent with the fund\u2019s liquidity profile and applied in accordance with the principle of fair treatment of investors.<\/p>\n<p>Following the implementation of AIFMD 2.0 and CSSF Circular 25\/901, there is increased regulatory focus on the governance, calibration and use of liquidity management tools, including the requirement to maintain clear activation policies and ensure that such tools are used in a manner consistent with the fund\u2019s investment strategy, valuation processes and underlying asset liquidity.<\/p>\n<p>While RAIFs are not directly subject to Circular 25\/901, similar principles are generally expected to be applied in practice, reflecting the alignment of RAIFs with the corresponding regulated regimes<\/p>\n<p>For regulated funds (such as SIFs and Part II UCIs), redemption terms are subject to CSSF review as part of the authorisation process, and any material changes may require prior approval.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the real estate assets of its fund (e.g., credit facilities, partial disposals, NAV financing)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In addition to formal liquidity management tools, managers of real estate funds typically use a range of structural, financing and portfolio management tools to manage illiquidity at asset and fund level.<\/p>\n<p>These include:<\/p>\n<ul>\n<li>credit facilities and financing arrangements, such as subscription lines, NAV facilities and asset-level financing, which allow managers to access liquidity without immediate asset disposals;<\/li>\n<li>refinancing strategies, including extending or restructuring debt at asset level to manage liquidity pressures;<\/li>\n<li>partial disposals and portfolio rotation, including the sale of individual assets or minority stakes;<\/li>\n<li>co-investment structures and secondary transactions, enabling liquidity at asset or investor level; and<\/li>\n<li>in certain cases, sale and leaseback transactions, allowing managers to generate proceeds while retaining exposure to the underlying assets.<\/li>\n<\/ul>\n<p>In practice, liquidity management in real estate funds is driven primarily by active asset and capital management, rather than reliance solely on redemption-based mechanisms.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its real estate funds (e.g., geographic diversification requirements, property type concentration limits, leverage restrictions)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg law does not impose real estate-specific restrictions on how managers structure or operate real estate funds (e.g. in terms of geographic diversification or property type concentration).<\/p>\n<p>Any limitations arise primarily from the applicable fund regime and general AIFM requirements, rather than from the nature of the underlying real estate assets.<\/p>\n<p>In particular:<\/p>\n<ul>\n<li>certain regimes (such as SIFs, RAIFs established on a SIF-like basis and Part II UCIs) are subject to risk-spreading requirements, which are applied on a principles-based basis and implemented through diversification limits at fund level (typically assessed on a look-through basis in practice);<\/li>\n<li>Luxembourg law does not impose specific geographic or sector concentration limits, which are instead determined contractually in the fund documentation;<\/li>\n<li>leverage is not subject to statutory caps for real estate AIFs as such (see question 5), although it must be defined, monitored and disclosed by the AIFM; and<\/li>\n<li>AIFMs are required to implement appropriate risk management frameworks, including diversification and concentration controls, consistent with the fund\u2019s investment strategy.<\/li>\n<\/ul>\n<p>In addition, AIFMD 2.0 introduces specific requirements for loan-originating funds, including diversification and leverage constraints, which may be relevant for certain real estate debt strategies.<\/p>\n<p>From a supervisory perspective, breaches of applicable investment or diversification limits must be managed in accordance with CSSF expectations, including those set out in Circular 24\/856, which governs the treatment of breaches and investor protection measures.<\/p>\n<p>In practice, investment restrictions for real estate funds are largely driven by fund documentation and investor requirements, rather than by prescriptive legal rules.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to real estate funds required to be licensed, authorised or regulated by a regulatory body? And the real estate fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Luxembourg real estate funds structured as AIFs must be managed by an alternative investment fund manager (AIFM), which is either authorised or registered (sub-threshold) under the applicable AIFM regulatory regime and subject to supervision by its competent authority.<\/p>\n<p>Advisers or asset managers may also be subject to regulation, depending on the nature of the services provided. Where services relate to financial instruments (for example, portfolio management or investment advice within the meaning of MiFID), authorisation may be required under applicable regulatory frameworks. However, for real estate funds investing directly in property or through non-listed holding structures, such activities will often fall outside the scope of MiFID.<\/p>\n<p>The fund itself may or may not be subject to direct regulation. Vehicles such as SIFs and Part II UCIs are authorised and supervised by the CSSF, whereas RAIFs and unregulated AIFs (e.g. SCSp) are not directly regulated at product level, with regulatory oversight occurring primarily through the AIFM.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there different tiers to regulation applicable to local fund vehicles based on the size of the fund and\/ or the size of the manager?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, the Luxembourg AIFM framework distinguishes between authorised AIFMs and sub-threshold (registered) AIFMs.<\/p>\n<p>AIFMs managing assets below the AIFMD thresholds (EUR 100 million for leveraged funds or EUR 500 million for unleveraged closed-ended funds with no redemptions for at least five years) may register as registered AIFMs. These managers are subject to a lighter regulatory regime (principally reporting to the CSSF), but do not benefit from the EEA marketing passport. Registered AIFMs may only manage AIFs that do not require the appointment of an authorised AIFM (for example, RAIFs must be managed by an authorised AIFM).<\/p>\n<p>By contrast, authorised AIFMs are subject to the full scope of AIFMD requirements and benefit from passporting rights across the EEA.<\/p>\n<p>In practice, most institutional real estate fund managers exceed these thresholds and operate as authorised AIFMs, particularly where cross-border fundraising is envisaged.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the appointment of a property and asset manager typically work for a real estate fund? Are there any regulatory requirements to be aware of?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Property and asset managers are typically appointed by the AIFM (or, in certain cases, at the level of underlying holding structures) under contractual arrangements, with responsibilities defined in asset management or property management agreements.<\/p>\n<p>The AIFM remains responsible for the overall management of the fund but may delegate portfolio or asset management functions to third parties, subject to AIFMD delegation rules and ongoing oversight, including enhanced supervisory expectations on delegation.<\/p>\n<p>The regulatory treatment of such delegates depends on the nature of the services provided. In a real estate context, where activities relate primarily to direct property ownership or non-listed holding structures, property and asset management functions will typically fall outside the scope of financial services regulation. Where services relate to financial instruments (for example, discretionary portfolio management within the meaning of MiFID), the delegate may require authorisation under applicable regulatory frameworks.<\/p>\n<p>In practice, property and asset managers are often appointed in the jurisdiction where the underlying assets are located, reflecting local operational requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation for real estate funds (e.g., property valuers, asset managers, property managers, custodians)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg real estate funds structured as AIFs typically require the appointment of a number of core service providers. These include:<\/p>\n<ul>\n<li>an AIFM, responsible for portfolio and risk management;<\/li>\n<li>a depositary, responsible for safekeeping of assets, cash monitoring and oversight functions (for AIFs managed by an authorised AIFM);<\/li>\n<li>a fund administrator, responsible for NAV calculation, accounting and investor services; and<\/li>\n<li>an approved statutory auditor, responsible for auditing the fund\u2019s annual financial statements.<\/li>\n<\/ul>\n<p>In addition, real estate funds typically appoint external valuers and property or asset managers, reflecting the nature of the underlying assets.<\/p>\n<p>The exact set of service providers will depend on the fund structure and regulatory status, but the above framework represents standard market practice for Luxembourg real estate funds.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the real estate investment fund and\/or the fund manager and\/or the property and asset manager to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Substance and local presence requirements in Luxembourg vary depending on the relevant entity (fund, AIFM or service provider).<\/p>\n<p>For the fund, Luxembourg vehicles must have a registered office and central administration in Luxembourg, with core functions (such as administration, accounting and investor services) typically performed by Luxembourg-based service providers. For structures subject to Luxembourg fund product laws (including SIFs, RAIFs and Part II UCIs), Luxembourg law requires that the administration of the fund be carried out in Luxembourg. In practice, this requires that key administrative and governance functions are effectively performed in Luxembourg.<\/p>\n<p>In partnership structures, management functions are typically exercised by a Luxembourg-based managing general partner (<em>associ\u00e9 g\u00e9rant commandit\u00e9<\/em>) or manager (<em>g\u00e9rant<\/em>), ensuring that governance, decision-making and effective management are appropriately anchored in Luxembourg. For corporate structures, similar substance expectations are met through Luxembourg-based governance and management at board or management company level.<\/p>\n<p>For the AIFM, the primary substance requirements apply. Luxembourg AIFMs must have effective management and organisational substance in Luxembourg, including appropriate governance arrangements and locally based senior personnel responsible for key management decisions, in line with CSSF supervisory expectations and the AIFMD framework (as further reinforced under AIFMD 2.0).<\/p>\n<p>There are generally no specific Luxembourg residence or substance requirements for property or asset managers, which are often located in the jurisdictions where the underlying assets are situated. However, their regulatory status will depend on the nature of the services provided (see question 17).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The applicable rules depend on whether the manager or adviser is established within the EEA or in a third country, and on the nature of the activities performed.<\/p>\n<p>An EEA-based AIFM may manage Luxembourg AIFs on a cross-border basis under the AIFMD passport, subject to notification procedures with its home regulator.<\/p>\n<p>AIFMs established outside the EEA may also manage Luxembourg AIFs, but do not benefit from passporting rights and must instead rely on national private placement regimes, reverse solicitation or other structuring solutions, depending on the circumstances.<\/p>\n<p>For advisers or asset managers, regulatory requirements depend on the nature of the services provided. Where activities relate to financial instruments, authorisation may be required under applicable regulatory frameworks (e.g. MiFID). However, for real estate funds investing directly in property or through non-listed holding structures, such activities will often fall outside the scope of financial services regulation.<\/p>\n<p>In practice, Luxembourg real estate funds are frequently managed within a cross-border framework, with AIFMs and service providers located in multiple jurisdictions, subject to the applicable regulatory regimes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid for real estate funds? Does it vary by sector or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fees in real estate funds vary depending on the investment strategy and risk profile, rather than the underlying real estate sector.<\/p>\n<p>At the higher end of the risk spectrum, opportunistic strategies typically involve management fees of around 1.5% per annum, usually calculated on commitments during the investment period and transitioning to invested capital thereafter. This reflects the more active management approach and return expectations associated with such strategies.<\/p>\n<p>At the other end of the spectrum, core strategies generally attract lower fees, often around 1% per annum or below, and are more commonly calculated on invested capital or NAV.<\/p>\n<p>Value-add strategies tend to fall between these two, with fees typically ranging between 1.25% and 1.5%, often following a similar structure of commitment-based fees during the investment period and a step-down thereafter.<\/p>\n<p>Many funds combine elements of different strategies (for example core-plus or hybrid strategies), and in those cases fee structures are typically calibrated on a blended basis, reflecting the overall investment profile.<\/p>\n<p>It is also common for real estate funds to apply tiered fee arrangements, with lower effective rates available to larger or strategic investors. Headline fee levels are therefore often subject to negotiation and may vary depending on investor profile and commitment size.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is a typical carried interest type in real estate funds? Is there a common approach to hurdle\/preferred return, catch-up provision, or other condition based on property-specific benchmarks? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Carried interest structures in real estate funds broadly follow private equity-style economics, with variations depending on the investment strategy and investor base.<\/p>\n<p>For value-add and opportunistic strategies, carried interest is typically set at around 20% of profits, subject to a preferred return (or hurdle), which is commonly in the range of 6% to 9% IRR. Core and core-plus strategies may feature lower performance fees or, in some cases, no carried interest.<\/p>\n<p>The prevailing approach is a whole-of-fund (European-style) waterfall, under which investors receive distributions up to the preferred return before carried interest becomes payable. Catch-up mechanisms are commonly included, although their structure (full or partial catch-up) varies between funds.<\/p>\n<p>Performance is generally assessed at fund level, rather than by reference to property-specific benchmarks, although asset-level performance may be taken into account in internal allocation and distribution decisions.<\/p>\n<p>From a Luxembourg perspective, the tax treatment of carried interest for Luxembourg-resident recipients has been clarified by legislation in force since 1 January 2026, distinguishing between different types of carried interest arrangements and generally providing a structured and competitive framework. While carried interest structures are broadly driven by market practice, they are increasingly influenced by jurisdiction-specific tax and regulatory considerations, particularly in light of recent reforms in certain key markets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are typical management fees for real estate funds paid during and after the investment period, and how do these vary (if at all) in terms of the basis of the fee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For closed-ended real estate funds, management fees are typically structured to reflect the different phases of the fund\u2019s life cycle.<\/p>\n<p>During the investment period, fees are generally calculated on committed capital, reflecting the manager\u2019s focus on sourcing and deploying investments.<\/p>\n<p>Following the investment period, fees typically transition to a basis of invested capital or NAV, often resulting in a lower effective fee as the portfolio matures.<\/p>\n<p>The percentage charged will not usually differ following the investment period, with adjustments typically made to the fee basis rather than the headline rate.<\/p>\n<p>For open-ended or semi-liquid funds, management fees are usually calculated on NAV throughout, consistent with their ongoing investment and redemption profile.<\/p>\n<p>In addition to fund-level management fees, it is common for real estate funds to charge asset-level fees, such as acquisition, asset management or development fees, typically payable to the manager or its affiliates and disclosed in the fund documentation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any particular requests investors in real estate funds are likely to ask for in their side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Side letters are widely used in real estate fund structures and reflect the specific requirements of institutional investors. Common requests include:<\/p>\n<ul>\n<li>fee arrangements, such as discounts, rebates or tiered fee structures;<\/li>\n<li>enhanced reporting, including more detailed asset-level information, valuation details and, increasingly, ESG-related data;<\/li>\n<li>co-investment rights or preferential access to additional investment opportunities;<\/li>\n<li>most favoured nation (MFN) provisions, allowing investors to benefit from more favourable terms granted to others;<\/li>\n<li>investor-specific investment restrictions or excuse rights in relation to certain prohibited investments; and<\/li>\n<li>regulatory or tax-related provisions, tailored to the investor\u2019s status or jurisdiction.<\/li>\n<\/ul>\n<p>In practice, side letter terms are highly negotiated and can vary significantly depending on the size, profile and strategic importance of the investor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can real estate funds be marketed to non-professional (retail) investors in your jurisdiction? If so, is this a particular form of real estate fund and what are the regulatory requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, real estate funds can be marketed to retail investors in Luxembourg, but only through specific regulated structures.<\/p>\n<p>The main routes are:<\/p>\n<ul>\n<li>Part II UCIs, which are fully regulated funds subject to CSSF authorisation and ongoing supervision and may be distributed to retail investors; and<\/li>\n<li>ELTIFs (European Long-Term Investment Funds), which benefit from a dedicated European framework and, following the introduction of ELTIF 2.0, may be marketed to retail investors across the EEA under enhanced distribution rules.<\/li>\n<\/ul>\n<p>By contrast, other commonly used structures for real estate funds, such as SIFs and RAIFs, are generally limited to well-informed investors (which may include certain retail investors meeting eligibility criteria, such as minimum investment thresholds or certification requirements) but are not designed for broad retail distribution.<\/p>\n<p>Retail-oriented structures are also subject to enhanced disclosure and investor protection requirements, including the preparation of key information documents (such as PRIIPs KIDs) and, where applicable, sustainability-related disclosures under SFDR and specific ELTIF requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing real estate funds to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors, given their typical allocation targets for real estate?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg law does not impose specific additional restrictions on marketing real estate funds to government entities, sovereign wealth funds, pension funds or insurance companies. These investors are typically treated as professional investors under AIFMD.<\/p>\n<p>In practice, any constraints arise primarily from the regulatory framework applicable to the investor, rather than from Luxembourg fund law. For example:<\/p>\n<ul>\n<li>pension funds may be subject to prudential investment rules (including under the IORP II framework) and internal allocation limits to illiquid or alternative assets;<\/li>\n<li>insurance companies are subject to Solvency II capital requirements, which may influence investment structuring and asset allocation; and<\/li>\n<li>sovereign wealth funds and government entities generally invest without specific additional regulatory constraints at fund level.<\/li>\n<\/ul>\n<p>Where real estate funds include US pension investors, ERISA considerations may also be relevant, and fund structures are typically designed to avoid the fund being treated as holding \u201cplan assets\u201d.<\/p>\n<p>Overall, Luxembourg provides a flexible and neutral framework for marketing real estate funds to institutional investors, with structuring considerations driven primarily by investor-specific regulatory and internal requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What sustainability due diligence or disclosure requirements and ongoing compliance obligations apply to managers of real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Managers of Luxembourg real estate funds are subject to a comprehensive sustainability-related regulatory framework at EU level, primarily under the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation.<\/p>\n<p>Under SFDR, AIFMs must integrate sustainability risks into their investment decision-making processes and provide pre-contractual and periodic disclosures. Funds must be classified under Articles 6, 8 or 9, with additional disclosure requirements applying to Article 8 and 9 products, including reporting on principal adverse impact (PAI) indicators, some of which are directly relevant at property level (e.g. energy consumption and greenhouse gas emissions).<\/p>\n<p>The EU Taxonomy Regulation imposes further disclosure obligations in relation to the environmental sustainability of underlying investments, including the extent to which investments are aligned with taxonomy criteria.<\/p>\n<p>From a due diligence perspective, managers are expected to incorporate ESG considerations into investment selection, asset management and ongoing monitoring, including the assessment of energy performance, climate-related risks and regulatory compliance at asset level.<\/p>\n<p>In addition, ongoing compliance obligations include periodic ESG reporting, updates to disclosures and increasing expectations around data quality, consistency and auditability.<\/p>\n<p>The regulatory framework continues to evolve. In particular, the European Commission\u2019s November 2025 proposal to revise SFDR (\u201cSFDR 2.0\u201d) likely to come into effect in early 2028 is expected to introduce a revised classification system and enhanced disclosure requirements. At the same time, the CSRD framework, which governs sustainability reports by companies, has been adjusted under the December 2025 Omnibus package, delaying implementation timelines and narrowing the scope of in-scope entities.<\/p>\n<p>In practice, Luxembourg real estate fund managers are subject to increasing supervisory scrutiny, including through CSSF supervisory communications and thematic reviews, with a particular focus on the robustness of ESG data, consistency of disclosures and substantiation of sustainability claims.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory energy efficiency reporting or carbon footprint disclosure requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Luxembourg does not impose standalone, real estate-specific requirements for energy efficiency or carbon footprint reporting at fund level. However, such disclosures arise indirectly under the broader EU sustainability framework.<\/p>\n<p>In particular, under SFDR, funds that promote environmental characteristics or have sustainable investment objectives (Articles 8 and 9) must disclose principal adverse impact (PAI) indicators, some of which relate directly to real estate assets (e.g. energy consumption and greenhouse gas emissions).<\/p>\n<p>The EU Taxonomy Regulation further requires disclosure on the environmental sustainability of investments, including energy efficiency criteria for real estate assets.<\/p>\n<p>In addition, depending on the structure and stakeholders involved, CSRD-related reporting may be relevant at the level of underlying portfolio companies or the AIFM.<\/p>\n<p>In practice, real estate fund managers are expected to collect and report granular, asset-level energy and carbon data, driven both by regulatory requirements and investor expectations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">5844<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/139242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=139242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}