Luxembourg’s financial ecosystem leveraged the EU regulation to create the successful Undertakings for Collective Investment in Transferable Securities (Ucits) brand, which subsequently benefited the development of private assets, argued Florence Stainier, partner at Arendt & Medernach, during an interview on 5 November 2025.
Adaptative regulatory environment
Luxembourg utilises specialised vehicles, such as the Part 2 fund, which is a long-standing retail vehicle for strategies that do not fully comply with Ucits limits. This progression—from the Part 2 fund to the introduction of Investment Company in Risk Capital (Sicar) and later the Alternative Investment Fund Managers Directive (AIFMD)—shows how Luxembourg has steadily structured private market activities.
Following the implementation of AIFMD, she explained that Sicar were reclassified as Alternative Investment Funds. Consequently, Part 2 funds may target retail investors in Luxembourg and non-EU markets. However, when using the EU passport, they must limit sales to professional investors due to AIFMD classification rules.
European Long-Term Investment Fund (Eltifs), a product designed to channel retail capital toward long-term assets, can be integrated into the Part 2 framework, granting retail passporting capabilities if relevant restrictions are adhered to.
Clients consistently highlight the CSSF’s pragmatic and market-aware approach, according to Stainier. These advantages are perceived to be comparable or superior to other jurisdictions, reinforced by Luxembourg’s status as a cross-border jurisdiction.
Ucits, private assets, and market convergence
The growing convergence observed between the two sectors is driven partly by the narrowing universe of listed securities and the resulting search for additional opportunities in private assets. Nowadays, Ucits and private asset promoters are offering products to the same retail investor base. Moreover, Stainier noted that investment fund managers are increasingly combining expertise in both fields to elevate the overall financial centre.
To maintain and grow the Ucits market, which accounts for two-thirds of the assets under management in Luxembourg, Stainier stressed that the country should maintain its pragmatic and flexible approach within the EU framework. It may mean adopting “a flexible interpretation of certain asset classes or investment policies.”
The primary differentiator for Luxembourg Ucits is its strong ecosystem built specifically for cross-border distribution, serving investors in the EU, but it is also a recognised brand in Asia, the Middle East, and South America.
Strategies to strengthen the Ucits market
1. Enabling ETF share classes: Luxembourg should continue promoting the inclusion of ETF share classes within existing, successful Ucits funds. This creates an efficient new distribution channel without the need to rebuild the entire ecosystem elsewhere.
2. Harmonising distribution: At the EU level, Stainier argued that the effort should focus on removing administrative frictions and non-harmonised consumer protection rules that currently impede cross-border sales within the Union.
3. Revamping the PEPP: The Pan-European Pension Product (PEPP) struggled partly because its requirements – such as being closed-ended – conflict with Ucits structures. If these restrictive frictions were lifted, Ucits could become the ideal vehicle, which would probably boost assets under management.
4. Protecting the Ucits brand: Safeguarding the reputation of the Ucits brand is crucial for non-EU distribution. Stainier warned that current EU discussions aiming to narrow the range of eligible Ucits investments, such as banning certain structured products or hedge fund exposures, could undermine the international perception of Ucits.
A modified version of this article was written for the December 2025 issue of Paperjam magazine, published on 19 November. The content is produced exclusively for the magazine. It is published on the site to contribute to the full Paperjam archive. Click this link to subscribe to the magazine.
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