Luxembourg proposes compartments for unregulated SCS and SCSp AIFs

Luxembourg has taken a further step towards increasing the structuring flexibility of its private funds toolbox. A new bill of law (8814) tabled before the Luxembourg Parliament ([link][1]) on 30 July 2026 proposes to allow unregulated Luxembourg limited partnership AIFs structured as a société en commandite simple (SCS) or société en commandite spéciale (SCSp) to operate with multiple compartments.

1. Key takeaways

• The bill would extend statutory compartmentalisation to certain unregulated Luxembourg partnerships qualifying as alternative investment funds (AIFs) by amending the law of 12 July 2013 on alternative investment fund managers (AIFM Law).

• The reform is expected to be particularly relevant for private equity, private debt, real estate, infrastructure, and other alternative investment strategies.

• If adopted, managers could use a single SCS or SCSp platform to launch segregated compartments for different strategies, vintages, investors, or assets.

• The assets and liabilities of each compartment are legally segregated from the others, subject to the provisions of the final law and the terms of fund documentation.

• The proposal is not yet law and may still evolve during the parliamentary process.

2. Background

Luxembourg SCS and SCSp structures are widely used for alternative investment funds, particularly in the private capital space. Their contractual flexibility, tax transparency and familiarity to international investors have made them a preferred choice for many unregulated AIF platforms. Until now, statutory compartmentalisation was, however, exclusively reserved for Luxembourg fund vehicles subject to specific product regimes, such as SIFs, SICARs, RAIFs as well as securitisation vehicles. By contrast, unregulated SCS and SCSp have not benefited from the same statutory umbrella fund framework. In practice, this has often required sponsors to establish separate partnerships for separate strategies, vintages or pools of assets, or to opt for other types of fund structures subject to specific product laws, such as the reserved alternative investment fund (RAIF).   The new bill seeks to address this by introducing the possibility for certain unregulated partnership qualifying as AIFs to create multiple compartments within a single legal structure.   After CSSF Circular 25/901 of 19 December 2025, which revisited among others the investment limits and borrowing restrictions of Part II UCIs, SIFs and SICARs and created a more level playing field between Part II UCIs, SIFs, SICARs and RAIFs, the new bill of law 8814 continues the modernisation of the Luxembourg AIF toolbox by creating a more level playing field between RAIFs and unregulated AIFs set up under the corporate form of an SCS or SCSp.

3. What would change?

If adopted in its current form, the bill would allow an unregulated Luxembourg AIF established in the legal form of an SCS or SCSp to be organised as an umbrella partnership with one or more compartments. Importantly: the reform only applies to the SCS and the SCSp, which are both tax transparent forms of partnership. In its current form, the Bill of law does not apply to Luxembourg AIFs set up in other, tax opaque, legal forms, such as the SA, Sàrl or SCA. As a result, these structures cannot be set-up as compartmentalised umbrella's, unless subject to a specific product law.   Each compartment could be used to pursue a distinct investment strategy, hold a separate portfolio of assets or accommodate a particular investor group. The assets and liabilities of each compartment would be legally segregated, meaning that investors and creditors should only have recourse to the assets of the relevant compartment, subject to the provisions of the law and the terms of relevant partnership documentation. Compartments do not benefit from legal personality.   This reform should enable managers to benefit from the operational efficiencies of a single platform while preserving asset and liability separation between compartments.

4. Why does it matter?

The proposal is a welcome development for Luxembourg's private funds industry. It creates a more level playing field between unregulated AIFs and other AIFs subject to specific product laws, thereby enhancing their attractiveness as the default structuring option.   In practical terms, the reform could help sponsors to:  

• launch new investment sleeves more quickly;

• reduce the need to establish multiple parallel partnerships;

• centralise governance and service provider arrangements;

• accommodate different investor groups or products within a single platform;

• separate strategies, vintages, jurisdictions or asset pools;

• improve scalability for private capital platforms; and

• preserve Luxembourg's competitiveness as a leading European funds domicile.

The proposed regime may be particularly useful for managers operating multi-strategy platforms, co-investment programmes, continuation vehicles, fund-of-one arrangements or asset-specific investment structures.

5. Points to consider

Although the bill is expected to be helpful, its practical implementation will require careful drafting and operational planning. Fund managers should consider, in particular:  
a.      Partnership agreement provisions: The LPA should clearly set out how compartments may be created, terminated and governed, including allocation of assets, liabilities, expenses, income and voting rights.  
b.      Investor disclosures: Offering documents should explain the compartment structure, the segregation of liabilities, the rights attaching to interests in each compartment and any relevant risk factors.  
c.      Financing arrangements: Subscription lines, asset-level facilities and other financing documents should reflect the compartment structure and ensure that lender recourse is appropriately limited or documented.  
d.      Governance and conflicts: Managers will need to manage conflicts between compartments, particularly where compartments invest in related assets, participate in follow-on investments or share expenses.  
e.      Service provider readiness: Administrators, depositaries, auditors, AIFMs and other service providers should be able to support compartment-level accounting, reporting, valuation and compliance.  
f.       Tax analysis: The tax treatment of the umbrella partnership and its compartments should be reviewed on a case-by-case basis, including from both Luxembourg and investor jurisdiction perspectives.  
g.      Existing structures: Existing unregulated SCS or SCSp AIFs may wish to assess whether their documents could be amended to introduce compartments once the law is adopted.

6. What happens next?

The bill must still pass through the Luxembourg legislative process. Its final form may therefore differ from the current proposal. Fund sponsors, AIFMs and investors should monitor developments closely and begin considering whether future platforms or existing structures could benefit from the proposed regime.  

7. Conclusion

After CSSF Circular 25/901, the new bill of law 8814 continues the modernisation of the Luxembourg alternative investment fund toolbox. If enacted, the reform would represent a significant enhancement to the Luxembourg private funds toolkit and would further strengthen the position of the SCS and SCSp as leading vehicles for alternative investment fund structuring.