Circular CSSF 25/901: New Rules For SIFs, SICARs And Part II UCIs

On 19 December 2025, the CSSF published the Circular CSSF 25/901 (the "Circular"), which relates to the assets, investment limits, risk capital, techniques, borrowing, and transparency requirements in relation to SIFs, SICARs and Part II UCIs. The Circular replaces previous CSSF circulars (such as Circular CSSF 02/80 applied to Part II UCIs, Circular CSSF 07/309 applied to SIFs, and Circular CSSF 06/241 applied to SICARs) about these topics while maintaining and adapting the core principles, and brings together all the provisions into a single text, with flexibility based on the type of investor targeted.

The CSSF Circular 25/901 has already entered into force (except for funds approved by the CSSF prior to its publication) and applies to all SIFs, SICARs and Part II UCIs and their compartments when set up as umbrella funds, except the following funds or compartments:

• European long-term investment fund (ELTIF);
• Money market fund (MMF);
• European venture capital (EuVECA) or a European social entrepreneurship (EuSEF) labelled fund; and
• closed-ended fund or compartment authorised before 19 December 2025.

Investment limits of SIFs and Part II UCIs

The investment diversification limits for SIFs and Part II UCIs are now the following:

• If the fund or compartment is marketed to unsophisticated retail investors (retail investors who are not well-informed investors), it may invest up to 50% in one infrastructure investment and up to 25% of its assets or commitments in:
  1. one entity or person. This limit does not apply to securities issued or guaranteed by an OECD Member State or its regional or local authorities or by EU, regional or global supranational institutions and bodies;
  2. one UCI or other investment vehicle. This limit does not apply if comparable or stricter risk-spreading is ensured at the level of the target UCI or other investment vehicle. This limit does not affect the requirements laid down in Article 15 of the AIFMD, where the latter applies.
  3. one asset. Assets whose economic viability is closely linked to the point that these assets form a single economic entity are considered as one asset.

• If the fund or compartment is reserved for well-informed investors or professional investors, it may invest up to 70% in one infrastructure investment and up to 50% of its assets or commitments in one entity or person, one UCI or other investment vehicle, or one asset.

When practising short sales or using financial derivative instruments (FDIs), SIFs and Part II UCIs must ensure a comparable risk spreading. When intermediary vehicles are used, the above diversification requirements apply to the target investments on a look-through basis.

A different calculation method may be used, subject to prior justification and prior acceptance by the CSSF.

These investment limits may not apply during the ramp-up period:

1. 12 months when the main strategy is to invest in UCITS liquid assets; or
2. up to 4 years when the main strategy is to make private investments, with a maximum one-year extension subject to CSSF's prior approval.

The investment limits may cease to apply during the wind-down period for private investments.

Risk Capital and SICARs

The SICARs must invest according to the notion of risk capital (direct or indirect contribution of assets to entities with a view to their launch, development or listing on a stock exchange). Private equity, in particular venture capital, and debt financing strategies for non-listed undertakings are targeted. There is no investment diversification requirement for SICARs. The contribution of assets by the SICAR may take the form of capital contributions, loan origination, bond subscriptions, bridge financing, mezzanine, or acquisition on the secondary market.

Risk capital under the SICAR Law is characterised by the combination of two elements: intention to develop the target entity (value creation, no passive holding, listing, degree of control and supervision, active management) and specific risk beyond mere market risk. This Circular further clarifies the third criterion, which is the exit strategy: the purpose of reselling at a profit with investment limited in time. Where other criteria, such as financing, involved parties, and remuneration, indicate risk capital, active intervention is not necessarily required. The active management factor is also relevant where the SICAR invests in a single target undertaking.

The CSSF Circular 25/901 also includes provisions about the risk capital notion and related restrictions for the following investments:

• Securities: listed securities are eligible if issued by an entity representing risk capital, or when associated with a development project or a delisting, such as for small caps. The sale after listing of risk capital assets is not mandatory. Investments in ABS, CDOs and other similar securities are generally not eligible for SICARs.
• Cash: cash may be temporarily invested in listed securities with low market risk pending risk capital investment. Cash management before deployment, reinvestment or distribution is based on the prudent person rule with due care.
• Debt: Mezzanine is eligible if the target entity represents risk capital, which is assumed not to be the case when the entity is listed, unless there is development or expected delisting.
• Derivative instruments may be used for hedging purposes, or if necessary, for the realisation of the investment policy.
• Real estate or infrastructure assets: Only indirect investment via intermediary vehicles (SPVs) or real-estate funds and the underlying real estate must qualify as risk capital.
• Commodities: The acceptability of a policy aiming at investing in commodities is assessed by the CSSF on a case-by-case basis, notably with regard to the criteria set out in Section 5.1. The SICAR cannot, under any circumstances, directly invest in commodities. However, indirect investments through the risk linked to investments in companies exploiting commodities are possible. In any case, the risk and development criteria must be identifiable at the level of the entities in which the SICAR invests, directly or indirectly.
• UCIs or other investment vehicles: The indirect investment through a private equity fund, a venture capital fund, or a real estate fund is acceptable insofar as their investment policy restricts them to investing in risk capital assets (development and specific risk). Hedge funds are generally not eligible.
• Investment through an intermediary vehicle: indirect investment through an intermediary vehicle is acceptable when its objective prevents it from investing in non-risk capital within the meaning of the SICAR Law. In that case, the SICAR must ensure that the cash contribution will structurally be invested in risk capital assets.

Techniques and Borrowing

The use of efficient management techniques by SIFs and Part II UCIs (such as repurchase or reverse repurchase agreements, securities lending or borrowing, or other techniques) and their risks must be described to the investors, while ensuring diversification of the collateral. They must be economically appropriate, either via generated profits or enabling risk reduction, cost reduction, and/or generation of additional capital or income. The counterparty risk which is not cleared by a clearing institution or not mitigated by collateral (pledge or ownership transfer) must be limited depending on the counterparty's quality and qualification.

If the fund or compartment is marketed to unsophisticated retail investors (retail investors who are not well-informed investors), it may borrowup to 70%of its assets or commitments. If the fund or compartment is reserved for well-informed investors or professional investors, this threshold doesnotapply, and these funds or compartments may set their own maximum borrowing limits.

Temporary borrowing arrangements fully covered by investor commitments are not considered when applying these borrowing limits. The same applies to debt security issued by the fund or compartment whose income is linked to the performance of the assets in the portfolio of the fund or compartment concerned.

RAIFs, transparency requirements, and CSSF key concepts and terms

The diversification requirements applicable to SIF-like RAIFs were based on the SIF Law by analogy and the concept of risk spreading according to Circular CSSF 07/309, which is repealed by the Circular, so the above-mentioned investment diversification rules for SIFs may also be used as guidance for RAIFs. They are more favorable for fund structuring purposes than the previous circular.

The CSSF Circular 25/901 also includes minimum transparency requirements for the sales documents of SIFs, SICARs, and Part II UCIs, depending on the investments, objective, strategies, investment method, target investors, marketing, use of derivatives, collateral, securities financing transactions, redemptions, subscriptions, borrowing, and duration.

Following the publication of the Circular, the CSSF compiled its key concepts and terms about investments fund other than UCITS and MMFs as a synthesis focused on private investments, while explaining the following: investment policy concept, different investment strategies and asset classes such as infrastructure, virtual assets or crypto-assets, different investment methods such as partial transactions, tokens, or joint transaction, and different subscription and redemption models, and related liquidity management measures and tools.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.