Luxembourg bill on multi-compartment partnership-based AIFs: proposed expansion of the legal structuring toolbox

On [date] June 2026, a bill was introduced to the Luxembourg Parliament to expand the structuring options available to certain Luxembourg alternative investment funds (AIFs) established as partnerships in the form of a société en commandite simple (SCS) or a société en commandite spéciale (SCSp). The proposal allows such partnership-based AIFs, where managed by an authorised AIFM in Luxembourg or in another EU Member State, to create legally segregated compartments without the need to be established under a specific Luxembourg product law.

The bill is intended to address a gap in the current legal framework. Indeed, while compartmentalisation is already available to Luxembourg partnerships that are subject to fund product laws (such as Part II funds, SIFs, SICARs and RAIFs) or set up as securitisation vehicles under the Law of 22 March 2004 on securitisation, it is not currently available to Luxembourg partnership-based AIFs operating outside those regimes. The reform would therefore preserve the flexibility of the SCS and SCSp while adding a statutory compartment mechanism that is already familiar in other parts of Luxembourg fund and securitisation laws.

Key features of the proposed regime

• The bill proposes to introduce a new Article 28bis into the Luxembourg Law of 12 July 2013 on alternative investment fund managers. Under that new regime, an eligible Luxembourg AIF formed as an SCS or SCSp could establish multiple compartments, each constituting a separate pool of assets and liabilities.
• The constitutive documents would need to expressly provide for the creation of compartments and set out the rules governing their operation.
• Certain disclosures would have to be prepared separately for each compartment and made available to the relevant investors, such as (but not limited to) the description of the investment strategy and objectives of the compartment, the types of assets in which it may invest and the applicable investment restrictions.
• As a matter of principle, the assets and liabilities of each compartment would be segregated, so that the assets of a given compartment would be exclusively available for the rights of the investors and the rights and claims of the creditors of that compartment, unless otherwise provided for by the constitutive documents.
• Each compartment could be liquidated independently, without triggering the liquidation of the partnership-based AIF as a whole, except where the last compartment ceases to exist.
• Cross-investments between compartments would be permitted, subject to safeguards designed to prevent circular structures and inappropriate voting arrangements.
• Separate annual accounts could be prepared for each compartment, provided that consolidated information for the partnership-based AIF as a whole is appended.

Market context 

The proposal responds to a practical structuring need observed in the market. Luxembourg SCSs and SCSps are frequently used in parallel fund structures, including alongside foreign vehicles that already benefit from compartmentalisation, such as US Series LLCs. Under the current framework, a Luxembourg vehicle generally needs to be brought within a product law or as securitisation vehicle in order to replicate that compartment-based structure.

That requirement may be burdensome in practice, because product laws and securitisation law can entail additional regulatory or structuring constraints, such as diversification rules or minimum capital requirements, even where those features are not otherwise needed for the relevant strategy. By allowing compartmentalisation directly at the level of certain partnership-based AIFs, the bill would reduce structural mismatches and offer greater flexibility for parallel funds, co-investment vehicles and other alternative investment structures.

Takeaways

The bill represents a targeted but potentially significant development in Luxembourg fund structuring for AIFs. It combines the contractual flexibility of the SCS and SCSp with a compartmentalisation mechanism modelled on existing Luxembourg fund and securitisation vehicle regimes, without requiring the partnership-based AIF to opt into a separate fund product or securitisation law.

If enacted in its current form, the reform should enhance Luxembourg’s attractiveness for multi-compartment alternative investment structures, particularly where sponsors seek a partnership vehicle managed by an authorised AIFM but without the overlay of a traditional product or securitisation regime.

Contacts

Should you wish to receive more information in respect of the above, please feel free to reach out to your usual contact persons at Elvinger Hoss Prussen.