CSSF Circular 25/901 – Key Changes for SIFs and, indirectly, RAIFs

This legal update focuses exclusively on the impact of Circular 25/901 on SIFs and on SIF-like reserved alternative investment funds (“RAIFs”).

Separate legal updates will be issued for Part II UCIs and for SICARs.

Scope

Circular 25/901 applies to all SIFs (and by extension may be considered by all SIF-like RAIFs), except where the SIF in question:

1. Is authorised as a European long-term investment fund (ELTIF), money market fund, European venture capital fund (EuVECA) or European social entrepreneurship fund (EuSEF); or
2. Is a closed-ended SIF authorised prior to the entry into force of Circular 25/901.

Unless otherwise specified, references to a SIF should be understood as a reference to a SIF or a compartment thereof.

Investment Limits

The CSSF considers the principle of risk spreading satisfied if the following investment limits are met.

A SIF may invest up to 50% of its assets or commitments in:

1. one and the same 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 and the same undertaking for collective investment or other investment vehicle. This limit does not apply if a comparable or stricter risk-spreading than that provided for under this point is provided for at the level of the target undertaking for collective investment or investment vehicle, in accordance with the offering document of the latter or the laws and regulations applicable to it. Each compartment of an undertaking for collective investment or other investment vehicle, as well as each compartment of a securitisation undertaking may be considered as a distinct undertaking for collective investment or entity provided that the principle of segregation of the liabilities of the various compartments with regard to third parties is ensured.
3. one and the same asset (“valeur” as defined below). Assets whose economic viability is so closely linked that they form a single economic entity—such as certain real estate assets—are not considered distinct assets.

Circular 25/901 further specifies, as its predecessor did, that short sales must not result in a short position exceeding the above limit.

When using financial derivative instruments, a SIF must ensure a comparable level of risk-spreading through an appropriate diversification of underlying assets. Counterparty risk that is not cleared by a clearing institution or collateralised must be limited, taking into account the quality and qualification of the counterparty.

A SIF may now invest up to 70% of its assets in a single infrastructure investment. An infrastructure investment may consist in the acquisition of such asset or the exposure to it.

The CSSF has also used the opportunity to confirm that, when using intermediary vehicles, regardless of their legal form, the applicable SIF investment limits apply to the investments made through such vehicles, and not to the vehicles themselves.

It should be noted that the CSSF may grant derogations upon a justified request.

Ramp-Up and Wind-Down Periods

If specified in the offering document of a SIF, the investment limits do not need to be complied with during a ramp-up period following the launch of the SIF and such ramp-up period may be:

1. Up to 12 months for SIFs investing in UCITS eligible assets.
2. Up to 4 years for SIFs with private investment strategies, with a possible extension of (in principle) a maximum one additional year if duly justified and approved by the CSSF.

Where the SIF’s objective is to make private investments, the offering document may also provide that the investment limits will not be complied with during the wind-down period.

Portfolio Management Techniques

SIFs may use portfolio management techniques (e.g. repurchase and reverse repurchase agreements, securities lending) provided these are economically appropriate and do not alter the investment objective or increase risk beyond what is disclosed in the offering document. Their implementation must be profitable or enable one or more of the following objectives:

1. risk reduction;
2. cost reduction; or
3. generation of additional capital or income for the SIF.

Borrowing

SIFs may borrow cash for investment or liquidity purposes, including to make investments, cover costs and expenses or meet redemptions.

Each SIF may set its own maximum borrowing limit.

Temporary borrowing arrangements that are fully covered by capital commitments of investors are, in general, not regarded as borrowings.

Information in the offering document

The SIF law does not indicate what information concerning a SIF should be included in its offering document but only provides that it must include the information necessary for investors to be able to make an informed judgment of the investment proposed to them and, in particular, of the risks attached thereto.

Circular 25/901 indicates the information to be included in the offering document that the CSSF considers important in accordance with the preceding paragraph. It should be noted that these requirements are without prejudice to the information that must be made available to investors before they invest as required by AIFMD.

This information includes, among other things, the following:

1. Investment policy and strategy, including objectives, asset classes, investment limits, calculation basis, and any use of intermediary vehicles.
2. Subscription and redemption terms, including frequency, notice periods, settlement timelines, and liquidity management tools with a description of their functioning and activation conditions.
3. Borrowing limit
4. Procedures for material changes, such as modifications to the investment policy, and provisions for extensions of the SIF’s term, including any notice periods and investor rights.

The CSSF considers that extensions of the term of a SIF by one year, up to a maximum of three times, are possible if such extensions are necessary to allow the investments to reach their full potential. In exceptional circumstances, the CSSF may grant derogations based on a duly motivated justification.

Concept of Asset

Circular 25/901 clarifies that the concept of ‘asset’ (“valeur” in French) under the SIF law encompasses any investment that can be entrusted to the depositary for safekeeping.

If the main objective of a SIF is to invest in assets eligible under the UCITS directive, the SIF must have an investment and borrowing policy that is different from that of a UCITS in order for it not to be subject to the UCITS Directive.

RAIFs

As the RAIF law (as amended) was based on the SIF law, it only includes a requirement for SIF-like RAIFs (which are not SICAR-like) to be managed according to the principle of risk spreading, Market practice has been to apply SIF guidance to SIF-like RAIFs in most cases.

As a consequence, SIF-like RAIFs can look for guidance on the concept of risk spreading to Circular 25/901 as it replaced CSSF circular 07/309 which previously dealt with the concept of risk spreading for SIFs. SIF-like RAIFs may, of course, decide to apply different criteria as Circular 25/901 does not explicitly apply to them.

Other elements of Circular 25/901 (such as the information to be included in the offering document) can also prove useful for SIF-like RAIFs.

Entry into Force

Circular 25/901 entered into force on 19 December 2025. However, existing SIFs may continue applying the rules approved by the CSSF before this date.

¹Circular CSSF 25/901 – CSSF