One of the first regulatory decisions any emerging manager faces in Luxembourg is whether to register as a sub-threshold AIFM or apply for full CSSF authorisation. I walk managers through this choice constantly, and the same misunderstandings come up every time. People assume registration is just "authorisation lite." It is not. The two regimes sit under different articles of the law, carry different obligations, and open different doors for your fund.
Getting this wrong has real consequences. Register when you should be authorised, and you are in breach from day one. Get authorised when you could have stayed registered, and you have spent six figures on a regulatory infrastructure you did not need.
The thresholds
The Luxembourg AIFM Law (Law of 12 July 2013) transposes Article 3(2) of AIFMD into domestic law [1]. It establishes two AUM thresholds below which a manager can opt for registration instead of full authorisation:
- EUR 100 million: applies to AIFMs that use leverage at the fund level, or whose funds offer redemption rights within five years of initial investment [1].
- EUR 500 million: applies to AIFMs that manage only unleveraged funds with no redemption rights for at least five years from the date of initial investment [1].
For a typical emerging venture capital or private equity manager running a closed-end fund with no fund-level leverage and a minimum five-year investment period, the relevant threshold is EUR 500 million. That covers the vast majority of first and second-time GPs we work with.
The AUM calculation includes all assets under management across all AIFs the manager manages, not just a single fund. It is calculated using the gross method specified in Commission Delegated Regulation (EU) No 231/2013 [2]. That means you include the total value of assets without deducting borrowings. If you manage multiple vehicles, they aggregate.
What registration gives you
A registered (sub-threshold) AIFM in Luxembourg files its registration with the CSSF under Article 3(3) of the AIFM Law [1]. The requirements are deliberately light:
- No minimum capital requirement. Authorised AIFMs must hold initial capital of at least EUR 125,000 (external manager) or EUR 300,000 (internally managed AIF), plus additional own funds of 0.02% of AUM above EUR 250 million [3]. Registered AIFMs have no such requirement under the AIFM Law.
- No mandatory depositary. Authorised AIFMs must appoint a depositary for each AIF they manage [4]. Registered AIFMs are exempt from this obligation under AIFMD, though some fund structures (like SIFs) still require one independently.
- Limited reporting. Registered AIFMs must report to the CSSF on the principal markets and instruments they trade, but they are not subject to the full Annex IV reporting regime that authorised AIFMs face [1].
- No AIFMD remuneration code. The detailed rules on variable compensation, deferral, and pay-in-kind do not apply.
The process itself is straightforward. You submit the registration application to the CSSF with supporting documentation, and the turnaround is measured in weeks rather than months [1].
What registration does not give you
Here is the catch. Registered AIFMs do not have access to the AIFMD marketing passport [5]. That passport lets authorised AIFMs market their funds to professional investors across the EU through a simple notification procedure to their home regulator. Without it, you are limited to marketing under each member state's national private placement regime, which varies enormously in cost, complexity, and availability.
For an emerging manager whose LPs are primarily in one or two countries, this may not matter much. But if you are planning a pan-European fundraise targeting institutional investors in Germany, France, the Netherlands, and the Nordics, the passport is a significant advantage.
Another constraint catches Luxembourg managers off guard: a registered AIFM cannot manage a RAIF [6]. The RAIF Law requires the appointment of a fully authorised AIFM. So if you want to use Luxembourg's most popular unregulated vehicle, you either need to be authorised yourself or appoint a third-party AIFM that is.
Full authorisation: what it actually involves
The CSSF authorisation process for an AIFM is set out in detail on the CSSF website and in CSSF Circular 18/698 [7]. This is what you are signing up for:
- Application. You submit a detailed application covering your governance structure, risk management framework, valuation procedures, delegation arrangements, compliance policies, and business plan. The CSSF reviews the individuals proposed for conducting officer roles and assesses their professional standing and experience [3].
- Capital. EUR 125,000 initial capital for an external AIFM, plus the additional own funds requirement calculated on AUM [3].
- Substance. The CSSF expects real substance in Luxembourg. That means conducting officers who are Luxembourg-resident, a physical office, and genuine decision-making capacity, not just a brass plate [7].
- Depositary. You must appoint a Luxembourg depositary for each fund [4]. For a small fund, this adds material annual cost.
- Ongoing compliance. Full Annex IV reporting to the CSSF, annual audited accounts, compliance with AIFMD remuneration rules, and detailed risk and liquidity management frameworks [7].
- Timeline. The CSSF has published that it aims to process complete AIFM applications within a reasonable timeframe, but in practice I tell managers to plan for four to six months from submission of a complete file.
The transition: what happens when you cross the threshold
If you start as a registered AIFM and your AUM grows past the relevant threshold, you must notify the CSSF within 30 days and apply for authorisation [1]. The CSSF expects you to monitor your AUM on an ongoing basis and to have a plan in place for the transition.
I have seen this play out in practice. A manager raises a successful Fund I under registration, launches Fund II while still below threshold, and then finds themselves crossing EUR 500 million mid-fundraise. If you have not planned for it, you face a scramble to appoint a depositary, build out your compliance function, and submit an authorisation application while simultaneously trying to close investors.
My advice: if your Fund I target is EUR 100 million or more, and you are planning a Fund II within three to four years, model out the AUM trajectory now. If authorisation looks likely within your planning horizon, it may be worth going through the process upfront rather than retrofitting it later.
The third-party AIFM option
A middle path exists. Instead of becoming an authorised AIFM yourself, you can appoint a third-party AIFM that is already authorised. This lets you manage a RAIF, access the EU marketing passport (through the third-party AIFM's licence), and avoid the capital and substance requirements, while staying registered yourself for your own regulatory status.
The trade-off is cost and control. Third-party AIFM fees in Luxembourg typically run between 3 and 8 basis points of NAV annually, with minimums that can be significant for a small fund. And you are delegating regulatory responsibility to someone else, which means their risk appetite and operational processes become your constraints.
For a first fund under EUR 100 million, this is often the right approach. For a second fund, when you have the revenue to support your own infrastructure, it starts to make sense to bring the AIFM in-house.
Practical decision framework
When I guide managers through this, I use a simple framework:
- AUM under EUR 500 million, closed-end, no leverage, LPs concentrated in one or two countries: Register. Appoint a third-party AIFM if you want to use a RAIF.
- AUM under EUR 500 million but planning a pan-European fundraise: Consider authorisation for the marketing passport, or appoint a third-party AIFM that can passport on your behalf.
- AUM likely to cross EUR 500 million within three years: Get authorised now. The cost of building the infrastructure incrementally is lower than doing it under time pressure.
- Strategy involves leverage or redemption rights within five years: Your threshold drops to EUR 100 million. Plan accordingly.
How we help at Infra One
We work alongside both registered and authorised AIFMs in Luxembourg. Our fund administration services cover NAV calculation, investor reporting, capital call and distribution processing, and the regulatory reporting that authorised AIFMs need to file with the CSSF. For managers using a third-party AIFM, we act as the operational layer that sits between the GP and the AIFM, handling the day-to-day fund administration so the AIFM can focus on its oversight role.
If you are trying to figure out whether registration or authorisation is the right path for your fund, reach out. We can walk through your specific AUM trajectory, LP base, and timeline to help you make a practical decision.
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