Loan origination funds: Ireland vs Luxembourg (AIFMD II)

Search results on Irish direct-lending funds still describe a 200% leverage cap, a 25% diversification limit and a mandatory closed-ended structure. That is the deleted Irish regime. The Central Bank of Ireland removed its loan-origination chapter from the AIF Rulebook on 5 May 2026, alongside its CP162 feedback statement (Question 71). Both countries now run loan-originating funds under Directive (EU) 2024/927, known as AIFMD II. Member States had to apply it from 16 April 2026 (Art. 3). Luxembourg did so on that date; Ireland's S.I. 181/2026 came into operation on 1 May 2026 (Reg. 1).

The domicile question has changed shape as a result. It is no longer which country has lighter lending rules, since the substantive rules are now the same. It is which vehicle, which authorisation route and which national extras. This page sets that comparison side by side.

The rules bind authorised AIFMs of AIFs that originate loans. Sub-threshold managers are covered only if they opt in (AIFMD Art. 3(2) to (4)). Ireland extends the rules to registered and non-EU AIFMs of QIAIFs (AIF Rulebook, Ch. 2 Parts III and IV).

Three terms carry the rest of the page. A loan-originating AIF is a fund whose investment strategy is mainly to originate loans. A fund also qualifies if its originated loans have an aggregate notional value of at least 50% of its net asset value (Art. 4(1)(at) of the consolidated AIFMD). Crossing either test switches on the leverage caps and the closed-ended default.

The commitment method is the AIFMD leverage calculation that nets derivative positions and converts them into equivalent asset exposure. The new caps measure exposure over NAV on this method. That is a different base from the old Irish gross-assets test. Originate-to-distribute is the prohibited strategy of originating loans with the sole purpose of selling them on.

The full matrix, with the primary source for each row:

Product laws add their own limits on top of the shared AIFMD rules. A RIAIF may not borrow more than 25% of its net assets (AIF Rulebook, Ch. 1 Part I, section 1.iii, para. 2). A SICAR must invest in securities representing risk capital (SICAR Law, Art. 1(1)). A RAIF or SIF must spread investment risk (RAIF Law, Art. 1(1)(b); SIF Law, Art. 1(1)). A RAIF that elects the risk-capital regime of Art. 48 of the RAIF Law is exempt from risk spreading.

The one-line read: for authorised AIFMs, the substantive lending rules are now the same in both domiciles. What still differs is the vehicle mechanics, the authorisation route and each country's remaining national layer.

Both transpositions copy the directive closely. Ireland places the limits in a new Regulation 17A and in Regulation 18(4) to (6) of the 2013 AIFM Regulations (S.I. 181/2026, Regs. 9 and 10). Luxembourg places them in Art. 14(5) to (12) and Art. 15(3) of the 2013 AIFM Law (law of 3 March 2026, Art. 35 and 36). The ELTIF 2.0 vs Part II UCI comparison maps the directive articles onto the Luxembourg article numbers.

Art. 15(4b) of the amended AIFMD sets the cap in two limbs. The AIFM must ensure leverage "represents no more than: (a) 175%, where that AIF is open-ended; (b) 300%, where that AIF is closed-ended". Leverage is the ratio of the AIF's exposure, calculated on the commitment method, to its NAV (consolidated text).

Two carve-outs matter in daily operations, both inside Art. 15(4b). Borrowing fully covered by contractual capital commitments from investors does not count as exposure (third subparagraph). That covers the standard subscription line. Funds whose lending consists solely of shareholder loans not exceeding 150% of the AIF's capital in aggregate are outside the caps (final subparagraph). Under Art. 4(1)(as), a shareholder loan goes to an undertaking in which the AIF holds at least 5% of capital or voting rights. It cannot be sold independently of that holding.

One precision is often blurred. The shareholder-loan exemption lifts the leverage caps only. The closed-ended default in Art. 16(2a) has no shareholder-loan carve-out. A shareholder-loan-only fund that meets the loan-originating AIF definition still defaults to closed-ended unless it makes the liquidity demonstration. The same 150% threshold also lifts the credit-policy requirements in Art. 15(3) for shareholder loans.

The history explains why the comparison used to matter. Ireland's deleted L-QIAIF chapter capped gross assets at 200% of NAV (CP162, item 76, reproducing the March 2024 Rulebook). That is a different and stricter basis than the new commitment-method test. Luxembourg had no product-level cap at all, which is why so much private credit was structured through unregulated SCSps and RAIFs there.

AIFMD II replaced the Irish cap and placed the first cap on the Luxembourg vehicles at the same time. A closed-ended fund that was over the legacy Irish limit can sit inside 300% today. A Luxembourg RAIF that never had a cap now has one, set out in Art. 14(8) of the 2013 AIFM Law as amended (Legilux, Art. 35).

Art. 15(4i) requires the AIF to retain 5% of the notional value of each loan it has originated and subsequently transferred. The slice is held to maturity for loans of up to 8 years, and for consumer loans whatever their maturity. For every other loan it is held for at least 8 years.

The second subparagraph lists four derogations. They cover liquidation, sanctions or product-requirement compliance, and sales needed to implement the strategy in investors' best interests. The fourth covers sales of deteriorating loans where the buyer is told. On request, the AIFM must show its home regulator that a derogation applies.

Art. 15(4h) separately bans the pure originate-to-distribute model, meaning originating with the sole purpose of transferring. Art. 15(4e) prohibits lending to the AIFM, its staff, its depositary or its delegates. It also catches entities in the AIFM's own group (point (d)). The exception is a group financial undertaking that exclusively finances borrowers outside points (a) to (c). Those are the AIFM and its staff, the depositary and its delegates, and the AIFM's delegates and their staff. Art. 15(4f) attributes all loan proceeds to the AIF, net of allowable administration fees, and requires the related costs to be disclosed.

None of this is domicile-specific. Ireland copies the rules into Regulation 17A(12) to (23) of the 2013 AIFM Regulations (S.I. 181/2026, Reg. 9). Luxembourg copies them into Art. 14(9) to (12) of the 2013 AIFM Law (Legilux, Art. 35). A Dublin ILP and a Luxembourg SCSp carry the same retention record-keeping burden.

Art. 16(2f) delegates the detail to an ESMA regulatory technical standard (RTS). ESMA's final report was published on 21 October 2025. The draft RTS would require sound liquidity management and available liquid assets, with no fixed minimum. It would add liquidity stress tests at least once a year and a redemption policy aligned to the liquidity profile.

The Commission's letter of 1 October 2025 lists that RTS among 115 "non-essential" Level 2 measures. It will not adopt them before 1 October 2027 (Commission annex, row 45; Commission publication of 6 October 2025). The Central Bank confirmed in May 2026 that the RTS had not been adopted (Feedback Statement, Q72).

In practice, the open-ended demonstration runs on the Level 1 text plus each regulator's judgment. An evergreen private-credit fund negotiates its liquidity case with the AIFM's home-state regulator, which is the CBI or CSSF for an Irish or Luxembourg AIFM. Neither side yet has the binding standard both will later be held to.

Ireland adds one restriction. The Central Bank will not let non-EU AIFMs manage open-ended loan-originating QIAIFs while the RTS is unadopted. It cited the obligations the RTS would place on the AIFM (Feedback Statement, Q72). The AIF Rulebook applies the same closed-ended rule to QIAIFs with a registered AIFM (AIF Rulebook, Ch. 2 Part III para. 2 and Part IV para. 2).

The full position for each population follows.

• Constituted before 15 April 2024, raising no new capital after it: deemed to comply with Art. 15(4a) to (4d) and Art. 16(2a) indefinitely. A fully raised 2022-vintage closed-ended fund can run off untouched by those limits.
• Constituted before 15 April 2024, still raising: may maintain, but not increase, concentrations or leverage above the new limits until 16 April 2029, then full compliance. A fund below a limit may not rise above it in the meantime.
• Loans originated before 15 April 2024: outside the credit-policy rule (Art. 15(3)(d)), the connected-party ban, the proceeds rule, the consumer provision, the originate-to-distribute prohibition and risk retention (Art. 15(4e) to (4i)), whatever the fund does next.
• Opt-in: an AIFM of a pre-15 April 2024 fund may choose to apply the new limits early by notifying its home regulator.

Funds constituted on or after 15 April 2024 get no grandfathering and comply in full from the national application date. Ireland transposes the transitional rules in Regulation 60(8) to (13) of the 2013 AIFM Regulations (S.I. 181/2026, Reg. 26). Luxembourg places them in Art. 58(7) of the 2013 AIFM Law (Legilux, Art. 54).

Note the risk inside the middle population. "Maintain but not increase" means a redemption or NAV fall that pushes a grandfathered ratio higher is a problem to manage, not a status to rely on.

Before AIFMD II, national approaches to fund lending diverged. Recital 13 of Directive (EU) 2024/927 says this hindered an internal market for loan origination. Several Member States treated lending as a banking-licence activity. An Irish or Luxembourg fund lending into those markets needed local workarounds.

The recital states the aim directly: common rules "to make it possible for AIFs to develop their activities by originating loans in all Member States". The scalability gain from a single domicile follows from that.

Two limits apply. The directive creates no freestanding lending passport. The passports in AIFMD Art. 32 and 33 govern marketing units of an AIF and managing an AIF established in another Member State; they say nothing about where the fund lends. Art. 15(4g) also lets any Member State prohibit AIF lending to consumers in its territory. Ireland and Luxembourg have both done so at home, so a pan-EU consumer-lending strategy must be checked country by country. Corporate direct lending, the core private credit business, is unaffected.

The function itself is new to the AIFM licence. Annex I point 2(d) of the AIFMD now lists "originating loans on behalf of an AIF". Ireland inserted it into Schedule 1 of the 2013 AIFM Regulations (S.I. 181/2026, Reg. 27) and Luxembourg into Annex I of the 2013 AIFM Law (Legilux, Art. 55). The Central Bank opened a streamlined process for extending AIFM authorisations on 29 January 2026 (CBI Markets Update, Issue 1 2026).

Ireland. The May 2026 AIF Rulebook deleted the prescriptive loan-origination chapter (Feedback Statement, Q71). Alongside it went the general restriction on QIAIFs granting loans or acting as guarantor for third parties (Q8). The Central Bank's consultation said guarantees are standard practice in bridge financing, fund-family financing and portfolio-company financing (CP162, item 13). Those structures no longer need workarounds.

What remains Irish is the product. The QIAIF is a regulated product with a depositary. The CBI authorises it on a complete application filed by 5pm on the business day before the proposed authorisation date (CBI authorisation process). Loan origination is not on the list of strategies that need a pre-submission (CBI pre-submission process). The ILP gives the partnership form institutional credit investors expect.

Irish administrators also ran the L-QIAIF regime for a decade. Its closed-ended structure, connected-party ban and lending restrictions (CP162, item 76) have close counterparts in the directive. The Central Bank's revised Retail Investor AIF chapter also lifts the ban on granting loans, which opens a loan-originating RIAIF (Feedback Statement).

The consumer-lending prohibition is retained. It now sits in Regulation 17A(15) to (18) of the AIFM Regulations, inserted by Regulation 9 of S.I. 181/2026. It bars lending to consumers in the State and servicing such credits. Marketing in Ireland of an AIF that lends to consumers elsewhere remains permitted.

The national extra for smaller and non-EU managers sits in Chapter 2 of the Rulebook. Part III covers a QIAIF with a registered AIFM and Part IV one with a non-EU AIFM. Under paragraph 1(f) of each Part, that manager must comply with Regulation 16(6)(d), 16(6A), 16(6B) and 17A of the AIFM Regulations. Separately, a loan-originating QIAIF with such a manager must be closed-ended (paragraph 2) (AIF Rulebook, Ch. 2 Parts III and IV, paras. 1(f) and 2).

Luxembourg. The law of 3 March 2026 (the former Bill 8628) adds the directive's definitions and puts loan origination on the AIFM's list of permitted functions (Art. 55). It exercises the consumer-lending prohibition: Art. 29 inserts a new Art. 4-1 into the 2013 AIFM Law. Otherwise it changes little, because Luxembourg never had a bespoke loan-fund product regime to dismantle.

The structuring ladder is untouched. A RAIF reaches market without CSSF product approval: it must appoint an authorised AIFM and is entered on a list kept by the Luxembourg Business Registers (RAIF Law, Art. 4 and 34). An SCSp outside the product laws also needs no product approval. The SCSp is a legal form, not a product: a SIF can itself be an SCSp (SIF Law, Art. 25). A SIF or SICAR adds CSSF product authorisation where investors want it (SIF Law, Art. 42; SICAR Law, Art. 12).

Enhanced AIFMD II reporting applies from 16 April 2027. Art. 57 of the law defers its two reporting articles, Art. 16 and Art. 42 points 1° and 2°, to that date (Legilux). Where a Luxembourg credit vehicle is meant to reach retail investors, the wrapper question runs on top of this one. Our ELTIF 2.0 vs Luxembourg Part II UCI comparison sets the same loan-origination rules against the ELTIF's own borrower and maturity conditions.

The full comparison follows, with the reasoning for each row.

The old decision rule was "Luxembourg, because Ireland's L-QIAIF regime is tighter than Luxembourg's nothing". The L-QIAIF meant 200% gross leverage, 25%-of-net-assets diversification, closed-ended only, and no consumer or connected lending. That rule is gone on both sides: Ireland deleted the chapter and Luxembourg acquired a cap.

Ireland spent 2021 to 2026 removing its disadvantages. First came the ILP overhaul: the Investment Limited Partnerships (Amendment) Act 2020 commenced on 1 February 2021, with the beneficial-ownership sections following on 1 March 2021. Then the Rulebook rebuild swapped a prescriptive national regime for the directive floor. The Central Bank deleted its own chapter to align with the EU framework without additional national requirements (Feedback Statement, Q71).

Luxembourg's incumbency in private debt remains large. The realistic frame for a new credit platform is no longer a choice between rulebooks. It is vehicle mechanics and service-provider fit under one shared rulebook.

For the Irish partnership vehicle itself, covering the 1994 Act, the QIAIF or RIAIF choice, drawdowns and authorisation, see the Irish ILP credit-funds guide.

Search results on this topic need care. Law-firm guides from 2018 and 2023 on establishing an Irish loan origination fund still rank for it. They describe the L-QIAIF regime accurately as it then stood: a 200% gross-assets leverage cap, 25%-of-net-assets per-group diversification, a mandatory closed-ended structure and a prohibited-borrower list. The Central Bank reproduced that deleted text in its consultation (CP162, item 76, pages 146 to 152 of the March 2024 Rulebook). Every one of those numbers was removed from the AIF Rulebook on 5 May 2026.

The firms that wrote the older guides have since published notes on the new framework. The older material can still outrank them, so check the date on anything you cite.

The two regimes' numbers are close enough to be misapplied without anything obviously breaking. Take a COO who runs a closed-ended Irish credit fund to the old 200% gross-assets cap. They may believe they have headroom under the new 300%. The new cap, though, is commitment-method exposure over NAV, a different calculation on a different base.

The 20% concentration limit they remember as "25%, everyone" now catches only financial-sector borrowers. Their fund documents may still hard-code the stricter deleted rule.