Beyond fund management: New revenue streams for Luxembourg IFMs 

AIFMD II and UCITS VI have broadened the strategic positioning of investment fund managers (IFMs). Beyond expanding the list of permissible ancillary services, these frameworks now explicitly allow IFMs to provide services to third parties, creating new avenues for operational scalability and revenue diversification. For many IFMs in Luxembourg, this may represent more than a regulatory update. It may signal a shift from viewing governance, risk management, compliance and operational infrastructure solely as regulatory requirements towards leveraging them as revenue-generating capabilities. The ability to monetize existing expertise could become an important differentiator in an increasingly competitive market. 

A broader concept of “third parties” 

According to the explanatory comments to the draft law transposing AIFMD II and UCITS VI, the notion of “third parties” should be interpreted very broadly extending well beyond fund structures and including (non-exhaustive list) other UCITS or AIFs, intermediary vehicles, co-investment vehicles, carried interest vehicles, whether they are linked to funds managed by the IFM, to funds initiated, managed, or advised by an entity belonging to the same group as the IFM, or to other legal entities, such as pension funds, securitization vehicles, or insurance companies. 

This non-exhaustive definition reflects a clear regulatory intent to enable IFMs to operate as multi-service platforms across a wider ecosystem. 

To do so, IFMs must demonstrate adequate expertise, robust governance, and sufficient IT and human resources to support these additional activities. 

Conditions for providing services to third parties 

The CSSF may authorize IFMs to deliver services to third parties, provided that: 

• The IFM already performs these functions internally for the funds it manages 
• The operational setup ensures consistency, quality, and proper risk management 

This principle of extending existing capabilities is intended to ensure that service expansion remains aligned with the IFM’s core competencies and governance framework.  

Authorization and governance requirements 

IFMs looking to offer services to third parties for the first time must: 

• Obtain prior CSSF authorization through a formal application 
• Update their articles of incorporation to reflect the provision of ancillary services 

Importantly, once authorized, the addition of further services under the updated corporate object only requires a notification, rather than a new authorization supporting a more agile expansion model. 

Scope of ancillary services 

The range of services that may be offered to third parties is extensive, including: 

• Human resources services 
• IT services 
• IT services for portfolio management 
• IT services for risk management 
• AML/CFT services 
• Corporate services (e.g., preparation of shareholders' meetings and management boards) 
• Domiciliation services
• Administration services, including accounting
• Risk management services for funds not managed by the IFM 
• Any other activities or services 

Strategic benefits for IFMs 

For years, Luxembourg IFMs have invested heavily in governance, compliance, risk management, reporting and technology infrastructure. The new framework creates an opportunity to leverage these capabilities beyond the funds they manage, potentially transforming traditional cost centers into strategic assets. 

This regulatory evolution represents a structural shift for the IFM model, with several key advantages: 

• New revenue streams: IFMs can monetize existing infrastructure by offering services externally, transforming cost centers (e.g., compliance, IT, risk) into profit-generating business lines 
• Economies of scale: Providing services to a broader client base allows IFMs to spread fixed costs (technology, staff, governance) across multiple entities, improving overall operating margins 
• Strengthened group integration: The ability to support group entities and affiliated vehicles enhances internal synergies and facilitates more integrated product structuring (e.g., private markets, securitization, co-investments) 
• Competitive differentiation: IFMs can position themselves as full-service platforms, offering end-to-end solutions to sponsors, institutional investors, and third-party structures, an increasingly attractive model in the context of private assets and complex fund ecosystems 
• Acceleration of private market strategies: The broad definition of third parties (covering SPVs, securitization vehicles, and co-investment structures) aligns particularly well with the rise of private debt, real assets, and semi-liquid structures, where operational flexibility is critical 

At the same time, IFMs will need to carefully assess governance, conflicts of interest, resource adequacy and operational scalability before expanding their service offering. Success will depend not only on obtaining regulatory approval but also on demonstrating that the additional activities can be supported within a robust and sustainable operating model. 

Information required for authorization 

To obtain approval, IFMs must provide the following information: 

• Type of activity/service 
• A business plan (three-year forecast) 
• Information on delegation (whether fully or partially delegated) 
• Assessment of any impact on conducting officer responsibilities 
• Information on conflict of interest 

Final Thought  

While AIFMD II and UCITS VI are often discussed through the lenses of liquidity management, delegation and loan origination, the possibility for IFMs to provide services to third parties may ultimately prove to be one of the most commercially significant aspects of the reform. For Luxembourg IFMs with mature operating models and scalable infrastructure, it opens the door to new business models and additional sources of revenue growth. 

As Luxembourg continues to strengthen its position as Europe's leading hub for Management Companies, the use of third-party ManCos continues to grow, particularly in private markets. In this environment, the ability to leverage existing governance, risk management and operational capabilities beyond the traditional fund perimeter may create a new source of scale and differentiation. It may also reinforce the strategic position of Luxembourg ManCos within international groups, allowing them to play a broader role in servicing affiliated entities, investment structures and related vehicles across the value chain. 

The ability to transform regulatory substance into commercial opportunity could become a defining characteristic of the next generation of Luxembourg IFMs and contribute to the continued evolution of Luxembourg's Management Company industry. 

How EY can help 

EY can support IFMs in capturing these new opportunities through: 

• Gap analysis and strategic positioning: identifying which services can be externalized and monetized 
• Regulatory authorization support: preparation of CSSF applications and business plans 
• Operating model design: governance, delegation frameworks, and resource assessment 
• Technology and process optimization: enabling scalable IT and reporting infrastructure 
• Risk and compliance frameworks: ensuring alignment with regulatory expectations, including conflicts of interest management 
• Go-to-market strategy: defining target clients, pricing models, and value propositions for third-party service offerings