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Prepared by the LPEA Fund Finance (Banking) Working Group | Luxembourg Private Equity and Venture Capital Association
Recently, the LPEA Fund Finance Working Group conducted a dedicated survey among LPEA members to assess the current state of the fund finance market in Luxembourg. With responses from borrowers, GPs and bank lenders, the survey provides a timely snapshot of market practices, product usage and perceptions of liquidity and jurisdictional positioning.
Fund finance remains a core tool for market participants. A clear majority of respondents confirmed that they actively use fund finance facilities, underlining their continued importance in fund liquidity management. Usage was most common among larger organisations, reflecting both balance sheet scale and operational sophistication. As one respondent noted, “For larger platforms, fund finance is no longer opportunistic – it is part of the core operating model.”
Subscription lines still dominate, but structures are evolving. Subscription facilities remain the most widely used product, with half of respondents relying exclusively on them. However, more than a third of respondents use both subscription and NAV-based facilities, signalling a gradual broadening of financing strategies. NAV-only facilities and GP financing remain more selective tools. Participants have commented that NAV lines are being looked at more frequently, but sponsors are still cautious and selective in how and when they deploy them.
Luxembourg continues to gain prominence as a fund finance center on both the lender and the borrower side. The survey highlights an increasing involvement of Luxembourg-based teams in the structuring and decision-making process. From the sponsor side, fund investment teams are frequently involved alongside finance and legal functions, and structuring is often undertaken jointly at head office and Luxembourg level. As one respondent observed, “We are seeing more real decision-making happening in Luxembourg, particularly for European strategies.”
Views on liquidity were mixed. While some respondents described the Luxembourg fund finance market as sufficiently liquid for well-established sponsors, others highlighted challenges in accessing local financing, particularly for larger ticket sizes or NAV facilities. One respondent noted that “Liquidity exists, but it is inconsistent – especially once you move beyond plain vanilla subscription lines.”
Despite Luxembourg’s central role as a fund domicile and booking location, English law remains the dominant governing law for fund finance facilities, particularly in syndicated transactions. Luxembourg law is typically used for bilateral transactions or where counterparties are locally based. As one respondent explained, “English law is still the default for international syndications – it’s about market convention rather than legal quality.”
Overall, the survey confirms that Luxembourg is firmly embedded in the global fund finance ecosystem while also highlighting areas for further development. The LPEA Fund Finance Working Group views these findings as the basis for ongoing dialogue between sponsors, lenders and other stakeholders to strengthen market depth, liquidity and product breadth over the coming years.
