Ch. 4ADVANCED ~15 mins

Investment Rules & Restrictions

UCITS limits and AIF flexibility

UCITS rules divide eligible assets into core categories and a residual non-core bucket. The CSSF expects pre-trade controls when the trash ratio is used.

Asset Category	Key Conditions
Transferable securities	Listed/traded on a regulated market; loss limited to investment; liquidity must not impair redemptions
Money Market Instruments (MMIs)	Liquid, precisely valued; no exposure to precious metals; no short selling of MMIs
Deposits with credit institutions	Eligible subject to framework; concentration limits apply (max 20% per institution)
UCITS / eligible UCIs	Max 20% in one target UCITS/UCI compartment; max 30% in non-UCITS funds
Financial Derivative Instruments	Underlying must be eligible UCITS asset; OTC counterparty prudentially approved; daily valuation required
Non-core / trash ratio	Unlisted/ineligible assets — hard cap at 10% of NAV. Cannot include precious metals or virtual assets

Virtual Assets: Prohibited for UCITS

The CSSF confirms UCITS cannot invest directly or indirectly in virtual assets (crypto). AIFs aimed at well-informed investors may invest subject to governance requirements.

▸Derivatives on commodities or non-financial indices are NOT eligible UCITS assets
▸If a transferable security embeds a derivative, the UCITS must apply a 'look-through' to the derivative underlying
▸UCITS global exposure from derivatives must not exceed 100% of NAV (net exposure ≤ NAV)
▸OTC derivative counterparties must meet CSSF-approved prudential standards