Alternative Investments: Luxembourg Sets the Pace in 2026

Interview & podcast by paperjam.lu from 14.01.2026

Luxembourg is a leading hub for alternative investments. The entry into force of a new carried interest tax regime in 2026 is expected to further strengthen this position. What is this new regime about? What impact will it have? And what should market participants pay particular attention to? Tax Director Laura Zahren and Tax Partner Bertrand Droulez from BDO, share their insights on these questions.

“A Financial Place to Be”

When it comes to alternative investments—non-listed assets such as real estate, cryptocurrencies or private equity, to name just a few—Luxembourg has firmly established itself as the place to be. Backed by a comprehensive ecosystem bringing together experts including fund administrators, distributors and auditors, as well as key industry associations such as ALFI, LPEA and LFF, the country stands out for both its dynamism and the breadth of its offering.

Luxembourg’s strong reputation is largely driven by a proactive legislator, committed to continuously adapting the legal framework, on the one hand, and by close and ongoing dialogue with industry professionals, on the other. Agility and accessibility are two defining strengths that set the Luxembourg financial centre apart from larger jurisdictions.

“What is also remarkable is the completeness of the toolbox Luxembourg has to offer,” highlights Bertrand Droulez. All investor profiles and industry stakeholders can find solutions tailored to their specific strategies, regardless of the asset class concerned. Finally, when assessing the key strengths of the Grand Duchy, its economic and political stability cannot be overlooked—an important factor for the many European and international investors operating in Luxembourg.

A New Carried Interest Regime

This is the topic currently at the centre of industry discussions: a new tax bill relating to the share of profits allocated to fund managers is expected to come into force in 2026. In practical terms, it introduces a mechanism designed to reward high-performing fund managers in line with the results they deliver.

One of the main consequences of this reform will be a significant boost to Luxembourg’s attractiveness. “Luxembourg was already highly attractive for middle- and back-office professionals; with this new regime, Luxembourg hopes to become equally appealing for front-office players and, more broadly, for all stakeholders along the value creation chain,” explains Laura Zahren. She continues: “Already recognised as an operational hub, the financial centre will be elevated to a leading global decision-making hub.” Bertrand Droulez shares this view, while also highlighting certain prerequisites: “For fund administrators, the key challenge in 2026 will be to reassess their organisational structures, the way remuneration schemes are designed, and how they approach talent acquisition.”

Towards the ‘Retailisation’ of Private Markets?

Beyond the new carried interest regime, one of the major trends currently shaping the alternative investment landscape is the retailisation of private markets—that is, the democratisation of an asset class that was previously reserved for sophisticated investors with high entry thresholds.

This is also Laura Zahren’s perspective: “Thanks to the ELTIF 2.0 regulation, access to private markets is becoming more accessible to a broader audience. For fund sponsors, this democratisation supports their search for new sources of capital, particularly in an increasingly competitive environment.” A similar trend can be observed in the continuation fund space, which was once a niche segment but has gained significant traction in recent years. Bertrand Droulez explains this growing appeal as follows: “Continuation funds offer a high degree of flexibility, allowing investors either to maintain their exposure or to exit when appropriate. This flexibility is particularly attractive in today’s market environment.”