{"id":148032,"date":"2026-09-08T08:53:13","date_gmt":"2026-09-08T08:53:13","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=148032"},"modified":"2026-09-08T08:53:13","modified_gmt":"2026-09-08T08:53:13","slug":"germany-alternative-investment-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/germany-alternative-investment-funds\/","title":{"rendered":"Germany: Alternative Investment Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-148032","comparative_guide","type-comparative_guide","status-publish","hentry","guides-alternative-investment-funds","jurisdictions-germany"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">PwC Legal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/06\/download.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">PwC Legal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/06\/download.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Alternative Investment Funds laws and regulations applicable in Germany<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under the German Investment Code (<em>Kapitalanlagegesetzbuch<\/em> \u2013 \u201c<strong>KAGB<\/strong>\u201d), German AIFs may principally be established as:<\/p>\n<ul>\n<li><em>Sonderverm\u00f6gen<\/em> (segregated asset pools);<\/li>\n<li><em>Investmentkommanditgesellschaften<\/em> (investment limited partnerships); and<\/li>\n<li><em>Investmentaktiengesellschaften<\/em> (investment stock corporations).<\/li>\n<\/ul>\n<p><em>Sonderverm\u00f6gen<\/em> (special assets) are AIFs in contractual-type form and do not have legal personality as such. They consist of asset pools and, depending on the underlying investment conditions of the relevant <em>Sonderverm\u00f6gen<\/em>, the assets may either be owned by the management company (<em>Kapitalverwaltungsgesellschaft<\/em> (capital management company) respectively \u201c<strong>KVG<\/strong><em>\u201d<\/em>) or jointly owned by the investors. <em>Spezial-Sonderverm\u00f6gen<\/em> (special investment assets) are a specialized form of <em>Sonderverm\u00f6gen<\/em> (only) for professional and semi-professional investors.<\/p>\n<p><em>Investmentkommanditgesellschaften<\/em> are AIFs in partnership-type form with, in principle, limited liability for investors and a general partner. <em>Spezial-Investmentkommanditgesellschaften<\/em> (special investment limited partnerships) are a specialized form of <em>Investmentkommanditgesellschaften<\/em> (only) for professional and semi-professional investors.<\/p>\n<p><em>Investmentaktiengesellschaften<\/em> qualify as stock corporations with either fixed or variable capital and are established as separate corporate legal entities.<\/p>\n<p>AIFs are generally externally managed by an authorised KVG acting as the alternative investment fund manager (\u201c<strong>AIFM<\/strong>\u201d), although internally managed investment companies are also possible. A lighter registration regime under section 2 paragraph 4 KAGB applies to qualifying sub-threshold AIF-KVGs (\u201c<strong>Small-KVGs<\/strong>\u201d) managing exclusively <em>Spezial-AIFs<\/em> within the relevant statutory thresholds. Sub-threshold KVG structures are also used in the German PE\/VC market.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a structure provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For AIFs in partnership-type form, such as <em>Investmentkommanditgesellschaften<\/em>, the liability of investors is generally limited to the amount of their capital contribution as investors typically invest as limited partners (rather than general partner).<\/p>\n<p>For a <em>Sonderverm\u00f6gen<\/em>, statutory ring-fencing under section 93 KAGB applies and investors are not personally liable to the KVG. Shareholders of an <em>Investmentaktiengesellschaft<\/em> are likewise generally not personally liable for the company\u2019s liabilities.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a market preference and\/or most preferred structure? Does it depend on asset class or investment strategy?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The preferred structure depends on the investor base, asset class, investment strategy, regulatory requirements and tax treatment of the relevant AIF.<\/p>\n<p>AIFs tailored for institutional investors are typically established as Spezial-AIFs that may only be marketed to professional and semi-professional investors under the KAGB. In German market practice, PE\/VC funds are frequently established as (Spezial-) Investmentkommanditgesellschaften, while real estate, infrastructure and multi-asset funds are commonly established as Sonderverm\u00f6gen. The preferred structure and legal form ultimately depend on the specific asset class, strategy, target investor base and applicable regulatory requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory regime distinguish between open-ended and closed-ended Alternative Investment Funds (or otherwise differentiate between different types of funds or strategies (e.g. private equity vs. hedge)) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. The KAGB is the principal German legislation implementing AIFMD as amended by AIFMD II; the principal AIFMD II changes have applied in Germany since 16 April 2026. Under the KAGB, an AIF may be structured as open-ended or closed-ended. Open-ended AIFs typically allow investors to redeem their units on a regular basis. Closed-ended AIFs typically have a fixed term and do not offer redemptions during their lifetime.<\/p>\n<p>The KAGB further distinguishes between Publikums-AIFs (retail AIFs) and Spezial-AIFs (which may only be marketed to professional and semi-professional investors). Different asset-class and strategy-specific rules apply, including those for real estate funds, infrastructure funds and hedge funds.<\/p>\n<p>Closed-ended domestic Publikums-AIFs are subject to the eligible-asset, diversification and leverage framework in sections 261\u2013263 KAGB. Closed-ended domestic Spezial-AIFs have materially greater investment flexibility under section 285 KAGB and may in principle invest in assets whose market value can be determined, subject to their fund terms and other applicable requirements. There is no general rule under current law that closed-ended AIFs must invest primarily in non-financial-instrument assets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions? What factors determine the degree of liquidity that a manager offers investors of an Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The manager\u2019s ability to restrict redemptions and the liquidity offered to investors depend on the AIF\u2019s type, legal structure, underlying assets, strategy, investor base and applicable regulatory requirements.<\/p>\n<p>Closed-ended AIFs typically have a fixed term and do not offer redemptions during the fund\u2019s lifetime.<\/p>\n<p>Open-ended AIFs are subject to the harmonised AIFMD II\/KAGB liquidity-management framework. The AIFM must select at least two appropriate liquidity-management tools (\u201cLMTs\u201d) from the list in Annex V points 2\u20138 AIFMD II: redemption gates, extensions of notice periods, redemption fees, swing pricing, dual pricing, anti-dilution levies and redemption in kind. The selection cannot consist solely of swing pricing and dual pricing.<\/p>\n<p>Suspension of subscriptions and redemptions and side pockets are additional exceptional tools available under the KAGB but do not count towards the minimum-two LMT selection.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the portfolio of its Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>General portfolio illiquidity management measures include portfolio diversification, liquidity buffers, asset-liability management, regular liquidity stress testing and liquidity-management planning.<\/p>\n<p>Open-ended AIFs are additionally subject to the statutory LMT framework described in question 1.5 above. The AIFM must select at least two LMTs from the Annex V list (excluding suspension of subscriptions\/redemptions and side pockets, which are exceptional tools not counting towards the minimum).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on transfers of investors\u2019 interests?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Transfer restrictions depend on the AIF\u2019s legal form and fund documents. Interests in a Spezial-AIF may only be transferred to investors satisfying the applicable professional or semi-professional investor requirements.<br \/>\nTransfers, particularly of interests in an Investmentkommanditgesellschaft, may be subject to GP or KVG consent, rights of first refusal, lock-ups, fees and specified procedures. For open-ended AIFs, investor liquidity is generally provided principally through redemption rather than secondary transfers.<\/p>\n<p>Certain regulated investors may require enhanced transferability rights; these may be addressed in fund documents or a legally binding side letter.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its funds (e.g., diversification requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Portfolio restrictions depend on the relevant AIF category and strategy. Requirements may include risk diversification, eligible-asset restrictions, leverage limits, liquidity management, reporting obligations and investor-protection measures.<\/p>\n<p>AIFMs acquiring control of certain non-listed companies or issuers may become subject to sections 287\u2013292 KAGB, including restrictions during the statutory post-acquisition period on specified distributions, capital reductions and share repurchases. These provisions do not apply to every PE AIF and are subject to statutory scope conditions and exclusions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the local tax treatment of (a) resident, (b) non-resident, (c) pension fund and (d) sovereign wealth fund investors (or any other common investor type) in Alternative Investment Funds? Does the tax status or preference of investors or the tax treatment of the target investments primarily dictate the structure of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs in contractual-type or corporate legal form fall, in principle, under the German Investment Tax Act (\u201c<strong>GInvTA<\/strong>\u201d) and typically qualify as so-called chapter 2-investment funds under GInvTA providing for an intransparent tax regime.<\/p>\n<p>Such chapter 2-investment funds are taxed at fund level with German corporate income tax in respect to certain German source income, including particularly German dividend income, German commercial income and German real estate income. For German dividend income, a final German withholding tax is generally applied at source whereby a reduced withholding tax rate may apply subject to further requirements. Although chapter 2-investment funds could, in principle, be subject to German tax, in practice such funds typically benefit from a wide range of exemptions. Therefore, as a general rule, no effective trade tax is incurred (subject to the structuring of its investments).<\/p>\n<p>German tax-resident investors of such chapter 2-investment funds are generally taxed at investor level with German (corporate) income tax and, as the case may be, German trade tax on the distributions of a chapter 2-investment fund, capital gains from a disposal\/redemption of shares in a chapter 2-investment fund and are subject to an annual minimum taxation known as lump-sum taxation (<em>Vorabpauschale<\/em>). Certain German tax-exempt investors (such as e.g. pension funds, foundations etc.) are typically tax-exempt with a view to investments in chapter 2-investment funds. Foreign (i.e., non-German tax-resident) investors are generally not taxed in Germany with a view to investments in chapter 2-investment funds.<\/p>\n<p>For completeness\u2019 sake, AIFs in contractual-type or corporate legal form subject to strict legal requirements as to number of investors, eligible assets, redemption rights etc. as provided for under section 26 GInvTA may qualify as so-called chapter 3-special investment funds providing for a so-called semi-transparent tax regime.<\/p>\n<p>AIFs in the legal form of partnerships fall not under the GInvTA. Rather, general German tax principles apply. Therefore, AIFs in the legal form of partnerships, as tax transparent vehicles for German income tax purposes, are not taxable entities for purposes of the German (corporate) income tax. Rather, income and gains of such AIFs are, from a German tax perspective, attributed and subject to German (corporate) income tax and, as the case may be, German trade tax in the hands of the underlying German investors. Foreign (i.e., non-German tax-resident) investors of an AIF structured as a partnership may also be subject to German (corporate) income tax pursuant to the German general tax rules for non-residents.<\/p>\n<p>If more than one German tax resident investor is invested in an AIF structured as a partnership, a so-called separate and uniform German partnership tax return (<em>Erkl\u00e4rung zur gesonderten und einheitlichen Feststellung<\/em>) pursuant to \u00a7\u00a7 179 \u2013 183 of the German General Tax Code (<em>Abgabenordnung<\/em>) must be filed with the competent German tax authorities to determine the income attributed to the respective investors.<\/p>\n<p>Furthermore, AIFs structured as a partnership may be subject to German trade tax at fund level if the AIF qualifies as a commercial partnership for German tax purposes and maintains a permanent establishment in Germany. A direct investment in such a commercial partnership for German tax purposes may jeopardize the tax-exempt status for certain German tax-exempt pension funds.<\/p>\n<p>Typically, both the tax status and preferences of the underlying investors of the respective AIF may have an impact on the chosen structure of the relevant AIF.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do investors typically have and what restrictions are investors typically subject to with respect to the management or operations of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investors generally do not participate in day-to-day portfolio management and cannot exercise instruction rights that displace the AIFM\u2019s statutory management responsibility. However, depending on legal form and fund documentation, investors may have information, voting, consent, reserved-matter and investor-advisory-committee rights. The KVG must act independently and in investors\u2019 interests.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Where customization of Alternative Investment Funds is required by investors, what types of legal structures are most commonly used?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs tailored for institutional investors are typically established as Spezial-AIFs. Institutional customisation may also be achieved through separate share or unit classes, feeder or parallel vehicles and investor-specific side-letter arrangements. In German market practice, PE\/VC funds are frequently established as (Spezial-) Investmentkommanditgesellschaften, while infrastructure, real estate and multi-asset funds are commonly established as Sonderverm\u00f6gen. The preferred structure ultimately depends on asset class, strategy, investor base and regulatory requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A KVG managing AIFs in Germany generally requires Bafin authorisation. The lighter registration regime under section 2 paragraph\u00a04 KAGB applies where the AIF-KVG manages exclusively <em>Spezial-AIFs<\/em> and remains within the relevant statutory thresholds: broadly EUR 100 million including leverage, or EUR 500 million for unleveraged AIFs with no redemption rights exercisable during the five years following the initial investment, subject to the precise statutory conditions.<\/p>\n<p>Registered AIF-KVGs are subject to the limited requirements specified by the KAGB.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are Alternative Investment Funds themselves required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The investment conditions (Anlagebedingungen) of domestic Publikums-AIFs are subject to Bafin approval. Marketing is separately subject to the applicable notification regime.<\/p>\n<p>For domestic Spezial-AIFs, there is no equivalent product-approval requirement. However, the investment conditions and material amendments must be submitted to Bafin under section 273 KAGB, and marketing to professional and semi-professional investors remains subject to the applicable distribution notification rules.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the Alternative Investment Fund require a manager or advisor to be domiciled in the same jurisdiction as the Alternative Investment Fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A German-domiciled Spezial-AIF may be managed cross-border by an appropriately authorised EU AIFM under the AIFMD passport, subject to section 54 KAGB. Portfolio-management and other functions may also be delegated to entities outside Germany, including third-country entities, provided the requirements of section 36 KAGB are met.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the Alternative Investment Fund and\/or the manager and\/or the advisor to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A KVG must have its registered office and head office in Germany and adequate personnel, governance, infrastructure and resources appropriate to its business.<\/p>\n<p>Delegated portfolio managers and other delegates must satisfy the applicable authorisation, qualification, resource, supervisory and organisational requirements under section 36 KAGB. These requirements do not themselves create a general requirement for the delegate to be resident or established in Germany.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>An AIF-KVG must generally ensure that a depositary is appointed for each AIF. For certain qualifying closed-ended AIFs, an eligible trustee may perform the depositary function under section 80 paragraph 3 KAGB. The depositary\u2019s responsibilities include custody of custody-eligible financial instruments and ownership verification\/record-keeping for other assets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are local resident directors \/ trustees required?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A German KVG must have at least two Gesch\u00e4ftsleiter (the persons responsible for directing its business for KAGB purposes). They must conduct the business on a full-time basis, reside in the European Union and satisfy the applicable fit-and-proper requirements. While the KVG must have its registered office and head office in Germany, the KAGB does not require the Gesch\u00e4ftsleiter themselves to be German residents.<\/p>\n<p>In practice, Bafin may also expect the management arrangements to ensure effective local oversight, accessibility and appropriate German-language capability, depending on the particular business model. These supervisory expectations should be distinguished from a statutory requirement that a Gesch\u00e4ftsleiter be resident in Germany.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Managing a German Spezial-AIF cross-border generally requires an appropriately authorised EU AIFM using the AIFMD passport, while a domestic registered AIF-KVG is available only where the statutory registration conditions are met.<\/p>\n<p>A foreign delegate or adviser must be assessed under the KAGB delegation regime and applicable German\/EU investment-services legislation. Depending on the activity performed and its territorial nexus to Germany, portfolio management or investment advice may require an EU passport, German authorisation or an applicable exemption. Reverse solicitation should not be treated as a general licensing exemption.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the common enforcement risks that managers face with respect to the management of their Alternative Investment Funds?\u00a0<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Bafin\u2019s enforcement powers under the KAGB may include information requests, inspections, remedial orders, restrictions on business or individual managers, and suspension or withdrawal of authorisation. The KAGB provides for administrative fines and, for specified conduct such as operating without the required authorisation or registration, criminal sanctions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid? Does it vary by asset type?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fees vary materially by strategy, fund size, fee base and investor base. An indicative market range is approximately 1.0%\u20132.5%. Private-markets funds frequently charge by reference to commitments during the investment period with a reduced rate or fee base thereafter, whereas open-ended funds more commonly calculate fees by reference to NAV.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is a performance fee or carried interest typical? If so, does it commonly include a \u201chigh water mark\u201d, \u201churdle\u201d, \u201cwater-fall\u201d, \u201cpreferred return\u201d or other condition? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Performance fees may apply to open-ended and liquid alternative strategies and commonly incorporate high-water marks and\/or hurdles. Carried interest is common in closed-ended private-market strategies and depends on the agreed waterfall. European-style whole-fund waterfalls commonly return contributed capital and any preferred return before carry becomes payable, but deal-by-deal and hybrid structures also exist. A preferred return of 6%\u20138% per annum is an indicative range seen in parts of the market, not a universal rule.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are fee discounts \/ fee rebates or other economic benefits for initial investors typical in raising assets for new fund launches?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Fee discounts, fee rebates or other preferential economics (e.g., specific share classes) may be negotiated by initial, strategic, large or first-close investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are management fee \u201cbreak-points\u201d offered based on investment size?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management-fee breakpoints are commonly offered based principally on the size of an individual investor\u2019s commitment. Such discounts are common but not universal.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are first loss programs used as a source of capital (i.e., a managed account into which the manager contributes approximately 10-20% of the account balance and the remainder is furnished by the investor)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>First-loss programmes are not a standard source of capital in the German AIF market, although they may be used in particular seeding or risk-sharing arrangements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the typical terms of a seeding \/ acceleration program?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Seed investors commonly negotiate enhanced economics and, depending on the structure, enhanced information, governance or consent rights. Seed\/founder classes may carry reduced fees in exchange for early capital, larger minimum commitments and\/or longer lock-ups.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What industry trends have recently developed regarding management fees and incentive\/performance fees or carried interest? In particular, are there industry norms between primary funds and secondary funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Fee pressure and alignment remain important institutional-investor negotiation themes. The fee bases, management-fee rates and carried-interest structures of secondary strategies may differ from primary funds because of deployment profile, portfolio maturity and greater portfolio visibility. There is no single market rule that secondary funds invariably have lower fees or carry.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restrictions are there on marketing Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Marketing AIF interests in Germany is subject to the applicable KAGB marketing and notification regime. In relation to professional and semi-professional investors, the statutory concept of marketing requires an offer or placement on the initiative of the management company or on its behalf. Genuinely investor-initiated investments may therefore fall outside the statutory concept of marketing, but this is fact-sensitive and should not be described as a broad reverse-solicitation safe harbour.<\/p>\n<p>Where marketing occurs, the applicable distribution notification must generally have been completed before marketing begins. The AIFM remains responsible for its KAGB marketing obligations even where placement agents or distributors are used.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the concept of \u201cpre-marketing\u201d (or equivalent) recognised in your jurisdiction? If so, how has it been defined (by law and\/or practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Pre-marketing applies where the information provided to prospective professional or semi-professional investors is not sufficient to enable commitment, does not include subscription agreements (draft or final) and does not include final constitutional documents, prospectuses or offering documents. Draft prospectuses or offering documents may be provided only if they are clearly marked as incomplete and not to be relied upon for an investment decision.<\/p>\n<p>The AIF-KVG must appropriately document pre-marketing and notify Bafin within two weeks after commencement. Where a professional or semi-professional investor subscribes within 18 months after commencement of pre-marketing for an AIF referred to in the pre-marketing, or an AIF established as a result of that pre-marketing, the subscription is treated as resulting from marketing and the applicable marketing notification procedure applies.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can Alternative Investment Funds be marketed to retail investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs may in principle be marketed to retail investors where the relevant Publikums-AIF or other retail-marketing requirements are satisfied. Domestic hedge funds under section 283 KAGB are Spezial-AIFs and therefore cannot be marketed to retail investors. Dach-Hedgefonds (fund-of-hedge-funds) are a permitted retail-AIF category.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your jurisdiction have a particular form of Alternative Investment Fund be that can be marketed to retail investors (e.g. a Long-Term Investment Fund or Non-UCITS Retail Scheme)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Germany provides for <em>Publikums-AIFs<\/em>, which are AIFs that may be marketed to retail investors. The KAGB provides for both open-ended and closed-ended variants, each with its own asset restrictions and investor-protection rules.<\/p>\n<p>European Long-Term Investment Funds (ELTIFs) may also be distributed to retail investors in Germany. The ELTIF 2.0 Regulation, applicable from 10 January 2024, reformed the previous ELTIF regime, including:<\/p>\n<ul>\n<li>broader scope of eligible assets and investments;<\/li>\n<li>removal of the previous EUR 10,000 minimum investment and the 10% aggregate exposure cap for most retail investors; and<\/li>\n<li>more flexible fund rules, including higher diversification limits and the ability to pursue master-feeder and fund-of-funds strategies.<\/li>\n<\/ul>\n<p>Retail distribution of ELTIFs nevertheless remains subject to the applicable ELTIF\/MiFID investor-protection and suitability requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the minimum investor qualification requirements for an Alternative Investment Fund? Does this vary by asset class (e.g. hedge vs. private equity)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The KAGB distinguishes the following investor categories:<\/p>\n<ul>\n<li>professional investors (<em>professionelle Anleger<\/em>);<\/li>\n<li>semi-professional investors (<em>semiprofessionelle Anleger<\/em>); and<\/li>\n<li>retail investors (<em>Privatanleger<\/em>).<\/li>\n<\/ul>\n<p>Professional investors are those referred to in Annex II of MiFID II.<\/p>\n<p>Semi-professional investors include:<\/p>\n<ol>\n<li>investors committing at least EUR 200,000, where: (i) the investor\u2019s written risk acknowledgement is made in a document separate from the investment commitment; (ii) the AIFM has assessed the investor\u2019s expertise, experience and knowledge; and (iii) the AIFM confirms in writing that the prerequisites are satisfied;<\/li>\n<li>relevant AIFM directors and employees investing in a fund managed by the AIFM;<\/li>\n<li>investors committing at least EUR 10 million; and<\/li>\n<li>qualifying public-law bodies and related entities, where the Federal Government or a Land has invested in the same <em>Spezial-AIF<\/em> at the same or better terms.<\/li>\n<\/ol>\n<p>Retail investors comprise all investors not qualifying as professional or semi-professional.<\/p>\n<p>Investor classification does not itself vary by asset class, although product-specific marketing restrictions do.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Regulated institutional investors may themselves be subject to prudential, investment, concentration, look-through, liquidity or eligibility requirements. For example, certain German insurers, pension funds and occupational pension schemes subject to the Anlageverordnung may require particular AIF characteristics or contractual rights before an AIF investment qualifies as eligible.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on the use of intermediaries to assist in the fundraising process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Intermediaries such as placement agents and distributors may assist in the fundraising process but remain subject to their own applicable authorisation and conduct requirements. Where the activity constitutes pre-marketing, section 306b paragraph 6 KAGB restricts the categories of third party that may conduct pre-marketing on behalf of an AIFM.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the use of \u201cside letters\u201d restricted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Side letters are permissible in principle and commonly used for institutional investors, but remain subject to the KVG\u2019s fair-treatment obligations. Under section 26 paragraph 3 KAGB, preferential treatment may be granted only where such treatment is provided for in the AIF\u2019s investment conditions, articles of association or partnership agreement. Individualised treatment is more constrained for retail AIFs.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements with respect to side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Preferential treatment granted to investors must be contemplated by the AIF\u2019s investment conditions, articles of association or partnership agreement in accordance with section 26 paragraph 3 KAGB. For professional and semi-professional investors, the AIFM must disclose the preferential treatment, the type of investors receiving it and, where relevant, their legal or economic links with the AIF or AIFM in accordance with section 307 KAGB.<\/p>\n<p>For a domestic Spezial-AIF, the investment conditions and material amendments must be submitted to Bafin under section 273 KAGB. The existence of a side letter does not by itself create a general statutory requirement for the separate side-letter document always to be filed with Bafin.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most common side letter terms? What industry trends have recently developed regarding side letter terms?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Institutional investors commonly negotiate commercial, regulatory and tax-related side-letter provisions, potentially including MFN rights, enhanced reporting and transparency, tax\/regulatory covenants, excuse or exclusion rights, transfer rights, fee\/carry arrangements, advisory-committee rights and investor-specific compliance requirements. German regulated investors may additionally seek matters such as enhanced transferability, trustee blocking notices (Sperrvermerke) or limitations on specified default remedies, but such requirements are investor- and regulatory-regime-specific rather than universal.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4188<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/148032","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=148032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}