The AIFM Directive was extensively modified and modernised in March 2024 by Directive (EU) 2024/927, known as AIFMD II. The new provisions represent a comprehensive extension of the existing regulatory framework and had to be transposed into national law by the Member States by 16 April 2026.
Accordingly, the German legislator has issued a legislative package. The AIFMD II was implemented by the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz, "FRiG"). At the same time, further developments to the German fund law were implemented by the Location Promotion Act (Standortfördergesetz, "StoFöG") and the Minimum Tax Adjustment Act (Mindeststeueranpassungsgesetz, "MinStAnpG").
This article provides an overview of the main changes and their practical implications for AIFMs, fund managers and institutional investors.
Fund Risk Limitation Act (FRiG)
The FRiG, which transposes the AIFMD II one-to-one into national law, largely entered into force on 16 April 2026. It was based on the former Fund Market Strengthening Act (Fondsmarktstärkungsgesetz) of the previous government, which did not enter into force during their term.
Lending
The AIFMD II focuses on the harmonisation of lending by AIFs. The authorisation to grant loans in the context of collective asset management has been implemented in section 20 para. 9 of the German Investment Code (Kapitalanlagegesetzbuch, "KAGB"). At the same time, the German legislator gold plated the requirements of AIFMD II and expressly restated the ban of consumer loans in section 16a KAGB. In this respect, the previous strict position of the German legislator, formerly set out in section 285 para. 2 no. 2 KAGB, will be continued.
The KAGB provides differentiated regulations for the various fund types: In accordance with section 221 para. 1 no. 4 KAGB, so-called other investment funds (sonstige Investmentvermögen) may invest into loans and unsecuritised loan receivables, if the investment limit of 30% of the fund assets are observed. Closed-ended public AIFs may grant loans pursuant to section 261 para. 1 no. 10 KAGB, provided that no more than 50% of the AIF's capital is used for this purpose. In addition to direct lending, indirect lending via controlled special purpose vehicles is also permissible (see below).
Section 273a KAGB introduces a uniform licensing regime for the granting of loans for domestic special AIFs, thus replacing the previous system of separate regulations for each type of special AIF.
Section 1 para. 19 no. 24b KAGB defines lending as the granting of a loan either directly by an AIF or indirectly via third parties or a special purpose credit vehicle, provided that the AIF or its AIFM is involved in the structuring of the loan at an early stage. Special purpose credit vehicles, on the other hand, are legally defined in section 1 para. 19 no. 24c KAGB as companies controlled by the AIF or its AIFM and whose purpose is to grant loans for an AIF.
In parallel, the German Banking Act (Kreditwesengesetz, "KWG") clarifies, from a banking supervisory perspective, that such special purpose credit vehicles are not considered credit institutions within the meaning of the KWG if they exclusively engage in the granting of cash loans and do not conduct any other banking business, section 2 para. 1 no. 3e KWG. This is a change from the previous legal situation, according to which loans could only be granted by the AIF and the AIFM, but not by the special purpose credit vehicle itself.
Risk and liquidity management
The AIFMD II introduces stricter requirements for risk and liquidity management. Sections 29a et seq. KAGB establish new obligations for AIFMs engaged in lending business. Reduced requirements apply to shareholder loans, provided that their aggregate nominal value does not exceed 150% of the capital of the AIF, section 29a para. 2 KAGB.
In principle, lending AIFs may only be structured as closed-end funds. However, open-ended structures are permissible if the AIFM proves to BaFin that the AIF has an appropriate liquidity risk management system, section 30 para. 3a KAGB.
Leverage is capped at 175% for open-ended AIFs and 300% for closed-end AIFs. In addition, section 30a KAGB introduces mandatory liquidity management instruments: AIFs must select at least two instruments from the catalogue provided for in Annex V nos. 2 to 8 AIFMD, including the suspension of redemptions or the temporary suspension of new subscriptions.
For AIFMs that manage AIFs that have already issued loans before 15 April 2024, a transitional period until 16 April 2029 applies. During this time, compliance with sections 29a para. 3 to 6 and 30 para. 3a KAGB is presumed.
Ancillary services
The catalogue of permitted ancillary services for AIFMs in section 20 para. 3 KAGB has been significantly expanded. AIFM are now entitled to offer all the functions and activities they already carry out for their own managed AIFs or as part of their ancillary services to external parties. The prerequisite for this is an appropriate handling of possible conflicts of interest. The recitals to AIFMD II list examples of business services in the areas of human resources and IT, as well as IT solutions for the management of portfolios and risks. Such offers to third parties were previously prohibited for AIFM due to the speciality principle practiced by BaFin.
In addition, ancillary services are decoupled. Previously, AIFM always had to apply for a licence for financial portfolio management, which then included the licence to provide investment advice or investment brokerage. BaFin's licensing practice has been restrictive due to the breadth of this licence. In the future, this coupling will no longer apply, which will make it possible to apply for individual licences in accordance with section 20 para. 3 KAGB. It is to be expected that BaFin will examine the granting of a licence in a more activity-related manner, which should practically lead to a more lenient procedure.
In the area of crypto-assets, AIFMs will be entitled to offer certain services in accordance with Regulation (EU) 2023/1114 ("MiCAR"). However, in order to do so, they must first go through the notification procedure provided for in Article 60 para. 5 and 7 MiCAR.
In addition, AIFMs may take over the administration of certain benchmarks in accordance with Regulation (EU) 2016/1011 ("Benchmark Regulation") and may also provide credit services in accordance with the Secondary Credit Market Act (Kreditzweitmarktgesetz).
Outsourcing
Going forward, AIFM will have to ensure that outsourced tasks that are subject to the KAGB comply with the AIFMD, regardless of the supervisory status and location of the service provider, section 36 para. 1 sentence 1 no. 7 KAGB. In practice, this can be difficult for third-country service providers. A conflict settlement for deviating foreign laws has so far not been implemented.
In the case of outsourcing portfolio management or risk management, extended disclosure and disclosure obligations apply, in particular detailed information on the personnel and technical resources of the AIFM, section 22 para. 1 no. 9 lit. b KAGB. However, these reporting obligations will only apply from 16 April 2027.
Furthermore, the requirements for placement agents will be tightened. If AIF distribution is carried out in the name of sales agencies in accordance with Directive 2014/65/EU ("MiFID II") or Directive (EU) 2016/97 ("IDD"), their requirements must be complied with, and the KAGB outsourcing requirements do not apply, section 36 para. 1a no. 2 KAGB.
Distribution of non-EU AIFs
Stricter requirements will also apply to the distribution of non-EU AIFs in Germany. The respective third country must not be on the EU high-risk country list, must have signed a double taxation agreement with Germany in accordance with Article 26 of the OECD Model Tax Convention and must not be included in the EU list of non-cooperative tax jurisdictions, sections 329 para. 1 sentence 1 no. 3, 330 para. 1 sentence 1 no. 3 KAGB.
Service-AIFM
Regulations on conflicts of interest have been significantly tightened in constellations in which an AIF is launched or managed "at the initiative of a third party" (typically a fund initiator/sponsor). Section 27 para. 4a KAGB obligates the AIFM to provide BaFin with detailed explanations and supporting documents which, taking into account any conflicts of interest, document compliance with the conflict of interest requirements under section 27 para. 1 to 4 KAGB in a comprehensible manner.
The focus of the new regulation is to set out in concrete terms what appropriate steps have been taken to avoid conflicts of interest arising from the relationship with the initiator or, where avoidance is not possible, how these conflicts of interest are identified, managed, monitored and, if necessary, disclosed so that the interests of the AIF and its investors are not adversely affected. The scope of application is expressly extended to cases in which the AIF uses the name of the initiator, as well as to structures in which the initiator is involved as an outsourcing company pursuant to section 36 para. 1 KAGB (e.g. as an investment advisor).
In practice, the decisive factor will be which administrative practice BaFin develops in this regard and whether or how the requirements affect cases in which the initiator is also a (substantial) investor in the fund.
Further amendments to the KAGB
In addition to the implementation of AIFMD II, the FRiG contains further amendments to the KAGB.
- Section 23 no. 2a KAGB now requires that the two mandatory managing directors of an AIFM work full-time (at least 40 hours per week) and have their residence in the European Union. Within group structures with several AIFMs, joint managing directors may still be permitted in individual cases.
- As a new supervisory instrument, sections 40a et seq. KAGB – following the example of section 45c KWG – introduce the possibility for BaFin to appoint a special representative. The prerequisite for this is a "special occasion", which, however, is not specified in more detail in the explanatory memorandum of the FRiG. The special representative can be deployed as a preventive measure in the event of deficient organisational structures and is authorised to take over tasks of the AIFM or its management. He has comprehensive information and inspection rights vis-à-vis the management, supervisory body and employees of the AIFM. The costs incurred as a result – including expenses and remuneration – are borne by the AIFM concerned.
- Section 93 para. 3a KAGB provides for a statutory limitation of liability for AIFM that manage contractual funds (Sondervermögen). Such AIFM can now temporarily refuse to fulfil obligations entered into on behalf of the investors if the fund assets are not sufficient. The aim of this regulation is to align the liability regime of contractual funds with that of other fund vehicles. Corresponding contractual provisions have been common practice so far, but the express statutory provision creates legal certainty in this respect and helps standardisation.
- According to section 99 para. 1 KAGB, an AIFM must in future wind up special funds itself after the end of the management mandate; the depositary is no longer responsible.
- Section 261 para. 1 nos. 5 and 6 KAGB now allow closed retail fund of funds structures to invest in open-ended AIFs. This removes a previous restriction.
Location Promotion Act (StoFöG)
The StoFöG, which already largely came into force on 9 February 2026, is intended in particular to implement Regulation (EU) 2024/280 ("EU Listing Act"). In addition, however, independent national and rather extensive amendments to the KAGB and the German Investment Tax Act (Investmentsteuergesetz, "InvStG") were also implemented. A key objective is to mobilise fund capital for the expansion of renewable energies and the financing of infrastructure.
The introduction of an independent definition of the "management of renewable energies" in section 1 para. 19 no. 6a KAGB now makes it possible, in particular, to qualify them as eligible assets for closed-end domestic retail AIFs pursuant to section 261 para. 2 no. 4 KAGB. In addition, AIFs in the form of contractual real estate funds (Immobilien-Sondervermögen) are now allowed to invest up to 15% of the fund assets in infrastructure project companies whose business object is limited exclusively to the construction, acquisition or holding of facilities in the field of renewable energies, section 231 para. 1 no. 8 and para. 3 KAGB.
Another significant change concerns the expansion of the eligible assets for open-ended domestic special AIFs with fixed investment conditions. According to section 284 para. 2 no. 2 lit. g KAGB, they may now invest in all types of domestic and foreign investment funds. Until now, participation was limited to open-ended funds, which effectively excluded investments in typically closed-end private equity or venture capital funds. At the same time, the new regulation enables legally compliant investments in European Long-Term Investment Funds ("ELTIFs"). According to the expressly declared intention of the legislator, this shall channel considerable capital from open-ended domestic special AIFs with fixed investment conditions into renewable energies, infrastructure financing and private equity and venture capital funds.
These regulatory liberalisations are accompanied by changes in investment tax law: Active entrepreneurial management of assets will no longer be detrimental to the investment tax fund status, section 1 para. 2 sentence 1 InvStG. In addition, investment funds can now generally and within the limits of supervisory law participate as shareholders in commercially active partnerships.
Minimum Tax Adjustment Act (MinStAnpG)
The third law of the legislative package, the MinStAnpG, largely entered into force on 23 December 2025 and serves to implement new OECD administrative guidelines.
The changes in the area of controlled foreign company taxation are particularly important for fund practice: The participation threshold is raised to 10% of the nominal capital or voting rights, section 13 para. 1 sentence 1 of the Foreign Tax Act (Außensteuergesetz, "AStG"). Furthermore, additional amounts pursuant to section 10 AStG will not be taken into account when determining income pursuant to section 37 para. 1 sentence 1 InvStG for special funds.
The aim of this regulation is to achieve equal treatment with direct investments and to avoid disadvantages to domestic special AIFs compared to comparable foreign vehicles. The relevant Art. 5 of the MinStAnpG therefore enters into force retroactively as of 1 July 2021 due to the favourable retroactive provisions in sections 11 and 13 AStG.
Conclusion and outlook
In summary, the three legislative initiatives mark a significant step in the development of German investment fund law. By implementing AIFMD II, the FRiG creates a harmonised legal framework for lending by AIFs, combined with stricter requirements for risk and liquidity management as well as concrete clarifications for conflicts of interest management. Together with the innovations introduced by the StoFöG, which opens up new investment opportunities for funds in the areas of renewable energies, infrastructure and private equity in particular, the KAGB will thus receive the necessary modernisations in order to reflect international requirements from the practice and to strengthen Germany as a competitive location. Corresponding tax law adjustments in the StoFöG and MinStAnpG complete the overall picture.
Market participants are now required to explore the new structuring options that are opening up and to adapt to the changed regulatory requirements.
Forward
