Germany is one of the first countries to implement Directive 2011/61/EU on alternative investment fund managers (“AIFMD”). On 16 May 2013, the German Federal Parliament (Bundestag) adopted the Kapitalanlagegesetzbuch (Law on Capital Investments) (“KAGB”) which will enter into force on 22 July 2013.

The new KAGB comprises the future legal framework for investment funds in Germany and, in line with the motivations behind the European AIFMD, aims to impose stricter risk-limiting rules for grey capital market investments.

Generally speaking, the AIFMD and Germany’s KAGB do not regulate the alternative investment fund (“AIF”) itself. Instead, they address entities managing and / or marketing alternative investment funds (“AIFM”) and set out specific rules for the authorisation of fund managers and the operation and transparency of funds.

The broad scope of the KAGB will capture a significant section of fund managers who are currently unregulated. In particular, the KAGB will affect managers of hedge funds, private equity funds and real estate funds. However, the KAGB might have an even wider impact by potentially capturing real estate investment trusts (“REITs”) and other investment vehicles.

As a result, fund managers will need to carefully consider the implications of the new law for their businesses. As a first step, fund managers should examine if they fall within the scope of the KAGB. Secondly, the organisational structures have to be reviewed to ensure that all necessary measures are put in place so as to comply with the KAGB. Last but not least, an application for an authorisation under the KAGB has to be submitted by 22 July 2014 at the latest.

Benjamin Schwarzfischer