AIFM Directive — a look into the future

The Fede­ral Minis­try of Finance published a discus­sion draft for an imple­men­ta­tion law on July 20. It is posi­tive that Germany was the first member state to deve­lop a draft law for full imple­men­ta­tion. This discus­sion draft is to be intro­du­ced into the parlia­men­tary process in the fall. The current task is to make the problems contai­ned in the discus­sion draft clear to decis­ion-makers and to work toward solutions.

From the perspec­tive of the German private equity indus­try, there are three sticking points in particular

1. so-called non-profes­sio­nal inves­tors should no longer be allo­wed to invest directly in private equity funds. This prohi­bi­tion covers, for exam­ple, many high net worth indi­vi­du­als but also many other insti­tu­tio­nal inves­tors who have the rele­vant expe­ri­ence. Such inves­tors are parti­cu­larly important for German venture capi­tal funds. A loss of this inves­tor group signi­fi­cantly redu­ces the available equity capital.

2. so-called small mana­gers should receive an exemp­tion from regu­la­tion under the AIFMD in order to avoid over­re­gu­la­tion. Contrary to the AIFMD, the discus­sion draft provi­des as a further condi­tion for the exemp­tion that the funds mana­ged by the mana­ger must have profes­sio­nal inves­tors only. Howe­ver, German funds typi­cally have a broa­der inves­tor base, so the excep­tion is actually not available. We can only hope that the Commission’s plan­ned VC regu­la­tion will provide relief.

3. accor­ding to the discus­sion draft, these funds must invest predo­mi­nantly in ’non-finan­cial instru­ments’. Howe­ver, the invest­ment objects of private equity and venture capi­tal funds are often finan­cial instru­ments, which unduly limits the funds’ invest­ment options.

The realiza­tion of the draft would repre­sent a profound change in the legal frame­work for the private equity indus­try in Germany. Other member states, such as France, will imple­ment the direc­tive in a way that promo­tes the market, so that the ques­tion of loca­tion will arise in many places. It would be desi­ra­ble if Germany were also to strive for compe­ti­tive frame­work conditions.