Key Takeaways
- • Germany's regulatory framework for Alternative Investment Funds is governed primarily by the Capital Investment Code (KAGB), which was comprehensively amended by the Fund Risk Limitation Act (FRiG) effective April 16, 2026, transposing the revised AIFMD II into German law.
- • AIF Managers domiciled in Germany must obtain a full licence from BaFin (German Federal Financial Supervisory Authority) or register as a "Small AIFM" under lighter regulatory requirements, with the latter available only to managers meeting specific AuM and fund-type criteria.
- • Small AIFM registration is accessible to managers handling only institutional AIFs (Spezial-AIF) with AuM not exceeding €100 million, or €500 million for closed-ended, unleveraged funds, creating a tiered regulatory approach for fund managers of varying scale.
- • The regulatory framework implements both the European UCITS Directive and the AIFMD into German law, with additional product-specific EU regulations potentially applicable including Long-Term Investment Funds, Venture Capital Funds, Social Entrepreneurship Funds, and Money Market Funds regulations.
Summary
Germany's alternative investment fund regulatory landscape underwent significant modernization on April 16, 2026, with the entry into force of the Fund Risk Limitation Act (FRiG), which comprehensively amended the German Capital Investment Code (KAGB). This amendment transposed the revised AIFMD II—formally adopted by the EU in March 2024—into German domestic law, representing a substantial update to how AIFMs operate within the German jurisdiction.
The regulatory framework establishes a dual-licensing structure for AIF Managers domiciled in Germany. Managers must either obtain a full licence from the German Federal Financial Supervisory Authority (BaFin) or qualify for registration as a "Small AIFM" under a lighter regulatory regime. This tiered approach accommodates managers across different scales and operational models. The Small AIFM registration pathway is restricted to specific manager profiles: those managing exclusively institutional AIFs (Spezial-AIF), which are investment funds limited to professional and semi-professional investors, with assets under management not exceeding €100 million. Alternatively, managers operating solely closed-ended, unleveraged AIFs may register as Small AIFMs with AuM up to €500 million. This higher threshold for unleveraged funds reflects the reduced systemic risk profile of such structures.
Beyond the core KAGB framework, German AIFMs may be subject to additional product-specific EU regulations depending on their fund offerings. These include the European Long-Term Investment Fund Regulation, the European Venture Capital Fund Regulation, the European Social Entrepreneurship Funds Regulation, and the Money Market Funds Regulation. The regulatory approach prioritizes manager-level oversight, with fund regulation exercised primarily through regulation of the fund manager rather than direct fund-level authorization, a structure consistent with the AIFMD architecture.
The regulatory framework establishes a dual-licensing structure for AIF Managers domiciled in Germany. Managers must either obtain a full licence from the German Federal Financial Supervisory Authority (BaFin) or qualify for registration as a "Small AIFM" under a lighter regulatory regime. This tiered approach accommodates managers across different scales and operational models. The Small AIFM registration pathway is restricted to specific manager profiles: those managing exclusively institutional AIFs (Spezial-AIF), which are investment funds limited to professional and semi-professional investors, with assets under management not exceeding €100 million. Alternatively, managers operating solely closed-ended, unleveraged AIFs may register as Small AIFMs with AuM up to €500 million. This higher threshold for unleveraged funds reflects the reduced systemic risk profile of such structures.
Beyond the core KAGB framework, German AIFMs may be subject to additional product-specific EU regulations depending on their fund offerings. These include the European Long-Term Investment Fund Regulation, the European Venture Capital Fund Regulation, the European Social Entrepreneurship Funds Regulation, and the Money Market Funds Regulation. The regulatory approach prioritizes manager-level oversight, with fund regulation exercised primarily through regulation of the fund manager rather than direct fund-level authorization, a structure consistent with the AIFMD architecture.
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