Key Facts at a glance
With the draft of the FRiG, the legislator intends a largely literal transposition of the AIFMD II into national law. The draft contains, in particular, new rules on the loan origination by AIFs. At the same time, transparency and reporting obligations for both registered and authorized AIFMs vis-à-vis BaFin and investors will be expanded; new requirements for delegation and sub-delegation are introduced, and the depositary passport will at least partially be implemented.
Compared with the previous draft bill for transposing AIFMD II (Investment Fund Market Strengthening Act – FMSG), the current draft contains significantly less national gold-plating with regard to loan origination by AIFs. This improvement is also due to proposals submitted by POELLATH during the prior consultation process. A particularly positive aspect is that registered AIFMs will still be allowed to provide shareholder loans and equity‑like instruments without having to comply with the strict risk management requirements and reporting obligations that apply to lending AIFs. This remains in line with the existing provisions under the KAGB and establishes legal certainty for Germany as a venture capital jurisdiction.
Still, certain individual – and in some cases new – provisions must be viewed critically, as they continue to constitute national gold-plating. In particular, the planned calculation of thresholds for assets under management on a fair market value basis poses considerable disadvantages for registered AIFMs. Likewise, the planned audit requirement for AIFMs managing EuVECA or EuSEF funds should be reconsidered in the interest of reducing bureaucracy. It would be desirable if these planned changes were abandoned during the further legislative process.
Background
AIFMD II was published in the Official Journal of the EU on 26 March 2024 and entered into force on 15 April 2024. Member States must transpose its requirements into national law by 26 April 2026. AIFMD II represents the first major amendment to the original AIFMD of 2011, which established a uniform legal framework for fund managers in Europe.
In Germany, the implementation of AIFMD II was originally intended to be carried out through the FMSG (draft bill of 5 August 2024). Although the legislator had stipulated a “1:1 implementation” of AIFMD II, the draft contained several national provisions going beyond EU specifications (so-called gold-plating). Due to the premature end of the legislative term and the snap election in February 2025, the FMSG was not adopted in time. Due to the principle of discontinuity, a draft bill must be reintroduced in the new Parliament.
Thus, the draft of the FRiG marks the second attempt to implement the EU requirements of AIFMD II into the KAGB on time. Fortunately, this draft is more closely aligned with the wording of AIFMD II. However, it is not entirely free of gold-plating either.
Key Changes at a glance
The FRiG draft – and ultimately AIFMD II itself – specifically addresses the following areas:
- Loan origination by AIFs
- Expanded reporting and transparency requirements for AIFMs
- Recalculation of thresholds for registered AIFMs
- Expansion of ancillary services for AIFMs
- Depositary passporting
- Increased requirements for delegation and sub-delegation
- Clarifications regarding the full authorization procedure
- Introduction of liquidity management tools
- Marketing (of AIFs managed by non-EU AIFMs)
Changes in detail
Loan origination by AIFs
Loan origination lies at the heart of AIFMD II and will now also be comprehensively regulated under the KAGB. The draft introduces uniform definitions for loans and lending AIFs, as well as definitions for shareholder loans and so-called loan origination special purpose vehicles.
- A loan is defined as any cash loan agreement granted by an AIF as creditor, either directly or indirectly through third parties or loan originating special purpose vehicles.
- An AIF qualifies as a loan-originating AIF if its investment strategy primarily consists of granting loans, or if the notional value of the originated loans represents at least 50% of its net asset value.
- Shareholder loans means loans which are granted by an AIF to an undertaking in which it holds directly or indirectly at least 5% of the capital or voting rights, and which cannot be sold independently of the capital instruments held by the AIF in the same undertaking.
- Loan originating special purpose vehicles are entities controlled by an AIF or an AIFM whose purpose is to originate loans for or on behalf of an AIF or AIFM, where the AIF or AIFM is involved in structuring the loan or predefining its terms before assuming the credit risk.
For loan-originating AIFs, the draft transposes the EU-wide leverage limits (open-ended loan-originating AIFs 175%, closed-ended 300%), rules on risk diversification (generally: notional loan value max. 20% of the capital of the AIF per borrower), and prohibitions on loan origination to affiliated companies, managers, and depositaries.
Additional requirements include enhanced risk management by the AIFM and expanded reporting and disclosure obligations for both the AIFM and the loan-originating AIF.
Good news: Unlike the FMSG draft, the draft of the FRiG refrains from gold-plating in this area. It clarifies that the granting of shareholder loans and equity-like instruments by merely registered AIFMs does not trigger heightened risk management or reporting obligations (§ 2(4) no. 4 KAGB draft). This clarification is appropriate, as the origination of shareholder loans and equity-like instruments does not entail any increased risks that would justify an increased organizational burden. It ensures continuity with the established and proven legal framework of the KAGB.
For venture capital funds in particular, this clarification provides tangible relief and helps avoid potential competitive disadvantages. Although the term “equity-like instruments” remains undefined in the current FRiG draft – and a clarification would certainly be desirable – in our view (in line with industry submissions on the FMSG), loans with qualified subordination as well as so-called SAFE agreements granted by AIFs or registered AIFMs to portfolio companies should not trigger stricter risk management requirements.
It is also positive that the draft expressly provides that AIFs may in future originate loans through loan originating special purpose vehicles (§ 1(19) nos. 24b and 24c KAGB draft). This inclusion eliminates longstanding legal uncertainty, aligns the KAGB with rules in other EU Member States, and creates more level playing field.
Equally welcome is the clarification that mere amendments to existing loan terms do not qualify as loan origination in the regulatory sense (§ 20(9) sentence 2 KAGB draft).
Expanded Reporting Obligations and Transparency Requirements for AIFMs
In particular, authorized AIFMs will in the future have to report to BaFin in greater details. Required reports will include, among others, detailed information on fee and cost structures, transactions with affiliated companies, and volumes of delegated activities (see below). In addition, BaFin reporting will be expanded to include a list of EU Member States in which an AIF is actually marketed.
Towards investors, AIFMs will also be obliged to provide more detailed disclosures, including granular breakdowns of direct and indirect costs.
The FRiG draft unfortunately also provides for national gold-plating with respect to registered AIFMs managing EuVECA or EuSEF funds. Their annual financial statements will in future have to be audited by external auditors (§ 45 sentence 1 KAGB draft). These additional audit obligations go beyond EU requirements, which do not impose any explicit audit obligation for EuVECA or EuSEF AIFMs. This amendment contradicts both the intended “1:1 implementation” of AIFMD II and the coalition agreement’s objective of reducing bureaucracy and avoiding national gold-plating in financial market regulations.
Recalculation of Thresholds for Registered AIFMs
The FRiG introduces a new reference basis for calculating assets under management (AuM) relevant for determining when an AIFM needs to be authorized. The so-called thresh-old calculation determines the point at which a merely registered AIFM must apply for an authorization. Unlike the FMSG, the FRiG draft contains a genuine deterioration compared to the current legal situation: Going forward, thresholds will no longer be calculated on the basis of acquisition costs (valuation principles of the German Commercial Code), but on the basis of fair market values (§ 2(4) sentence 4 KAGB draft, corresponding to § 168 KAGB). The latter assessment would correspond to the value determination for authorized AIFMs. According to the rationale, the aim is to align the KAGB requirements and to facilitate supervision and administrative practice.
This represents national gold-plating, since neither AIFMD II nor the AIFM Delegated Regulation (EU) 231/2013 provide for a change in threshold calculation. Article 2 of the AIFM Delegated Regulation continues to refer to national accounting standards for threshold calculations applicable to registered AIFMs (valuation principles of the German Commercial Code).
Assessment: We oppose the introduction of fair value market calculations for registered AIFMs. The planned amendment is not required by AIFMD II and would impose significant burdens in practice without providing any tangible benefit for regulators or investors. Up to now, accounting under the valuation principles of the German Commercial Code has been sufficient: this method is clear, available, and practical. Mandatory fair market value calculation would generate substantial additional costs – especially for small and medium-sized AIFMs in the venture capital sector – and would cause significant uncertainties. Fair market values of illiquid holdings are highly speculative and subject to strong fluctuations. This results in thresholds that are volatile and unreliable. The purpose of thresholds is to enable an appropriate risk classification. Commercial law accounting (lower-of-cost-or-market principle) realistically reflects loss risks, while fair market values merely introduce volatility without offering additional insights. Under the German Commercial Code, values for assets under management evolve in a predictable manner (only through new investments or exits). By contrast, fair values may trigger abrupt threshold breaches, that AIFMs cannot manage operationally. Many registered AIFMs would suddenly fall under the authorization obligation without having sufficient time or resources to transition into authorized AIFMs. Instead of creating efficiency gains, the rule would only increase administrative burden – a clear contradiction to the political objectives of reducing bureaucracy and strengthening Germany as a fund location. The proposed amendment to § 2(4) KAGB draft is impractical, disproportionate, and harmful. It increases operating costs and uncertainty, endangers especially smaller AIFMs, and does not contribute to better risk assessment. Instead, the proven valuation principles of the German Commercial Code should be maintained, and grandfathering protection should be ensured for existing AIFMs.
Expansion of Ancillary Services
Under AIFMD II, authorized AIFMs may in future provide additional services beyond their core business, such as IT or human resources services for third parties – provided that conflicts of interest are avoided.
The FRiG draft introduces further clarifications on the scope of permissible ancillary services. Authorized AIFMs will thus be allowed to provide investment advice, custody services, and investment brokerage even where they do not hold a separate license for individual portfolio management (§ 20(3) nos. 3 – 5 KAGB draft). In addition, credit-related services under § 2(3) of the Secondary Loan Market Act, such as debt collection for non-performing loans, may in future be offered as ancillary services (§ 20(3) no. 10 KAGB draft). These changes are to be welcomed.
Depositary Passporting
However, the German legislator has not made use in the FRiG draft of the option provided in AIFMD II to allow crossborder use of depositaries for domestic AIFs (so-called depositary passport). Domestic AIFs managed by an authorized AIFM will therefore not be able to appoint depositaries in other Member States. Conversely, EU AIFs can take advantage of the depositary passport if their home Member State has implemented the AIFMD II option (§ 80(6) KAGB draft). These amendments are at least positive for German depositaries, since they may now be appointed by EU AIFs.
Increased Requirements for Delegation and Sub-Delegation
Delegation and sub-delegation will be subject to stricter requirements in the future. This affects both substance requirements for the delegating AIFM and detailed documentation and reporting obligations. In particular, the mandatory disclosure of volumes, percentages, and organizational structures will significantly increase administrative workload for AIFMs. In addition, delegates and sub-delegates will in future have to comply with AIFMD/KAGB standards – regardless of their place of incorporation or primary regulation (§ 36(1) sentence 1 no. 7 KAGB draft). This statutory clarification largely mirrors current BaFin supervisory practice in Germany.
Clarifications in the Full Authorization Procedure
The FRiG draft contains certain clarifications on the requirements for obtaining an authorization under the KAGB.
For managing directors of an authorized AIFM, it is clarified that at least two full-time managing directors must be appointed, each of whom must also have their residence in the EU (§ 23 no. 2a KAGB draft).
The documents and descriptions to be submitted in the notification of these managing directors within the licensing procedure are further specified (§ 22(1) no. 2 KAGB draft). Required details now expressly include, for example, a description of responsibilities within and outside the AIFM and an overview of the time each managing director devotes to their tasks. These changes will be welcomed by AIFMs undergoing the licensing process, as they create more clarity around the application requirements.
The FRiG draft also introduces a cut-off date for completing an authorization application. If BaFin requests additional documents, these must be submitted within three months; otherwise, the application will be deemed to be withdrawn (§ 44(6a) KAGB draft). While the intention of expediting proceedings is commendable, the draft overlooks the fact that applying AIFMs themselves already have an inherent interest in swift procedures. To avoid unintended withdrawals and to ensure that BaFin also contributes to timely proceedings, BaFin should be required to issue final and topic-specific requests for documents. A corresponding clarification in the legislative text would be desirable. In addition, the consultation process should address the possibility of granting extensions and grace periods where justified.
Introduction of Liquidity Management Tools
AIFMs of open-ended AIFs will be required to implement a range of liquidity management tools such as redemption suspensions, side pockets, in-kind redemptions, etc. (§ 30a KAGB draft). Such instruments are not new to the existing KAGB regime. However, a more detailed framework is intended to further mitigate the risk of uncontrolled redemptions in times of market stress. AIFMs of semi-liquid funds, evergreen funds, and multi-vintage funds will likewise need to implement these rules for the AIFs they manage.
Distribution (AIFs Managed by Non-EU AIFMs)
Stricter requirements will also apply to the distribution of AIFs managed by non-EU AIFMs, particularly concerning the home state of the AIFM and the AIF. The relevant third country must not be listed as a high-risk jurisdiction under Article 9(2) of Directive (EU) 2015/849 nor may it appear on Annex I of the EU list of non-cooperative tax jurisdictions. In addition, an agreement between the third country and Germany must exist that fully complies with Article 26 of the OECD Model Tax Convention (information exchange) (§§ 329, 330 KAGB draft). In practice, the vast majority of third countries that have concluded a Memorandum of Understanding with BaFin already meet these new requirements. Therefore, no significant negative impact on the distribution of third-country AIFs in Germany is anticipated.
Outlook
The FRiG draft is still at an early stage in the legislative process. Following publication on 8 August 2025, industry associations will now submit their comments, and further internal deliberations will take place within the Federal Ministry of Finance.
Given the 26 April 2026 transposition deadline for AIFMD II, time is running short. It is therefore expected that the draft bill will be introduced into the Parliament already in autumn of this year for deliberation. A swift legislative process is anticipated.