So, what does it mean to create an investment fund in Germany or in other EU countries? In fact, this implies setting up a complete legal entity accompanied by all permits for financial and investment activities. The main source of regulation for the funds is the Investment Law. It is completely harmonized with the EU Directive governing UCITS and AIF managers.
This post is mainly focused on the regulation of investment funds in Germany and will surely come in handy for the new investors on the market.
Licenses for fund managers
As it often happens in modern days, investment companies choose to register in offshore jurisdictions which allows them to function under simplified registration conditions and lower to no taxation. As a matter of fact, after an offshore company obtains an appropriate license, it only takes a few months to turn it into an offshore investment fund.
However, these rules do not work in EU countries. The EU member states including Germany and other popular jurisdictions such as Liechtenstein or Luxembourg set their goals on full protection of investors and have stricter regulatory requirements.
Individuals interested in registering an investment fund in Germany should take into consideration these aspects:
- Manager regulation is the main channel of fund regulation in Germany. This means that all managers are obliged to either have an asset managing license or an authorization from BaFin.
- In Germany, it is possible to appoint professional and semi-professional investors to manage funds. The requirements applied to this key person state that they must hold an MBA degree in finance or be a chartered accountant. Experience in service regulated products is also a must.
- An AIF manager is a person responsible for managing an alternative investment fund.
- If a foreign manager would like to continue their activities in Germany, they are supposed to be based in a country.
- A registered manager administers portfolios of AIFs (directly or indirectly). The AIFs’ assets under management cannot exceed 500 EUR in total.
- In case when fund managers refuse to register or are not eligible to do so, they are obliged to file an application for receiving a full fund management license in Germany.
Marketing of investment funds in the EU is not possible without having a regulatory permit or a European marketing passport. What was available earlier but is not allowed in Germany anymore is private placement mode. Small managers with local registration pose the only exception to this rule.
Some important fact for those planning to get an investment managing permission in Germany:
- For German jurisdiction both open-ended and closed-end mutual funds are common;
- In Germany retail funds are required to pay tax on dividends, regular income, and income from real estate transactions;
- It is necessary to coordinate the choice of the depository for a fund with the financial regulator.
Do you need a consultation regarding establishing an investment fund in Germany or other EU countries? Contact our specialists in COREDO – we will make the process of registration smooth and worriless.