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At the end of 2020 Germany has updated its national investment regulation in order for it to be coordinated with the EU Directive. Also, it is important to note that, generally, the financial supervision of PEFs in Germany is stricter compared to other EU member states.
According to the institutional framework for PEFs in Germany, the government regulates investment funds, management companies supervise the assets, accounting organizations conduct accounting services and asset storage as well as have a responsibility of recording investment shares of each owner. When it comes to evaluating the objects that form the property fund, this is the task for independent appraisers. And finally, agents’ job is to attract investors.
A license is necessary to operate management companies and infrastructure organizations that serve the funds. Before an AIFM license is granted in Germany, an applicant must undergo a mandatory external evaluation.
Management companies manage funds while making sure that all institutional restrictions are followed. They also take into account the structure of the fund’s investment portfolio as well as considering the investor funds’ inflow and outflow.
To ensure the additional guarantee of compliance with institutional restrictions, management companies are controlled additionally.
Tranche financing and lending to PEF for qualified investors are the tools used to ensure optimal capital structure.
It is not difficult to buy PEF assets in Germany. Nonetheless, certain steps need to be taken before the acquisition: one or multiple external experts need to evaluate the assets independently. To make sure that investors are truly protected thanks to insuring the accounting infrastructure organizations, loss of property, risks of damages related to closed PEFs.
In Germany, open PEFs are not possible to create, yet professional investors can directly own shares of a closed German PEF. Importantly, before registering a German PEF, it is crucial to remember that legally this kind of partnership agreement is significantly different from the one made under English law.
Equally to France and the UK, Germany has an important position in the sector of private equity funds. Are you planning to enter this market specifically through Germany? Arrange a consultation with COREDO on the topic of German PEFs and the regulation of private investments.