Investment Funds Germany
Launch investment funds in Germany: UCITS, Special AIF, closed-ended funds. AIFM license or service AIFM. BaFin-compliant structuring. Free consultation.
In summary: Fund formation Germany: UCITS for retail funds, Special AIF for institutional investors. Service AIFM saves costs vs. own license. BaFin approval 3-12 months. Costs: €100,000-300,000 initial. Germany as largest EU fund market with strong infrastructure.
Investment Funds in Germany
Germany is the largest fund market in the EU and offers a mature infrastructure for launching and managing investment funds. The German Capital Investment Code (KAGB) implements the European AIFMD and UCITS directives and creates clear regulatory frameworks.
Fund Types Overview
1. UCITS Funds
Undertakings for Collective Investment in Transferable Securities are strictly regulated retail funds that can be distributed EU-wide to private investors.
| Feature | UCITS Fund |
|---|---|
| Investors | Retail and institutional investors |
| Investment Universe | Securities, money market, derivatives (restricted) |
| Diversification | Strict spreading requirements (5-10-40 rule) |
| Liquidity | Daily redemption mandatory |
| EU Distribution | Europe-wide passporting |
| Minimum Capital AIFM | €125,000 - €10 million |
2. Special AIF
Alternative Investment Funds for professional and semi-professional investors with more flexible investment rules.
| Feature | Special AIF |
|---|---|
| Investors | Professional investors (min. €200,000 investment) |
| Investment Universe | Real estate, private equity, infrastructure, hedge funds |
| Diversification | Flexible, according to fund rules |
| Liquidity | According to strategy (often semi-annual/annual) |
| Regulation | KAGB/AIFMD, less strict than UCITS |
3. Closed-Ended Funds
Closed-ended AIFs raise capital once and have a fixed term. Typical for real estate, shipping, or private equity investments.
- Fixed Term: Usually 10-15 years
- No Redemption: Unit return only at end of term
- Secondary Market: Trading via secondary market exchanges possible
- Assets: Often single investments (property, aircraft, etc.)
4. Investment KG
The Investment Limited Partnership is a popular legal form for closed-ended funds, especially for real estate and private equity.
- Legal Form: GmbH & Co. KG as fund entity
- Tax: Transparent taxation at investor level
- Flexibility: Partnership agreement structuring
- Liability: Limited partners liable only with contribution
Alternative Investment Fund Manager (AIFM)
Own AIFM License
An own AIFM license from BaFin authorizes the management of investment funds. The requirements are substantial:
| Requirement | Details |
|---|---|
| Initial Capital | €125,000 - €10 million (depending on AUM) |
| Managers | Min. 2 qualified persons |
| Risk Management | Own risk management function |
| Compliance | Compliance officer required |
| IT & Systems | Adequate technical infrastructure |
| Approval Duration | 12-18 months |
Service AIFM (Third-Party Management)
A Service AIFM (Master AIFM) is an external provider that provides the regulatory infrastructure:
- No Own License Needed: Use of existing BaFin authorization
- Faster Launch: 3-6 months instead of 12-18 months
- Lower Fixed Costs: Variable fees instead of infrastructure buildup
- Portfolio Management Delegation: Investment decisions with initiator
- Makes Sense Until: Approx. €500 million AUM
Depositary
Every regulated fund requires an independent depositary that safeguards fund assets and monitors the AIFM:
- Custody: Secure safekeeping of assets
- Oversight: Control of AIFM activities
- Cash Flows: Monitoring of fund flows
- NAV Control: Verification of unit price calculation
- Costs: From approx. €10,000 annually (volume-dependent)
BaFin Approval Process
Phase 1: Structuring (1-3 Months)
- Define investment strategy
- Choose fund structure (UCITS, AIF, closed-ended)
- Select service AIFM and depositary
- Draft fund rules
- Prepare prospectus
Phase 2: Documentation (1-2 Months)
- Finalize fund rules
- Create prospectus and KIID/KID
- Contracts with AIFM and depositary
- Risk management documentation
- Compliance policies
Phase 3: BaFin Review (2-6 Months)
- Submission to BaFin
- Document review
- Queries and adjustments
- Approval of fund rules
- Commencement of operations
Fund Launch Costs
| Cost Type | Amount |
|---|---|
| BaFin Fees | €5,000 - 25,000 |
| Legal Advisory | €30,000 - 80,000 |
| Tax Advisory | €10,000 - 30,000 |
| Service AIFM Setup | €20,000 - 50,000 |
| Depositary Setup | €5,000 - 15,000 |
| Prospectus Preparation | €15,000 - 40,000 |
Ongoing Costs (Annual)
| Item | Cost |
|---|---|
| Service AIFM | 0.05-0.15% of fund assets (min. €25,000) |
| Depositary | 0.02-0.10% of fund assets (min. €10,000) |
| Auditor | €15,000 - 50,000 |
| Reporting & Compliance | €10,000 - 30,000 |
Tax Aspects
Fund Level
- Corporate Tax: 15% on domestic income (with exceptions)
- Trade Tax: Generally exempt (for regulated funds)
- Investment Tax Reform 2018: Partial exemptions for investors
Investor Level
- Partial Exemption: 30% for equity funds, 60% for real estate funds
- Withholding Tax: 25% on income (retail investors)
- Institutional: Regular corporate taxation
Advantages of Germany as Fund Location
- Largest EU Market: Over €2 trillion in fund assets
- Strong Infrastructure: Many service AIFMs and depositaries
- Regulatory Clarity: Established KAGB regime
- Investor Confidence: German supervision highly regarded
- EU Passporting: Distribution across entire EU possible
- Institutional Demand: Large pension funds and insurers
Who Benefits from a German Fund?
- Asset Managers: Institutionalization of asset management
- Family Offices: Professional wealth structuring
- Real Estate Developers: Capital raising for projects
- Private Equity: Regulated framework for investments
- International Initiators: Access to German market
Frequently Asked Questions
Germany offers various fund structures: UCITS (open-ended retail funds), Special AIF (institutional funds), closed-ended AIF, and the Investment KG. The choice depends on target investors, investment strategy, and regulatory requirements.
Costs vary significantly: BaFin approval €5,000-25,000, legal/tax advisory €30,000-100,000, AIFM license or service AIFM fees €20,000-50,000 annually, depositary from €10,000/year. Total initial costs: €100,000-300,000.
Not necessarily. For smaller funds, you can use a service AIFM (third-party management company) that already holds a BaFin license. This saves significant costs and time. Your own AIFM license only makes sense from around €500 million in assets under management.
Timeframes: Special AIF with service AIFM: 3-6 months, UCITS fund: 6-12 months, own AIFM license: 12-18 months. BaFin review is often the time-critical factor.
UCITS are strictly regulated retail funds that can be distributed EU-wide with investment restrictions. AIFs (Alternative Investment Funds) offer more flexibility in investment strategies (real estate, private equity, hedge funds) but have more limited distribution possibilities.
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