Non-retail pooled funds

Available vehicles

What are the main legal vehicles used to set up a non-retail fund? How are they formed?

With regard to vehicles used for non-retail funds (ie, professional or semi-professional investors only), Germany distinguishes between funds managed by fully licensed managers and funds managed by registered managers (sub-threshold managers). Non-retail funds are typically called special AIFs (see question 3).

In the case of a fully licensed manager, the following types are available: contractual fund, investment KG and investment AG. In our experience, the contractual fund is the most common vehicle used for non-retail investors by fully licensed managers.

In the case of a registered manager, the vehicle of choice is a simple limited partnership with a company with limited liability (GmbH) as the only general partner (GmbH & Co KG). However, the legal forms of an investment KG or an investment AG are also available.

Laws and regulations

What are the key laws and other sets of rules that govern non-retail funds?

With regard to fully licensed managers managing non-retail funds, the same key rules apply to managers managing retail funds (see question 13).

Managers who are only registered benefit from very light regulation. With the exception of the requirements mentioned in question 3, non-retail funds managed by sub-threshold managers are, in principle, not regulated.


Must non-retail funds be authorised or licensed to be established or marketed in your jurisdiction?

In contrast to retail funds, the investment guidelines of non-retail funds only need to be submitted to BaFin without BaFin having to approve the guidelines. The investment guidelines of non-retail funds can either mirror the investment guidelines of retail funds or can be freely specified as long as a fair market value of the assets can be determined. The marketing of non-retail funds requires BaFin approval.

In the case of registered managers, no investment guidelines are necessary and they do not need to be submitted to BaFin. BaFin has established in its practice a requirement to submit a commercial register excerpt of the fund once the fund is established. Once the manager is registered, the marketing of a fund does not need BaFin approval (on the assumption that the marketing takes place within the private placement regime of the German prospectus laws; see question 7).


Who can market non-retail funds? To whom can they be marketed?

Non-retail funds can, in general, be marketed by the same players as retail funds (see question 15). An exception applies to funds managed by registered managers. Such funds cannot be marketed by firms with a financial intermediary licence under the GewO.

Non-retail funds may only be marketed to professional or semi-professional investors (for the definition of these, see question 3).

Ownership restrictions

Do investor-protection rules restrict ownership in non-retail funds to certain classes of investor?

Only professional or semi-professional investors may invest in non-retail funds.

Managers and operators

Are there any special requirements that apply to managers or operators of non-retail funds?

The distinction between retail and non-retail lies in stricter investment guidelines and stricter marketing rules, at least with regard to funds managed by fully licensed managers.

With regard to registered managers, only a regulation-lite regime applies (see question 3).

Tax treatment

What is the tax treatment of non-retail funds? Are any exemptions available?

The tax treatment of retail funds (see question 18) is generally also applicable to non-retail funds. Certain qualifying retail funds, however, have a second option available.

Revised law (in force since 1 January 2018)

As noted in question 18, funds in the form of a partnership are now outside the scope of the Investment Tax Act. In effect, there is no change compared to the previous law for most non-retail AIFs, as they are often structured as limited partnerships. Thus, the new law only applies to non-retail funds if they are structured in a corporate or a contractual form. Under the new law, there is an option for certain qualifying specialised investment funds to opt out of the new ‘opaque regime’ and, instead, to apply the ‘restricted transparency regime’ (ie, the tax regime for investment funds under the previous law, which was in force until the end of 2017, but with certain amendments).

Specialised investment funds may only have a maximum of 100 investors (as was the case previously). Unlike the previous law (in force until end of 2017), there is a look-through approach with respect to partnerships as investors (ie, each partner of such partnership is counted as one investor of the fund). However, individuals may now invest directly in a specialised investment fund, provided that they hold such fund interests as part of their business assets (previously, only indirect participations of investors were possible).

To qualify as a specialised investment fund, a fund must satisfy certain criteria with respect to regulation, redemption rights, eligible assets and investment restrictions. These are substantially similar to the criteria under the previous law (although certain changes with respect to the definition of ‘securities’ apply).

If the specialised fund opts to apply the restricted transparency regime, at fund level, there is no taxation for domestic participation income and domestic real estate income. At the investor level, ‘special investment income’ is subject to tax (ie, distributed income, deemed distributed income and capital gains realised upon the dispositions or redemption of investment fund interests). The flat income tax is not applicable, even if an individual holds its investment fund interests as part of its non-business assets. Foreign withholding tax is still creditable.

Fund manager taxation

A 40 per cent exemption from German income tax applies to the carried interest received by managers of a private equity fund structured as a partnership (including limited partnerships) if certain cumulative criteria are fulfilled (in particular, the fund must qualify for asset management status and the carried interest must be paid only after the investors have had all their invested capital paid back). Otherwise, such income is fully taxable at normal German income tax rates. These rules are generally not affected by the revision of the German Investment Tax Act.

Asset protection

Must the portfolio of assets of a non-retail fund be held by a separate local custodian? What regulations are in place to protect the fund’s assets?

A separate custodian is necessary if the non-retail fund is managed by a fully licensed manager. A custodian is not necessary in the case of a registered manager.


What are the main governance requirements for a non-retail fund formed in your jurisdiction?

The governance requirements with regard to non-retail funds managed by fully licensed managers are similar to retail funds (see question 20).

There are no special requirements on the governance of non-retail funds managed by registered managers.


What are the periodic reporting requirements for non-retail funds?

A manager must report annually.