GERMANY Trends and Developments Contributed by: David Jansen, Wulf Kring, Maria Risse and Marcel Seemaier, Willkie Farr & Gallagher LLP
Many of the developments identified in Germany in the 2024 edition of this guide continue to impact the asset management and alternative funds sector in 2025. Retailisation and ELTIF 2 Like other European jurisdictions, Germany has picked up on the trend of retailisation of certain asset classes such as private equity, private debt and infrastructure. This was fuelled, in particular, by the revised ELTIF regulation that came into force in January 2024, and which was generally perceived in the market as a very successful development, as it eliminated many of the shortcomings of the ELTIF regulation first published in 2015. After a big wave of ELTIF launches in 2024 and 2025, the new products now have to prove themselves on the market. It is already clear that no single investment strategy is absolutely dominant, but rather that ELTIF 2 has given retail investors equal access to a wide range of new products. These include private equity, private debt, infrastructure funds, and more special - ised strategies such as infrastructure debt and real estate debt. Debt strategies are particularly interesting because they have a slightly different liquidity profile and can make regular distributions during the term. Finally, fund of funds that promise to provide access to large flagship funds of premier asset managers are among the newly formed products. At the same time, many product providers are confronted with retail dis - tribution and its very specific challenges. While experts generally agree that ELTIFs in their closed-end form tend to be the better product for investors from an economic perspective, as expen - sive and performance-draining liquidity reserves do not have to be maintained, the psychological effect of a redemption right in retail distribution has so far been indispensable. This poses a particular challenge for sales teams, who need to properly inform private investors about the redemption right and its restric - tions due to redemption gates. Since there have been no comparable liquidity mechanisms in the German retail fund sector to date (in particular, the rules on redemption suspension in German retail funds often followed a much simpler logic), this poses a particular
challenge for investment advisers, which also includes training sales staff. Part of this trend is the growing shift towards semi-liq - uid investment products, such as evergreen structures and interval funds. While such structures can reduce liquidity mismatch compared to fully open-end funds, challenges remain, such as strict disclosure and suit - ability requirements under MiFID II, complex valuation and redemption mechanisms, and heightened super - visory scrutiny. Infrastructure Investments In February 2025, amendments to the German Invest - ment Ordinance ( Anlageverordnung or AnlV) regarding infrastructure investments made by, among others, pension schemes ( Pensionskassen ), small insurance companies and funeral expense funds ( Sterbekassen ), were introduced via the 8th Amendment Ordinance to Ordinances under the Insurance Supervision Act ( Achte Verordnung zur Änderung von Verordnung nach dem Versicherungsaufsichtsgesetz , or the “Ordi - nance”). These amendments are of particular significance to those investors interested in infrastructure invest - ments and mainly entail the following changes: • A 5% quota of guarantee assets for infrastruc - ture investments – certain specified infrastructure investments, up to the new designated 5% infra - structure quota, will not be counted towards the existing allocation quotas ( Mischungsquoten ) under the AnlV. The independent address of such invest - ments in the AnlV will provide relief-enhanced pos - sibilities for infrastructure investments and reduce competition with other types of investments. • Risk capital quota increase to 40% – the AnlV’s risk capital quota of the guarantee assets has been increased from 35% to 40%. This quota includes, besides investments in private equity (funds), equi - ties and some debt instruments. • Confirmation of administrative practice for closed- end AIFs – the AnlV now explicitly confirms the established regulatory practice for closed-end AIFs to hold investments in infrastructure project companies.
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