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New German Investment Regulation Adopted
16 March 2015
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A new German regulation concerning permissible alternative investments by German insurers and pension funds came into effect on March 7, 2015. The regulation adapts German law in this area to the regulatory framework under the AIFM Directive.
Generally speaking, German insurers and pension funds will be permitted to invest in private equity funds that (1) are organized under the laws of an EEA or other OECD member state and (2) are managed by a fund manager domiciled in an EEA or other OECD member state, so long as the fund manager has a “license or registration” that is comparable to a German license or registration. AIFM licenses or registrations from other EEA member states will be considered comparable. German investors will need to determine whether licenses or registrations of fund managers domiciled outside the EEA -- such as registrations under the U.S. Investment Advisers Act of fund managers based in the United States -- are comparable to a German license or registration.
The rules for investment in real estate funds, private debt funds, hedge funds and funds pursuing other alternative strategies generally are more restrictive than the rules applicable to private equity funds.
In the case of larger German insurers, the regulation will be superseded by the Solvency II rules which will come into force in 2016.
Michael P. Harrell
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