German insurance companies and other institutional investors
which are subject to German insurance company regulation (e.g.
pension funds) (together "German Insurance Company
Investors") are an important group of investors for
private equity, infrastructure and comparable funds. For these
investors, eligibility of their investments for their restricted
assets is of major relevance.
However, the German Investment Regulation
(Anlageverordnung), the most relevant source of law
regarding investments by German Insurance Company Investors, has
not yet been adapted to the new German Capital Investment Act
"KAGB"). This has resulted in
uncertainty as to whether German Insurance Company Investors can
continue to use the so-called equity-quota for their investments in
The German regulator (BaFin) has now taken the position that
this is still possible. With regard to investments in open-end
funds, BaFin distinguishes between funds for which KAGB provides an
extended scope of allowed investments and funds for which the
investment spectrum remains the same.
I. Administrative Practice Pending the Adjustment of the German
Investment Regulation (Anlageverordnung)
According to current information, an adaption of the German
Investment Regulation is not expected to enter into force before
January 2014. The German Insurance Association
("GDV"), which is the umbrella
organization for private insurers in Germany, has discussed the
issue with BaFin during the last weeks. Based on these discussions,
GDV expects that, until the German Investment Regulation will have
been adapted, BaFin will apply the following basic rules in
deciding whether a fund investment is eligible for the restricted
1. Open-end Funds
Units in open-end funds which have been established in
accordance with the rules of the abolished German Investment Funds
Act (Investmentgesetz) and are adapted to the KAGB remain
eligible for the restricted assets if the adaption does not result
in any new investment opportunities becoming allowed under the
adapted terms of the fund ("one-to-one adaption").
In case of the adaption of an existing fund to, or the
establishment of a new fund under, the KAGB, the units are not
considered to be or remain to be eligible for the restricted assets
if their terms provide extended investment options as compared to
the old law.
2. Closed-end Funds
Interests in closed-end funds which have so far been eligible
assets qualifying for the so-called equity-quota remain eligible
under the same conditions even under the KAGB. The same applies to
closed-end funds which are established as new funds under the KAGB
as long as the existing requirements under insurance company
supervisory law applying to investments for the
equity-quota are met.
II. Foreign Funds
Based on its discussion with BaFin, GDV has not expressed any
view regarding the question whether the above does not only apply
to domestic funds, but also to foreign funds. In our opinion, there
are good reasons not to make any distinction between domestic and
foreign funds in this regard.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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