German private market fund managers with assets above €500 million might face a new compliance obligation. A proposed amendment would change how the €500 million threshold is calculated, meaning many funds may soon require Alternative Investment Fund Manager (“AIFM”) services to remain compliant.
The current regulatory framework
Under current rules, German private market GPs can manage up to €500 million without being fully regulated under the so-called registered AIFM licence. If the unregulated AIFM stays below the threshold, applying German GAAP (HGB - assets reflected at acquisition cost), it is not taken into account that the real AuM may have exceeded the €500 million threshold. This has created a grey area: funds with NAVs far exceeding €500 million under fair value measurement (KAGB - to be applied above €500 million AuM) could still operate unregulated, while accounting in accordance with HGB.
What's changing: the shift to fair market value
The German Federal Ministry of Finance has now proposed a clear amendment through the Draft Law to Limit the Risks Posed by Investment Funds (Investment Fund Risk Limitation Act). The draft law, published on July 9, 2025, specifies that the €500 million threshold must apply to fair value rather than acquisition costs.
This change will directly impact German private market GPs that have been successfully fundraising and investing beyond €500 million of AuM. Once the new regulation takes effect, these fund managers will need to achieve compliance quickly or face potential regulatory action.
Private market funds typically see significant value appreciation over their life cycle, meaning many funds that start below the threshold will now find themselves subject to AIFMD requirements.
Two paths to compliance
Fund managers facing this new requirement have two primary options for achieving compliance:
- Obtaining an internal authorised AIFM licence
GPs can apply for their own AIFM licence through BaFin, Germany's financial regulator. This option requires significant organisational restructuring, including hiring additional full-time employees with specific regulatory expertise, particularly risk managers and compliance officers who already hold BaFin approval.
The licensing process demands strict separation of risk and portfolio management, the establishment of detailed regulatory reports, and the building of risk management systems that satisfy AIFMD rules. This approach typically involves significant costs and can take considerable time to implement. - Appointing a third-party AIFM
The alternative approach involves outsourcing AIFM responsibilities to a specialist service provider. This option allows fund managers to maintain focus on their core investment activities whilst ensuring regulatory compliance through an experienced external partner.
Third-party AIFM services can provide immediate regulatory coverage without requiring internal organisational restructuring. This approach typically is more cost-effective and allows for faster implementation compared to pursuing an internal licence.
The urgency factor
The regulatory timeline creates particular pressure for affected fund managers. When this law takes effect, fund managers operating above the threshold must comply or face regulatory consequences. Those currently managing unregulated funds exceeding €500 million in AuM will need to move quickly.
The transition period may be limited, making advance preparation crucial for affected firms. Fund managers should review their current commitment levels to understand whether this change will affect them. Non-compliance carries not only regulatory action but also potential damage to investor confidence.
Fund managers who have not previously considered AIFM requirements may find themselves needing to secure these services on short notice.
How we can support German fund managers
We provide comprehensive AIFM services through our fully licensed entities in Luxembourg, delivering turnkey regulatory solutions for private market GPs, not only for Luxembourg-domiciled funds but also cross-border for German private market funds. Our Luxembourg-based AIFM platform delivers complete regulatory compliance without requiring costly internal restructuring.
For German fund managers, we can also establish branches as an extension of our existing local presence in Hamburg and Frankfurt, where we already provide fund administration services. This combined approach offers seamless integration of AIFM services with existing operational support.
Our private market-focused AIFM services are designed specifically for the needs of private equity, private market, and real asset fund managers, providing the regulatory oversight required under AIFMD whilst allowing fund managers to concentrate on their investment activities.
Preparing for the change
German private market GPs should assess both their current NAV and projected growth to determine the potential impact. Acting early provides greater flexibility and ensures compliance before the new law comes into force.
The regulatory change represents a major shift for the German private market sector. With early preparation and the right partners, fund managers can maintain operational focus while achieving full compliance with the new requirements.
For more information about how we can support your AIFM requirements, please complete the form below to discuss your specific needs.
