GERMANY - New legislation to implement the Alternative Investment Fund Managers Directive (AIFMD) could outlaw open-ended real estate Spezialfonds, in addition to threatening the existence of German open-ended funds (GOEFs).

A draft bill published for consultation by the German finance ministry would not impose new regulations on securities Spezialfonds but would affect real estate Spezialfonds, according to German real estate investment association ZIA.

The German fund management industry body BVI has already criticised the legislative proposals to outlaw new GOEFs, but early indications were that Spezialfonds would be exempt.

The bill, if unchanged, could see the introduction of one-year minimum holding periods for Spezialfonds.

Carsten Rothbart, head of tax and finances at the ZIA, said this would enable funds to be classified as ‘closed-ended' under current proposals.

Rothbart said the bill "left a lot of questions unanswered" and posed a number of new ones, noting that it was unclear whether the one-year minimum holding period referred to the calendar year or the 12 months from investment.

Rothbart also said closed-ended funds were problematic for German insurance companies under their supervisory regulations, which include restrictions on illiquid investments.

The draft bill is open for consultation until 17 August; a hearing with industry representatives will follow on 22 August.

Rothbart added that it "remains to be seen" whether or not comments and criticism will be included in a revised draft to be presented to parliament.

"There is the basic question whether it makes sense to do away with investment vehicles", he said, referring to GOEFs, on the basis of new regulations yet to take effect. The proposed limitations for real estate Spezialfonds, meanwhile, he did "not understand" at all.

ZIA have stated that the proposed regulations are "not useful" for real estate Spezialfonds, which have been "stable and established" in Germany and "accepted by professional investors".

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