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Launching a German Debt Fund (Loan Fund)

Legal Excellence

Launching debt funds (loan fund) in Germany has so far been shaped by a restrictive legal framework. However, there has been no such requirement under European law.

The initial granting of monetary loans has, until now, essentially been reserved for closed-ended special AIFs (Spezial-AIF) (only available to professional and semi-professional investors). More flexible options exist only in cases of secondary loan acquisitions from original lenders (such as banks / credit institutions) – albeit with a margin discount in favour of the original lender.

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Due to the amendments introduced by AIFMD II (AIFMD 2), the German legislator will no longer be able to avoid liberalising the rules on credit granting by AIFs. The previous “traffic light” coalition government took an initial step in this direction with the draft of the Fund Market Strengthening Act (Fondsmarktstärkungsgesetz). AIFMD II must insofar be transposed into national law by 16 April 2026.

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The following Client Alert provides you with a practical overview, whether you are already managing a loan fund or are considering launching one (German only).

Kronsteyn supports your loan fund in all matters of regulatory, corporate, and tax law.

Some key aspects of the new regulations on loan granting for German debt funds (loan funds) are as follows:

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  • All special AIFs (Spezial-AIF) will be permitted to grant loans even if the borrower is not a portfolio company (§ 273a KAGB draft amendment).

  • There is also a relaxation for retail investment funds. Certain investment funds may grant loans up to 30%, and closed-ended retail AIFs up to 50% of the AIF’s capital.

  • If an open-ended AIF qualifies as a “loan-originating AIF” (§ 1 (19) no. 24c KAGB draft amendment) due to its significant exposure to credit risks, it must actively demonstrate to BaFin that its liquidity risk management system is consistent with the investment strategy and redemption policy (§ 30 (3a) KAGB draft amendment).

  • Leverage limit for loan-originating AIFs (as above): 175% (open-ended) or 300% (closed-ended) (§ 29a (5) KAGB draft amendment).

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The draft legislation for the Fund Market Strengthening Act has not yet been passed. Following the reconstitution of the Bundestag in early 2025, the legislative proposal will need to be reintroduced and adopted by Parliament (as of 18 April 2025). Amendments to the original draft can be expected.

Legal Services

The German law firm Kronsteyn advises debt fund (loan fund) managers on the placement and management of their investment offerings. The range of services includes

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  • Corporate, regulatory and tax law structuring of debt funds

  • Support in administrative procedures for the granting of a licence as an AIF capital management company (KVG) or support in registration procedures

  • Provision of investment terms and standardised loan agreements

  • Legal conception of distribution structures and provision of distribution agreements

  • Review of marketing documents and other advertisements

  • Representation in administrative and court proceedings, including defence against investor lawsuits

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