Criteria for approval of Asian Alternative Real Estate Investment Funds (AIFM) via Luxembourg for German investors
In these notes we want to clarify the criteria which must be met to receive the approval for an Asian asset manegement company to be able to sell real estate funds to German investors via a local capital management company (CMC) based in Luxembourg.
Such a management company takes care of the administrative tasks for investment funds such as real estate funds. To do this, it requires a official approval. Comprehensive duties in accordance with the German Capital Investment Code (KAGB) are to be fulfilled for the activity. Providers of investment funds or asset managers are quickly faced with the problem of either applying for authorization as a capital management company themselves or outsourcing management to an approved local capital management company inside Europe. This is then referred to as the “Service Capital Management Company (CMC)”.
The division of tasks between the asset management of the respective investment fund and the Service-CMC is not regulated uniformly. The Service-CMC is often responsible for reporting, reporting obligations to the BaFin supervisory authority and contact with the depositary, while portfolio management remains the task of the asset manager.
The European AIFM Directive (Directive 2011/61 / EU) is also referred to as the directive on the managers of alternative investment funds. It entered into force on July 21, 2011 and had to be implemented into the national law of the member states by July 22, 2013. In Germany, this was done by introducing the Capital Investment Code (KAGB). The AIFM Directive deals with the managers of alternative investment funds who are not affected by the provisions of the UCITS Directive.
The directive deals with the so-called alternative investment funds (AIF). This is understood to mean “organisms” - that is, forms of organization - for collective investments, including their investment branches, which take up capital from a group of investors in order to reinvest it for the benefit of the investor in accordance with a specific investment strategy. Since AIFs do not participate in economic life themselves, the directive regulates the work of their administrators, who are usually legal entities (such as corporations).
• Use of a Luxembourg-based capital management company.
• The local capital management company based in Luxembourg has to apply for and manage the real estate special fund.
• Asset management continues to take place in the country of origin of the asset manager. All decisions regarding the funds, such as the closure, liquidation or merger of the funds, are still made by the asset manager.
• The capital management company in Luxembourg has to make a „qualification check“ for the asset manager in Singapore.
• The licensing of the asset manager as well as comparable real estate funds have to be submitted to the regulator in Luxembourg for the capital management company.
• Reporting and „legal support“ is carried out by the Luxembourg capital management company, costs about 20 bps (0,2%) p.a., but this will be charged to the fund (not the manager).
• Advice and structuring via capital management company initially free of charge. Applications for supervision in Luxembourg are then borne by the asset manager (if necessary, also settled via fund, which has to be clarified with the capital management company).