Experienced fund services leader overseeing Infra One’s Austrian and German operations. Deep expertise in AIFM regulation and cross-border fund structures.
Germany's implementation of AIFMD II opens real loan origination opportunities for alternative funds — but with strict compliance requirements, even for sub-threshold managers.
Germany is implementing AIFMD II through the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz), and for fund managers who operate or are considering private credit strategies, the loan origination provisions are the biggest change in the package. For the first time, German Special AIFs will have a clear, EU-harmonised framework for originating loans directly, replacing the patchwork of restrictions that made direct lending hard to run in practice [20].
But this is not a free pass. The new rules come with compliance requirements that apply even to sub-threshold AIFMs, which breaks from the usual pattern where lighter-touch managers avoid most of the AIFMD apparatus. If you manage or plan to manage a fund that lends money, you need to understand what is coming.
What changes for German funds
Under the current KAGB framework, German Special AIFs face investment limitations when it comes to direct lending. The existing rules were built for equity-focused vehicles, and managers who wanted to run credit strategies had to work around various restrictions. The AIFMD II implementation removes these barriers for loan origination by Special AIFs, aligning Germany with the directive's intent to create a single EU framework for loan-originating funds [20].
Once the new rules take effect:
German Special AIFs can originate loans without the existing KAGB investment limitations that previously restricted direct lending.
One set of rules across the EU. Germany will apply the AIFMD II rules directly rather than maintaining a separate national approach. German funds will operate under the same loan origination regime as funds in other EU member states [34].
Existing investment restrictions are removed. The specific limitations that currently apply to credit-oriented German Special AIFs will be replaced by the AIFMD II requirements [20].
The rules that apply
AIFMD II, implemented through new Sections 29a and 29b of the KAGB (as drafted), sets out several requirements for loan-originating AIFs [20]:
Retention requirement. When a fund transfers loan receivables to a third party (through securitisation, loan sales, or other mechanisms), the fund must retain at least 5% of the nominal value of each loan originated [20]. This "skin in the game" rule is designed to stop originate-to-distribute models where the fund has no ongoing economic interest in the loan's performance.
Concentration limits. There are maximum lending limits per individual borrower. The exact thresholds follow the AIFMD II directive framework and are designed to prevent excessive concentration risk in the fund's loan portfolio [34].
Prohibition on consumer lending. Loan-originating AIFs cannot lend to consumers in Germany [20]. Put simply: if your borrowers are individuals acting in their personal capacity rather than as businesses, you cannot use a German AIF to lend to them.
Leverage limits. The directive imposes leverage ceilings that Germany will adopt:
175% of NAV for open-ended loan-originating AIFs.
300% of NAV for closed-ended loan-originating AIFs [20].
For most emerging managers running closed-ended credit funds, the 300% ceiling provides reasonable headroom. But it is a hard limit that must be monitored continuously.
The sub-threshold trap
This is the part that catches most managers off guard. Under the general AIFMD framework, sub-threshold AIFMs have much lighter regulatory obligations than fully authorised managers. They do not need a depositary, they have reduced reporting requirements, and they face fewer organisational requirements.
Loan origination is the exception. The draft KAGB amendments say that sub-threshold AIFMs managing loan-originating funds must meet the same organisational, risk management, and liquidity management requirements as fully authorised AIFMs [20]. This was a deliberate choice: the EU and German regulators see loan origination as carrying systemic risks that justify full regulatory treatment regardless of fund size.
In practice, a sub-threshold manager who adds a credit strategy faces a step-change in compliance burden. You may not need a full AIFM licence, but you will need the organisational infrastructure that normally only fully authorised managers maintain: proper risk management policies, liquidity management procedures, and the reporting that goes with them.
Sub-threshold managers expect lighter rules and that has always been the deal. Loan origination breaks the pattern. Adding a credit sleeve pulls you into the full AIFMD II compliance set on the credit side, even if you stay sub-threshold on AUM. Half my conversations on this now are about whether the strategy actually needs the loan.
Exemptions that matter for VC and PE
Not all lending triggers these requirements. The draft law carves out exemptions that matter for venture capital and private equity managers [20]:
Shareholder loans. Loans made by the fund to portfolio companies in which it holds an equity stake are exempt from the full loan origination requirements. This is the classic VC/PE scenario: you invest in a company and provide a bridge loan or working capital facility alongside your equity investment.
Equity-like mezzanine loans. Subordinated loans that function economically like equity, typically with conversion features, profit participation, or similar equity-linked characteristics, are also exempt.
These exemptions matter because many VC and PE funds extend credit to their portfolio companies as part of normal operations without thinking of themselves as "loan originators." Under the new rules, these activities are carved out. But the exemptions are narrow. If your lending does not fit cleanly into either category, you fall under the full loan origination regime.
Most VC managers I work with assume the new rules will catch them because they do convertible bridges. They will not, in the typical case. Shareholder loans to portfolio companies you already own equity in are carved out. Read the exemption carefully before you redesign your strategy. There is usually less to do than the headlines suggest.
What this means for private credit strategies in Germany
For managers who are specifically building private credit or direct lending strategies, the AIFMD II implementation is good news overall. It creates a clear legal basis for German AIFs to originate loans, removes the ad hoc restrictions that applied before, and gives institutional investors a framework they can understand because it is the same across the EU [34].
The trade-off is compliance. You need:
A documented credit risk assessment process for each borrower, including ongoing monitoring.
Policies for loan concentration, diversification, and portfolio management that meet the AIFMD II standard.
Retention tracking if you plan to sell or transfer any originated loans.
Leverage monitoring against the applicable ceiling.
Liquidity management framework that accounts for the mismatch between fund redemption terms and loan maturities (particularly for open-ended vehicles).
Timeline and implementation
The Fund Risk Limitation Act that implements AIFMD II in Germany was published in draft form in August 2025 [20]. The legislative process is ongoing, with enactment expected during 2026 [39]. The EU directive (Directive 2024/927) set a transposition deadline of 16 April 2026 for most provisions, though several member states, Germany included, are running behind schedule [34].
If you are planning a new credit strategy, structure your fund assuming the new rules will apply. Getting your organisational framework to the AIFMD II standard now saves you from retrofitting compliance after the law takes effect.
Impact on existing funds
If you already manage a fund that originates loans under the current KAGB framework, you will need to check whether your existing policies and procedures meet the new requirements. The areas most likely to need updating:
Retention documentation. If you have transferred any originated loans, you need to verify compliance with the 5% retention requirement or ensure that transfers made before the law's effective date are grandfathered.
Borrower concentration. Existing portfolios may need rebalancing if individual borrower exposures exceed the new limits.
Organisational structure. Sub-threshold managers running loan-originating funds will need to build out risk management and compliance functions to the fully authorised standard.
How we support credit fund managers at Infra One
We administer funds across equity and credit strategies and have been following the AIFMD II loan origination provisions closely as they move through the German legislative process. Our fund administration platform handles the ongoing compliance monitoring (leverage tracking, concentration limits, retention calculations) that loan-originating funds require.
For managers launching a first credit fund in Germany, we handle formation and administration end to end: entity setup, BaFin registration, investor onboarding, NAV calculation, and regulatory reporting. We also coordinate with the legal and tax advisers on fund documentation and structuring.
If you are considering a private credit strategy in Germany and want to understand how the new loan origination rules affect your plans, get in touch. We can walk you through the requirements and help you build the right structure from the start.
