A pending German law will switch the AIFM threshold calculation from acquisition cost to fair market value. Funds with appreciated portfolios could suddenly need full authorisation.
If you manage a German fund under the sub-threshold AIFM registration and your portfolio has appreciated, pay attention. A draft law published on 9 July 2025, the Fondsrisikobegrenzungsgesetz (Fund Risk Limitation Act), will change how the EUR 500 million AIFM threshold is calculated [2]. The shift from acquisition cost to fair market value is not a technical accounting adjustment. It could move your fund from the light-touch registration regime into full BaFin authorisation, and the compliance timeline once you cross the threshold is very short.
How the threshold works today
Under the current rules in Section 2(4) of the KAGB, a fund manager can operate as a registered (sub-threshold) AIFM if total assets under management stay below EUR 500 million (for unleveraged funds with a five-year lock-up) or EUR 100 million (for leveraged funds or those without lock-ups) [2].
The key detail is how "assets under management" is measured. Under the existing regime, German GAAP (HGB) allows managers to use acquisition cost (Anschaffungskosten) as the basis for this calculation. For a venture or private equity fund, this means your portfolio companies are counted at the price you originally paid for them, not at their current fair market value.
The result is a wide gap between the regulatory measurement and economic reality. A fund that deployed EUR 80 million in capital but now has a portfolio worth EUR 700 million at fair market value would still be counted as holding EUR 80 million for threshold purposes. BaFin has publicly described this as a "grey area" that effectively allowed substantial fund complexes to operate without full supervision [2].
What the new law changes
The Draft Law to Limit the Risks Posed by Investment Funds closes this gap by requiring fair market value (Verkehrswert) as the basis for threshold calculation [2]. Once enacted, the AIFM threshold will be measured against the actual economic value of the portfolio, not the historical cost of investments.
For early-stage and growth-stage venture funds, the impact is potentially huge. A successful Fund I that invested EUR 50 million at seed and Series A but where several portfolio companies have grown into large valuations could easily cross EUR 500 million in aggregate fair market value. Under the old rules, such a fund would remain comfortably below the threshold. Under the new rules, it would need full BaFin authorisation.
The 30-day problem
Here is where the time pressure hits. When a fund manager crosses the threshold, whether due to the new calculation methodology or organic growth, German law requires them to apply for full AIFM authorisation within 30 days [2]. They then have three months to submit complete documentation for the licensing process.
Thirty days is not enough time to build what full authorisation requires from scratch. Full AIFM licensing under Section 20 of the KAGB demands [2]:
- Sufficient initial capital. EUR 125,000 for external AIFMs, plus own funds of at least one-quarter of the prior year's fixed overheads.
- Qualified senior management. At least two senior managers with relevant qualifications and experience.
- Risk management function. A dedicated risk management function that is organisationally separate from portfolio management.
- Compliance function. A permanent compliance function with adequate resources.
- Depositary appointment. A depositary (custodian) must be appointed for the fund, which involves its own negotiation and onboarding process.
- Valuation procedures. Formal valuation policies and procedures compliant with KAGB requirements.
- Detailed business plan. A multi-year business plan covering organisational structure, governance, outsourcing arrangements, and internal controls.
The full authorisation process itself typically takes four to ten months from submission of a complete application. During the interim period, BaFin may impose conditions on how the fund operates.
Who is affected
The managers most exposed are those running successful first or second funds who never expected to approach the EUR 500 million threshold based on their original deployment size. In particular:
- Venture capital funds with portfolio companies that have raised significant follow-on rounds, pushing up fair market values.
- Growth equity funds where portfolio appreciation is a core part of the strategy.
- Fund complexes where a single manager runs multiple vehicles whose aggregate fair market values exceed the threshold, even if no individual fund does.
- Managers approaching a second fund. If Fund I's appreciated portfolio plus Fund II's commitments push aggregate AUM over the threshold, the new methodology catches you.
The two paths forward
If the fair market value change might affect you, there are two basic options:
Option 1: Apply proactively for full AIFM authorisation. Rather than waiting to cross the threshold and scrambling, you prepare and submit a full licence application on your own timeline. This gives you months rather than weeks to build the required infrastructure. The downside is cost and complexity: full authorisation is a much heavier regulatory burden than sub-threshold registration [2].
Option 2: Appoint a third-party AIFM. Instead of obtaining the licence yourself, you transfer AIFM responsibilities to an entity that already holds a full BaFin licence. You continue to manage investments under a delegation arrangement, while the third-party AIFM handles regulatory compliance, risk management, and depositary relationships. This is faster to implement and avoids the need to hire a full regulatory team, but it means a new relationship, additional costs, and a governance layer that some managers find constraining [2].
Neither option is free or simple. But both are far better than being caught crossing the threshold with nothing prepared.
Valuation implications
Using fair market value for the threshold also raises practical questions about how valuations are determined. Under HGB acquisition cost accounting, there is little room for judgement. You paid what you paid. Fair market value, by contrast, requires a valuation methodology: comparable company analysis, recent transaction prices, discounted cash flows, or whatever approach your fund uses for NAV reporting.
The law does not prescribe a specific valuation method for threshold purposes. The implication is obvious: your internal valuations now have regulatory consequences beyond investor reporting. If BaFin believes your portfolio is undervalued for threshold calculation purposes, they can challenge the methodology. One more reason to have a defensible, well-documented valuation process in place.
Timeline: when does this take effect
The draft law was published on 9 July 2025. As of early 2026, the legislative process is still underway, with the Fund Risk Limitation Act expected to be enacted in the course of 2026 [39]. But waiting for final enactment to start preparing is a mistake. The organisational changes that full authorisation requires (hiring, depositary negotiations, policy documentation) take months. Managers should be doing that groundwork now.
The final law may include transitional provisions that give existing sub-threshold managers a grace period. But I would not bet on generous phase-in rules. The draft as published includes the 30-day application deadline with no indication of a long phase-in period [2].
Practical steps to take now
Even before the law is enacted, any manager who might be affected should be doing the following:
- Run the numbers. Calculate your aggregate AUM using fair market values. If you are within striking distance of EUR 500 million, you are in the risk zone.
- Assess your readiness. Map the gap between your current setup and what full AIFM authorisation requires. Figure out which hires, policies, and relationships you would need.
- Talk to potential third-party AIFMs. If you are leaning toward the delegation model, start conversations now. Negotiating a management delegation agreement takes time, and the best AIFM service providers will be in high demand once the law takes effect.
- Review your valuation methodology. Make sure it is documented, defensible, and applied consistently. BaFin will be looking at this.
- Update your fund documents. Consider whether your current LPA and side letters need amendments to accommodate a change in AIFM status.
How Infra One supports this transition
We work with German fund managers at every stage, from first-time sub-threshold registrations through to funds that need to transition to full authorisation. Our fund services include threshold monitoring, valuation support, and coordination with third-party AIFMs and depositaries. We have been tracking the Fondsrisikobegrenzungsgesetz since the draft was published and are already working with clients on preparation plans.
If you are unsure whether the fair market value change affects your fund, talk to us. We can run the analysis and help you decide which path makes sense.
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