If you are launching a first fund in Germany, the single most important regulatory question is whether you need a full AIFM licence or can register as a sub-threshold AIFM. The difference is not small. Full licensing takes four to ten months and requires a team, capital, and infrastructure that most emerging managers do not have at launch. Sub-threshold registration takes about a month and lets you start operating with far less overhead [1].
I work with first-time and second-time fund managers every day, and most of them qualify for sub-threshold registration. But the rules are changing in ways that matter, and if you do not plan ahead you can end up in a position where you suddenly need full authorisation with only 30 days to apply.
The threshold numbers
Under Section 2(4) of the KAGB (Kapitalanlagegesetzbuch, Germany's Investment Code), a fund manager can register rather than seek full BaFin authorisation if total assets under management stay below two limits [1]:
- EUR 500 million for funds without leverage and with a five-year lock-up period on investor redemptions.
- EUR 100 million for all other fund strategies, including leveraged funds.
For a typical first venture capital or private equity fund, the EUR 500 million threshold is the relevant one. Most emerging managers are raising between EUR 10 million and EUR 100 million on their debut fund, so you have plenty of room.
What registration looks like in practice
BaFin registration as a sub-threshold AIFM (also called a "registrierte KVG") is simple compared to full licensing. You file a notification with BaFin, provide details about the fund manager, the fund, and the investment strategy, and BaFin processes it in roughly four weeks [1]. There is no formal application procedure with hearings, no requirement to submit detailed business plans for the next three years, and no mandatory initial capital requirement comparable to the EUR 125,000 minimum for fully authorised external AIFMs.
The ongoing obligations are lighter too. Sub-threshold managers are exempt from the full AIFMD reporting regime. You do not need to appoint a depositary bank. You do not need a full-time risk manager or compliance officer from day one. You still need to report to BaFin and meet basic conduct rules, but the difference in regulatory burden between registration and full authorisation is large [1].
What you still have to do
Lighter regulation does not mean no regulation. Sub-threshold AIFMs in Germany must:
- Register with BaFin and keep the registration current.
- Report to BaFin on assets under management periodically so the regulator can monitor whether you are approaching the thresholds.
- Comply with the German Money Laundering Act (Geldwaschegesetz), including KYC procedures for investors.
- Maintain proper governance. Even without the full AIFMD organisational requirements, you need proper books, records, and an auditable process for valuations and investor reporting.
- Register in the Transparency Register (Transparenzregister) for beneficial ownership reporting [4].
You also need to monitor the threshold continuously. If your AUM crosses the line, you have limited time to react, and the consequences are real.
The GmbH & Co. KG structure
Nearly all sub-threshold fund managers in Germany use a GmbH & Co. KG as the fund vehicle [4]. The GmbH serves as general partner, providing limited liability for all participants, while the KG structure gives you the tax transparency that investors expect. The fund manager entity itself is typically a separate GmbH that acts as the AIFM and is the entity that registers with BaFin. I will cover the structural details of GmbH & Co. KG separately, but the key point here is that the sub-threshold registration regime and this fund structure were designed to work together [6].
Semi-professional investors open the door wider
Germany also has the semi-professional investor category, which most EU jurisdictions lack. Instead of just professional and retail, Germany allows wealthy individuals, family offices, and foundations to invest in special AIFs managed by sub-threshold AIFMs, provided they commit at least EUR 200,000 and meet certain documentation requirements [9]. This widens the pool of potential LPs without pushing you into the full authorisation regime reserved for retail fund distribution.
The fair market value problem
This is where things get complicated, and where every emerging manager in Germany should be paying attention.
Under current rules, the EUR 500 million threshold is calculated using acquisition cost under German GAAP (HGB). For a venture fund, this means your portfolio companies are carried at the price you paid for them, regardless of how much they have appreciated. A fund that invested EUR 50 million across its portfolio but now has a net asset value of EUR 600 million would still be below the threshold under the old calculation method [2].
That is about to change. The Draft Law to Limit the Risks Posed by Investment Funds (Fondsrisikobegrenzungsgesetz), published on 9 July 2025, will require managers to calculate the threshold using fair market value rather than acquisition cost [2]. This eliminates what BaFin has called a "grey area" where funds with substantial unrealised gains operated without full supervision.
For emerging managers, the practical implication is this: if your fund has performed well and your portfolio has appreciated a lot, you may cross the EUR 500 million threshold under the new methodology even though you were safely below it before. And when that happens, you have only 30 days to apply for a full AIFM licence, with three months to submit complete documentation [2].
Planning for the threshold
If you are managing a fund that might approach the threshold over its lifetime, the worst thing you can do is ignore it. The 30-day application deadline means you need organisational infrastructure prepared in advance: a compliance framework, risk management policies, a depositary relationship lined up, and potentially additional senior hires [2].
The alternatives are either to apply proactively for full authorisation before you cross the threshold, or to appoint a third-party AIFM that already holds the licence. We see both approaches with our clients. For managers who expect to raise much larger second or third funds, getting the full licence is often the right long-term move. For managers who want to stay focused on investing and keep their team small, appointing an external AIFM is cleaner.
How sub-threshold compares to other EU regimes
Germany's sub-threshold regime is broadly similar to equivalent registrations in other EU member states under Article 3(2) of AIFMD. A few differences stand out:
- Speed. BaFin registration is fast, about a month. Some jurisdictions take longer.
- No strategy restriction. Unlike the UK's RVECA regime, which locks you into venture capital, German sub-threshold registration works for any fund strategy: venture, buyout, credit, real estate [1].
- Semi-professional investors. The EUR 200,000 middle category is a German-specific feature that gives you more fundraising flexibility than most other EU jurisdictions [9].
- Cross-border limitations. Sub-threshold managers do not get an AIFMD marketing passport. You can market domestically and to professional investors in other EU countries through national private placement regimes, but this requires country-by-country compliance [1].
What is changing with AIFMD II
Germany's implementation of AIFMD II through the Fund Risk Limitation Act is expected in 2026 [3]. For sub-threshold managers, the most relevant change concerns loan origination. If your fund originates loans (as opposed to just making equity investments), you will face additional organisational and risk management requirements even as a sub-threshold AIFM, unless your lending falls into specific exemptions for shareholder loans and equity-like mezzanine financing [20]. For a standard VC fund making equity investments, the impact should be minimal.
How we help at Infra One
We set up and administer German funds for emerging managers, and sub-threshold AIFM registration is what we do most. Our team handles the BaFin registration process, sets up the GmbH & Co. KG fund structure, manages investor onboarding with automated KYC/AML, runs ongoing fund administration, and monitors threshold compliance so you are never caught off guard.
We also prepare the organisational groundwork for managers who may need to transition to full authorisation or appoint a third-party AIFM as they grow. Our fund platform is designed for this exact trajectory: start light, scale up when the time comes.
If you are planning a fund launch in Germany and want to talk through the registration process, get in touch.
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