Funds constructed as Limited Partnerships

The closed-end fund still plays an important role in Germany. From the investor’s point of view the closed-end fund is an especially transparent form of investment. From the initiator’s point of view the closed-end fund is a particularly effective way to procure equity capital. In Germany the closed-end fund is generally founded as a limited partnership with a limited liability company as general partner (GmbH und Co. KG). The investors are either involved directly as limited partners or participate indirectly through a fiduciary. As a limited partner is granted many rights by law, the investment in a fund constructed as a limited partnership is generally particularly transparent.

The public offer of shares of a closed-end fund requires a prospectus approved by BaFin. The issue and administration of a fund constructed as a limited partnership is currently not regulated by law. If the fund invests in financial instruments, it is possible that the fund is bound by applicable regulation (asset management pursuant to § 1 Abs. 1a Satz 2 Nr. 11 German banking act – KWG).

Presumably the issue and administration of funds constructed as limited partnerships will be regulated by European law in the future. Therefore both issuers and administrators of closed-end funds will need counselling in the future.