The new asset pooling vehicle, the Investment KG is “not something the market has been eagerly awaiting”, according to Sabine Mahnert, senior consultant at Towers Watson Germany, and may struggle to attract interest.
Mahnert told IPE there had not been “that much demand” for the vehicle, legally a limited partnership, just over a year after it has been introduced by the new Kapitalanlagegesetzbuch (KAGB) - the legislation with which Germany implemented the EU’s Alternative Investment Fund Managers Directive (AIFMD).
Jörg Ambrosius, senior vice president at State Street Germany, pointed out that the vehicle is “still very young” and it remains to be seen how the market will develop and how the new structure will be accepted.
Ambrosius added while similar structures in other countries such as Ireland and Luxembourg were set up as segregated accounts, the German vehicle was structured as a Kapitalverwaltungsgesellschaft (KVG), which involved a paper-heavy registration process with the BaFin.
Similarly, Stefan Oecking, partner in the retirement department at Mercer Germany, pointed out: “Companies have looked into this and seen that it is difficult to implement and now they are waiting for someone to make the first step.”
Another obstacle to a wider use was also the fact that Germany does not have very advantageous tax regime for foreign asset pooling vehicles, meaning other countries were not introducing privileges for the German Investment KG, he explained.
“But these questions may only become sufficiently answered once a pension scheme seeks to implement a multinational asset pooling solution,” noted his colleague Carl-Heinrich Kehr, principal in the investments department at Mercer Germany.
Mahnert also pointed out for many German companies, there was little to no benefit in using the vehicle: “When it comes to asset pooling within Europe, a large proportion of pension assets are outside of Germany, so companies have to ask the question why it would make sense to pool foreign assets in Germany.”
Therefore, Oecking and Kehr agree, pooling of pension assets in a German Investment KG is “not anything that is high on companies’ agenda” at the moment.