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In May 2015, BaFin declared credit funds permissible. This has paved the way for this product category, at least from a regulatory perspective. Fund providers see themselves increasingly obliged to open up this product category to their customers.

Credit funds are alternative investment funds (AIFs) that either extend a variety of loans (original lending business) or acquire them (derivative lending business). The role of the financial investment management company focuses in particular on the bundling as well as the monitoring and management of the loans.

The increasing demand for loan funds can be attributed to the following developments:

  • In the low-interest environment, institutional investors (e.g. pension funds, insurance companies, etc.) are looking for investments that, on the one hand, meet their requirements for the calculated interest rate and, on the other hand, take into account their reduced risk-bearing capacity.
  • Banks are looking for ways to reduce or relieve the burden on their balance sheets in the context of the new capital requirements under Basel III.
  • Due to the reduction in public sector investment, particularly in the infrastructure sector, with third-party financing and the involvement of the capital markets, alternatives are being sought that are suitable for resolving the investment backlog.

Unfortunately, in practice, the new latitude at fund level can only be used to a limited extent, as the financial investment management company again requires a banking licence for lending. Of course, there are workarounds to circumvent this requirement (e.g. via fronting bank and secondary acquisition). However, as in the past, many institutional investors take the small step to Luxembourg, where the interpretation of the financial supervisory authority (CSSF) is much more liberal. The original intention of the legislator to substitute public with private investments and to promote infrastructure projects is thus thwarted again.

However, the operational challenges for the financial investment management company in the management of credit funds, such as the classification and early detection of risks in accordance with MaRisk, also require a corresponding organisational structure and workflows. The latter are strongly based on the business processes of banks and require well thought-out risk and liquidity management. These are systems and processes that are not necessarily part of the basic equipment of a financial investment management company.

KPMG can fully support you. Both in the banking area and in the conception of the procedural support of the control and monitoring activities necessary for the successful launch of credit funds within a financial investment management company. Please get in touch with us.