Good news for investments of German VAG-Investors

On 6 February 2025, the Eighth ordinance amending ordinances under the Insurance Supervision Act (Achte Verordnung zur Änderung von Verordnungen nach dem Versicherungsaufsichtsgesetz; „Ordinance”) was published in the Federal Law Gazette. The amendments to the Investment Ordinance (Anlageverordnung; "AnlV") pick up the changes that were previously contained in the Federal Government's draft bill on the Second Act to Strengthen Occupational Pensions of 18 September 2024 (BR-Drs. 488/24, p. 42 ff.; "Government Draft"). The changes proposed in the Government Draft will now be implemented by the Ordinance shortly before the German national election.

In this post, we discuss the few but significant changes to the AnlV. These are particularly relevant for certain insurance companies, burial and pension funds as well as numerous pension schemes that fall within the scope of the AnlV via references in the corresponding federal state law provisions regarding their investments in so called guaranteed assets (Sicherungsvermögen). Particularly infrastructure investments are likely to benefit from the updates.

1. Introduction of a separate infrastructure quota of 5%

According to the previous legal situation, infrastructure investments were counted towards other mixing ratios/quotas of Section 3 (1) to (6) AnlV depending on their specific structural features. For example, they could be counted towards the quota for risk capital (Rsikokapitalquote) in accordance with Section 3 (3) sentence 1 AnlV or towards real property (Immobilienquote) in accordance with Section 3 (5) AnlV. However, these quotas were regularly already fully utilised. Accordingly, the new infrastructure quota of Section 3 (7) AnlV as amended, amounting to 5% of the guaranteed assets, is intended to enable direct and indirect investments to finance infrastructure assets and infrastructure companies which are projects for the construction, expansion, renovation, maintenance, provision, holding, operation or management of infrastructure.

According to the explanatory memorandum to the Ordinance, which refers to the explanatory memorandum to the Government Draft, investments in both equity and debt instruments are allowed (Government Draft, p. 43). The policy with the new quota is to incentivising investors subject to the AnlV (“VAG Investors”) to invest their guaranteed assets in infrastructure assets by not counting the corresponding investments towards the existing quotas in Section 3 (1) to (6) AnlV and therefore no longer competing with other investments. However, the infrastructure quota shall not limit the investment of the guaranteed assets in infrastructure assets to 5 %. Rather, according to a statement in the Government Draft, investments in infrastructure can continue to be counted towards the already existing other quotas pursuant to Section 2 (1) AnlV in accordance with their specific structural features. They must not be counted towards the infrastructure quota – not even in priority (Government Draft, p. 43). Investments for the financing of infrastructure within the meaning of the new Section 3 (7) AnlV, which are held by open-ended special AIFs (Alternative Investment Funds), can also be counted towards the infrastructure quota.

2. Increase of the risk capital quota from 35% to 40%

The increase of the risk capital quota in Section 3 (3) sentence 1 AnlV, as amended, from 35% to 40% of the guaranteed assets is also intended to increase the room to manoeuvre for risk capital investments (Government Draft, p. 43). This includes investments in participations, stocks and private equity funds. However, according to the clarification in the Government Draft, Section 1 (3) and (4) AnlV must still be observed: The extent to which the increased quota can effectively be utilised is therefore determined by the investment and risk management as well as the risk-bearing capacity of the respective VAG Investors.

3. Investments in infrastructure project companies by private equity funds

According to previous administrative practice, closed-ended AIFs within the meaning of Section 2 (1) sentence 1 no. 13 (b) AnlV (so-called 13b funds, e.g. private equity funds) may, among other things, acquire investments in infrastructure project companies. However, the wording of the previous version of the AnlV did not explicitly allow for this. It is to be welcomed that this is now clarified in Section 2 (1) sentence 1 no. 13 (b) (aa) AnlV, as amended, by referring to Section 261 (1) no. 2 Capital Investment Code (Kapitalanlagegesetzbuch) (see Government Draft, p. 43).

4. Possibility of utilising the opening clause for exceeding the spreading limits

The so-called opening clause (Öffnungsklausel) of Section 2 (2) AnlV has also previously allowed the investment of the guaranteed assets in investments that would normally not be permitted under Section 2 (1) AnlV if the absolute investment prohibitions under Section 2 (4) AnlV did not apply. In principle, a portfolio composition quota of 5% of the guaranteed assets applies to such investments. With the approval of BaFin, this portfolio composition quota can be increased to up to 10 % (Section 3 (2) No. 4 AnlV).

In future, it will also be possible to invest under the opening clause in investments that exceed the diversification limits of Section 4 (1) to (4) AnlV. This extension of the existing opening clause in Section 2 (2) AnlV, as amended, is intended to create more flexibility regarding investments in individual debtors or individual investments and to expand the possibilities for investments with higher returns (see Government Draft, p. 43). However, the percentage amount of the opening clause remains unchanged and continues to be up to 5% or up to 10% (the latter with the approval of BaFin) of the guaranteed assets.

5. Entry into force

The Ordinance enters into force on 7 February 2025.

6. Outlook

Due to the extensive need for investments, the area of infrastructure is becoming the focus of political attention. The aim is to increasingly promote private investments in the infrastructure sector. In addition to the changes brought about by the Fund Location Act (Fondstandortgesetz) of 2 August 2021, the FAQs published for consultation by BaFin on 20 December 2024 on infrastructure mutual funds (Infrastruktursondervermögen) are also worth mentioning. The final version of these FAQs is expected shortly (the consultation period expired on 31 January 2025), and they should make BaFin's understanding of important issues clear.

In this context, reference should also be made to the Federal Ministry of Finance discussion draft for a law to promote investments by funds in renewable energies and infrastructure (Gesetz zur Förderung von Investitionen von Fonds in erneuerbare Energien und Infrastruktur) dated 21 May 2024 and, above all, to the government draft of a Second Future Financing Act (Zweites Zukunftsfinanzierungsgesetzes) dated 27 November 2024 with planned amendments to the Capital Investment Code (Kapitalanlagegesetzbuch) and Investment Tax Act (Investmentsteuergesetz) to promote investments in renewable energies and infrastructure. It is to be expected that these plans will be taken up again in the next legislative period after the upcoming German national election. We will keep you posted.