On June 27, 2024, the draft bill for the 2nd Company Pension Strengthening Act (2. Betriebsrentenstärkungsgesetz) was published. Among other things, the draft provides for changes to the Investment Ordinance (Anlageverordnung – AnlV), which this article discusses below.
Table of Contents
1. Separate infrastructure quota
The draft provides, among other things, for the introduction of a separate infrastructure quota in section 3(7) AnlV-draft of 5% for direct and indirect investments to finance infrastructure projects, without, however, creating a separate form of investment for this purpose. This corresponds to the approach taken by the North Rhine-Westphalian Ministry of Finance, which grants pension funds an independent 5% infrastructure quota.Which investments are covered by the infrastructure quota?
Which investments are covered by the infrastructure quota?
The quota covers investments in projects for the provision, expansion, operation or maintenance of an extensive asset. According to the explanatory memorandum, this refers to assets considered to be in general public interest, with the project operator based in a state in accordance with the respective investment form of section 2(1) AnlV and the assets being located in this state. This includes investments in both equity and debt instruments.
It is unclear what is meant by the word extensive (umfangreich) and whether this is a separate element, which must be fulfilled. It is also interesting that geographical requirements are apparently being placed on the project operator and the actual infrastructure assets. It would be desirable if the final version of the ordinance also included any requirements in its actual wording and not just in the explanatory memorandum.
Geographical requirements
It is also not explicitly clarified whether the geographical requirements of the respective investment form in section 2(1) AnlV for the fund itself and its manager should continue to apply unchanged.
This would have an impact in particular on infrastructure debt funds, since these are not generally covered by the investment form “private equity funds” in accordance with section 2(1) no. 13 b) AnlV and the otherwise applicable investment form “other AIF” (no. 17) requires the manager to be based in the EEA and the fund to be based in the EU (as well as a license and not just registration of the manager). At the very least, it would be desirable to clarify whether debt fund investments are actually to be treated differently here – as has been the case so far. At least regarding the quota itself, it appears that debt capital investments should not be discriminated against, which would only truly be the case if no higher hurdles were to be set for the eligibility of the investment itself. It remains to be seen whether the legislator will amend the ordinance in this regard.
Mixed funds
In addition to the investment forms already mentioned above, “private equity funds” (section 2(1) no. 13 b) AnlV) and “other AIFs” (no. 17), infrastructure funds may also fall under the investment form “real estate funds” according to no. 14 c). In all cases, it is questionable how to deal with mixed funds that do not invest exclusively in infrastructure. Consequently, a division into different quotas should then take place, regardless of whether the infrastructure investments in the fund predominate or not.
Despite the systematic change, not introducing a separate investment form for infrastructure investments would appear to be advantageous in the end, at least if infrastructure investments per se are sufficiently enabled by the existing investment forms. However, this should be the case. In the context of the investment form “direct investments” according to no. 13 a), the BaFin’s investment circular expressly states that infrastructure investments are covered by this investment form – then infrastructure funds should also be covered by the investment form “private equity funds” according to no. 13 b). Since no. 13 b) does not necessarily require a licensing of the capital management company and is also more liberal in geographical terms than, for example, no. 17 (other AIF), no. 13 b) is likely to have a fairly broad scope of application for infrastructure funds (see, however, the comments above on infrastructure debt funds).
Relation of the infrastructure quota to other quotas
Since the wording of section 3(7) AnlV-draft states that infrastructure investments are not to be counted towards the existing quotas under section 3(1) to (6) AnlV, we believe that such investments must be allocated to the infrastructure quota as long as there is still “room” in the quota and the investments are new (overflow quota). In view of the wording, we do not see a right of choice to decide which quota such new investments are to be counted towards to, if at least one other quota besides the infrastructure quote is still available. By having a choice, one could “spare” specific quotas.
Looking at how there is no specific provision regarding this, at the time the amended Investment Ordinance comes into force, there should be an option to choose which infrastructure investments overflow into another quota if more than 5% of the secured assets consist of qualified infrastructure investments in and the infrastructure quota is therefore inevitably exceeded. However, it is unclear whether it would be possible to switch between the quotas at a later date if the infrastructure quota only became “full” after the amended Investment Ordinance came into force. In our opinion, there should always be a right of choice regarding the quota allocation, as otherwise it would depend on the chronological order of the acquisition of infrastructure investments and thus essentially on chance which quotas would ultimately be used.
2. Increase in the risk capital investment ratio
The risk capital investment ratio (Risikokapitalanlagenquote) in the Investment Ordinance is to be increased from 35 to 40 percent of the security assets. This also fundamentally increases the possibility of investing in infrastructure funds, as the corresponding forms of investment would continue to burden this ratio in the future, unless the new infrastructure ratio were already being utilized. This means that, in combination with the separate infrastructure quota and the increased risk capital investment quota of up to 10% of the security assets, more infrastructure investments would be possible (subject to the separate 15% quota within the risk capital investment quota in accordance with section 3(3) sentence 3 AnlV, which is not to be adjusted).
3. Opening clause and diversification limits
The draft also provides for the opening clause in the Investment Ordinance to apply to the diversification limits (Streuungsgrenzen). This means that investments that exceed the diversification limits can be acquired in the future under the opening clause.
4. No separate infrastructure quota in the Pension Fund Supervision Ordinance
A separate infrastructure quota in the Pension Fund Supervision Ordinance (Pensionsfonds-Aufsichtsverordnung – PFAV) is not planned. This is consistent in that there are generally no mixing quotas (Mischquoten) in the PFAV. However, investments in “other AIFs” are limited to a “prudent level” (generally 5%) in accordance with section 17(1) no. 17 PFAV (corresponds to section 2(1) no. 17 AnlV). Insofar as (indirect) infrastructure investments can only be made via “other AIFs”, the introduction of a separate quota would also have a positive effect here. The 2nd Company Pension Strengthening Act should be amended accordingly.
