GERMANY - The government has approved a host of reforms of Germany's investment law, including easing investment restrictions on open-ended real estate funds and institutional funds and cutting approval periods for new funds.

The reforms, which transpose an EU directive on investment funds, were first unveiled by the finance ministry in January. They must be passed by parliament to take effect.

While the initial reaction from German fund industry association was generally positive, the BVI objected to a requirement that investment funds disclose transaction costs and not just total costs, as is currently the case.

The association had argued that the requirement - the only of its kind in Europe - would harm the competitiveness of funds domiciled in Germany.

According to the BVI, that requirement has now been dropped along with another proposal to create two new classifications for open-ended real-estate funds, namely "security-oriented" or "return-oriented".

The BVI further welcomed a new provision whereby the real estate funds may invest up to 10% of assets in real estate investment trusts (REITs) - listed property firms that are tax-privileged.

Meanwhile, investment restrictions on German institutional funds, known as Spezialfonds, are to be removed, though these vehicles must demonstrate to the regulator BaFin that they have a "balanced mixture of risk".

But the BVI said the government should further liberalise Spezialfonds by permitting private investors to buy shares of these funds. "The Spezialfonds launched in Luxembourg last February permit this, so those in Germany would be at a disadvantage," a spokeswoman said.

Other reforms approved by the government include requiring the BaFin the approve new funds for sale in Germany within four weeks.

Two new asset classes - infrastructure funds and special funds - have also been approved along with the sale of SICAVs - fund vehicles that are a Luxembourg export.

Finally, to improve corporate governance, the reforms require that one member of a supervisory board for a particular asset manager not be employed by that same manager.

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