The category of semi-professional investors was introduced to create more flexibility in German investment law and to create new opportunities, especially for family offices, foundations and wealthy private individuals who do not meet the strict criteria of professional investors under the German Capital Investment Act (KAGB).
Here are some key features of semi-professional investors under the KAGB:
Commitment Amount: Semi-professional investors are required to make a minimum commitment of €200,000. This minimum commitment serves as a threshold to ensure that semi-professional investors have a certain level of wealth or financial resources.
Written Confirmation: The investor must confirm in writing that they are aware of the risks associated with the intended commitment.
Expertise and Experience: The management company must verify and confirm that the investor has the necessary knowledge and experience to comprehend the risks associated with the investment.
Waiver: The semi-professional investor must explicitly waive the protections provided to retail investors.
Cooling-off Period: The investor has a right to withdraw from the contract within a period of two weeks after conclusion of the contract.
This classification enables investors who don't qualify as professional investors but who want to make substantial investments and are aware of and willing to accept the risks associated, to have more investment options, including those which might not be available or suitable for typical retail investors.
For fund managers operating in Germany and accepting semi-professional investors, tracking different investor classifications and their associated compliance requirements becomes critical. Funds like Blockwall, which operates across multiple European jurisdictions, must navigate varied compliance requirements for semi-professional investors across their entire LP base. As Dominic Briggs, Co-Founder and General Partner, explains: "Since the inception of Blockwall, we've been laser-focused on diversifying our Limited Partner (LP) base, which ranges from high-net-worth individuals (HNWI) to demanding institutional investors across a dozen jurisdictions. The onboarding process has been particularly challenging in this regard due to the varied compliance requirements." Managing multiple investor classifications across different jurisdictions requires robust compliance infrastructure that can accommodate varying regulatory requirements.
Fund administration platforms help fund managers track investor classifications, manage jurisdiction-specific requirements, and maintain proper documentation for semi-professional and professional investors. This is particularly important during investor onboarding, where fund managers must collect different sets of documentation depending on investor classification.
