There are only two of them, but more are soon to follow: the open-ended infrastructure special funds. This new fund vehicle was included in the German Capital Investment Code as part of the German Fund Location Act, which came into effect in August 2021. It allows private investors to invest in infrastructure, particularly renewable energies, with small amounts starting at 25 euros.

However, it took two years before the first corresponding fund was launched. DWS was the first on the market with "Infrastruktur Europa" in April 2023, but only for Deutsche Bank customers at that time. According to DWS, the fund is now also distributed via Postbank. Other sales partners are to follow.

The aim of the DWS fund is to participate in the transformation of the economy. "DWS Infrastruktur Europa" aims to invest in energy (generation, transport, storage), telecommunications (such as fibre optic projects, data centres), transport (rail, road) and social infrastructure (schools, universities, hospitals). Around 50% of the investments are to be in the energy sector. In August 2023, an initial investment was made in the Klettwitz Süd solar park in Brandenburg. According to information from DWS at the beginning of the year, further projects are in the pipeline. Fund assets currently total 221 million euros.

The "DWS Infrastruktur Europa" is open to private savers as well as institutional investors. They "particularly appreciate the fact that our fund allows them to redeem units after a minimum holding period of two years," says Peter Brodehser, Partner Infrastructure Investments and fund manager of "DWS Infrastruktur Europa". "This basically makes illiquid assets partially liquid again."

Asset manager KGAL was the second to launch such an infrastructure fund on the market. Matthias Weber, Head of Sales Retail Business at KGAL, was tasked with making renewable energies accessible to the general public. "We spent a long time looking for a suitable vehicle," says Weber. "The open-ended infrastructure special fund is similar to an open-ended property fund. Everyone knows that." KGAL sees the minimum holding and redemption periods as positive.

This was then implemented via Universal-Investment as the capital management company, with KGAL acting as the asset manager. The approval process at BaFin turned out to be relatively complex because of some differences to open-ended property funds. According to Weber, this is related to the new order path to be programmed and the settlement platform as a whole.

The company actually wanted to be ready in April of last year. However, it was not until 25 October that it received approval from the financial supervisory authority BaFin. In November, money flowed into "KGAL Klimasubstanz" for the first time. In turn, the fund has been listed on a major settlement platform since mid-December and can be sold by savings banks. As a result, merely a five-figure sum was channelled into the fund before Christmas.

A special fund can invest up to 80% of its funds in infrastructure project companies. These can cover kindergartens, toll roads and real estate, for example. KGAL wants to focus on renewable energies such as onshore wind farms and photovoltaics (PV).

When it was launched in November, the fund was said to have secured a purchase pipeline of wind and solar parks in Germany and Poland. According to Weber, the first purchase is planned for the coming weeks. The fund volume is expected to be several hundred million euros. "We have set ourselves a minimum cash inflow target of 100 million euros for 2024." After portfolio assets in the start-up phase, project developments (ready-to-build) can then also be added. "We are aiming for 70% portfolio and 30% project developments."

An open-ended infrastructure special fund can invest a maximum of 80% of the fund assets in project companies. The minimum liquidity is 10%. Weber also wants to keep the remaining 10% liquid in the initial phase of the fund. "Once the fund has reached a certain size, we will invest the 10% either in ESG-related securities or suitable property."

The biggest challenge for Weber is bringing the funds to the customer. "There is not yet a settlement platform for independent brokers on which the fund is listed." He expects the technical connection to a platform by the end of February 2024. The cooperative banks are also not yet able to sell the product. Weber is, therefore, currently focussing on savings banks and major banks. "Some of the programming, especially for order routing, will take until the end of this year."

The return and cancellation periods are a stumbling block. In the case of open-ended property funds, there is an agreement between the leading associations of the banking industry, according to which these deadlines are kept at the custodian banks. There is a broad consensus that this also applies analogously to the open-ended infrastructure special fund. However, to ensure a legally compliant settlement process, the association declaration must be formally extended to include the special infrastructure fund. It is reported that the associations are currently coordinating this. It remains to be seen when this will be finalised.