Legal Expert Dr. Jannik Zerbst Discusses Changes in Fund Operations

Private markets have always operated by their own set of rules, which are very different from public markets and traditionally more resistant to rapid change. However, that’s no longer the case. 

In recent years, a wave of new regulations like eIDAs, pressure to adopt digital solutions, and a growing demand for greater transparency have sparked a noticeable transformation across the industry.

To get a deeper understanding of what’s driving these changes, we sat down with Jannik Zerbst, Associate at YPOG. 

YPOG is a law firm specializing in fund formation, fund structuring, and regulatory compliance. 

During our conversation, Jannik shared his perspective on the current state of private markets and the challenges that come with adapting to this new environment. From navigating the latest fund regulations and  Environmental, Social, and Governance (ESG) requirements to exploring the rise of digital assets and technology’s role in streamlining operations, it’s clear that private markets are entering a new era.

The Current State of Private Markets: A “Normalization” Period

According to Jannik, the current slowdown in fundraising activity across private markets—particularly in Germany—is not necessarily a negative development. 

Fundraising has been slowing down compared to previous years, but this could be considered a normalization.

Dr. Jannik Zerbst

Associate @ YPOG

This observation reflects broader industry trends where the volatility of global markets and increasing regulatory scrutiny have tempered the frenetic pace of venture capital (VC) and private equity (PE) activity seen in the past decade.

“Political unrest, wars, and stricter regulatory requirements have created a complex landscape for fund formation and structuring,” Jannik adds, highlighting how international crises have shaped the investment climate. 

The effects of global events like the Russia-Ukraine war, trade tensions between the U.S. and China, and ongoing uncertainties in the Middle East are being felt across private markets, contributing to a heightened sense of caution among investors. 

Regulatory bodies, particularly in Europe, have responded by tightening the requirements around cross-border transactions and enhancing their scrutiny of fund structures to ensure compliance with a growing number of directives.

For General Partners (GPs) and Limited Partners (LPs), these shifts have added layers of complexity to structuring funds and executing investment strategies. 

In Germany, collecting and managing all the necessary documents can be very time-consuming and resource-intensive.

Ertan Can

Founder at Multiple Capital

For instance, navigating the intricacies of the EU’s Anti-Money Laundering (AML) Directive or complying with new tax reporting standards under the OECD’s Base Erosion and Profit Shifting (BEPS) initiative can be particularly challenging. “It’s not just about raising capital anymore,” Jannik explains. 

Managers now need to be prepared to tackle a host of compliance issues, from AML requirements to complex tax regulations that vary depending on where their investments are made.

New Challenges in Fundraising and Structuring

One of the key challenges for GPs and LPs today is navigating the evolving regulatory landscape. 

The regulatory requirements for how to market a fund or where to conduct fundraising have become more stringent. Additionally, there’s growing complexity in dealing with tax issues, particularly when an investor is based in one country but making investments in another.

Dr. Jannik Zerbst

Associate @ YPOG

This has created a more intricate and fragmented environment for fundraising, making it essential for fund managers to stay up-to-date on multi-jurisdictional rules and the impact of international treaties, such as the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, on cross-border transactions.

Taxation is particularly thorny in this context. For example, the implementation of the OECD’s Common Reporting Standard (CRS) requires fund managers to disclose the tax residency of their clients, adding to the administrative burden. Meanwhile, the EU’s Anti-Tax Avoidance Directive (ATAD) has introduced new rules to combat tax base erosion and profit shifting, which significantly impact fund structures, especially those operating across multiple jurisdictions. 

This means fund managers need to pay close attention to how they set up their fund entities, as small oversights can lead to substantial tax liabilities or non-compliance penalties.

A significant portion of new regulatory guidelines pertains to ESG standards. 

The European Union’s efforts to create a robust legal framework around ESG have been met with mixed reactions from the industry. On the one hand, these regulations seek to combat greenwashing—a practice where funds are marketed as more environmentally or socially responsible than they actually are. 

On the other hand, the rapidly evolving requirements have made it difficult for fund managers to keep up, particularly when it comes to categorizing their funds under Sustainable Finance Disclosure Regulation (SFDR’s) Article 6, 8, or 9 classifications. 

These classifications dictate the extent to which a fund incorporates ESG factors, with Article 9 being the most stringent, reserved for funds that have a sustainable investment as their objective.

“It’s crucial for fund managers to align their marketing strategies with these regulations to avoid the pitfall of overstating their ESG commitments,” Jannik asserts.

This is especially important when attracting institutional investors, who are increasingly driven by ESG considerations.

Dr. Jannik Zerbst

Associate @ YPOG

Institutional investors such as pension funds and endowments often have their own ESG mandates, and failing to comply with regulatory expectations can lead to reputational damage or even exclusion from these investor pools.

The push for ESG compliance has also created a need for new tools and processes. Many fund managers are now turning to digital platforms and third-party service providers to help collect, analyze, and report ESG data.

Embracing Digital Transformation  in Legal Operations

Digital transformation is another factor reshaping private markets. From digital platforms that streamline investor onboarding to tech solutions that enhance reporting standards, technology is enabling firms to operate more efficiently and transparently. 

“Digitalization has greatly impacted our work in private markets,” Jannik says.

“For example, digital platforms speed up the onboarding and review process, making it easier for us and our clients to manage large volumes of data.”

Despite the evident benefits, digital adoption in private markets has lagged compared to other sectors like fintech. Jannik attributes this to cultural and strategic hesitancy rather than outright resistance. 

It’s not a delay, but rather a cautious approach typical in Germany and Europe. There’s a tendency to stick to what works until the benefits of new solutions are fully realized.

Dr. Jannik Zerbst

Associate @ YPOG

The slower adoption also stems from the smaller size of private markets compared to public ones, making it harder for digital solutions to achieve the same level of scalability and acceptance.

Striking a Balance Regarding Privacy Concerns and Data Management 

As the private market increasingly adopts digital platforms, concerns around data privacy and security are moving to the forefront of discussions. 

“Privacy is one of the biggest issues that come with digitalization,” Jannik acknowledges. While technology offers powerful tools to streamline operations and improve efficiency, it also brings new challenges in managing the vast amount of sensitive information exchanged between parties.

Today, with stronger regulatory frameworks in place at both the EU and national levels—such as the General Data Protection Regulation (GDPR) and the upcoming Digital Operational Resilience Act (DORA)—law firms and fund managers must be more vigilant than ever about how data is handled. 

This means not only ensuring compliance with stringent regulations but also being proactive in implementing robust data protection measures. 

"Using digital platforms and third-party service providers broadens the scope of data accessibility, and that’s something that can be intimidating for stakeholders,” Jannik explains.

Navigating these issues requires more than just a checkbox approach to compliance. As Jannik points out, many digital platforms and cloud-based solutions introduce complex data-sharing scenarios that can blur the lines of responsibility. 

For example, when a fund manager utilizes third-party tools for onboarding or reporting, it’s necessary to determine who holds accountability for data security and how any potential breaches would be managed. 

“Digital adoption doesn’t have to come at the expense of privacy,” Jannik asserts. It’s about building trust through transparent data management practices and ensuring that all parties—GPs, LPs, or third-party providers—are aligned on how data is handled and protected.

This involves setting clear guidelines around data sharing, developing comprehensive data security policies, and conducting regular compliance audits to ensure that every piece of information is managed following both local and international regulations.

The Rise of ESG and the Push Against Greenwashing

With ESG factors becoming an integral part of investment decisions, both GPs and LPs must navigate a complex web of regulations preventing greenwashing. 

“The EU’s legal framework around ESG is becoming more detailed, which helps promote sustainable investments but also complicates fund structuring,” Jannik points out. 

For institutional investors with ESG mandates, the alignment between a fund’s stated ESG objectives and its actual investments is under greater scrutiny.

Jannik advises fund managers to be transparent and realistic in their ESG commitments. 

It’s important to adjust your marketing strategy and fund promotion according to the legal framework to avoid promoting ESG factors that you’re not taking into account. This is particularly relevant for institutional investors who have strict ESG requirements.

Dr. Jannik Zerbst

Associate @ YPOG

The Impact of AI in Legal Tech and Private Markets

Looking ahead, Jannik sees artificial intelligence (AI) as a key driver of change in legal tech and private markets. “AI promises to develop better solutions on a broad scale, from automating mundane tasks to enhancing complex legal analyses,” he says. 

YPOG has already started implementing sophisticated software add-ons that aid in legal drafting processes. 

“The software can quickly scan through lengthy contracts, identify potential inconsistencies, and flag clauses that might pose risks based on predefined criteria or historical case data,” Jannik explains. This capability speeds up document reviews and helps YPOG’s legal team understand how different clauses interact, providing deeper insights into legal structures and their implications.

But the benefits of AI extend beyond efficiency gains. AI is also changing how law firms deliver strategic value to their clients. 

By automating repetitive tasks such as contract reviews, compliance checks, and due diligence processes, lawyers can shift their focus to more complex issues—such as advising on the strategic implications of different fund structures or navigating cross-border regulatory environments.

We’re just scratching the surface of what’s possible with AI. 

The future will be about finding even more innovative ways to use this technology to solve complex legal and business challenges, ultimately reshaping how private markets operate and how law firms deliver their services.

Jannik’s Recommendations for Law Firms and Fund Managers

When adopting digital solutions, Jannik advocates for a strategic and measured approach that aligns with the firm’s immediate needs and long-term objectives. 

Start by identifying the biggest pain points within your current processes and categorize them based on complexity and impact. This helps prioritize which areas to address first.

Dr. Jannik Zerbst

Associate @ YPOG

By breaking down pain points from simplest to most complex, law firms and fund managers can set realistic goals and achieve quick wins that build momentum for larger digital transformation initiatives.

For example, law firms might start by automating document management and streamlining internal communications—tasks that often consume a lot of time but don’t require complex solutions. 

By implementing these smaller changes first, teams can build confidence and familiarity with digital tools, making it easier to tackle more advanced integrations, like AI-based compliance monitoring or digital contract analysis, down the line.

For fund managers, Jannik emphasizes the importance of digital tools that can enhance communication with investors and streamline compliance processes. 

Fund managers should look for solutions that offer both operational efficiency and transparency. Digital platforms that centralize investor relations, provide real-time updates, and facilitate seamless reporting can be game-changers. 

These tools reduce administrative overhead and improve the overall investor experience, helping to build stronger relationships and trust.

What’s Next for the Private Market? 

According to Jannik, the key to success for funds lies in staying adaptable and open to new technologies while maintaining a strong grasp on regulatory compliance. 

This adaptability involves leveraging digital platforms designed specifically to meet the unique needs of private markets. 

The nice thing about platforms like Vestlane is enabling different stakeholders to access and review information simultaneously. This greatly reduces the time spent on back-and-forth communication.

Dr. Jannik Zerbst

Associate @ YPOG

Vestlane offers fund managers a streamlined solution for investor onboarding, compliance management, and secure data handling—all critical functions in today’s regulatory environment.

Our compliance modules are designed to keep firms aligned with the latest legal and regulatory changes, minimizing the risk of errors or oversights. 

For example, Vestlane’s automated Anti-Money Laundering (AML) checks and Know Your Customer (KYC) procedures simplify complex due diligence processes, enabling fund managers to onboard new investors more quickly and securely. 

It’s not just about speeding up the process,” Jannik explains, “but ensuring that every step of the onboarding and compliance workflow is thorough and fully compliant with local and international regulations.

Dr. Jannik Zerbst

Associate @ YPOG

Looking ahead, the adoption of such platforms is likely to accelerate as private markets continue to embrace digital transformation to stay competitive. Digital solutions like Vestlane will become the norm, helping funds manage their operations more easily while maintaining robust compliance standards.

Currently, we have 300 funds and more than 6,000 LPs using Vestlane. If you’re interested in how our platform can help your law firm or fund, book a demo with us.