The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

German real estate is not an open-and-shut case

The problems of open-ended real estate funds might pave the way for the rapid success of Reits.

By Florian Neuhof

Not all is well with open-ended property funds in Germany. In recent months, three big funds with a market value of about €9 billion, or 10% of the total volume of German open-ended funds, closed in an effort to prevent a stampede of investors redeeming their shares.

The largest fund, Deutsche Bank Real Estate’s Grundbesitz-Invest, worth €5.9 billion, was closed after it was announced that the fund was to be revalued. The other two, both KanAm funds that were previously performing well, closed after local property rating agencies switched their recommendation from hold to sell.

Investor confidence in open-ended funds has taken a blow, according to Michael Clauss of financial research consultancy Eurozone Advisers, as the apparent overvaluation practised by rating agencies in the past has undermined their trust. Indeed it is odd that funds have continued to receive positive ratings against a backdrop of diminishing returns (from 5.7% in the heyday of 2001 to 3.6% in 2005) and a property market in decline.

But although it is logical that property funds should be affected by bad market conditions, the malaise is also the result of structural problems. As Ralf Groenemeyer, head of equity strategy and real estate analyst at Commerzbank, points out, open-ended funds are designed to be long-term investments that provide a stable return.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree