IVG Immobilien AG in Bonn, one of the leading real estate companies in Europe with assets under management of 22 billion, welcomes the German government's plans to regulate the "grey capital market" and place it under financial supervision.
Following the introduction of prospectus and publicity obligations for closed-ended funds in 2005, the tightened supervision will oblige fund providers to plan and document their business operations carefully and allow them to be reviewed externally in cases of doubt, explains Dr. Georg Reul of the Board of Management of IVG Immobilien AG,
The supervisory authority could become a German equivalent of the SEC, the Security and Exchange Commission in the US.
Reul: "That is strongly necessary, we are in need of a rigorous consumer protection when it comes to managing third parties money."
The number of investors with investments in closed-ended funds is currently estimated at 3 million, as compared to 3.6 million with investments in shares in 2008, according to the information of Deutsches Aktieninstitut (German Shares Institute).
Closed-ended funds are an important component of asset formation and pensions. For instance, according to a survey by the VGF (German Association of Closed-ended Funds) its member companies distributed approximately 4 billion to 1 million investors in 2008. Also, rental agreements for commercial real estate are generally guarded from inflation by corresponding contract clauses.
"Top properties at popular locations are currently bringing in returns of a good 5% after tax and costs," says Reul, "whereas government bonds yield roughly half of this without providing any protection from inflation, and are also subject to withholding tax."
"Black sheep" still dominate in the headlines and in commentaries on the sector. Consumer rights associations have been calling for regulation of the grey capital market for years. But only now with a European Commission directive (AIFM) are transparency, minimum requirements and monitoring to be brought into this market, with admission procedures, risk management systems and extensive notification obligations towards investors and authorities.
IVG board member Reul believes that times are beginning to change for the funds sector. He describes the relationship between the initiator and the investors as a trusteeship where there must be strict requirements and a clearly defined situation. He states that for major issuers such as IVG this is self-evident, and that since the Euro Select fund series was issued in 2004 there has been comprehensive documentation and a duty to provide information promptly, as is now being demanded by the European Commission. Without financial supervision, it would hardly be possible on a long-term basis for funds to obtain the EU pass for sales including in neighboring countries.
Through its special funds, IVG is already one of the major asset management companies in Holland, Belgium and France. IVG also operates in Switzerland. Altogether it manages funds with a total value of 15 billion for institutional investors particularly insurance companies, pension funds and foundations and for 50,000 private investors. Here, it says, close communication is a prerequisite for the necessary relationship of trust.
Source: IVG Immobilien AG