The latest product of IVG Institutional Funds, the IVG Protect Fund an open-ended, specialized real estate fund for institutional investors with an investment volume of approx. 300 million has been fully placed.
IVG transferred to the fund eight high-yield office properties located in the major European cities of Brussels, London, Paris, Berlin, Hamburg and Munich. In the end, there was so much demand that several interested parties could not be served.
Dr Gerhard Niesslein, spokesman of IVG's Board of Management, said at an investors' meeting in Frankfurt: "We are currently at the very bottom of the business cycle; and we will now increasingly take advantage of this opportunity."
Against the background of greater volatility and higher risks of inflation, he added, investments in real assets would become an essential part of capital allocation.
IVG has pursued a new approach with its Protect Fund which has now been fully placed. The concept developed by IVG Institutional Funds is based on an alignment of interests between the investors and IVG as the seller. IVG will retain a share of 20% in the fund's equity and use this share as a risk cushion. The investors (five institutional investors) will be protected against any write-downs for a period of five years due to this value protection mechanism. Any decrease in value will first be offset against IVG's share, while the fund will fully benefit from any increase in value; in this case, IVG will participate only by a performance fee.
IVG's Protect Fund is a specialized fund ("Spezialfonds") under the German Investment Act and therefore has a fund structure that is efficient from a tax and regulatory perspective. The fund has a target yield of 6% p.a. and a sound borrowing ratio of 47%. In agreement with the investors, the fund may be liquidated at any time.
Via its branches in the major European cities, IVG has been familiar with some of the properties of the Protect Fund for years and continues to be the asset manager for the new owners.