Open-ended real estate funds: Consolidation phase almost complete (DE)

Following the liquidation of KanAm grundinvest, the plug has been pulled on another large open-ended real estate funds, SEB ImmoInvest. Both funds were hit by turbulence in the wake of the financial markets crisis of 2008 and were unable to raise the liquidity required to re-open before the legal deadline.

"We are currently experiencing the conclusion of an episode that has brought this generally successful product into disrepute among many small investors and the general public," comments Dr. Reinhard Kutscher, Chairman of the Management Board of Union Investment Real Estate GmbH, Hamburg.

"For the open-ended real estate fund industry, liquidation of the funds marks a turning point after they had been frozen for more than two years. There is now a real opportunity to re-focus the debate on the positive features of open-ended real estate funds and their advantages over other investment options. Open-ended real estate funds remain the most attractive form of indirect property investment for small investors."

The product has shown itself capable of reform, notes Kutscher. The new legislation aimed at strengthening investor protection and improving the operation of capital markets (the AnsFuG Act) which comes into force on January 1, 2013 will see open-ended real estate funds reverting to their classic role as a low-risk product for a broad cross-section of private investors. He added that a key aspect was the restriction on daily redemption exceeding €30,000 per half-year.

"Most open-ended real estate funds which practiced strict separation of private investors and large institutional investors have withstood the stress test imposed by the financial crisis. Our own funds in particular have so far come through with flying colors. The sustained strong demand confirms the high degree of trust placed by our investors in our products and in the quality of our management," continued Kutscher.

Union Investment's open-ended real estate funds for private investors have attracted net cash inflows of some €650 million since January 2012.

"Both on the retail side and on the special fund side, our funds offer stable returns that are totally competitive – currently between 2.5-3%. As market conditions improve, the outlook for our funds is positive."

The upcoming sale of assets from the funds being liquidated could give some investment markets an additional boost, Dr. Reinhard Kutscher adds. "The almost completed consolidation clearly indicates that open-ended real estate funds are back on track. It also confirms that the industry once again ranks as a trusted partner for reliable and sustainable real estate investment," said Kutscher.

Source: Union Investment Real Estate GmbH

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