Scope publishes new rating results of Open-Ended Real Estate Funds (DE)

The rating agency Scope has published the rating results of all open-ended real estate funds in Germany for the second time. Two-thirds of the funds received assessment changes. The primary reasons for the up- and downgrades are the continuing difficult real estate market conditions over the past months, net redemptions in some funds that cause portfolio restructuring as well as an extended analysis aided by the supply of more detailed information by the fund management companies.

With the ratings, the definition of each fund’s strategy cluster and the buy/hold/sell recommendations, which are derived from the cycle chart, the investor gets important and understandable information regarding the quality and the substance of funds’ yield.

The Scope Group has made a new, complete evaluation of all 26 open-ended real estate funds and has consequently updated the ratings of September 2004. Compared to the previous year, ten ratings have improved, seven have deteriorated and three are unchanged. Six new funds have not been given a rating yet. This time again, none of the funds were assessed with ratings in the AAA or AA range. “The high number of changes can be explained not only by the present difficult real estate market environment, but also by the restructuring of some portfolios which are caused by high net redemptions“, explains Alexandra Merz, managing director at Scope Group and responsible for the open-ended real estate funds segment. “This year it was possible to do a more intensive evaluation of real estate and portfolio data since 85 percent of the fund management companies provided Scope with complete data sets. Information flow was also aided by the eight management quality ratings that have been executed in the last year“, adds Alexandra Merz.

The allocation of the funds into the four strategy clusters has changed for only two funds. Thus, eight funds are “safety oriented”, five funds “growth oriented”, seven funds “opportunistic” and four funds “aggressive”. Two new funds (SEB ImmoPortfolio Target Return Funds and SKAG 3 Kontinente) are respectively classified in the aggressive and opportunistic strategy cluster.

The buy/hold/sell recommendations by the Scope Group were not modified for 18 of the funds. There are twelve “buy“, nine “hold“ and five “sell” recommendations. “Users should first select a strategy cluster that meets their risk profile and then select a fund that fits their investment expectations“, explains Alexandra Merz.

For the first time Scope published current calendar year performance forecasts for all of the funds. “The expected performance of the open-ended real estate funds can be estimated with high probability by the structure of tenancy agreements and other portfolio elements”, constitutes Alexandra Merz. “We want to inform the investor as precisely as possible.”

The real estate portfolio expertise was once again delivered by BulwienGesa AG, which cooperates with Scope. The real estate data consists of details of 1,476 properties, analyzed not only for the German and other European markets, but for the first time covering in detail the American market. “The funds show considerable differences in their real estate portfolios. This supports the theory that the open-ended real estate funds followed diverging investment strategies, particularly regarding their macro position and regional markets”, concludes Hartmut Bulwien, President and Chief Executive Officer of the BulwienGesa AG. “Some of the capital investment companies are characterized by consistent market monitoring and early investment positions in markets that had for a long time been undiscovered by the open ended real estate funds” continues the real estate expert. “Furthermore American properties seem to still be under-represented accounting only for 3.5 percent of the total funds’ real estate value.”

“Overall, the situation of the open-ended real estate funds is not yet completely stress-free. But today, good funds have better perspectives

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