German real estate funds: changes in return distributions and portfolio favourability
Abstract
Purpose
Since 2008, the German open-ended real estate fund (GOEREF) industry has experienced a critical phase of suspensions of redemption of fund shares, announced fund terminations and, eventually, introduction of a new regulation. With assets under the management of over 80 billion, GOEREFs are the dominant indirect real estate investment vehicle in Germany. Thus, it is extremely important to study the effects of this crisis on the risk and return characteristics of the respective funds. The paper aims to discuss these issues.
Design/methodology/approach
Both net asset values (NAVs) and potential secondary market prices of the shares of funds with suspended redemptions are used. The resulting total return patterns are analysed on an index basis for fund groups that best represent the most important investor groups for GOEREFs.
Findings
Groups that comprised a higher number of funds with suspended redemptions were considerably worse off and less attractive in an asset allocation context than the others given the often much lower secondary market prices. However, changes in return and risk must also be considered in terms of NAVs. The fund group comprising co-operative savings banks' funds was virtually unaffected by the liquidity crisis and continued to deliver stable and non-volatile returns, while the other fund groups exhibited a clear shift in their respective return profiles.
Originality/value
This study analyses fund groups that reflect the most important investor groups by using both types of important prices in a comprehensive industry sample. It, thus, provides valuable insights into the changing profiles of the funds and groups and their favourability from an asset allocation perspective.
Keywords
Acknowledgements
The author would like to thank Robin Borcherding for providing excellent research assistance. Comments and suggestions by Bertram Steininger, participants of the European Real Estate Society Conference 2013 held in Vienna, Austria, and the 3rd Real Estate Workshop held in Essen, Germany are gratefully acknowledged. The author would like to thank two anonymous referees for helpful comments. Assistance received from Bloomberg representatives and fund management companies for resolving data problems is also gratefully appreciated. The author is responsible for any remaining errors.
Citation
Stein, M. (2014), "German real estate funds: changes in return distributions and portfolio favourability", Journal of European Real Estate Research, Vol. 7 No. 1, pp. 87-111. https://doi.org/10.1108/JERER-10-2013-0024
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited