GERMANY - Investors in AXA Real Estate's frozen €2.5bn Immoselect German open-ended fund (GOEF) have responded with "anger, frustration and disappointment" to events leading up to the fund manager's decision to liquidate after failing to sell enough assets to meet investors' redemption requests.

The fund manager blamed the sovereign debt crisis for its failure to sell enough properties to reach the 30% liquidity ratio needed to cover investor demands for liquidity. AXA Real Estate could only raise 10%.

"It's not a decision we've taken lightly," said Immoselect fund manager Ian Gordine. "We have to weigh up the interest of both sets of investors - those that wanted to stay in the fund and those that wanted the money.

"We had to make a decision and the best decision was to liquidate the fund to protect all investors. Investors may be frustrated, but there's understanding there as well."

The firm said it would begin to pay out to investors in around April next year.

Gordine will now have three years to sell the assets to a wider spectrum of core investors. "We saw an improvement earlier this year, which is why we went to the market. But core investors have pulled back, except for extremely core assets," he said.

"Opportunistic and value-added investors have been coming up and offering us silly prices. We won't sell assets at any price because that would be a wipeout for investors."

AXA Real Estate will reposition below-prime assets that are estimated to make up 10-15% of the portfolio, renegotiating leases close to maturity.

Achim Gräfen, managing director at AXA Real Estate Germany, said investors were cash-rich but unwilling to spend, despite a continuing strong cashflow argument for investing in real estate.

He noted a trend for investors to opt for separate account structures rather than funds. "Even small and medium-sized investors, which have no option but to invest in funds, are looking for homogenous groups of co-investors," he said.

"The idea is to protect investors. They want their money back but we have to protect them - even from themselves," said Gordine. "Investors just want to get their money."

Iryna Pylypchuk, associate director at CBRE, pointed out that with one exception - a DEGI fund - most of the GOEFs that had earlier announced they were in trouble have gone into liquidation, while four other funds have until May to decide whether to reopen or liquidate.

"It's difficult to say whether they will be able to reopen or not, but the timeframe is sufficient for them to have a go at it," she said.

H1 data indicates that open-ended funds were net-sellers in Europe. "There is a clear divide between those doing well, which mostly rely on private money, and those still trying to keep liquidity an adequate level," said Pylypchuk.

She said GOEFs would likely accelerate disposals over the next 12-18 months.