GERMANY - Fund industry association BVI has urged the European Commission to enable German real estate funds qualify for a so-called “EU passport,” which would permit their sale across the bloc.
“Our view is that German real estate funds provide a stabilising factor in an investor's portfolio. This is simply because traditionally, real estate investments have been less volatile than bonds,” the BVI said.
“As a result, real estate funds should be able to obtain an EU passport just like investment funds have been able to for years,” it added.
According to the BVI, German real estate funds that are open to investors had €104.4bn in assets at the end of September 2005. The funds largely invest in commercial property though there is some exposure to private property.
The four biggest providers of such funds are DekaBank with a 21.9% share of the market, Union Investment (14.9%), Commerzbank (11.%) and Deutsche Bank (9.9%).
BVI's comments come as the Commission currently solicits the European fund industry for comment on a green paper, containing proposals on how to modernise the European fund industry.
The safety of German real estate funds was thrown into question last year when Deka Immobilien, Deka's real estate fund arm, was rocked by a series of corruption scandals.
The scandals led to the resignations of Deka Immobilien's entire management and, eventually, the chief executive of Deka itself.
Deka Immobilien's main fund, which exclusively invests in German real estate, was hit by €2.7bn in investor outflows both because of poor performance and the scandals.
The outflows at the German fund have continued in 2005, but have been on a much smaller scale. Investors have been somewhat reassured by Deka's claim earlier this year that it could quickly inject €500m into the fund if inflows again grew rampant.
