German property redemptions could carry two-year waiting period

GERMANY - Investors in German open-ended real estate funds will have to abide by a two-year holding period before redeeming their shares, if government plans come to fruition.

Minister of finance Dr Wolfgang Schäuble has drafted legislation that will introduce the mandatory holding period for funds and greater liquidity requirements from fund managers.

Both private and institutional investors will be affected by draft legislation, which will also require funds to provide cancellation periods. These could vary from between six and 24 months, depending on the level of liquidity provided by the fund.

The German government is hoping this new requirement will protect the interests of investors who hold funds for the long-term, from investors with shorter investment horizons seeking to redeem their shares.

However, fund manager Union Invesment is concerned that the proposed notice period is "misleading" for private investors.

"The characteristics of the open-ended real estate fund - the right to daily redemption - have to be maintained for private investors," claimed Fabian Hellbusch, spokesman at Union Investment.

"We see the proposal as the starting point of a discussion which will hopefully result in a solution reflecting the interests of the vast majority of investors."

The measures, which are still in discussion and could be adopted by the summer, are part of a wider raft of legislative reforms to strengthen and stabilise capital markets in the country, including a new transparency system for the short-selling of German financial stocks.

Dr Schäuble said the proposed legislation was "an important and necessary complement to the international efforts for a comprehensive regulation of financial markets".

He added: "The federal government uses every opportunity to achieve national measures with greater transparency and better protection of investors."

Schäuble also said closer regulatory supervision would be paid to open-ended real estate funds that were unable to operate in a sustainable fasion and were consequently liquidated.