GERMANY - Institutional investors continue to lose interest in German open-ended real estate funds (GOEF), but the vehicle will survive after major consolidations, according to ratings agency Scope Analysis.

Currently, nine GOEFs are in liquidation, while earlier this week Credit Suisse opened its frozen Euroreal fund to gauge market sentiment.

According to a survey by Scope Analysis among 45 institutional investors, interest in GOEFs has dropped dramatically, with the 60% of respondents expressing interest in the vehicle in 2011 dropping to just 20% this year.

Meanwhile, interest in Spezialfonds has increased, from 60% to 70% over the same period.

Despite regulatory uncertainties such as Solvency II or AIFM Directive, 40% of institutionals expect  "good" development in the market this year.

Scope Analysis also downgraded 10 of 17 GOEFs compared with last year, including all those open to institutional investors.

However, the agency said that, once it became clear which vehicles would remain open to private investors, the sector had a "historic chance for a fresh start".

Sonja Knorr, director of real estate, said she was convinced that, after the consolidation, private investors would still be able to choose from enough good open-ended real estate funds.

For the CS Euroreal fund - the "last major GOEF whose future is yet uncertain" - Knorr sees a better chance of survival than for other funds such as the SEB ImmoInvest, which has to be dissolved.

She explained that the advantage of the CS Euroreal fund was that it had 25% liquidity and, according to Scope Analysis, "a portfolio of better quality" than the SEB ImmoInvest.

According to Knorr, in the course of the consolidation in the GOEF sector, real estate worth around €20bn will have to be sold over the next 3-5 years - but that should be "no problem" for the markets.