GERMANY - Fund manager KanAm has won the approval of around one-third of investors to reopen its Spezial Grundinvest fund after a three-month freeze, as it prepares to convert the vehicle into a Spezialfond.

The Munich-based fund manager this month suspended the €359m open-ended vehicle after a single institutional investor made a redemption request that could not be met due to insufficient liquidity.

Spokesman Michael Birnbaum would not identify the departing investor but said that, despite its small capital commitment, rules that require fund managers to treat all 78 investors equally meant it had no choice but to suspend the fund.

"One investor was willing to take a loss to get out and we had no choice because we needed a consensus," he said.

Although it could extend the closure for a further nine months, Birnbaum said it planned instead to reopen the fund when the three-month freeze ends in May with a view to converting it to a Spezialfond, a structure designed specifically for institutional investors.

KanAM decided to convert the open-ended fund to a Spezialfond following a study that concluded that the existing structure would not "adequately cater to the needs of institutional investors" under new regulatory requirements to protect retail investors that come into force at the end of the year.

A poll of investors in the fund at a recent KanAm road show suggested overwhelming support for the plan.

"It isn't only us; there are 20 funds in Germany in the same situation," Birnbaum said. "The investors we've talked to say they want to stay in real estate and they want us to go ahead with the plan."

The fund invests primarily in mature European markets, though with a 6% exposure to Greece, and almost 80% allocated to the office sector.

"From our perspective it's a new label - and that's it," said Birnbaum, although he pointed to evidence of a correlation between the fund's illiquidity and performance.

"The point of the change is to protect private investors from institutional professionals. So now investors won't be able to withdraw more than €30,000 a year. It makes no sense to institutions - they're thinking a little bigger than that."