GERMANY - The new German capital investment fund (KAG) announced by LaSalle Investment Management last week will tap small and medium-sized pension schemes struggling to adapt to globalisation.

In an interview with IPE Real Estate, LaSalle's German regional director Claus Thomas said the KAG, once approved, would appeal to cautious investors comfortable with local structures.

"German investors are more cautious with international structures, such as limited partnerships in the UK, not least because they involve English-language reporting," he said.

"The long-term trend is toward internationalisation, which in any case is forced by EU law.

"That trend will continue. For large investors, English is the language of business - but even with these, the back office often struggles with English."

He added: "The largest institutions already have tax and legal departments to help them. The KAG will give us access to small and medium-sized pension funds that want to invest across Europe and the US, [but lack back-office support]."

When LaSalle began operating in the German market 10 years ago, the KAG was the vehicle of choice for pension funds.

However, the regulator at that time looked on KAGs as banks and required "a very significant downpayment" to set one up, said Thomas.

As a result, real estate funds targeting German investors tend to be Luxembourg vehicles.

A change in the regulatory environment - notably the 2008 reform of German investment laws - has liberalised compliance in line with international standards.

Austrian and Swiss investors, used to investing in Germany, are likely to embrace the new structure, he said.

But the KAG is geared primarily toward the German market.

"It ticks all the boxes - on legal and tax requirements, for example," he said. "Germany is still the largest market, with the largest number of investors."

Supervisory board members, in addition to Thomas, will include David Ironside, current managing director of LaSalle Investment Management in Germany, and Andy Watson, international director of the company's Paris office.