GERMANY - The flight of institutional money away from German open-ended real estate funds (GOEFs) has caused their market share as part of the overall German fund market to drop drastically over the past five years, according to Kommalpha.

As of March 2012, the market share of GOEFs was just over 4%, close to the level in 2006 but considerably below the record of almost 6% in March 2007.

Kommalpha noted in its latest study on the German property market that most of the problems in the GOEF sector were "home-made" and that the "German fund market in total certainly is in a structural crisis".

Nevertheless, the research company pointed out that most analysis differentiated too little between the funds.

In total, the asset volume in GOEFs has increased slightly over the past five years from €78bn to €85bn, with Kommalpha noting that retail customers were sticking with the vehicles.

Institutional investors, on the other hand, have substituted GOEF investments with shares in Spezialfonds or closed-ended funds. Kommalpha stressed that the share of the still open GOEF market was "growing and sees net inflows".

In total, 10 funds will be liquidated over the next five years, with most of the vehicles scheduled to be wound down by 2013-14. A list of the funds can be found in the report.

The research company noted that GOEFs would "continue to play a role" in the German property sector, echoing a statement recently issued by rating company Scope.

In its latest note on the GOEF market, Scope included a ranking of KAGs managing this type of vehicle.

RREEF and Union Investment received the top AAA rating, followed by Deka Immobilien and WestInvest - both AA - and Commerz Real Investment with an A rating.

Scope noted that these companies managed to keep products open throughout the crisis.