GERMANY - Redemptions in open-ended real estate funds, sparked by a German ministerial report proposing a 10% cut in property valuations, have caused some managers to re-freeze funds. But fund managers have blamed the latest spate of redemptions on market nervousness rather than a sensible reaction to talk of reform.

Michael Birnbaum, a spokesman for fund manager KanAm, stressed that a discussion draft on investor protection issued by the German Federal Ministry of Finance was far from official. He said the firm had reacted because they were "too many investors giving back shares".

He said: "It was a protective nervousness on the part of investors and we need to calm it down. I think the arguments are clearer now and it could take a year, in any case, before it becomes law."

Among the draft proposals is a two-year pre-redemption holding period and greater liquidity requirements imposed on fund managers.

Christina Bertholdt, a spokeswoman for SEB Asset Management, said large institutional investors had responded quickest with requests for redemptions last week. The SEB ImmoInvest fund temporarily suspended redemptions in response - it said to guarantee proper management of the fund.

In particular, said Bertholdt, the proposal to cut valuations by 10% "has to be discussed because it would deprive investors of 10% of the value of their assets." She added: "I'm confident that it won't be a final draft and that it will be amended. But we need to see what will happen when the draft is finalised, with everyone knowing where they're going. Then people will calm down."

If it were to pass in its current form, she said the proposal would "change the structure of open-ended funds completely, and that makes investors nervous."