DeAWM launches first open-ended fund in 14 years

Deutsche Asset Wealth and Management (DeAWM), the asset management arm of Deutsche Bank, has launched its first open-ended real estate fund in 14 years, following the introduction last summer of Germany’s new capital investment act (KAGB), which is designed to promote greater fund stability.

'We decided to launch our fund grundbesitz Fokus Deutschland at this time because there is strong investor interest in Germany’s real estate market,’ Ulrich Steinmetz, head of open-ended funds at Deutsche Asset and Wealth Management, told PropertyEU. ‘In macro-economic terms, Germany is also one of the drivers of the European economy.’

The new fund – open to retail investors - was launched at the beginning of October, with the aim of making its first investment before the end of the year, Steinmetz said. It has a broad investment remit and can invest in any asset class in Germany, including offices, logistics, retail and residential assets. However, the fund will only invest in real estate directly, so it won’t invest in real estate debt.

‘Our aim is to build up a diversified property portfolio of up to €700 mln,’ said Steinmetz. ‘Our target distribution rate is about 4% annually. We also don’t want to use much gearing, only around 15%,’ he added.

Deutsche Asset Wealth and Management is targeting retail investors in Germany because ‘a lot of Germans are very interested in the real estate market, particularly in light of such low interest rates,’ Steinmetz said.

SECOND-TIER CITIES
The concept of the latest fund is slightly different to Deutsche Asset and Wealth Management’s two other grundbesitz funds because it will typically invest in lot sizes of around €30 mln rather than big ticket deals. ‘As Germany is very polycentric, we will invest in the ‘Big 6’ but also in second-tier cities for the right asset and location. The location itself of an asset is very important, as is its flexibility,’ Steinmetz said.

Subsequently, like most German open-ended funds, grundbesitz Fokus Deutschland will be a conservative fund, so value-added and opportunistic assets will only play a small part. ‘Ultimately, it depends on how you define risk. For example, if a building has a vacancy rate or if there are less than two years left on the lease, we would still consider the property, if the property and location ticked the right boxes,’ Steinmetz said.

Germany’s new capital investment act came into force last summer and is designed to bring greater stability to the open-ended fund sector, thereby preventing the massive runs on funds witnessed in Germany at the height of the financial crisis. Under the new code, investors must hold units in a fund for at least two years, with a notice period of one year. When units are redeemed, a 2% fee will be charged as of end-December 2019. The measure is designed to ensure stable liquidity as well as underpinning the long-term characteristics of the fund.

GRUNDBESITZ SERIES
The fund marks Deutsche Asset Wealth and Management’s third open-ended fund, following the launch of grundbesitz-global 40 years ago and grundbesitz-global in 2000. However, its two predecessors are significantly larger. Grundbesitz-europa had €4.1 bn of AUM as of end-August 2014, compared to grundbesitz-global with €2.2 bn. Deutsche Asset Wealth and Management has also appointed a new fund manager, Anke Weinrich, to tie-in with the new fund launch.

And there are other sizeable fund launches in the cards. UK-based fund manager Tristan Capital Partners has commenced talks with existing investors regarding the launch of a €1 bn European fund European Property Investors Special Opportunities 4 (EPISO 4), a spokesperson said. Tristan already closed its European Property Investors Special Opportunities III fund earlier this year, having raised €950 mln; the fund is already 80% invested in markets such as Germany and the UK. Tristan’s fourth European fund will follow the same format as its third fund, targeting net returns of 15% and investing in a diversified portfolio of assets. The fund is expected to start capital raising in the first half of 2015.

It has been a good year for German funds. In July, the German fund industry benefitted from record inflows of €9.7 bn, according to figures published this week (17 September) by the German Investment Funds Association (BVI). Of the total, €5.6 bn was invested in retail funds. Since the beginning of the year, German funds have attracted €56 bn in inflows, according to the BVI. Compared to other European countries, asset management in Germany is much more focused on investment funds. Over 80% of assets are managed via investment funds with less than 20% invested outside investment funds. This is largely due to the strong increase in the asset portfolios of Spezialfonds in recent years.