German open-ended funds (GOEFs) have made a strong return to the market this year, and with the current changes in Europe's investment environment, this trend looks set to accelerate, according to the EMEA research group at CB Richard Ellis. GOEFs made EUR 3.9 bn in cross-border purchases in Europe in the first half of 2007, representing a three-fold increase on the same period last year, the research shows.
German open-ended funds (GOEFs) have made a strong return to the market this year, and with the current changes in Europe's investment environment, this trend looks set to accelerate, according to the EMEA research group at CB Richard Ellis. GOEFs made EUR 3.9 bn in cross-border purchases in Europe in the first half of 2007, representing a three-fold increase on the same period last year, the research shows.
With the current credit crisis squeezing out highly-leveraged investors, GOEFs, which typically have lower loan-to-value ratios, are likely to become more competitive and important in the European investment market.
'We have already seen greater activity from GOEFs, but this is only the start. We expect to see even more buying in the future as their low leverage means they are largely unaffected by more stringent lending standards,' says Jonathon Hull, executive director of EMEA investment. 'The better balance between debt and equity buyers is positive for the real estate market and will improve stability in the longer term.',
The return of GOEFs to the market as active buyers has been driven partly by a return of investor confidence, which has seen the net cash inflow into GOEFs reach EUR 6.9 bn over the first eight months of 2007. This is in contrast to both bond and equity funds in Germany, which registered total net withdrawals of EUR 11.2 bn and EUR 15.8 bn, respectively, over the same period.
GOEF buying activity in 2007 also reflects the large amounts of capital raised through the real estate asset disposals in Germany over the past two years. It is likely that the funds will continue their portfolio restructuring in the short term in pursuit of higher diversification across Europe and, increasingly, around the globe.
Another notable trend is their shift of investment focus. While in the past the funds bought mainly in the biggest office markets, such as London, Paris and Stockholm, they are now increasingly going to Italy and Central and Eastern Europe, the research shows.
