Investors stick with GOEFs as new legislation looms: INREV

Institutional investors and fund managers of German open-ended funds (GOEFs) remain surprisingly positive about these vehicles despite the imminent introduction of tighter requirements under the AnsFuG legislation, according to recent research by INREV.

The AnsFuG reforms, which are due to come into effect in January 2013, will introduce a 24-month 'lock-up' period, a notice period of 12 months for the redemption of fund units, and a cap on the debt ratio of 30% for all GOEFs. The legislation is designed to improve protection for retail investors in these funds following significant capital redemptions and the forced closure of some funds in the wake of the financial crisis of 2008.

INREV found that the vast majority of institutional investors and fund managers welcome the changes, saying that overall they will strengthen the GOEF market by introducing more capital to Spezialfonds, which are exclusively for professional investors.

The research indicates that 75% of institutional investors are expected to increase their allocations to Spezialfonds. This could result in a projected 20% rise in total NAV for Spezialfonds to around EUR 38 bn.

'Despite initial uncertainty about the impact of new legislation on GOEFs, our research suggests that the reforms will help to strengthen the market in the long term. There will be a significant shift of capital allocation from retail funds to Spezialfonds. Spezialfonds will therefore become more important,' commented Matthias Thomas, CEO of INREV.

However, the reforms are likely to impact retail funds and institutional retail funds in the GOEF sector, with a potential decrease in NAV from EUR 85 bn to EUR 65 bn. Total NAV for institutional retail funds is expected to halve to around EUR 5 bn, with the majority of institutional investors exiting these funds in favour of Spezialfonds.