GERMANY - Rating agency Scope has predicted a rise in ‘blind pools' among German closed-ended real estate funds following implementation of the Alternative Investment Fund Managers (AIFM) Directive.

The company has already identified an increase in such arrangements where investors commit capital to an investment strategy, placing faith in the manager to execute the strategy without securing a seed portfolio in advance.

According to Scope, approximately 22% of all real estate funds launched in 2011 were set up as blind pools, a number that has risen to 34% in 2012.

Analysts noted that this type of investments was mainly used in the German residential sector, which has seen growing interest from investors.

Scope said the impact of the new AIFMD regulations on closed-ended real estate funds was "not yet clear", but analysts said it was likely further increase the proportion of established as blind pools, or at least ‘semi-blind pools'.

The conclusion is based on the possibility that German regulators will go beyond the AIFM Directive and impose minimum requirements on asset diversification on closed-ended funds.

"Should a minimum requirement of three or more objects be introduced, issuers might be more likely to buy objects gradually during the placement phase," Scope's report said.

The company noted that one advantage of this would be that funds would no longer be required to pre-finance several objects at the same time.

"At the moment even pre-financing a single object sometimes proves a major hurdle," Scope stated.