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Funds
A Stable Foundation
The Open-Ended Real Estate Investment Fund is a unique form of investment product “made in Germany” to provide “equal opportunity for all in all investment markets”. Open-Ended Real Estate Investment Funds have been enormously successful in Germany and the favour they enjoy with investors has been growing steadily ever since they were introduced in the 1950’s.In 2003, they ranked first among publicly owned funds in terms of net cash in-flows. Especially given the difficult situation in the equity markets, many investors have turned to this investment as a low volatility alternative. In terms of both time and money spent, Open-Ended Real Estate Investment Funds offer a proven low-cost method of participating in the multitude of opportunities offered by the world’s real estate markets. These funds are also not an opportunity restricted to small, private investors. Institutional investors increasingly regard
Open-Ended Real Estate Investment Funds as major players in the land and property industry; an avenue worth exploring, in particular, when seeking professional management expertise for larger real estate portfolios. Today, Open-Ended Real Estate Investment Fund managers are expanding their investments in foreign properties and exploiting the opportunities to be found in international markets while simultaneously guaranteeing a high quality product with a high degree of transparency. The strict legal provisions with which they must comply, require them to diversify their investments, avoid speculation, and allow their fund units to be easily traded. All of these are factors that make this form of investment so attractive to investors seeking steady growth in value at a low risk for their invested principal.
Open-Ended Real Estate Investment Funds are investment funds managed by a trustee and are subject to state supervision. They invest the capital contributed by their investors primarily in commercial buildings and real estate. The funds are categorized as “open” because no limits are set on the number of properties in which the fund can invest, the number of investors or the duration of investments. In addition, unit certificates in the fund may be redeemed at any time at the current unit price. Open-Ended Real Estate Investment Funds are launched with the objective of realizing a regular flow of income. Economically speaking, when an investor buys a unit certificate in an Open-Ended Real Estate Investment Fund, he acquires a shared equitable interest in whatever real estate assets are held by the fund. The range of such properties might include anything from suburban shopping malls to office complexes or from hotels to exclusive downtown fashion boutiques.
Diversified Risk
Open-Ended Real Estate Investment Funds are managed by professionals who are obliged by law to conform their acquisition of real estate properties to the principles of blended risk and investment diversification. Fund managers invest their shareholders’ money with the greatest care. To achieve a balanced portfolio, they are required, when contemplating a decision to invest, to consider such factors as the size of a property, its usage, its industry segment and the age of its buildings. Liquidity to protect their investors, real estate investment companies must ensure they have sufficient funds available to them at all times should investors desire to redeem their units. The liquidity ratio is therefore set by law at not less than five percent. Normally, however, fund managers maintain a higher degree of liquidity to allow for new investments, to complete construction projects and to perform maintenance work. Units are repurchased at the redemption price that is published every exchange trading day. The unit price is calculated according to the net value of assets held in the fund divided by the number of units outstanding.
Investor Protection – Made in Germany
A feature of Open-Ended Real Estate Investment Funds: investors and their investment enjoy special protection under the provisions of the Investment Act (Investmentgesetz) This law sets out detailed guidelines governing fund companies. In addition to supervision by the Federal Institute for Financial Services Supervision (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), investment companies are subject to regular monitoring by depositary banks as well as their own internal and external auditors.
International Investment Opportunities
In recent years, German legislation governing Open-Ended Real Estate Investment Funds has followed the trend towards increased internationalisation, globalisation and interdependence of national economies. Since the middle of 2002, the German legislature has permitted complete international diversification. Real estate investment companies now enjoy virtually unlimited authority to invest abroad. This has opened additional opportunities by allowing fund managers to take full advantage of different market conditions and economic cycles. Whether they are in Paris, London, Toronto, Tokyo or Sydney, fund managers are actively engaged in all the important real estate markets of the world. Active in the property investment business for over 40 years, Union Investment Real Estate for example now operates in 18 countries around the world, with approximately 45 % of property assets located in countries outside the domestic market. The company has particularly extensive holdings in France (15,3 %), the UK (9,5 %) and the US (6,8 %).
Investor safety coupled with solid returns, quick access to invested capital, widely diversified risk and the comfort of professional management are the factors that make Open-Ended Real Estate Investment Funds such an attractive investment.
Flexibility for Investors
Open-Ended Real Estate Investment Funds allow for the accumulation of wealth by buying units through regular investment of amounts as small as € 25. Fund investment schemes are flexibly designed to allow purchases in regular, equal increments or sporadically, in variable amounts. Liquidity and financial flexibility remain secure because fund units can be surrendered to the fund for redemption at the daily price at any time.
Investing in Comfort
Investors are spared the laborious effort and problems associated with direct ownership of real estate. The investment companies assume complete responsibility for leasing, managing and maintaining the properties owned by an Open-Ended Real Estate Investment Fund. Because they are bound to maintain a high degree of transparency, such companies keep their investors up to date with regular reports and information regarding the status of their investment. Repurchase prices are also published regularly.
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