In the first half of 2020, 16 open-ended retail real estate funds recorded an average increase in value of 0.9 percent – this was the result of a study by the Scope rating agency. The funds are thus showing a positive development despite the Corona crisis. The outlook is still clouded by the pandemic.
Positive return – but with losses
Although the interim result at the middle of the year is quite encouraging, it is noticeably worse than the performance within the last year. In the first half of 2019, the average increase in value of the same 16 real estate funds was a full 1.6 percent. There is a clear discount of 0.7 percentage points. According to Scope, the front runners in terms of performance as of June 30, 2020 are “UBS (D) Euroinvest Immobilien” with 3.2 percent, “FOKUS WOHNEN DEUTSCHLAND” with 2.5 percent and “LEADING CITIES INVEST” with 1, 5 percent. This is followed by “Deka-ImmobilienEuropa” with 1.4 percent and “WERTGRUND WohnSelect D” with 1.1 percent. Viewed over a year, the open-ended real estate funds increased in value by a total of 2.4 percent by mid-2020. This development is also significantly worse compared to the same period of the previous year, an increase of 3.4 percent. The reasons for this are the already noticeable consequences of the Corona crisis. Depending on the segment, rental income and property prices decline. As a result, adjustments must be made to the assessment. The hotel sector and retail trade are particularly affected by this. By the end of 2020, the Scope experts are therefore expecting an average return on open real estate funds of 1.5 to 2 percent. The returns of individual funds can also be negative.
Net inflows remain at a good level
According to the analysis by Scope, the open-ended real estate funds received a net inflow of 4.4 billion euros in the first half of 2020. In the same period of the previous year, the net inflows still amounted to 5.7 billion euros. The development can nevertheless be viewed as positive. By the middle of the year, investors consistently invested more money in the funds than they withdrew. The largest inflows took place in January and February. Around 3 billion euros were spent on these two months alone. The remaining 1.4 billion euros were placed in the funds in the months that followed.
With a total of 572 million euros, “hausInvest” was able to achieve the largest net inflow of funds in the first half of 2020. This is followed by “grundbesitz europa” with 562 million euros and “UniImmo: Europa” with 514 million euros. Together, the three funds account for around 38 percent of the net inflows.
Open real estate funds are considered crisis-proof
With this performance, the open-ended real estate funds present themselves as quite stable in the crisis. The positive interim result is due, on the one hand, to the fund’s reputation for being particularly secure in difficult times, and, on the other, to the minimum holding and notice periods introduced in 2013, which are intended to preserve liquidity. If you compare the current events with the financial crisis of 2008 and 2009, you can see that real estate funds are extremely resilient. In the economic misery of that time, a total of 18 open real estate funds with assets of around 26 billion euros had to be closed and liquidated. The reason was a massive liquidity problem. Among other things, investors withdrew their money from the fund in panic selling. Such circumstances put the fund managers under pressure and inevitably lead to quick real estate sales, which can often only be realized at lower prices. The new regulations protect the funds from corresponding liquidity withdrawals. Shares in open-ended real estate funds that were acquired after July 22, 2013 must remain in the investor’s custody account for at least 24 months before they can be sold again to the issuing company. In addition, the redemption of the units must be irrevocably announced at least one year in advance. This counteracts sudden and existence-threatening panic sales. The positive effects of the new deadlines can be seen today. According to Scope, real estate funds currently have an average of around 20 percent of the fund’s assets in cash. In addition, no serious cash outflows have been identified so far. The real estate funds are currently far more stable than in the past.
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