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Secondary market for closed real estate funds – opportunities for investors

On the secondary market for real estate funds, shares from closed funds can be quickly liquidated. Buyers benefit from relatively low prices without having to forego performance.

Secondary market for closed real estate funds

Closed-end funds are considered illiquid investments, as the sale of the units can only be carried out as a difficult and lengthy procedure, because the units can neither be sold on the stock exchange nor returned to the issuer before the end of the term. The so-called secondary market for all closed-end funds arose from this dilemma.

In general, company shares from closed funds are also traded on a secondary market during the term. The shares to be sold are usually listed on online platforms such as those of Deutsche Zweimarkt AG or Zweimarkt.de and then sold to willing buyers via bidding processes.

In this way, fund shares can be liquidated faster and more cost-effectively for the seller than the traditional way. For those interested in buying certain fund units, there is again the chance to get the desired units relatively cheaply.

However, the secondary market is not regulated by law, which is why the state does not protect the investor from any losses due to misconduct.

Secondary market real estate fund from HTB

In an interview with FondsDISCOUNT.de, Andreas Prey, managing director of HTB Fondshaus, which offers secondary market real estate funds, argues to what extent investors benefit from the secondary market. Accordingly, the secondary market has a very broad risk diversification, since the diversification of the assets it contains is often greater than that of the target funds.

In addition, the shareholder of a secondary market real estate fund usually receives his shares more cheaply than the market suggests, since the sellers accept lower sales prices. With regard to possible safety concerns due to the lack of regulations on the secondary market, Prey emphasizes that each of the target investments made by HTB go through a threefold review process.

“[Das Zielinvestment] if at that time passed the review process for the original fund, it must then pass our analysis process with the evaluation of historical performance and the predictable further development as well as an external review by a neutral auditing company ”, says Prey.

The performance of secondary market funds

Shareholders in secondary market real estate funds therefore benefit from possibly particularly low prices, because there is no other market that is more likely to invest cheaply in the real estate market.

After acquisition, the shareholders are also paid sales proceeds and distributions of returns in the secondary market fund. As an example, Prey cites HTB 1. Real Estate Fund, which, in addition to recently made special payments of 10.5 percent, generated an average return of 6.2 percent over the financial years 2008 to 2019.

“A major advantage of HTB secondary market real estate funds is the ability to adapt our investment strategy to the current market situation. […] Accordingly, we are currently invested in the stable types of use residential (78.3%) and office (18.5%) with semi-public / state tenants / banks with long-term rental contracts, ”concluded Prey.

Image Sources: Tanoy1412 / Shutterstock.com

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