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German real estate funds: changes in return distributions and portfolio favourability

German real estate funds: changes in return distributions and portfolio favourability Purpose – Since 2008, the German open‐ended real estate fund (GOEREF) industry has experienced a critical phase of suspensions of redemption of fund shares, announced fund terminations and, eventually, introduction of a new regulation. With assets under the management of over €80 billion, GOEREFs are the dominant indirect real estate investment vehicle in Germany. Thus, it is extremely important to study the effects of this crisis on the risk and return characteristics of the respective funds. The paper aims to discuss these issues. Design/methodology/approach – Both net asset values (NAVs) and potential secondary market prices of the shares of funds with suspended redemptions are used. The resulting total return patterns are analysed on an index basis for fund groups that best represent the most important investor groups for GOEREFs. Findings – Groups that comprised a higher number of funds with suspended redemptions were considerably worse off and less attractive in an asset allocation context than the others given the often much lower secondary market prices. However, changes in return and risk must also be considered in terms of NAVs. The fund group comprising co‐operative savings banks' funds was virtually unaffected by the liquidity crisis and continued to deliver stable and non‐volatile returns, while the other fund groups exhibited a clear shift in their respective return profiles. Originality/value – This study analyses fund groups that reflect the most important investor groups by using both types of important prices in a comprehensive industry sample. It, thus, provides valuable insights into the changing profiles of the funds and groups and their favourability from an asset allocation perspective. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

German real estate funds: changes in return distributions and portfolio favourability

Journal of European Real Estate Research , Volume 7 (1): 25 – Apr 29, 2014

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Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-9269
DOI
10.1108/JERER-10-2013-0024
Publisher site
See Article on Publisher Site

Abstract

Purpose – Since 2008, the German open‐ended real estate fund (GOEREF) industry has experienced a critical phase of suspensions of redemption of fund shares, announced fund terminations and, eventually, introduction of a new regulation. With assets under the management of over €80 billion, GOEREFs are the dominant indirect real estate investment vehicle in Germany. Thus, it is extremely important to study the effects of this crisis on the risk and return characteristics of the respective funds. The paper aims to discuss these issues. Design/methodology/approach – Both net asset values (NAVs) and potential secondary market prices of the shares of funds with suspended redemptions are used. The resulting total return patterns are analysed on an index basis for fund groups that best represent the most important investor groups for GOEREFs. Findings – Groups that comprised a higher number of funds with suspended redemptions were considerably worse off and less attractive in an asset allocation context than the others given the often much lower secondary market prices. However, changes in return and risk must also be considered in terms of NAVs. The fund group comprising co‐operative savings banks' funds was virtually unaffected by the liquidity crisis and continued to deliver stable and non‐volatile returns, while the other fund groups exhibited a clear shift in their respective return profiles. Originality/value – This study analyses fund groups that reflect the most important investor groups by using both types of important prices in a comprehensive industry sample. It, thus, provides valuable insights into the changing profiles of the funds and groups and their favourability from an asset allocation perspective.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: Apr 29, 2014

Keywords: Asset allocation; Liquidity; German real estate funds; Net asset value; Return distributions; Secondary market

References