GERMANY - German fund industry association BVI has dismissed fears of a liquidity crisis facing German-based mutual funds investing in real estate.
The fears emerged yesterday when Deka Bank confirmed that one of its real estate funds had lost 1.2 billion euros in the first eight months of 2004. The fund now needs a cash injection to stay afloat.
Yet BVI said that following a snap survey of the 15 providers of the funds, it was assured that they had “more than enough liquidity to deal with investors’ wishes to sell their holdings.” The association declined to quantify the amount of liquidity held by the 15 fund providers.
BVI also stressed that mutual funds investing in real estate continued to be popular among investors, noting that the funds took in 3.7 billion euros in the first eight months of the year. According to a BVI spokesman, that made the funds the second-most popular investment vehicle in Germany after bond funds.
Turning to the troubled Deka fund, which invests in German real estate objects, the spokesman agreed with Deka’s explanation that the depressed state of the German real estate market was behind the huge outflows.
“In the previous three years, we had a stagnant German economy, the effect of which is only now being felt by the real estate industry. This is being reflected in returns for German real estate funds,” he told IPE.
“Experts don’t any improvement in that industry before 2006, but of course that depends on sustained growth of the German economy as a whole,” he added.