Open-ended real estate funds

Investment fund with a real estate portfolio.

Open-ended real estate funds invest globally or regionally in real estate of any type. This can be high-class commercial buildings such as office buildings, shopping centers and hospitals, but also residential properties.

As so-called real estate special funds, open-ended real estate funds are subject to the Investment Act. As a consequence, these funds have to consider the protection of the investors, their investment and the publication requirements. The funds are controlled by a custodian and an independent expert committee. As specialist banks, the investment companies must also conform to specific statutory provisions and are observed, like all funds, by the German Federal Financial Supervisory Authority (BaFin).

According to the current investment law German real estate funds are obliged to acquire at least ten plots and properties in Germany, Europe or globally, depending on their respective design. Usually, they comprise considerably more, which allows the investment companies to be fully diversified on an international basis. There are restrictions only with regard to foreign currency risk, which has to be limited to 30 percent of the fund volume. Also, at the time of purchase the value of no property may be more than 15 per cent of the overall fund assets.

An estate fund's return is made up of current rental and lease income, and the increase in value of the properties as well. Since 2011, minimum holding and notice periods apply to investors.

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