Real estate fund oversales from a German perspective

Fund transactions at the Frankfurt Stock Exchange tend to be slightly less busy than usual due to seasonal trends. However, this does not apply to the real estate fund sector. Here, traders face huge losses.

2024/7/11 Frankfurt Stock Exchange (Börse Frankfurt). Bader Bank fund trader Matthias Prager reported relatively low transaction volumes, citing lack of market momentum and the start of vacations in several German states as reasons. In the retail sector, it is said that “as is almost always the case, there is a sales trend.” One reason for this is that fund owners prefer trading on the stock market.

Pleasure is seeing larger sales with FF - European Growth AD (LU0048578792) and UBS (D) EF - Small Caps Germany (DE0009751651) German and European equity funds, but Comest Growth Europe AC (IE0004766675) is more in demand. JP Morgan Pacific Equity (LU0052474979) and JPM Pacific Equity A (LU0217390573) show transaction volumes above average in the Asian region. Profit-taking sales are increasing for these 2 funds, which have just updated their year-to-date highs.

The precious metals division is also relatively busy, and investors are trading securities such as DWS Investment Gold & Precious Metals Equities (LU0363470401), BGF World Gold Fund AC (LU0055631609), and NESTOR Gold Fund (LU0147784465), especially in the current phase of rising gold prices. “This trader said, “Both have decent turnover rates.

Open-ended real estate funds, which were once popular as “high-yield time deposit alternatives,” are currently under considerable pressure. Frank Wernitz of the ICF Bank reports, “All we see is sales and price declines.” The current news situation seems to ensure that many investors who are still investing are eager to withdraw from these funds. <ZBI DE000A2DMVS1>Unimo's Revaluation: The revaluation just under 3 weeks ago would have been a dramatic experience for many investors.

On 6/24, Union Investment lowered the evaluation of this real estate fund managed by ZBI General Boden Immobilien Group by approximately 17%. This is because the value of rental apartments invested by the fund was reduced by 0.8 billion 60 million euros or more by independent experts, to just under 4.3 billion euros. Along with that, fund prices also plummeted, and since the 2008 financial crisis, it recorded the highest daily loss amount for real estate funds.

Due to concerns about similar valuation adjustments and tremendous selling pressure, many other real estate funds are also trading at prices far below the official net asset value (NAV). For example, in the case of Deka Immobilien Global (DE0007483612), the fund company has announced a base price of 55.07 euros, but the market price is only around 49 euros. Wernitz says it's a “difficult situation.” This is because it is almost impossible for outsiders to evaluate real estate portfolios. “That's because it's almost impossible for an outsider to evaluate a real estate portfolio. As sales volume is increasing, pressure is also being put on prices. “Until now, most orders were normal, but now it seems that institutional investors' withdrawals are also increasing,” the trader says.

What is spurring this trend is that for some time now, quick sales have only been possible via the stock exchange. Investors are no longer able to exchange investment units in open-ended real estate funds on a daily basis. In Wernitz, they are Grundbesitz Europe (DE0009807008), UniImmo (UniImmo: Deutschland (DE0009805507), and HausInvest (DE0009807016). Also, large selling pressure is currently being applied to funds that are hardly traded, such as Fokus Wohnen Deutschland. Here, the base price of 55.57 euros has been reported, but the price has fallen from 52 euros in 1 month and is currently around 44 euros. Therefore, discounts on values considered “fair” exceed 20%.