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German Property Fund Investors Head For Exits Today

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http://investing.reuters.co.uk/news/newsAr...&archived=False

FRANKFURT (Reuters) - Investors rushed to withdraw their cash from German property funds in January, industry data showed, in the wake of the freezing of three such investment funds and widespread fears that others could follow.
In December, Deutsche Bank barred investors from selling shares in one of its property funds, warning that the real estate it had bought might not be worth as much as previously thought.
Last month, German investor KanAm followed suit. It shut two property funds after a
stampede to sell
-- sparked by a rating-agency downgrade -- threatened to plunge them into a cash crisis.
On Friday, fund industry data showed a
sharp rise in investors selling
out of so-called open-ended property investment funds in Germany -- these allow investors to buy and sell when they want.

Looks like the Germans know when to sell--or at least try to sell.

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http://investing.reuters.co.uk/news/newsAr...&archived=False

FRANKFURT (Reuters) - Investors rushed to withdraw their cash from German property funds in January, industry data showed, in the wake of the freezing of three such investment funds and widespread fears that others could follow.
In December, Deutsche Bank barred investors from selling shares in one of its property funds, warning that the real estate it had bought might not be worth as much as previously thought.
Last month, German investor KanAm followed suit. It shut two property funds after a
stampede to sell
-- sparked by a rating-agency downgrade -- threatened to plunge them into a cash crisis.
On Friday, fund industry data showed a
sharp rise in investors selling
out of so-called open-ended property investment funds in Germany -- these allow investors to buy and sell when they want.

Looks like the Germans know when to sell--or at least try to sell.

It must be Dogbollox,s flats in Berlin single handed he trounces the German economy? :lol:

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Who'd trust fund managers after news like that? It's taking the p!ss:

"Yes it's your money,but you can't have it, we won't give it to you cause we've messed up!"

So much for a "free" market it doesn't exist with fund managers like that. They're probably busy selling their own holdings because the report took them by surprise.

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http://investing.reuters.co.uk/news/newsAr...&archived=False

FRANKFURT (Reuters) - Investors rushed to withdraw their cash from German property funds in January, industry data showed, in the wake of the freezing of three such investment funds and widespread fears that others could follow.
In December, Deutsche Bank barred investors from selling shares in one of its property funds, warning that the real estate it had bought might not be worth as much as previously thought.
Last month, German investor KanAm followed suit. It shut two property funds after a
stampede to sell
-- sparked by a rating-agency downgrade -- threatened to plunge them into a cash crisis.
On Friday, fund industry data showed a
sharp rise in investors selling
out of so-called open-ended property investment funds in Germany -- these allow investors to buy and sell when they want.

Looks like the Germans know when to sell--or at least try to sell.

kisses3.gif

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It seems this story has been bubbling for a couple of months. I really don't understand it. Can anyone enlighten me on what is going on?

frugalista

Deutsche Bank froze a fund, news being it was overvalued - later turns out they way overdid this, overvaluation only some 3%, but too late for their reputation now. The big issue though was that retail investors were told this was a no risk open-ended style of investment and had piled in big style - and of course property is fairly illiquid, so enough heading for the exit caused a run on the fund DB were not prepared to support. The suspension then caused a relook at the whole sector.

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Deutsche Bank froze a fund, news being it was overvalued - later turns out they way overdid this, overvaluation only some 3%, but too late for their reputation now. The big issue though was that retail investors were told this was a no risk open-ended style of investment and had piled in big style - and of course property is fairly illiquid, so enough heading for the exit caused a run on the fund DB were not prepared to support. The suspension then caused a relook at the whole sector.

So let me get this right -- its a mutual fund which people were investing in via retail investors, e.g. equivalent to unit trusts?

Property fund was valued at say 100m euros. But then someone at DB says actually if we sold up all the property we would not be able to get 100m.

So DB stops people buying units of the fund. Current unit holders then try to sell up which means the quoted value of the fund falls?

What does it mean the DB were not prepared to support?

frugalista

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So let me get this right -- its a mutual fund which people were investing in via retail investors, e.g. equivalent to unit trusts?

Correct

Property fund was valued at say 100m euros. But then someone at DB says actually if we sold up all the property we would not be able to get 100m.

Correct - scandal being they reportedly knew this for quite a while before taking action. ie was still being marketed

So DB stops people buying units of the fund. Current unit holders then try to sell up which means the quoted value of the fund falls?

Not sure of exact order of events, about right though.

What does it mean the DB were not prepared to support?

They could not sell an illiquid portfolio of real estate that quickly (no surprise to this site...) and DB were not prepared, in effect, to buy the shares back and accumulate a big holding in their fund. Initially they were also not prepared to repay investor losses - not unreasonable in my view, but the issue of who knew what when and the terrible publicity in Germany has caused a partial backtrack.

The real issue underlying this is 1. misselling this sector as a very low risk investment, safer even than houses and 2. structuring these as open-ended funds, which must be a problem if there is a rush on the way out. This is not Deutsche's problem alone, but they highlighted this.

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My experence of German house prices is that they are cheaper than say The Netherlands and the UK. As a bonus you get a basement to install a bar area for your mates.

Edited by pessimistic

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Correct

Correct - scandal being they reportedly knew this for quite a while before taking action. ie was still being marketed

Not sure of exact order of events, about right though.

They could not sell an illiquid portfolio of real estate that quickly (no surprise to this site...) and DB were not prepared, in effect, to buy the shares back and accumulate a big holding in their fund. Initially they were also not prepared to repay investor losses - not unreasonable in my view, but the issue of who knew what when and the terrible publicity in Germany has caused a partial backtrack.

The real issue underlying this is 1. misselling this sector as a very low risk investment, safer even than houses and 2. structuring these as open-ended funds, which must be a problem if there is a rush on the way out. This is not Deutsche's problem alone, but they highlighted this.

r u zzg?

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So let me get this right -- its a mutual fund which people were investing in via retail investors, e.g. equivalent to unit trusts?

Property fund was valued at say 100m euros. But then someone at DB says actually if we sold up all the property we would not be able to get 100m.

So DB stops people buying units of the fund. Current unit holders then try to sell up which means the quoted value of the fund falls?

What does it mean the DB were not prepared to support?

frugalista

Its been an ongoing scandal which has hit most of the big German asset management firms. DB is just the latest and highest profile. For the last 15 years German real estate prices have been falling (especially in the former E Germany). Asset managers failed to adequately revalue the portfolio, leaving the funds over valued. When the scandal first broke, investors tried to sell out. Given the lack of liquidity in the underlying holdings, DB and others stopped investors redeeming their holdings.

While it is a financial scandal, it has nothing to do with the current outlook for the German market which is probably the best in Europe. It is a symtom of a long-term decline in German property prices, not the peak of a bull market, so the situation is exactly the opposite of the UK or US. Still, its a useful reminder to anyone thinking of investing in the open ended property funds currently being pushed by IFAs in this country.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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