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German Real Estate Funds – Changes in Return Distributions and Portfolio Favourability

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  • Michael Stein

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    Abstract

    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 management of over EUR 80 billion, GOEREFs are the dominant indirect real estate investment vehicle in Germany. Thus, it is extremely important to study the eff ects of this crisis on the risk and return characteristics of the respective funds. 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. 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 unaff ected by the liquidity crisis and continued to be deliver stable and non-volatile returns, while the other fund groups exhibited a clear shift in their respective return profiles.

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    File URL: http://repec.rwi-essen.de/files/REP_13_454.pdf
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    Bibliographic Info

    Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0454.

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    Length: 35 pages
    Date of creation: Dec 2013
    Date of revision:
    Handle: RePEc:rwi:repape:0454

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    Keywords: German real estate funds; return distributions; portfolio building; secondary market;

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    References

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    1. Christina E. Bannier & Falko Fecht & Marcel Tyrell, 2008. "Open-End Real Estate Funds in Germany – Genesis and Crisis," Credit and Capital Markets, Credit and Capital Markets, vol. 41(1), pages 9–36.
    2. Mila Getmansky & Andrew W. Lo & Igor Makarov, 2003. "An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns," NBER Working Papers 9571, National Bureau of Economic Research, Inc.
    3. Steffen Sebastian & Marcel Tyrell, 2006. "Open-end real estate funds: danger or diamond?," Working Paper Series: Finance and Accounting 168, Department of Finance, Goethe University Frankfurt am Main.
    4. Fecht, Falko & Wedow, Michael, 2009. "The dark and the bright side of liquidity risks: evidence from open-end real estate funds in Germany," Discussion Paper Series 2: Banking and Financial Studies 2009,10, Deutsche Bundesbank, Research Centre.
    5. Stein, Michael, 2013. "German Open Ended Real Estate Fund Performance," ERES eres2013_47, European Real Estate Society (ERES).
    6. Raimond Maurer & Frank Reiner & Steffen Sebastian, 2004. "Characteristics of German Real Estate Return Distributions: Evidence from Germany and Comparison to the U.S. and U.K," Working Paper Series: Finance and Accounting 108, Department of Finance, Goethe University Frankfurt am Main.
    7. Raimond Maurer & Frank Reiner & Ralph Rogalla, 2004. "Return and Risk of German Open-End Real Estate Funds," Working Paper Series: Finance and Accounting 114, Department of Finance, Goethe University Frankfurt am Main.
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