German investors switch to property funds(3)

Anecdotal evidence suggests German institutional investors are increasingly switching billions of euros invested directly in real estate into property funds.

A sea change is under way in Germany with pension funds and insurance companies increasingly looking toward the unlisted real estate sector, according to the vice chairman of INREV, the European industry body representing investors in non-listed vehicles.

Georg Allendorf, who also doubles as managing director of RREEF Alternatives in Germany, said at a seminar in Frankfurt hosted by INREV: “It is clear that a major trend is underway.”

“While it is difficult to quantify this through available data, it is apparent anecdotally what is happening,” he said. “This is based on feedback from our German members and also the strong demand for INREV services from Germany in terms of higher professional standards and investment transparency for these funds.”

German membership of INREV has nearly doubled in the past 17 months from 18 to 34 out of a total membership of around 300, the association said in a statement.

Chief executive Lisette van Doorn added, “By investing in real estate through fund vehicles they can manage their portfolios more efficiently, save costs, and achieve better diversification in investment assets.”

The anecdotal evidence is not quite matched by INREV data. German institutional investors in non-listed real estate funds committed around €1.05 billion ($1.64 billion) in 2007, down from around €1.22 billion the previous year. However, this drop was due to a fall in transaction volumes across Europe as the credit crunch began to bite, INREV insisted.