Trend to conversion to German ‘Spezialfonds’ status continues apace

Germany’s changed legislation for its open-ended funds sector has affected not just traditional German fund managers but has had a lot of foreign-domiciled fund managers scutinising the environment particularly for the Spezialfonds vehicle, and finding that it has much to offer.

The latest fund to change its status is London-based retail property fund manager Pradera, which has just converted its €145m Pradera Open-Ended Retail Fund (POERF) into a German institutional Spezialfonds.

Fund director Simon Cairns said in a statement, “The changed legislation was disappointing as it frustrated our original growth plans for the fund. We are very pleased to have successfully changed the fund’s status which was a complex project and required the approval of all investors. We now look forward to continuing with our original aim to create a portfolio of high-performing retail properties.”  

Currently the portfolio consists of seven retail assets in the UK, Germany and Poland worth about €145m. Pradera plans to expand this to €500m with a target return of 7%-10% over 10 years, aiming for an average dividend of 5%-6%. “Having paid a dividend to investors equivalent to 5% on equity last year with capital growth on top of that, we are on track to delivering our target returns to our investors,” said Cairns.  

Launched in 2009 on Warburg-Henderson’s IntReal service KAG fund platform, POERF focuses on retail property across Europe and from the start served only institutional clients. The German open-ended funds liquidity crisis led to the recent changes in Germany’s legal framework, which have set tight restrictions that make institutional investment into the vehicles practically prohibitive. Warburg-Henderson itself took a similar step in converting its status in January of this year.

With the conversion to a Spezialfonds, POERF will remain eligible for its target clients and enable further growth, said Pradera.. The IntReal service platform managing director Michael Schneider cited a growing need for traditional open-ended funds to convert to Spezialfonds, “to ensure the ongoing involvement of institutional investors.”