Germany’s listed sector sees surge in inflows, mutual funds suffer

2014 was the year to be in German real estate stocks, while the Spezialfonds vehicle also had a superb year seeing hefty capital inflows. However, the open-ended and closed-ended funds sector had a much tougher time of it, a new study by capital market specialists Akselrod/Barkow Consulting shows clearly.

The study puts the volume of capital placed in Germany’s listed real estate sector at €4.6bn, a rise of 29% over the previous year and marking a second consecutive year of growth. On top of this, a wave of convertible bond issues contributed a further €1.9bn, easily surpassing the previous best year of 2012, which saw barely 25% of this volume. Last year, the FTSE/EPRA NAREIT index of German real estate stocks gained 40%.

The study measures inflows of capital into listed real estate, institutional open-ended funds, public open-ended funds and closed-ended funds. A clear highlight for the year was the listing of Berlin-based TLG Immobilien, which invests in the hotel, office and retail sectors, but noting little activity otherwise in the listed commercial real estate sector.

NOT included in the study are Immofinanz’s spin-off of Buwog or Adler Real Estate’s takeover of Estavis. Deutsche Annington’s bid for GAGFAH is also outside of the study, as is the merger of Deutsche Wohnen and GSW. All four transactions were neutral on a net-new-money basis and structured as share-for-share offerings or carve-outs.

Indirect real estate vehicles saw net capital inflows falling 20% to €13.8bn, with institutional open-ended funds remaining the most important contributor to indirect real estate investment for the sixth consecutive year, accounting for 49% of net inflows.

The study’s author Peter Barkow said that the increase in investment in listed real estate in Germany could be viewed as evidence of a growing appetite for what is widely seen as the eurozone’s safest market. “What’s struck us most is how important listed real estate is to Germany’s wider equity capital markets activity”, he said. “The market is still waiting for large insurance funds and pensions to invest in German listed real estate”.

He added that while domestic asset managers usually have a “home bias”, the situation in Germany’s listed real estate sector has been “quite the contrary”.

The country’s listed sector, which has tried to encourage more real estate investment trusts (REITs), is also largely the domain of residential-focused companies. “The (German listed) sector is dominated by residential investment companies,” Barkow said. “That’s unusual across Europe. The commercial side is still very small.”

The study said that despite a lack of data on closed-ended funds, last year was likely to have seen around €600m flowing in from retail investors. ”These numbers continue to reflect a difficult issuance environment in the face of increased regulatory requirements,” the report said. On the other hand, institutional closed-end funds show more promise, with market estimates put at around €900m.

Barkow’s report said last year was likely to have been the ”worst year ever” for both retail and institutional closed-ended funds, with inflows down by over 60%.“There are still funds open for inflows, which are doing very well, but frozen funds have impacted overall figures,” Barkow said. Net inflows into public open-ended funds were “very light”, totalling €900m.The Deutsche Bundesbank is due to publish official closed-end fund numbers in May.