Jörn Zurmühlen, Fondsbörse Deutschland
Jörn Zurmühlen supports the private markets team at Fondsbörse Deutschland, led by Alex Gadeberg and Jan-Peter Schmidt. He brings a wealth of experience to the table, having previously spent five years on the executive board of Real Exchange AG, a trading platform for secondary market shares in institutional real estate funds. We are grateful to Markus Gotzi, the Editor of specialist funds publication Der Fondsbrief for the following interview:
Fondsbrief: You’re familiar with secondary market trading across various market cycles. Where do you see the key differences?
Jörn Zurmühlen: The low-interest-rate phase was largely characterised by excess demand. This gave sellers the opportunity to offload shares at premiums of up to 17% above NAV at the peak. Today, investors only look at offerings if a discount of at least 5% is on the table. Since the mid-1990s, many institutional investors have primarily sought to increase their real estate allocations. But for the first time in 30 years, we’re witnessing a paradigm shift: investors with real estate know-how are returning, recognising once again that property can deliver attractive returns, lower distribution volatility, and long-term value preservation. These fundamentals had been forgotten in recent years.
Fondsbrief: What role do banks and savings banks play in this?
Zurmühlen: In the 2010s, investing via their own portfolios (Depot A) was attractive for credit institutions, since traditional lending was difficult under negative interest rates. Now, driven by heightened risk management requirements, investors are optimising and restructuring their portfolios. We’re seeing this de-risking take two forms: first, the replacement of high-risk investments as defined by CRR; second, a consolidation of asset managers, with mandates reduced to trusted partners. The more managers involved, the higher the costs of oversight, audits and coordination. A further motive was to minimise transaction costs by recapitalising entire funds—but that business has now largely ground to a halt.
Fondsbrief: I had expected the current market environment to lead to a wave of existing investors looking—or needing—to sell fund units, especially given the sharp drop in values.
Zurmühlen: That is precisely what we’re seeing right now.
Fondsbrief: So shouldn’t this be leading to massive sell orders?
Zurmühlen: Only to a limited extent. That said, we currently have sell mandates totalling around €450 million. And supply continues to grow steadily.
Fondsbrief: Asset managers have tried to keep investors on board using standstill agreements. Many of these are due to expire shortly. Will that trigger more sell orders?
Zurmühlen: Definitely. We expect supply to increase from the second half of 2025 onwards—especially as pressure mounts on asset managers, not just from banks but from auditors, and ultimately BaFin as well. In the worst case, this could lead to fund terminations or even liquidations. Nobody benefits in that scenario.
Fondsbrief: How do you find suitable buyers?
Zurmühlen: Unlike during the low-interest phase, that’s become much harder. We’re in close contact with investors and are identifying prospective buyers across sectors—but significantly fewer than in previous years. Some are underweight in real estate and see this as a countercyclical entry point. Others want exposure to underlying assets via real estate funds. And some are looking to optimise their portfolios through greater diversification.
Fondsbrief: The price still remains the key sticking point. Sellers and buyers often remain far apart.
Zurmühlen: That’s true. However, sellers are now far more willing to accept steeper discounts on net asset value than they were a year ago. Offices are a prime example: sellers are now accepting double-digit markdowns. It appears they’ve reached a realistic conclusion—unlike in 2011, values will not recover simply by waiting. In residential, by contrast, the discounts are much smaller. The critical factor is whether the fund’s valuation reflects a competitive, risk-adjusted interest rate. Institutional investors today expect a spread of 100 to 200 basis points between 10-year Bunds and attractive real estate investments. The expected annual distribution capacity is more decisive than total return or IRR. Depending on asset type, investors currently expect 4.0% to 6.5% cash-on-cash returns. As long as valuations don’t reflect those levels, NAV discounts will persist.
Fondsbrief: The German government’s massive financial package is likely to push up Bund yields, which doesn’t exactly help.
Zurmühlen: I agree. However, much of that appears to be already priced into investor expectations. We’re seeing a similar pattern on the debt side, by the way.
Fondsbrief: Internationally, secondaries are widely accepted. Are foreign investors active in this market?
Zurmühlen: Yes—but still cautiously. Major international players are looking at opportunities, but often prefer to buy control over real estate assets directly rather than through fund shares. The biggest hurdle remains Germany’s valuation procedures, which make integration into international portfolios difficult. Other barriers include the peculiarities of special-purpose vehicles under the German Investment Code (KAGB), and the fact that contracts are typically in German. These issues can be resolved, but at the cost of reduced returns.
Fondsbrief: What would give the market a real boost?
Zurmühlen: The advantages of the secondary market are clear to all sides. Sellers can exit more quickly and smoothly than via fund termination. Buyers avoid blind-pool risk—they can evaluate both the assets and the manager directly. With new funds, you’re buying expectations; with secondaries, you’re buying track records—an investment with a history and performance profile. Asset managers benefit too: they avoid turbulence within the fund, which in the worst case can lead to investor exits, asset sales, and forced liquidation due to a domino effect. We’re also seeing growing activity from newly launched fund-of-funds vehicles, which is encouraging. The secondary market for institutional real estate funds in Germany will grow—because it’s both necessary and makes sound economic sense.
This article is part of our ongoing series about Germany's secondary markets. Read the other articles in this series here: Series on Germany's secondary market