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Secondary markets attracting increasing attention
Germany’s secondary market for fund shares may no longer be the illiquid backwater it once was. If the tone of a recent Fondsbörse Private Markets LiveTALK webinar is anything to go by, investors who hesitate risk losing out to nimbler, more opportunistic Anglo-Saxon capital. Speakers from CBRE, IW Köln, Fondsbörse.de and law firm KUCERA painted a picture of a market in cautious recovery—already seeing signs of sharp divergence between those willing to engage with distressed assets and those paralysed by caution.
Before unpacking the panel's insights, it’s worth clarifying what the secondary market actually is—and how it works.
What Exactly Is Germany’s Secondary Fund Market?
Germany’s secondary fund market allows investors to buy and sell shares in closed-end funds—primarily real estate vehicles—on a regulated exchange. These funds, often structured for retail or semi-professional investors, typically have long lifespans and limited exit options. Fondsbörse Deutschland Beteiligungsmakler AG, based in Hamburg, operates the country’s most established platform for such secondary trades.
What’s being sold is not the underlying property itself, but a share in a fund that owns it. Sellers are often retail investors seeking liquidity or portfolio rebalancing. Buyers—often family offices, Spezialfonds managers or opportunity-driven investors—acquire these shares at significant discounts to nominal value, especially in distressed or out-of-favour sectors.
Crucially, pricing is transparent: trades are public, and daily updated bid/ask spreads are available. Discounts of 30–70% below original investment levels are common, depending on fund quality, sector exposure, remaining term, and perceived risk. Some buyers use this route as a low-entry-cost mechanism to gain exposure to German real estate markets indirectly—without the operational overhead of owning assets directly.
One such example, as described by Alex Gadeberg during the LiveTALK, involved a retail-focused fund product whose asset manager now expects a forced sale within the next two to three years—resulting in an estimated 80–90% loss of equity for existing investors. While extreme, such markdowns illustrate the magnitude of revaluation currently underway—and the scale of the discount that secondary market entrants can potentially capture.
Secondary transactions don’t inject fresh equity into the fund. But they can reset investor expectations, pave the way for restructuring, and offer recapitalisation solutions when paired with new equity injections or debt restructuring. For savvy investors, they offer the chance to buy into property-backed vehicles at distressed levels—often well below replacement cost.
The quiet return of the risk-takers
"The glass is half full," argued CBRE's Jan Linsin, citing growing transaction activity, rising rents in core housing markets, and renewed lending appetite from both banks and debt funds. While Germany's overall economy remains stagnant, the real estate sector is showing signs of resilience—particularly in residential and prime logistics. Yet the sharp rise in refinancing costs, coupled with ESG-driven capex requirements, has left many funds and sponsors exposed.
Alex Gadeberg of Fondsbörse.de confirmed a clear uptick in secondary market activity, with both buyers and sellers regaining confidence after months of paralysis. "Sellers now have more clarity about price levels. The market has found a footing," he said. But he warned that while interest is growing, capital alone isn't enough: "What we need is movement. Sitting on the sidelines won't generate returns."
The legal perspective came from Oliver Platt, partner at KUCERA Rechtsanwälte, who highlighted the looming restructuring wave—not a tsunami, but a steady series of credit events as five- and ten-year financings mature into a very different rate environment. "Banks aren't bringing out the whip like they did in the early 2000s," he noted. Instead, they are cooperating with developers and equity holders to avoid fire sales. But with IFRS 9 reclassifications and regulatory capital backstops tightening, the pressure is growing. Platt estimated the NPL volume could reach €60 billion, though actual exposures may be higher.
Dr. Michael Voigtländer of IW Köln echoed that sentiment, urging investors not to mistake the absence of a headline crisis for market stability. "We are not in a new boom," he warned. "We are merely working through the consequences of the last one."
Why the Anglo-Saxons keep getting there first
One recurring theme: the stark difference between German and Anglo-Saxon investor behaviour. "It's always the Anglo-Saxons who come in first," lamented Platt. "They work with debtors, they structure creative deals, they protect reputations—and they walk away with the upside. The Germans are too cautious, waiting for textbook clarity."
That hesitation, Gadeberg added, is a missed opportunity. German Spezialfonds are often structurally hesitant, despite having the dry powder to act. "Anglo-Saxon investors may not be blind to risk, but they accept it as part of the deal. They analyse it, price it, and move."
Linsin noted that new investors are returning to residential, hotels, and logistics, with selective moves into office and retail only in core, ESG-compliant locations. In many segments, he argued, the recovery has already begun—but without the fanfare. "You won't see the market announce a comeback," he said. "It’s already happening under the radar."
For opportunistic investors willing to get involved in restructuring cases—especially through debt positions or share deals in troubled funds—the time to act, all panellists agreed, is now. Platt noted that banks are increasingly accepting haircuts, even on senior positions, simply to avoid reputational damage and regulatory capital hits.
This moment could mark the emergence of a more transparent and tradable secondary market for real estate fund stakes in Germany. As fund sponsors grapple with mark-downs, ESG retrofits, and liquidity shortfalls, platforms like Fondsbörse.de offer an alternative route to price discovery and recapitalisation. But the window is narrow. With refinancing costs resetting and structural demand for housing and logistics holding strong, those who wait for macro certainty may once again find the best deals already gone—and in foreign hands.
As Gadeberg put it succinctly: "Have courage. Do something. The sidelines are already crowded." That exhortation may reflect more than just sentiment. The secondary market is fast becoming a strategic lever for institutional allocators seeking undervalued exposure to real estate-backed vehicles—at a time when direct transactions remain muted.