BLACKDAY/Envato
Record outflows from public retail funds of nearly €500m in January
German open-ended institutional real estate funds are facing their first sustained headwinds in years. While 2024 saw net inflows of €7.4 billion into these funds, according to the Deutsche Bundesbank, overall net assets declined for the first time in more than a decade. Fund assets fell from €182.2 billion at the end of 2023 to €178.3 billion by the close of 2024—a drop of 2.1%, or €3.9 billion.
The divergence between capital inflows and falling net assets reflects a new reality for fund managers: the time lag between real estate price corrections and fund-level revaluations has ended. “This development is new because the total net assets of all funds in previous years— including 2023—still grew significantly,” said Camille Dufieux, Managing Director of INTREAL. She attributed the decline squarely to property value adjustments, describing 2024 as a turning point after five consecutive years of growth.
INTREAL, Germany’s largest third-party AIFM for institutional real estate funds, remains upbeat despite the valuation losses. Dufieux highlighted that the total number of institutional open-ended funds rose from 671 to 684 last year and that INTREAL expects to launch between three and five new vehicles in 2025. “So the picture is a mixed one,” she said. “There were more funds overall and significantly positive cash inflows. On the other hand, the funds had to accept devaluations for the first time in years.”
Public retail funds hit hard in January with €500m in net outflows
While institutional funds absorbed losses quietly, public retail funds faced a more visible reckoning. According to Barkow Consulting, January 2025 marked the worst start to a year for German open-ended mutual property funds since the financial crisis. Net outflows totalled €499 million, bringing the cumulative tally of redemptions over the past 18 months to €7.1 billion.
Much of the damage stems from the crisis at Union Investment’s UniImmo: Wohnen ZBI fund. In June 2024, the fund slashed its unit price by 17%, triggering investor panic and liquidity constraints. That devaluation has since been followed by two substantial portfolio sales—some 8,000 units sold in early 2025 to I-Wohnen Group, and a similar number offloaded in late 2024 to a Net Zero Properties subsidiary. Prices were not disclosed in either transaction.
Legal fallout followed quickly. In February, the Nuremberg-Fürth Regional Court ruled that UniImmo: Wohnen ZBI had underestimated investor risk. The judgment, which Union Investment has pledged to appeal, has been seized upon by consumer protection groups and investor lawyers as a potential precedent.
“The UniImmo: Wohnen ZBI fund has managed to discredit not only itself, but the entire open-ended real estate fund industry,” wrote Handelsblatt’s Markus Hinterberger. The fund, launched at the height of the market, had deployed investor capital into overpriced residential portfolios in B and C locations. When interest rates rose sharply in 2022, the valuations collapsed, exposing the fund’s vulnerabilities.
Further outflows likely as 12-month redemption periods loom
Dufieux argues that the valuation lag across funds is now correcting. “The development of property values in the funds always follows the development on the property market with a certain time lag,” she said. Barkow Consulting, meanwhile, warns that fund managers now face a second wave of outflows as the one-year notice periods start expiring.
Despite the reputational damage in the retail segment, institutional funds appear to have weathered the turbulence with greater resilience. Their investor base is less reactive, and fund managers are adjusting assumptions and risk protocols more swiftly. INTREAL and other platforms are moving ahead with new fund launches, albeit with revised pricing assumptions and tighter governance. Whether retail investors return to the sector in significant numbers remains uncertain.
The bigger question for 2025 is whether funds can stabilise asset valuations, maintain liquidity buffers, and reassure regulators that the open-ended model remains viable. The market has moved—and the funds must now prove they can move with it.