FRANKFURT (dpa-AFX) - Germany's financial supervisory authority, BaFin, sees significant risks for private investors in open-ended real estate funds. "Open-ended real estate funds are legitimate products," BaFin President Mark Branson told the "Süddeutsche Zeitung." However, the crucial factor is whether they are sold correctly and fairly. "Advice is not always advice; often it is sales-driven marketing," Branson said.
For a long time, open-ended real estate funds were considered stable investments. Cooperative banks and savings banks, in particular, market them on a large scale to private investors – often in the lowest risk category. However, there is a danger that funds may have to close: recently, two smaller real estate funds refused to redeem shares. In such cases, investors are left with no choice but to wait or sell their shares on the stock exchange, which carries the risk of significant losses.
When asked whether he could rule out further fund closures, Branson said: "I cannot. There is an increased risk with smaller real estate funds."
Open-ended real estate funds often invest in commercial real estate such as office and retail properties. Rising interest rates and structural shifts caused by the work-from-home trend have put property valuations and fund returns under pressure for several years. Since January 2025, investors have withdrawn a net total of around ten billion euros from open-ended real estate funds, the financial advisory service Finanztip recently reported, citing figures from the Deutsche Bundesbank.
Branson also expressed doubts about whether open-ended real estate funds should rightfully be sold in risk category one – as very low risk. "Risk category one is indeed very low, even lower than many government bonds. The idea that a portfolio of commercial real estate is less risky than a portfolio of German federal bonds does not align with common sense," Branson told the newspaper.
Branson also showed skepticism regarding the documentation requirements introduced since the financial crisis: "Do they really serve to protect the customer, or rather to protect the institutions? Who understands these extensive documents? The system has significant pitfalls: in practice, it often fails because it overwhelms exactly those customers we want to protect most urgently."/als/DP/zb
