Real estate fund

Real estate funds primarily invest investors’ money in plots of land, building rights and real estate, for example office buildings, hotels, shopping centres as well as apartment buildings and rental apartments. The returns generated predominantly arise from rental income and appreciation in value when properties are sold on.

Real estate funds provide retail investors with the opportunity to invest in real estate, without having to purchase a property themselves (alone). Investment in real estate funds is not risk-free: Changes in the quality of the location, rental incomes and the interest rate environment all influence the fair market value of the real estate in the fund. The possibility of a total loss cannot be completely excluded.

Legally, the fund is a special asset form, being managed by an investment fund management company (KAG) for real estate and with the assets being held at a separate custodian bank. The fund assets are held by the investment fund management company, which holds and manages them as a trustee for the unit-holders. The legal basis for them includes the Real Estate Investment Funds Act (ImmoInvFG; Immobilien-Investmentfondsgesetz) and the Alternative Investment Fund Managers Act (AIFMG; Alternative Investmentfonds Manager-Gesetz).

Currently the possibility exists to redeem the unit certificates held in investment funds on a daily basis. However, in light of the fact that real estate is unable to be disposed of by sale immediately, the real estate investment fund management company is required to hold liquid assets of at least 10% to be able to pay out units being redeemed. To restrict liquidity risks in the interest of the investors, new rules will apply from 1 January 2027 at the latest that stipulate a twelve-month minimum holding period and a twelve-month notice period. Furthermore, liquidity management tools (LMTs) may be used for securing and building up the liquidity of the real estate fund.