Rating of the German Open-Ended Real Estate Funds: an Analysis and Perspectives

Abstract

The paper targets to analyse and to show perspectives for the rating of German open-ended real estate funds. Germany counts 20 open-ended real estate funds, which enjoy a high popularity as an investment opportunity, such as stocks and pension funds. By the end of 2001 the amount of new equity summed up to 6.8 billion euro and was double as high to the year before. In total the invested capital denoted 62.1 billion euro. The regulatory frame work for these investments is set by the German Kapitalanlagegesetz (KAGG) and requires a high standard of transparency. Through the regulatory changes the German real estate lobby forced towards a better performance transparency. Since 1959 until March 2001 there was no activity seen to suffice the markets calling, so that the German Bundesverband Deutscher Investment- und Vermogensverwaltungs-Gesellschaften e.V. (BVI) assigned the rating agency Moody's Investor Service (Moody's) to develop a rating for all German open ended real estate funds, which in the following step should find its appliance. Here with the BVI hopes to achieve a higher level of transparency and comparability between the single funds. The new rating scheme should be able to cover the quality of the funds' management, the investment portfolio and the performance.