Abstract

Shares of open-end real funds are typically traded directly between the investor and the fund management company. However, we provide empirical evidence for the growth of secondary market activities, i.e., the trading of shares on stock exchanges. We find high trading in situations when the fund management company suspends the redemption of shares but lower trading when the issue of shares is suspended. Shares trade with a discount when the fund management company suspends the redemption, whereas shares trade with a premium when the fund management company suspends the issue. We also find evidence that secondary market trading activity is increasing since German regulation introduced a minimum holding period and a mandatory notice period for open-end real estate funds.

Highlights

  • Open-end real estate funds (OREFs) are the dominant form for investing in real estate properties in Germany

  • The present paper provides a detailed analysis on the secondary market activities for OREF shares

  • We find that shares are traded on the secondary market in particular when direct trading between investors and the fund management company is restricted

Read more

Summary

Introduction

Open-end real estate funds (OREFs) are the dominant form for investing in real estate properties in Germany. In December 2005 and January 2006, there was a massive request for redemption of shares by investors as a reaction to public rumors that the fund management companies Deutsche Bank and KanAm would have to devaluate the real estate assets of their OREFs. The massive capital outflows forced Deutsche Bank and KanAm to temporarily suspend share redemptions. In 2016 and 2017 several funds had to suspend the issue of additional shares because they could not find enough properties in the tight real estate market to profitably invest the capital inflows. In response to the excessive capital inflows and outflows, more restrictive regulatory requirements on the redemption and issue of OREF share requests have been introduced. Fund management companies are required to suspend the issue and redemption of shares if there is a risk of violating the admissible liquidity ratio of 5% to 49%. Investors are required to hold their shares for a minimum period of 24 months and have to notify the fund management 12 months in advance if they want to redeem their shares to the fund management company

Objectives
Methods
Results
Conclusion
Full Text
Paper version not known

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.