Real estate

Open-ended real estate funds: the market crisis does not eliminate all opportunities

Posted by MoneyController on 10.07.2023

In a crisis situation on the property market, some people wonder whether there are still opportunities to be found, including in open-ended property funds. Iris Bülow's interview with property specialist Kanam Thomas Rehmet appeared in 'Das Investment'.

Rising interest rates and pressure on the property market

Rising interest rates have put pressure on the property market: mortgage costs have risen and this has had a direct negative impact on the volume of house purchases and sales. However, the property market as a whole is very diverse, both geographically and in terms of property categories (residential, commercial, corporate, etc.). Rehmet agrees that the situation in the property market is challenging, but believes that there are still some investment opportunities for open-ended property funds.

An example of an open-ended property fund strategy

With regard to open-ended real estate funds, Rehmet speaks of an average outperformance compared to assets with a comparable level of risk, also due to certain tax considerations. Rehmet also explains the strategy of the Leading Cities Invest (LCI) fund, which invests in commercial property in cities such as London, Barcelona, Hamburg and Paris. These investments are complemented by investments in other properties, such as those with a logistics function, in order to diversify the portfolio.

The importance of tenants' financial reliability

As Rehmet explains, remote working is not a risk factor for real estate funds, and in particular for the LCI fund: firstly, remote working involves days spent in the office; secondly, up to a third of the properties in the assets managed by the LCI fund belong to public bodies. The nature of the client, particularly its financial reliability, is also important when it comes to rent increases.

Investment in a property fund as a diversification element

According to Rehmet, investing in open-ended real estate funds can be part of an investment horizon of 3 to 5 years. Although these investments can be risky and in some cases illiquid, property fund shares can also be an element of diversification within a portfolio. For example, the indexation of rents is one way in which this type of investment can at least partially protect investors from inflation.

Read also

Housing crisis could be a boon for funds and asset managers

Interest rates put pressure on the housing market

European real estate risks crisis, but there are still opportunities for investors

Interest rates dampen demand for mortgages and now inflation could hit real estate too

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