Which real estate fund is worthwhile?

Rents drop out, buildings lose value: the returns on open-ended real estate funds are falling. We show where there is still plenty to get.

Business closed, main tenants moved out: real estate funds are struggling with problems like those on the fairly deserted Zeil in Frankfurt.

SConfident, solid and always stable income: Many investors have come to appreciate open-ended real estate funds. Some funds are so popular that their managers at times no longer accept money from investors because they cannot buy suitable real estate for it and the cash is just lying around dearly. Investors who were able to secure one of the limited fund contingents could look forward to decent returns for years with very little risk. Then Corona came and the world became a different one. Shops, restaurants and hotels had to close, stopped making sales and were barely able to pay their rent. The consequence for real estate funds was that they had to negotiate rent deferrals and cope with rent defaults. A nasty surprise for investors too.

It is true that the corona crisis did not lead so far that open real estate funds got into difficulties or even had to be wound up, as they did after the financial crisis, when investors panicked their money. However, the past 13 months have reminded us that investments in supposedly solid properties also involve certain risks. The average performance of the funds, which had been a respectable 2.9 percent a year earlier, fell by 0.6 percentage points in 2020. According to the Scope rating agency, the yield gap compared to German government bonds narrowed to the same extent. Most fund providers are expecting even lower returns this year.