Net inflows into open-ended mutual property funds have risen by more than 100% compared to the same period of the previous year in the first eight months of 2019, according to BVI. Inflows amounted to around EUR 7.3 billion between January and August in 2019, after around EUR 3.5 billion in the same period of 2018. This is also significantly higher than in previous years: Inflows had amounted to EUR 4.1 billion in the first eight months of 2017 and EUR 3.9 billion in the same period of 2016.

Which fund issuers have benefited especially from this cash wave? Despite there being various new providers of open-ended mutual property funds, the majority (92%) of the fresh money – around EUR 6.7 billion – went to the four major providers. Union Investment claimed the biggest amount at EUR 2.1 billion, followed by the Deka Group with EUR 1.7 billion. Third place goes to the Deutsche Bank subsidiary DWS at EUR 1.7 billion, with Commerz Real taking the fourth spot with around a billion euro.

Michael Schneider, Managing Director of INTREAL, commented: “These very high inflows show that there is currently too much money for too few products. Demand from private investors is set to keep on rising given the threat of negative interest rates on private accounts as well. However, the established funds and providers are apparently having difficulty in quickly investing such large amounts under their existing fund strategies. As a result, almost all providers have pulled the ripcord and some are now working with restrictive quotas for their funds.”

How are things looking for the “new” funds to be had? Swiss Life AIFM is one of the most successful of the “new” providers this year with its Working & Living open-ended fund. The company has increased its net fund volume by around EUR 209 million in the first eight months of 2019. The KanAm Grund Group and its Leading Cities Invest fund have taken in net new cash of around EUR 140 million. The service AIFM INTREAL, which manages multiple mutual funds, has reported impressive net growth of around EUR 114 million in this segment. For example, in addition to funds for several AIFMs, INTREAL manages Fokus Wohnen Deutschland, the fund from INDUSTRIA that specialises in residential property.

INTREAL’s Managing Director Schneider feels that “taking the established, conventional sales structures into account, the popularity being enjoyed by new products is very encouraging. However, investors are also happy to see providers – new and established alike – starting up other product alternatives. This way the distribution of demand can shift more towards new products moving ahead. On the one hand this is because the old funds have called a halt. On the other, it is because of the new funds with attractive and alternative investment strategies out there. One example of this is ‘Habona Nahversorgungsfonds Deutschland’, which was launched recently and only invests in food retailers that operate at a local level.”

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easol GmbH (easol), a joint venture between third-party AIFM INTREAL and control.IT Unternehmensberatung GmbH (control.IT), has gained a Sales Director. Marko Broschinski (52) has become Sales Director of the recently founded company specialising in all-in-one IT solutions for the management of real assets. For the last two years, the banking graduate and Master of Business Administration (Frankfurt School of Finance) has been a freelance consultant for companies. Previously, among other things, he was Regional Coordinator for East Africa / Country Director for Tanzania at Sparkassenstiftung für internationale Kooperation for two years and worked at Bankhaus Carl F. Plump & CO AG for 21 years, for the last eight of which he was on the board of directors.

During his 29-year career, Marko Broschinski has managed selection processes and the implementation of software solutions in various areas. Among other things, he has helped to select new digital bank systems, core bank systems and CRM systems in various positions, and managed their subsequent introduction. His work has also focused on establishing and optimising digital solutions in controlling. Klaus Weinert, Managing Director of easol, says: “With Marko Broschinski, we have secured a sales expert who is a perfect match for our target customer group and has a great deal of experience with all issues regarding IT solutions.”

Markus Schmitt, also Managing Director of easol, adds: “Since easol was founded a few weeks ago, we have received numerous enquiries and are seeing a lot of interest in our new IT solution. With Marko Broschinski, we have acquired a consummate businessman who will help turn easol into a success story.”

Marko Broschinski adds: “I am convinced that easol solution will significantly professionalise and improve the digital management of real estate and other real assets. I am delighted with the trust that the management of easol has placed in me.”

easol was founded in June 2019 and offers an all-in-one IT solution, “easol solution”, for investments in real estate and other real assets such as aircraft, ships and photovoltaic plants. The components of easol solution are preconfigured for the requirements of fund providers and real asset managers, are fully integrated and have been tested thoroughly in practice. Assets with a volume of over €30 billion are currently managed in terms of IT using easol solution. Among these assets are properties belonging to the HIH Group, including INTREAL.

Service AIFMs have become key players on the market for open-ended special property AIFs in Germany. This has been found by a comparison of the market shares of management AIFMs and service AIFMs in new business. Open-ended special property AIFs raised around EUR 3.6 billion in total in 2012. Service AIFMs accounted for EUR 752 million of this, corresponding to a market share of 21%. Six years later, in 2018, the share of service AIFMs has virtually tripled to 59% (EUR 4.7 billion of EUR 8.1 billion).

Michael Schneider, Managing Director of INTREAL, commented: “More than half the money that institutional investors invested in open-ended special property funds went to service AIFM funds. This confirms the trend towards the division of work into administration on the one hand and property management on the other. After around ten years, the service AIFM principle is finally established on the market. As regulatory and other administrative requirements will keep on rising, I predict that service AIFMs will continue to gain in significance.”

INTREAL plays a key role in this development. Its share of the proceeds of the three major service AIFMs has been between 30% and 50% since 2013. INTREAL has consistently raised funds of more than
EUR 1 billion per year since 2015, and in 2017 it even took in more than EUR 2 billion. Michael Schneider added: “INTREAL has succeeded in positioning itself as one of Germany’s top three service AIFMs in the first ten years of its history. The open-ended special property AIFs we manage raised a net amount of EUR 1.8 billion in 2018. This corresponds to a market share of around 38%.”

An analysis of the current net fund assets under management rather than net inflows of new money also clearly illustrates the growth of service AIFMs: In 2013 the administration specialists had a combined total of EUR 4.6 billion in net fund assets, giving them a market share of 11%. Six years later, in December 2018, service AIFM funds already have EUR 27.5 billion, which means that they have increased their net fund assets more than fivefold. At the same time, their market share has climbed to around a third.

These developments must also be considered against the backdrop of the property boom and the industry’s considerable growth. In 2009, net fund assets under management in open-ended property special funds amounted to EUR 28.6 billion in total. Just nine years later, at the end of 2018, this figure had risen to EUR 89.9 billion.

A service AIFM is a fund management company licenced by BaFin that performs all administrative duties for asset managers and sets up property funds. Work is divided between administration and asset management. Property management is performed by the asset manager. By contrast, a management AIFM has its own licence from the regulator and also manages its properties itself.
The above analysis is based on BVI statistics. The figures for the three major service AIFMs (HANSAINVEST, INTREAL and Universal Investment) are assigned to the group of service AIFMs.

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A no-deal Brexit is becoming an increasingly likely scenario. For this reason, interest from British real estate fund providers in cooperating with German or Luxembourgish third-party real estate AIFMs is soaring. Such cooperation will give British fund providers the ability to enjoy EU passporting privileges, to initiate their own funds and to sell fund units throughout the EU even after Brexit. The model is as follows: The real estate asset manager is based in the United Kingdom, and the third-party AIFM is based in Germany, for example. The latter launches the fund in accordance with German law. As the AIFM is licensed in Germany – and thus in the EU – the fund units may be sold throughout the EU via passporting rules.

Michael Schneider, Managing Director of INTREAL, commented: “In the past few months, and especially since the beginning of this year, we have been receiving an increasing volume of enquiries from asset managers in the United Kingdom. The advantages of cooperating with INTREAL are obvious: The fund providers spare themselves the costs of founding and maintaining an AIFMD-licensed branch office in the EU, while they can still initiate their funds and sell fund units EU-wide.”

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