German Open Ended Funds: Was there a Valuation Problem?
||German Open Ended Funds: Was there a Valuation Problem?
||14th Annual European Real Estate Society Conference in London, UK
||At the end of 2005 German open ended funds were subject to heavy withdrawals and a number of funds either suspended dealings or were supported by the parent bank. Fund units are priced by the fund managers based on the asset values of the properties in the funds. The main selling platform of those units is based on a clear commitment to offer a product that has very low risk and volatility. The BVI (German Open Ended Fund representative body) “sales” document is sub titled “An investment in solid value” and is packed full of statements like “a low volatility alternative”, “steady growth in value at a low risk” and “stable profitability and the absence of wrenching moves in market price”. How is that low volatility policy delivered within a property fund? One suspicion is that the valuations in Germany are subject to even greater smoothing than in other parts of the world and this paper explores that suspicion and develops a set of questions for the German real estate valuation industry to address.
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||Session J1: Valuation Uncertainty
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