Germany's property funds stabilise as investors head for the exit

Germany's open-ended real estate funds (GOEFs) may finally be approaching the bottom of their crisis. Scope's latest ratings round downgraded five funds, upgraded two and left twelve unchanged — a marked improvement on last year, when more than half the funds analysed were cut and none were upgraded at all. Yet behind the stabilising ratings lies a more uncomfortable reality: the sector continues to shrink as investors withdraw billions of euros and confidence remains fragile.

That question of confidence moved to the centre of the debate this month after Deka deputy chief executive Dr. Matthias Danne publicly challenged one of the industry's most common explanations for its difficulties. Speaking at the BIIS funds conference in Oberursel, outside Frankfurt — the German real estate fund industry's main annual gathering — Danne argued that the crisis was not primarily the result of the 450 basis point interest-rate shock of 2022-23. Instead, he said, "structural management errors" at some fund companies had contributed far more to the industry's current predicament.