Aberdeen Exits German Property Mutual Funds to Serve Big Clients

Aberdeen Asset Management Plc (ADN), which is winding down its German property mutual funds after failing to meet investor redemption requests, plans to stop offering funds to individuals and focus on banks and insurers.

Aberdeen’s German unit raised 400 million euros ($515 million) for institutional funds this year and expects to raise as much as 500 million euros in 2013, Hartmut Leser, head of the Frankfurt-based unit, said by telephone yesterday. That would increase the firm’s institutional assets to more than 2 billion euros.

“Interest rates keep falling and institutional investors can’t get the returns they need,” Leser said in the interview. “European real estate has the advantage that it’s very low risk and low volatility.”

German property mutual funds with 20 billion euros in assets were forced to wind down since 2010 after failing to meet investor payment requests. The crisis, which began with liquidity shortages in 2008, has led some fund managers to scale back their activities in the industry.

Real estate funds aimed at individual investors shrank 2.4 percent to 83 billion euros in the 12 months through August, according to data compiled by BVI, Germany’s funds association. During that period, funds aimed at institutional investors such as banks, insurers and pension funds grew by 12.5 percent to about 35 billion euros.

Institutional investors in Germany, seeking a haven amid the European sovereign-debt crisis, tripled their real estate allocation in 2011 to about 15 percent from 5 percent in 2010, according to data compiled by Union Investment Group.

Canadian Sale

Aberdeen is liquidating three property mutual funds with assets of about 2.9 billion euros. One of its funds, Degi International (GH7A), yesterday agreed to sell two office towers in Calgary valued at about 276 million euros, Leser said.

When the credit crisis started to escalate, a scramble to withdraw money exposed a flaw in real estate mutual funds that own properties directly. While investors are allowed to withdraw money daily, the funds hold assets that usually take months to sell.

“Our mutual funds, across the Aberdeen group, are the only property mutual funds,” Leser said. “Aberdeen’s strength is the institutional funds.”

Aberdeen’s new funds are aimed at German pension funds, insurers, and companies with cash reserves to invest. Clients can choose between German residential, German commercial and pan-European funds.

The pan-European fund will target a yield for investors of as much as 5.5 percent, while the German residential and commercial funds will aim for 4 percent to 6 percent.

Aberdeen Asset Management, named after the Scottish city in which it’s based, entered the German property mutual fund business five years ago by acquiring DEGI Deutsche Gesellschaft fuer Immobilienfonds mbH from Dresdner Bank AG and Allianz SE. (ALV)

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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