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SEB’s $8.7 Billion German Property Fund Sets Make-or-Break Date

SEB Asset Management’s 6.6 billion-euro ($8.7 billion) property mutual fund will be liquidated if it’s unable to meet all investor demands for repayment, the company’s chief executive officer said.

SEB ImmoInvest, the largest of 13 German real-estate funds that suspended redemptions after the global financial crisis, will re-open for one day on May 7 to take requests. It will liquidate if it doesn’t have enough cash to cover all orders, SEB Asset Management CEO said at a press conference today in Frankfurt. The fund has been closed for almost two years.

Knoflach said she’s optimistic the fund won’t have to liquidate. ImmoInvest has “considerably” more than 30 percent of its assets in cash or equivalents, after selling properties she said.

Germany’s 85.2 billion-euro real estate mutual fund industry may be facing its biggest crisis. Following the global recession that ended in 2009, funds struggled to meet redemption requests. As a result, 13 funds were frozen over the course of two years. Of those, six funds are liquidating, and several more, including funds owned by Credit Suisse Group AG and UBS AG, face deadlines this year to reopen or liquidate, according to Germany’s financial trade group, Bundesverband Investment und Asset Management, or BVI.

SEB, which proposed the one-day reopening with approval from German financial regulator BaFin, said it would allow withdrawals only once a year, instead of daily, if the fund continues after May 7. More than 90 percent of the fund’s customers are small private investors, according to Knoflach.

The strategy “will fail,” said Bjoern Drescher, chief executive of Drescher Cie, a consulting firm near Bonn. “It’s herd psychology. I don’t think investors will heed her appeal.”

ImmoInvest owns buildings in Paris, Singapore, Rome as well as 19 buildings on Berlin’s Potsdamer Platz. SEB Asset Management is a unit of Skandinaviska Enskilda Banken AB.

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