Track Record

Quality prevails in crisis situations

In 2008, Lehman Brothers filed bankruptcy in the United States. The financial crisis erupted and investors became nervous, withdrawing large amounts from their fund investments – including open-ended real estate funds in a matter of just a few days. What triggered this crisis and fund closures, and how did typical investors in KanAm grundinvest Fonds still manage to achieve positive returns?

A look back to the year 2008.

Many investors sold their fund shares almost overnight. Real estate, however, is a long-term investment that cannot be sold at a moment's notice. Many open-ended real estate funds had to halt repayments and were ultimately liquidated – including KanAm grundinvest Fonds, which was the first purely internationally invested open-ended real estate fund in Germany. Established in 2001 under former legislation, the fund possessed top ratings – for example, from FERI Rating and Öko-Test – as well as an attractive real estate portfolio with long-term rental agreements.

All of that was no help in the midst of the financial crisis, and the fund was forced to close and was later liquidated. But that wasn’t the end of the story. In contrast, the crisis highlighted the quality of both the portfolio as well as the fund management.

The KanAm Grund Group worked with the BaFin to develop Germany’s first liquidation strategy for an open-ended real estate fund. Known as "Agenda 2016", the strategy's aim was to achieve the best sale price possible for properties for the benefit of the investors.

The result: a typical KanAm grundinvest Fonds investor, with an average holding period for the shares of about eleven and a half years, achieved a positive investment return amounting to a cumulative 9.7 percent. Those who had been invested in the fund since its creation achieved a positive return of approximately 39.9 percent, despite the fund's liquidation.

For the extraordinary success of this liquidation, the KanAm Grund Group received the Scope Award in 2012.

Background: a new legislative environment

At the same time, the KanAm Grund Group worked actively to prevent similar developments from occurring in the future. Today investors enjoy excellent protection, among others, thanks to legally regulated minimum holding and termination periods.

The KanAm Grund Group also developed a "cash call" strategy, which enables it to avoid diluting the performance of real estate due to low interest levels – a procedure that is now commonly practiced in the market.