Corona slows returns: Open-ended real estate funds: This is how Scope assesses the current state of real estate funds | message
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by Christoph Platt, Euro am Sonntag
D.he ratings from Scope Analysis are among the most important indicators of the state of the real estate fund industry. Now the analysis house has published its new judgments. The ratings of 13 funds suitable for private investors have been updated. For seven, the rating remained constant compared to the previous year, and six were downgraded.
Union Investment was hit particularly hard. All three funds for private investors were rated weaker than in 2020. With grundbesitz europa and WestInvest InterSelect, two other heavyweights had to make do with a lower rating. Wertgrund WohnSelect D, which specializes in residential buildings, also lost a rating level.
The main reasons for the downgrades were increased risk assessments for the property portfolio and poor performance. The funds now examined, which also include two products for institutional investors, achieved an average return of 3.2 percent in 2019. Last year it was only 2.1 percent. The spectrum ranged from -1.0 percent to 5.1 percent. The otherwise very stable type of fund was unable to escape the effects of the pandemic.
“The changed return profile of the funds shows that the risks that led to rating downgrades in the past year are now materializing,” says Sonja Knorr, Head of Alternative Investments at Scope Analysis. “Above all, funds with a large portfolio of hotel properties and shopping centers had to accept a drop in income and value corrections.”
Although Scope’s overall rating is somewhat weaker than in the previous year, the analysis house attests that the open-ended real estate funds have performed solidly. The average rating of the funds under review is “a-” – which, from the investor’s point of view, suggests a good risk-adjusted return. None of the portfolios was rated badly.
The highest rating this year was “a +”. Four products received this rating: Deka-ImmobilienEuropa, Fokus Wohnen Deutschland, Leading Cities Invest and Wertgrund WohnSelect D.
Scope regards the further economic development, especially in Europe and North America, as the most relevant risk factor for the future. According to the rating agency, the strength and persistence of the economic recovery in the second half of the year will have a major impact on letting activities, possible rental income shortfalls and property valuations in the portfolios. For the whole of 2021, the analysts expect that open-ended real estate funds will achieve an average return of 1.5 percent.
The table below contains all open-ended real estate funds for private investors that Scope has assessed. Swiss Life Living and Working joins the six funds with a current rating. However, it was reassessed in December 2020. The only fund with an improved rating compared to the previous year is KGAL ImmoSubstanz. Its upgrade, however, dates from October 2020. For the sake of completeness, the table shows all the funds assessed.
Image sources: Istockphoto, Brian A Jackson / Shutterstock.com, Finanz Verlag