Major Swiss bank winds up open real estate fund UBS Euroinvest

The major Swiss bank runs a comparatively small open-ended real estate fund. The industry's problems have recently also reached the large funds.

Dusseldorf. The open real estate fund UBS Euroinvest is a second public fund for German private investors. As UBS Real Estate GmbH announced to its investors on Thursday, it has terminated management of the fund on September 24th. “With the termination of the administration, the possibility of redeeming and issuing shares in the fund expires,” the letter says.

The European real estate market in which the fund invests has faced persistent challenges in recent years, which have hampered efforts to realign the fund's investment strategy and diversify its portfolio, it said. “Should the fund have to comply with current redemption requests, it would be forced to continue to sell the most liquid assets in its portfolio in a difficult market environment.”

Terminating the management of the fund enables an orderly sales process and ensures that all investors receive an equal share of the sales proceeds, which is in the best interests of all investors, the fund management explains the step.

With a fund volume of 390 million euros, Euroinvest is a comparatively small vehicle. The largest open real estate funds manage investor money amounting to billions of euros. UBS had already suspended the redemption of shares in the fund in the spring. The UBS fund is the second open real estate fund for German investors after Kanam Leading Cities Invest.

The situation for the industry's large funds has also worsened. At the beginning of September, DWS announced that it would have to devalue three of its real estate funds again and was preparing investors for further sales.

In an interview with Handelsblatt, DWS real estate boss Clemens Schäfer said that there was no imminent stop to returns. However, one remains open to possibly only serving returns on a pro-rata basis if the situation requires it. “You first have to realize that little new money is flowing into open funds while capital continues to be withdrawn,” said Schäfer. If these outflows continue over a longer period of time, real estate sales will be the logical consequence.

In principle, lawmakers have been providing the industry with liquidity management tools since April - including so-called gating, in which returns are served on a pro rata basis. "The legal requirements for this have been met since April. We are complying with our legal obligation and are continually checking whether we need to activate this instrument," said Schäfer.