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Germany’s open-ended retail real estate funds saw record inflows in 2019 as the gap widened on the spreads between government bond yields and returns from the property market, as new data published by Berlin-based rating agency Scope shows.
As a comparison, the average yield on 14 open-ended mutual real estate funds over the past 15 years has always shown a positive differential, or premium, over German government bonds, with this spread, or “excess return” only widening since 2013. Net inflows in 2019 were only exceeded in 2009 and 2016.
As Frank Netscher, analyst at Scope, puts it: “The 3.8 percentage-point spread between yields on open-ended real estate funds and German government bonds has very rarely been so wide. “On the one hand, yields on government bonds have fallen steadily, with the yield on 10-year German bonds in negative territory for much of 2019. On the other hand, yields on open-ended real estate funds have also risen steadily, driven primarily by increases in the value of properties in fund managers’ portfolios.” Read more here in ReFire: