Brussels, 17/03/2008 (Agence Europe) - A report by a group of European experts on open-ended real estate funds or OEREF has recommended European legislation to provide cross-border retail distribution of this kind of investment funds which specialise in high quality real estate assets (see EUROPE 9447). The report will be discussed at an open hearing on funds which do not come under directive 85/611/EEC governing Undertakings for Collective Investment in Transferable Securities (UCITS). Stakeholders will have until mid-May to respond to the report. A Commission communication on non-harmonised retail funds is expected for autumn 2008.
12 member states, including Austria, Belgium, France, Finland, Germany, Hungary, Portugal, Slovakia, Spain and the United Kingdom, already have national legislation governing open-ended real estate funds, however, there is no internal OEREF market, only different fragmented national markets, the experts say. Noting a certain infatuation among retail investors for a market estimated to be worth over €110 billion in the EU, they consider that, for there to be European integration in this sector, there has to be a “European passport” allowing funds established in one member state to sell its products elsewhere in the EU. They believe that the inclusion in the UCITS directive of a chapter specifically on OEREF would be the most effective option, although a specific directive would also be an acceptable solution. The report highlights six key points if the sector is to operate smoothly and investors are to be properly protected: funds have to be able to use property special purpose vehicles, they have to be able to borrow up to 60% of the value of real estate assets held, OEREF should be able to redeem units on investor request, they should retain a minimum liquidity of 10% of their assets, there should be an annual independent evaluations of assets, and funds should publish their pricing policies. (M.B.)