Scope publishes new rating results of Open-Ended Real Estate Funds (DE)
Friday 15 April 2005
|The rating agency Scope has published the rating results of all open-ended real estate funds in Germany for the second time. Two-thirds of the funds received assessment changes. The primary reasons for the up- and downgrades are the continuing difficult real estate market conditions over the past months, net redemptions in some funds that cause portfolio restructuring as well as an extended analysis aided by the supply of more detailed information by the fund management companies.|
|With the ratings, the definition of each fundâ€™s strategy cluster and the buy/hold/sell recommendations, which are derived from the cycle chart, the investor gets important and understandable information regarding the quality and the substance of fundsâ€™ yield.|
The Scope Group has made a new, complete evaluation of all 26 open-ended real estate funds and has consequently updated the ratings of September 2004. Compared to the previous year, ten ratings have improved, seven have deteriorated and three are unchanged. Six new funds have not been given a rating yet. This time again, none of the funds were assessed with ratings in the AAA or AA range. â€śThe high number of changes can be explained not only by the present difficult real estate market environment, but also by the restructuring of some portfolios which are caused by high net redemptionsâ€ś, explains Alexandra Merz, managing director at Scope Group and responsible for the open-ended real estate funds segment. â€śThis year it was possible to do a more intensive evaluation of real estate and portfolio data since 85 percent of the fund management companies provided Scope with complete data sets. Information flow was also aided by the eight management quality ratings that have been executed in the last yearâ€ś, adds Alexandra Merz.
The allocation of the funds into the four strategy clusters has changed for only two funds. Thus, eight funds are â€śsafety orientedâ€ť, five funds â€śgrowth orientedâ€ť, seven funds â€śopportunisticâ€ť and four funds â€śaggressiveâ€ť. Two new funds (SEB ImmoPortfolio Target Return Funds and SKAG 3 Kontinente) are respectively classified in the aggressive and opportunistic strategy cluster.
The buy/hold/sell recommendations by the Scope Group were not modified for 18 of the funds. There are twelve â€śbuyâ€ś, nine â€śholdâ€ś and five â€śsellâ€ť recommendations. â€śUsers should first select a strategy cluster that meets their risk profile and then select a fund that fits their investment expectationsâ€ś, explains Alexandra Merz.
For the first time Scope published current calendar year performance forecasts for all of the funds. â€śThe expected performance of the open-ended real estate funds can be estimated with high probability by the structure of tenancy agreements and other portfolio elementsâ€ť, constitutes Alexandra Merz. â€śWe want to inform the investor as precisely as possible.â€ť
The real estate portfolio expertise was once again delivered by BulwienGesa AG, which cooperates with Scope. The real estate data consists of details of 1,476 properties, analyzed not only for the German and other European markets, but for the first time covering in detail the American market. â€śThe funds show considerable differences in their real estate portfolios. This supports the theory that the open-ended real estate funds followed diverging investment strategies, particularly regarding their macro position and regional marketsâ€ť, concludes Hartmut Bulwien, President and Chief Executive Officer of the BulwienGesa AG. â€śSome of the capital investment companies are characterized by consistent market monitoring and early investment positions in markets that had for a long time been undiscovered by the open ended real estate fundsâ€ť continues the real estate expert. â€śFurthermore American properties seem to still be under-represented accounting only for 3.5 percent of the total fundsâ€™ real estate value.â€ť
â€śOverall, the situation of the open-ended real estate funds is not yet completely stress-free. But today, good funds have better perspectives compared to last yearâ€ť summarizes Alexandra Merz. With the annual independent rating of all open-ended real estate funds, Scope assesses the overall quality of this investment vehicle and judges each fundâ€™s investment portfolio, structure, strategy and management. Scope analyses in detail the following criteria, each of which carry a different weighting in the overall assessment: management quality, real estate portfolio, liquidity portfolio, cost structure, substance of performance and tax yield of
To differentiate the open-ended real estate funds regarding risk and strategy, Scope classifies all funds in the four strategy clusters â€śsafety orientedâ€ť, â€śgrowth orientedâ€ť, â€śopportunisticâ€ť and â€śaggressiveâ€ť. This classification allows the investor to find the product which matches his own risk profile.
Furthermore all open-ended real estate funds are positioned on a cycle chart which allows the investor a comparison of their respective sustainable yields. Based on the cyclical behavior of real estate markets and their impact on the open-ended real estate funds, the position on the cycle chart shows in which phase the fund is currently located and if the expected yield is below or above average. The fundâ€™s position on the cycle chart determines
Scope recommendation for an investor with a medium term (three to five years) investment horizon.