Real asset investments: Fund solutions offering advantages

Real asset investments: Fund solutions offering advantages

Munich, 06 December 2022 – For decades, institutional and semi-institutional investors have been investing in various tangible assets such as real property, wind farms or other real assets by way of numerous and often small-scale special purpose vehicles. “In view of rising interest rates, higher regulatory and tax requirements of investors and more quickly changing market conditions, the demand for funds as investment vehicles is increasing strongly. They make it easier and more efficient to structure tangible assets”, says Daniel Knoblach, Managing Director of Super Global GmbH.
The relevant funds are launched by specialised fund companies on behalf of and carrying the names of the corresponding investors or asset managers. “This is advantageous for initiators and investors alike”, Knoblach points out. It reduces complexity on both sides when offering simple clearable securities instead of investing in a closed-end investment company that is cumbersome to administer. “The initiator is responsible for naming, which also strengthens its visibility”, says Knoblach.

Funds also offer significant advantages for the reputation of their initiators – including towards investors – as they are considerably more regulated and more transparent than investment companies. “And funds are more easily scalable compared to what is usually possible with special purpose vehicles, for example”, Knoblach highlights. There are no disadvantages either since funds are able to act as borrowers and investors in the same way as companies.

Quite the contrary: advantages for investors are even greater. “The entire investment process is much more transparent and simpler, as these are securities that can be deposited: Like all securities, they may be booked and managed in investors’ investment accounts”, Knoblach says. A simple order to the bank will then be all that is needed to invest in a real property project, for example. “Overall, the administrative effort will be reduced by some 50 per cent, which also entails significant cost advantages”, Knoblach explains.

In view of the market environment, the trend towards funds instead of more complex SPVs as vehicles for real property investments is expected to accelerate even further. “For a long time, the real property market used to be purely a seller’s market”, says Knoblach. “This is changing now. Buyers have a greater say not only as relates to pricing but also in the design and terms of the investment.” Funds are considerably better suited for this approach.