EUROPE - The Bundesverband Investment and Asset Management (BVI), the German fund managers' industry body, has defended open-ended funds against a proposed ban under the Alternative Investment Fund Managers Directive (AIFMD).

According to the BVA, outlawing the creation of new open-ended funds would work against the interests of institutional as well as retail investors.

Around €100bn is currently invested in these funds.

An industry source close to the BVI said: "From an industry perspective, of course there's no rationale for a ban on new open-ended funds because there's still demand. There's fresh money coming in - and it isn't coming from outer space."

"The classic open-ended real estate funds are either Germany-specific, pan-European or global, and you could argue that the market is well-served.

"But, as time goes by, especially given euro-zone uncertainty, investors might be looking for products that invest only in European markets outside the euro-zone.

"If the regulator says no to new open-ended funds in the German market, it could be a problem."

In a statement, BVI chief executive Thomas Judge welcomed the decision not to impose further regulation on German Spezialfonds.

He described Spezialfonds - which the BVI claims account for €860bn - as "indispensable" for pension funds and insurers looking to diversify away from government bonds and maximise returns.

While the BVI largely approves of current rules governing Spezialfonds, the industry source said it was not unthinkable that the regulator would stretch the definition of 'open-ended' to include the institutional market.

"Institutions know what they're doing and are not in need of a regulator to protect them," he said.

"If the regulators stick to the facts, they'll conclude institutions don't need to be in a kindergarten."

Asked about concerns over redemptions that drove domestic regulatory concerns over open-ended funds, he added: "Daily liquidity with spezialfonds is a theoretical possibility.

If an investor went to a fund manager and asked for his money back tomorrow, the fund manager would say: 'Are you kidding?'

"Real estate can't be sold the next day. That was true before, and, in future, it won't be any different."

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