“Coal is not an energy source of the future,” explains a spokesman for the Sparkassenfondhaus.
Frankfurt Deka says it will partially withdraw from coal investments on May 1. The Sparkassen-Fondshaus placed corresponding information on its website on Friday afternoon. “Coal is not an energy source of the future,” a spokesman told the Handelsblatt. Coal is considered an important emitter of greenhouse gases and therefore a driver of climate change.
According to the Deka spokesman, future sales thresholds will apply to retail funds aimed at private investors. Mining companies would be excluded if they generated more than 30 percent of their coal sales.
A hurdle of 40 percent applies to energy producers. According to the environmental organization Urgewalt, large companies will no longer be considered for investments with these limits: the Indian NTPC, the Swiss one Glencore or the Chinese huaneng. Even stricter rules should apply to pure Deka sustainability funds.
According to the spokesman, coal miners are completely excluded from this, companies from the power generation sector from a sales threshold of ten percent. The coal approach is part of overarching sustainability strategies that seem to deliver superior returns from an investor perspective.
Different approaches to competition
The other three large German fund houses are taking different approaches on the subject, as inquiries from the Handelsblatt revealed. Union Investment tightened its approach in mid-February, as a spokesman for the fund provider of the cooperative banking group explains.
Coal miners would be excluded from a certain share of coal in total sales. This threshold has been reduced from 30 to five percent, and will be zero in 2025. According to industry estimates, there are around a dozen large companies in this field such as Glencore or Anglo American.
According to Union Investment spokesman, the electricity generators are also affected by coal. Discussions with companies currently underway should clarify to what extent the addresses pursued a credible strategy for the transition to a climate-neutral world. The spokesman says: “If we are not convinced of this, we will exclude companies with a coal share of more than 25 percent of sales.”
At the Deutsche Bank fund house DWS “there are no exclusions in classic funds,” says a spokesman. This is different with those products that are explicitly looked after from a sustainability perspective.
Here a sales share threshold of 25 percent applies. Companies above it would be excluded. The DWS representative gave one reason for deciding not to exclude classic funds: “If we are out as an investor, we can no longer exert any influence on the company.”
Allianz global Investors acts in a similar way to DWS and defines sales thresholds in its sustainability funds as a starting point for a possible exclusion.
The environmental organization Urgewald welcomes the changes at both Deka and Union Investment. However, her spokeswoman Kathrin Petz restricts that there remains a major shortcoming: “With their new guidelines, both can retain RWE as Europe’s largest coal-fired power plant operator and one of the largest lignite producers worldwide.”
More: Investors are also demanding sustainable strategies from companies in the corona crisis.
Erfurt Claus 2020 has big plans for 2020. The managing director of BNP Paribas REIM in Germany – the real estate investment arm of the French major bank – plans to launch an open real estate fund.
With this, the investment manager, whose real estate expertise in Germany has so far been reserved primarily for wealthy and institutional investors, also wants to enter the market for retail funds.
Or rather: wanted. According to the original plan, the fund should start selling at the beginning of April. But then Corona came and everything for Thomas’ plans was different than expected. “We have now postponed the start of our new mutual fund to June 2020,” he says.
The virus pandemic not only keeps the economy under control, but also the capital markets. If retailers and hoteliers today apply for deferral of rental payments to bridge their slump in sales as a result of the prescribed standstill, sooner or later investors in open-ended real estate funds will also be affected. Through the funds, they are indirectly the landlords of the industries concerned.
Corona crisis different from financial crisis
The situation brings back memories of the financial crisis, when real estate values had to be corrected and funds closed because too many investors wanted their money at once. Experts also expect returns from the funds to decline as a result of Corona. Nevertheless, the situation today is different from that in the financial crisis.
At that time, the epicenter of the financial crisis was in the real estate sector. High-risk real estate loans failed, the nervousness spread rapidly to other real estate classes. In droves, investors withdrew funds from the open real estate funds.
Because they didn’t have enough liquidity buffers to earn all the claims, they were frozen. The funds bought time to monetize their properties. In general panic and under great time pressure, they sometimes made considerable losses, which ultimately also had to cope with the investors.
Today, there is no high-risk real estate loan at the beginning of the economic crisis, but a virus. “What we know from previous financial crises is that the spillover effects become more apparent the closer they are to the cause,” explains Steffen Sebastian, professor of real estate finance at the Ireb Real Estate Academy in Regensburg. However, the real estate is not in a crisis of confidence today.
In the corona crisis, retailers and hoteliers ask for rent deferrals because they are not allowed to open their shops and break down sales – and not because they have encountered problems due to a previously miserable business situation. For many companies, it is a stress test.
“Tenants from the hotel and retail sector have informed us that they want to negotiate their rental payments with us,” says Esteban de Lope, Managing Director of Deka Immobilien. The fund house is not alone in this. The other large providers from Commerz Real to DWS to Union Investment Real Estate also report on corresponding inquiries.
In the interests of investors
This puts the funds in a delicate position: On the one hand, they have an interest in keeping long-term leases – and thus secure income – in the funds and helping their tenants with a temporary solution.
On the other hand, they have to work for their customers, the investors. “We are committed to our investors and therefore do not grant flat-rate deferrals or rent reductions,” said a spokesman for Union Investment Real Estate. In plain language: deferrals remain individual decisions.
If rents are deferred, only the time of payment is postponed. They still have to be paid. But: “There could also be rent losses or rent adjustments here,” says Sonja Knorr, real estate fund analyst at the rating agency Scope.
The funds are also aware of the consequences: “Overall, it can be expected that the rental income of the funds will decline this year,” says de Lope from Deka. No fund manager can and does not yet estimate the extent of the decline.
Investors are not entitled to immediate notification of deferral or loss of rent: “There are no ad hoc notification requirements for open-ended real estate funds. If the fund defers rents or even loses rents, it does not have to notify it immediately. This is enough in the quarterly notifications to investors, ”explains Carola Rathke, partner at the business law firm Eversheds Sutherland in Germany.
Some providers already confirm revaluations. A spokesman for Commerz Real, for example, reports that in the first three months of this year objects dominated by retail were devalued by the experts.
But this also includes: The problems in the trade already existed before Corona, they have now been exacerbated by the crisis. At the same time, Commerz Real emphasizes: “At the moment, however, we are not seeing any significant effects on the management of our properties.” The provider calculates the fund’s return at 2.0 to 2.5 percent, roughly on the previous year’s level.
Loss of yield
Analysts remain more skeptical about the outlook. Rüdiger Sälzle, head of the fund analysis firm Fonds Consult, expects yields to fall by 50 to 100 basis points due to the corona crisis.
“On average, I expect a return of 1.5 to two percent,” says Sälzle. That was calculated conservatively, but manageable in view of the general conditions. The drop in rental income is likely to be felt initially, alongside property valuation and interest on liquidity, one of the return components of the funds. Where new contracts are due and the new rents are significantly lower than the previous ones, this will also lead to devaluations for real estate, says Sälzle.
The bottom line, from today’s perspective, returns remain in the positive range. This speaks in a market environment with highly volatile and sometimes sharply declining stock and bond markets for real estate. Morningstar analysts are already showing that European investors are drawing more capital from equity, bond and mixed funds than ever before.
There are still no official data for the real estate funds. Those of the BVI fund association for the first quarter will not be published until May. Scope analyst Knorr recognizes investment reluctance. “But we cannot see any waves of sales.”
The funds themselves report positive inflows in the first quarter. Commerz Real’s house investment has recorded inflows of 470 million euros since the beginning of the year. “The announcements of returns are still in the single-digit million range,” said a spokesman.
Union Investment Real Estate, whose funds UniImmo Germany and UniImmo Europe are among the largest open mutual funds, also reports on return claims in the single-digit million range. A spokesman for DWS says there are still positive net inflows – ie investments less return requests – and “generally no significantly increased return requests”.
Longer holding periods
In order to prevent a sudden, massive withdrawal of capital, which caused the funds to plummet during the financial crisis, stricter regulations apply anyway. Since 2013 it has been said that anyone who buys an open-ended real estate fund must hold it for at least two years.
Anyone wishing to redeem their shares can only do so with a notice period of one year. The illusion of a completely liquid trade in an illiquid product such as real estate was taken away from investors. Because when the going gets tough, the financial crisis showed, the funds have to sell their assets – and that is far more difficult than trading a stock package on the stock exchanges.
However, there is one exception for investors who bought their shares before 2013: they can withdraw up to EUR 30,000 from the fund every six months. “Today, however, the funds have sufficient liquidity to service these claims,” says analyst Knorr, drawing attention to another difference to the financial crisis. The average liquidity ratio is 20 percent of the fund’s assets. 50 percent must be invested in real estate.
Debt financing is also more conservative today than in the financial crisis, says Knorr. Before the financial crisis, the average was 28.6 percent, today it is 15.1 percent. Some funds even had quotas of more than 40 percent.
With this credit lever, earnings could be increased in good times. This also applies reciprocally to the losses. “Today, a debt ratio of up to 30 percent is required by law. This is very conservative for real estate transactions, ”explains Knorr.
If funds fall below threshold values, for example that less than 50 percent of the fund’s assets are held in real estate, the capital management company must inform Bafin, who acts as the supervisory authority, explains Martina Sradj, partner of Eversheds Sutherland in Germany.
Private investors among themselves
Another stability factor: up to the financial crisis, semi-professional and institutional investors were invested in open real estate funds to a much greater extent than today. “Funds of funds or asset managers were very quick to return their shares at the time,” says Knorr. Today, these actors are not prohibited from investing in open-ended real estate funds. However, a wide range of alternative products has only developed for institutional investors in recent years, which is usually also cheaper.
The proportion of institutional investors in open-ended funds cannot be clearly quantified, but is significantly below the level of the financial crisis. Real estate funds of funds have disappeared from the market for private investors, explains Knorr.
The lawyer Rathke from Eversheds Sutherland adds: “Today, institutional and semi-professional investors are not directly prohibited from investing in open-ended real estate funds. However, there are strict requirements in terms of tax law, so that an investment in the open products is generally excluded. “
If people in countries like Germany, Austria or the USA are talking about relaxing the corona restrictions when shops are allowed to open again, then this should also make things easier for investors in open real estate funds. However, these measures are not a guarantee of a return to normalcy. This also applies to the real estate world. Sälzle, for example, points out the so-called second-round effects: “How the corona crisis will affect the real estate segment in the medium to long term is still completely open,” says the analyst. So the world is today in the “largest joint field trial in the home office”.
In the future, people will return to their normal jobs. But the office world doesn’t have to be the same. “The structure of the office space will change in the medium term. In the future, less space could be rented and employees could be given more flexibility in dealing with their home office, ”says Sälzle. What that means for the funds as a landlord is not yet clear.
Claus Thomas of BNP Paribas REIM, whose fund is due to launch this year, is not worried by this. He already has several objects in sight for sale, including a hotel in Munich. Although hotels in Corona are under particular pressure, he still assumes that use will develop above average in the long term, says Thomas. His fund should also focus on megatrends such as digitization and also invest in healthcare properties – two areas that could well benefit from the corona crisis.
More: Where investors can still find returns in times of the corona crisis
As a bond house, Pimco has benefited greatly from the boom in this asset class in recent years.
Frankfurt A cartel of silence dominates the European fund market. None of the big asset managers want to talk about the massive escape of investors from the products. In March, customers in Europe withdrew a total of 232 billion euros from funds because of the corona panic in the markets – more than ever before.
The number is based on the latest estimates from the rating agency Morningstar for the Handelsblatt. It is significantly higher than the data published a little more than a week ago. “The number should also continue to rise because we still lack information from some funds,” says Morningstar analyst Ali Masarwah.
The subsidized supplementary insurance should help in old age.
Frankfurt It was certainly well-intentioned, but it did not lead to the goal: the capital guarantee for the funded private pension scheme called the Riester pension. The bottom line is that this obligation to guarantee the contributions paid in at the start of the payout phase prevents the capital that is usually invested for decades from being invested sufficiently in shares. Opportunities for returns disappear.
No wonder that the providers of fund products in particular are calling for the capital guarantee to be abolished in the planned Riester reform. Consumer advocates want even more. The federal government is preparing for reform. But savers can do something today.
Munich Has three quarters of a year InfineonChief Reinhard Ploss fought for the nine billion euro deal. His efforts paid off: The Chinese authorities have now bought the American competitor Cypress approved by Germany’s largest semiconductor manufacturer. Infineon has thus received all the necessary regulatory approvals, said the DaxGroup with.
Ploss had secured the financing of the largest takeover in the company’s history long before the corona crisis. So the manager implemented a capital increase last summer and issued a so-called hybrid bond.
That brought in a total of 2.7 billion euros. The rest of the money comes from loans that provide a total of 20 banks, the group said.
The loans are therefore due between March 2022 and June 2024. This offers “sufficient time and flexibility” for refinancing. In order not to get into trouble in the current environment, the company wants to retain liquid funds of one billion euros plus at least ten percent of sales.
With Cypress, Infineon will strengthen its core business of power semiconductors, sensors and security controllers, Ploss said at the general meeting in mid-February. In this way, Infineon can serve a wider range of applications and offer customers complete solutions. The group will also advance to the top ten largest chip manufacturers in the world. It is by far the largest acquisition since the company was spun off from Siemens Late 90s.
Ploss had already overcome the highest hurdle in March when he cleared the concerns of the American authorities. They apparently feared that US know-how could flow to China. The approval was preceded by long and intensive discussions.
Shareholders are critical of the deal
However, the shareholders do not only see the takeover as positive. The strategic logic is obvious, said Markus Golinski, Union Investment’s portfolio manager at the Annual General Meeting. Infineon will thus become the world’s largest chip supplier for the automotive industry, get better access to the Japanese market and close the product gap in microcontrollers.
However, the shareholders would pay a high price for this: on the one hand due to the dilution effect, which had particularly hurt due to the capital increase in June at low prices.
Secondly, due to the rise in debt, which could lead to a deterioration in the credit rating and thus to higher financing costs. “What return this investment of nine billion euros will generate is still uncertain,” complained Golinski.
But that’s not all: “The desired strengthening of the market position, the planned synergy effects and the resulting higher profits have yet to be demonstrated.”
However, Ploss has the backing of the supervisory board for the mega purchase: “We are fully behind the acquisition,” said its chairman Wolfgang Eder at the general meeting. It is important to secure Infineon’s growth course. The purchase price was justified, said the ex-boss of the Austrian steel producer Voestalpine.
Difficult business year expected
Analysts believe that Infineon can also afford to buy in the corona crisis. Mark Li from Bernstein Research believes that Bavaria has the necessary financial strength. In his “stress test”, he came to a positive result.
However, Infineon is currently not running smoothly. The company withdrew its revenue and profit targets for the fiscal year ending September. Instead of the planned increase in sales of around five percent, CEO Ploss now expects a decrease in revenues. In addition, the margin will decrease.
“The corona virus pandemic, which is currently worsening worldwide, is causing massive dislocations in global supply chains, end markets and overall economic developments,” said Infineon. “The expected reduced sales will also impact Infineon’s profitability in the 2020 financial year.”
The reason for this is the lower capacity utilization of the plants. Infineon does a large part of its business with the auto industry, which is slowing down due to slump in demand and production stoppages worldwide.
More: These companies are the big winners and losers of the corona crisis.
Lone shareholder: First companies are considering an online AGM because of Corona.
(Photo: imago / Sven Simon)
Frankfurt It is an unexpected premiere. For decades it had been stipulated by law that general meetings in Germany are face-to-face events. But the corona virus has now wiped that certainty off the table. Already in April a law should allow virtual general meetings in Germany this year without attendance.
This will enable managers to carry out dividend resolutions and supervisory board elections despite restrictions on meetings. The first practical tests could already take place at the general meetings at the end of April the DaxCorporations Bayer and Munich Re respectively. This step means new territory not only for companies, but also for many shareholders.
Experts expect the global stock markets to recover in the medium term.
Frankfurt The stock markets look shaky: after the massive price drop of more than 30 percent, well-respected stock indices like the Dax seem to be fighting to continue the recovery of the past week. But strategists are far from over. Frank Engels, head of fund management at Union Investment, says: “It will remain turbulent for the time being, but we should have already seen the high points in volatility.”