Faculty of Economics and Business Administration Publications Database

The Growing Importance of Secondary Market Activities for Open-end Real Estate Fund Shares in Germany

Gerlach, Philipp
Volume: 72
Pages: 65 - 106
ISSN-Print: 1439-2917
ISSN-Online: 2194-072X
Link External Source: Online Version
Year: 2020
Keywords: Open-end real estate funds; Secondary market; Trading restrictions; NAV-price-spread

Shares of open-end real estate funds are typically traded directly between the investor and the fund management company. However, we provide empirical evidence for the growth of secondary market activities, i.e., the trading of shares on stock exchanges. We find high trading levels in situations where the fund management company suspends the issue or redemption of shares. Shares trade at a discount when the fund management company suspends the redemption, whereas shares trade at a premium when the fund management company suspends the issue. We also find evidence that secondary market trading activity is increasing since German regulation introduced a minimum holding period and a mandatory notice period for open-end real estate funds.