Before deciding to purchase units in the investment fund, investors should carefully read the following risk information (excerpt) and take it into account when making their investment decision.
The occurrence of one or more of these risks, either individually or together with other circumstances, may have an adverse effect on the performance of the investment fund or the assets held in the investment fund and may therefore also have an adverse effect on the unit value. A detailed description of the main risks associated with the investment can be found in the information document pursuant to section 307 KAGB.
If the investor sells units in the investment fund at a time when the value of the assets held in the investment fund has fallen compared with the time at which he acquired the units, he will not receive back all or any of the capital he invested in the investment fund. The investor could lose some or, in individual cases, all of the capital invested in the investment fund. Value appreciation cannot be guaranteed.
In addition to the risks and uncertainties described below, the performance of the investment fund may be affected by various other risks and uncertainties that are currently unknown. The order in which the following risks are listed contains neither a statement on the probability of their occurrence nor on the extent or significance if individual risks should occur.
In the event of the sale of the investment, there may be a lack of a sufficiently liquid secondary market. A 360-day notice period must be taken into account in the event of the return of shares. In this respect, losses in value may occur, particularly during this phase, as the market price of the assets falls. There is thus a risk that the redemption price achieved by a new investor may be lower than the issue price at the time of unit acquisition or than the redemption price at the time of the irrevocable declaration of redemption. In this case, investors receive less money back than they expected at the time of unit acquisition or the declaration of redemption.
Liquidity risk also includes the risk of liquidity bottlenecks in the fund, in particular that assets – unlike shares, for example – cannot be sold or liquidated at short notice at limited cost. Under certain circumstances, this may mean that it is not possible to meet the requirements for redemption. If, for example, a very large number of investors wish to redeem their investment in the investment fund at the same time, its liquidity may not be sufficient to meet all redemption requests. In such cases, the investment management company must suspend unit redemption with the consequence that investors may not be able to dispose of their invested capital, possibly for a longer period of time. If unit redemption is suspended, the unit value may also fall. The investment management company may be forced to sell assets below market value during the suspension of unit redemption. Ultimately, the fund may also be liquidated, resulting in the sale of all assets. If necessary, an investor will not receive the liquidation proceeds attributable to his investment until the liquidation has been completed. In addition, the net asset value of the AIF and thus the unit value may decline as a result of the realization of liquidity risks, for example if the Company is forced to sell assets for the AIF at a price below the market value where this is permitted by law.
Risks of negative performance of the fund (market risk).
In addition to the risks arising from fluctuations in the market value of assets in the fund, there are special risks associated with the assets that can be used. These include, in particular, losses in the value of the assets in which the Company invests for the account of the AIF, in that the market value of the assets falls compared with the cost price or spot and forward prices develop differently. In addition, inflation represents a devaluation risk for all assets. Concentration on a few specific investment sectors may be associated with risks (e.g. narrow market, high volatility within certain economic cycles). In addition, capital market risks, interest rate risks and currency risks may have a negative impact on the value of the fund’s assets and thus on the unit value of the investment fund.
Risks from borrowing
The investment management company may take out loans for the account of the investment fund. Loans with variable interest rates may have a negative impact on the fund assets due to rising interest rates. If the investment fund has to repay a loan and cannot offset it with follow-up financing or liquidity available in the fund, it may be forced to sell assets prematurely or on less favorable terms than planned. In the event of short-term liquidity bottlenecks, e.g. as a result of massive unit redemptions, there can be no guarantee that the Company will be able to raise the necessary funds by selling assets or taking out short-term loans.
Operational risks and other risks arising from indirect real estate investments
Operational risk is the risk of loss to an investment fund resulting from inadequate internal processes and from human or system failure at the Company or from external events, and includes legal, documentation and reputational risks as well as risks arising from the trading, settlement and valuation procedures operated for an investment fund. These include, in particular, natural disasters or criminal acts that may lead to losses. In the case of investments in financial products, particularly in other countries, political, social or economic developments there may have a significant influence on the value of a financial product. In addition, political and legal developments in foreign jurisdictions may lead to legal or tax risks that may adversely affect the AIF or its performance. The tax treatment of income from the AIF depends on the individual circumstances of the respective investor and may be subject to change in the future.
The performance of the AIF will depend in particular on the success, the preservation of value and possible increases and losses in value of the real estate companies which issue debt securities in which investments are made for the account of the AIF. The extent of specific risks of the market for real estate cannot be estimated against the background of economic developments. Interest rate developments may also lead to different expected returns. A falling market interest rate level could be reflected in declining returns. Suitable investment or investment opportunities must be analyzed or found on an ongoing basis. As a result of this and the need for revolving investments, delays or even a failure to find suitable investment opportunities may occur, so that the planned (but not promised) return target cannot be achieved.
The AIF invests primarily in unlisted securities in the form of debt securities issued by real estate companies (although full financing of the real estate company is not excluded in individual cases). In the case of these assets, there is in particular the risk that there is no liquid market for these securities and that the AIF does not have any rights of control, information or other rights of influence under company law with respect to the issuer due to the debt nature of the debt securities to be acquired. In addition, there are risks in connection with the investment objects that are inherent in the nature of the issuers (typically pure special purpose entities) and/or in connection with their (limited) activities, such as earnings risks, that the issuers of the Notes as real estate companies often do not have any further assets than are necessary for the realization of the respective project, or numerous entrepreneurial risks that may lead to a reduced return. In particular, there is also the risk of default by the issuer, which may lead to a complete devaluation of the bonds issued by it, with a corresponding negative impact on the fund.