Open-ended real estate funds were long regarded as a comparatively stable form of investment. Investors’ capital is invested primarily in office buildings, shopping centres and residential properties. Since 2024, however, impairments, fund closures and increasing redemption requests have placed the asset class under considerable pressure.
DWS, which belongs to Deutsche Bank, is now also limiting redemptions of units in its open-ended real estate fund “grundbesitz europa”, with ISIN DE0009807008. The measure was announced in a company statement on 26 October 2026.
Redemptions of fund units limited to ten percent
The pro rata redemption restriction took effect on 27 October 2026. Redemption orders due on this first day will still be executed in full. For orders due from 28 October 2026 onwards, an initial payout ratio of ten percent will apply.
Consequences for redemption orders already placed
The restriction also applies to redemption orders that were submitted before the measure was activated but do not become due until during its period of application. Investors will therefore initially receive only ten percent of the redemption value applicable on the respective due date.
For a due order covering fund units worth EUR 10,000, a ten-percent ratio would initially result in the redemption of EUR 1,000. Settlement is based on the unit price on the due date and not on the value at the time notice of redemption was given.
According to the DWS statement, the unexecuted portion of the redemption order will not automatically be carried forward to a later settlement date. Instead, that portion of the order will lapse. The corresponding fund units will therefore remain in the investor’s securities account.
New order may trigger a new notice period
If the investor still wishes to redeem the remaining portion, a new redemption order must be placed. For units acquired after 21 July 2013, this will restart the statutory twelve-month notice period. If a new order is placed in autumn 2026, redemption of the remaining holdings could therefore become due no earlier than autumn 2027.
Alternatively, fund units may generally be sold on the stock exchange. However, the price obtainable there may differ significantly from the reported unit value. A sale on the stock exchange will therefore not necessarily generate proceeds equal to the value calculated by the fund management company.
Legal framework for the redemption restriction
The measure is based on a pro rata redemption restriction provided for in the fund’s investment terms and conditions, also referred to as gating. Under § 1(19) no. 25a lit. b KAGB (German Capital Investment Code), a redemption restriction is a temporary and partial restriction of the right of redemption under which investors can redeem only a certain portion of their units; the selection of this tool and its inclusion in the investment terms and conditions are governed by § 30a(1) and (2) KAGB.
Since April 2026, as a result of the amended AIFM Directive, open-ended funds have been required to maintain at least two liquidity management tools from a prescribed selection. Pro rata redemption restrictions are among these tools.
Limited to a maximum of twelve months
The activated restriction may remain in place for no longer than twelve months. During this period, DWS may adjust the payout ratio depending on the fund’s liquidity position or terminate the measure early.
For future developments, this means:
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The payout ratio may be increased if the liquidity position improves.
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If liquidity deteriorates further, the ratio may also be reduced.
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The redemption restriction may be lifted completely before the twelve-month period expires.
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Under the investment terms and conditions, the tool may be used again if the relevant requirements are subsequently met once more.
The restriction must therefore be distinguished from a complete suspension of unit redemptions. Investors will continue to receive payments, but only in the amount of the ratio applicable at the time.
DWS intends to sell properties in an orderly manner
DWS justifies the measure by citing the need to generate additional liquidity. The portfolio management team intends to continue selling properties in order to increase the liquidity ratio, repay loans and enable the payout ratio to be raised at a later date.
The managing director of DWS Grundbesitz GmbH stated that the company was aware that activating the redemption restriction could place a personal burden on investors. Nevertheless, DWS considers the temporary measure to be in the interests of investors. It is intended to facilitate orderly property sales and create the conditions for generating appropriate returns again in the future. This applies both to investors who remain invested and to those who wish to end their investment.
Impairments at DWS Grundbesitz Europa
Investors in DWS Grundbesitz Europa have already had to absorb losses in value in recent months.
As a result of the redemption restriction, their liquidity is now also significantly constrained, at least temporarily.
Interest rate reversal puts pressure on the business model of open-ended real estate funds
Open-ended real estate funds were among the investment products popular with investors. For years, such funds regularly generated returns of approximately two to three percent. With the return of higher interest rates, however, government bonds and overnight deposits have regained their appeal. At the same time, the rapid rise in interest rates brought the previous property boom to an end and placed particular pressure on office property prices.
The recovery of the property market expected at the beginning of the year was adversely affected by the war in Iran. At the same time, redemption requests increased. Several funds were therefore forced to sell properties under considerable time pressure and, in some cases, at a loss in order to make payments due after expiry of the twelve-month notice period.
This also led to drastic measures at other open-ended real estate funds: Wertgrund Wohnselect D, Fokus Wohnen Deutschland, Habona Nahversorgungsfonds Deutschland and Swiss Life Living and Working have already suspended unit redemptions this year. Leading Cities Invest by Kanam, UBS (D) Euroinvest Immobilien and Catella Max are being wound up.
Legal assessment for affected investors
The redemption restriction significantly limits the liquidity of investors in DWS Grundbesitz Europa. This alone does not establish claims for damages. However, such claims may have arisen if investors were not informed of the existing risks associated with open-ended real estate funds when they received investment advice.
According to the case law of the Bundesgerichtshof (BGH, Federal Court of Justice) of 29 April 2014 (case nos. XI ZR 477/12 and XI ZR 130/13), the risks requiring disclosure also include the possibility that unit redemptions may be suspended.
MTR Legal advises companies, investors and high-net-worth individuals on the assessment of capital markets law matters. Investors who wish to have their individual situation in connection with open-ended real estate funds reviewed can find further information under Legal Advice on Capital Markets Law.
