VIEW-German property funds brace for freeze

By Sinead Cruise

LONDON (Reuters) - German funds were among the world's most hungry property buyers in 2008, but financial regulation has dumped the once cash-rich community into a sudden investment lull, the head of Commerzbank's property unit said.

Hubert Spechtenhauser, head of Commerz Real AG (CBKG.DE), told Reuters nervous investors were switching out of many types of investment funds to hoard money in government-guaranteed bank accounts, forcing some managers to stockpile cash, postpone investments and suspend investor redemptions.

"The definitely led to some outflows from all funds, not just property or equity funds but other investment products also," Spechtenhauser said.

"If you have closed your fund and you don't redeem shares anymore, you can't be a big buyer. That is against the logic," he added.

As legally required, a number of German open-ended property fund managers including KanAm and Morgan Stanley Real Estate Investment GmbH temporarily closed some funds this week in a bid to protect liquidity after a rash of exit demands from investors spooked by the financial market turmoil.

Spechtenhauser said Commerz Real was monitoring sentiment in the market carefully but it was not currently considering closing any of its open-ended real estate funds, including Europe's biggest -- the 10.2 billion euro HausInvest Europa Fund.

"We are not yet in the situation to have to contemplate whether we will have to close funds," he said.

"We will have to see how liquidity evolves but for the time being, we have more than enough liquidity in our two open-ended funds ... somewhere in the region of 2.2 billion euros."