BERLIN-The German cabinet has approved a new law covering changes to the struggling real estate open-end fund sector. However, the federal funds association BVI and the country's senior property association ZIA say that the reforms do not go far enough.

The new law, which still needs to pass the Bundestag lower house and Bundesrate upper houses of parliament, henceforth require investors to allocate capital for a minimum of two years; existing shareholders are deemed to have fulfilled this minimum period once the law comes into force in January. To protect private savers, Berlin decrees that amounts up to $7,000 per month can be redeemed whatever happens, in other words even if the fund has to close for large-scale redemptions due to lack of liquidity.

The BVI is hoping to improve on these changes to the Investment Law. It wants special handling of existing investors and is still pressing for special categories in the law separating completely the treatment of institutional and private investors. Despite the closures still in force across a whole swathe of German open-end property funds, capital has still flowed into the vehicles. The BVI recorded some $3.8 billion in total net incoming capital over the year to end September. However most of this flowed into the large funds that have remained open, particularly those by the savings bank group's DekaBank investment bank, and the cooperative banks investment manager Union Investment.