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Brussels, 13 March 2008

Financial services: industry report recommends new EU retail product framework for real estate funds

(see MEMO/08/161)

The European Commission has published an industry report analysing the EU market for open-ended real estate funds, which provide investors with access to professionally managed investments in commercial and other types of property. The report and stakeholders' reactions to it will contribute significantly to the policy debate on whether regulatory barriers need to be removed to facilitate development of a cross-border EU market for open ended real estate funds. In particular, it constitutes an important input to the forthcoming Communication on non-harmonised investment funds, scheduled for publication in autumn 2008. The report, which does not necessarily represent the views of the Commission, will be publicly debated at an open hearing in Brussels on 8 April 2008 and was prepared by the expert group on open-ended real estate funds (see IP/07/836). This group was announced in the Commission's White Paper on the enhancement of the EU framework for investment funds (see IP/06/1569).

Internal Market and Services Commissioner Charlie McCreevy said: "I would like to thank the Members of this Group for working with the Commission over the last six months. Their final report sheds new light on the European market for real estate funds. Assets managed by regulated real estate funds have more than doubled over the last 10 years. Open-ended real estate funds are now subject to retail investment fund regulations in 12 Member States. This report highlights the fact that divergent national rules create regulatory fragmentation in the EU, holding back further development of this business on a cross-border basis and possibly limiting the range of investment choices available to consumers. We will study carefully the business case for action presented by the group and their recommendations on the need for new EU legislation to overcome market access barriers. However, before the Commission takes its own view on the issue, I invite reactions from other interested stakeholders and market participants."

Summary of report recommendations

The report on open-ended real estate funds calls for the introduction of EU legislative arrangements to provide cross-border retail distribution of open-ended real estate funds. Open-ended real estate funds invest primarily in high quality real estate assets, including land and buildings. As such, these funds are currently excluded from the UCITS1 Directive.

The report explains that open-ended real estate funds are already a well-established nationally regulated investment product in many Member States. Several more Member States have recently introduced new regimes to allow real estate funds to be offered to retail investors. The report analyses these national regimes and compares them to the rules applicable to UCITS funds. The report concludes that the high level of similarity between the national rules represents a strong basis on which to harmonise rules around a common set of EU regulatory provisions. The Group expresses frustration that it is practically impossible to offer nationally regulated open-ended real estate funds to foreign retail investors on a cross-border basis.

The report recommends that EU legislation is required in order to overcome EU market access barriers. It presents a set of key features which could be used as the regulatory template for competitive investment products incorporating high levels of investor protection safeguards.

Next steps

The report will be discussed with Member States, regulatory bodies and the European Parliament. It will be debated at an open hearing in Brussels on 8 April 2008, which will give other stakeholders, such as regulators, institutional investors and retail investors, the opportunity to react.

The Commission also welcomes any written reactions to the report, which can be e-mailed to:

The expert group report, plus registration details for the open hearing, are available at:

1 :

Undertakings for Collective Investment in Transferable Securities

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