So far, investor interest in real estate European Long-Term Investment Funds has been limited. While the number of newly launched ELTIFs hit a record high of 82 in the first three quarters of the year, only a small share focus on property. Just six of the new ELTIFs are dedicated to real estate.

The same picture can be seen at Hansainvest – although the asset manager has 20 new ELTIFs in the pipeline, only three of them focus on property. Nevertheless, Ludger Wibbeke, Managing Director at Hansainvest, expects the number to rise. „The property cycle is turning again. It won’t be like it was before the crisis, but real estate will always be in demand“, Wibbeke says on the podcast „Beyond Billions“.

He also points to structural advantages of ELTIFs over traditional real estate funds. Different asset classes and usage types can be combined within one vehicle, and the usual distinction between institutional and retail funds no longer applies.

It is therefore no surprise that existing property funds have rebranded as ELTIFs following the reform last year. One example is Greenman Open, which with assets of more than 700 million euros, is currently the largest real estate ELTIF on the market. Newly launched real estate ELTIFs, by contrast, tend to remain in the low double-digit million range. The larger vehicles seen so far have, without exception, been legacy funds that were subsequently rebranded.

Although the analytics and rating firm Scope stops short of calling this a trend, the issue is very much being discussed in the industry. Greenman opted for the conversion to facilitate pan-European distribution. The competitive implications of this move remain to be seen.

There are several reasons why real estate ELTIFs are still struggling to gain momentum. For one, the property market remains weak. In addition, according to Scope, return expectations are generally lower than in private equity or private debt. Moreover, only a limited range of use types is currently in demand for property investments, with real estate ELTIFs largely concentrated on residential assets and food-anchored retail.