Legal Form
The Open-Ended Institutional Property Fund (OIPF) is a mutual fund type that corresponds to the Luxembourg FCP. The fund itself does not qualify as separate legal entity. The fund's assets are formally owned by the management company, but have to be kept strictly separate from the assets of the company. The fund's assets are managed for the investors' account. They are supervised by a custodian bank and the German Banking Supervisory Authority.

An OIPF may have just one institutional investor or many as the number is not limited. The investors subscribe to fund units and pay a corresponding amount of equity, but are not liable for the fund’s debt. Relations between investors as well as the characteristics of the fund are laid down in the fund rules which usually consist of standardized General Conditions and Specific Conditions as well as additional rules specifically agreed upon by the fund management company and the investors. No regulatory authorization is required for setting up an institutional fund.

Manager, Supervisory Authority, Custodian and Auditor
An OIPF has to be managed by a German fund management company (“Kapitalanlagegesellschaft”) that under German fund law requires a special license from the German Banking Supervisory Authority ("Bundesanstalt für Finanzdienstleistungsaufsicht" or "BaFin"). This authority monitors the activities of the fund management company in compliance with all regulatory provisions and ensures investor protection. In addition there is a custodian bank for every single fund, which can either be a German bank or a German branch of a foreign banking group. The Custodian bank shall monitor all ingoing and outgoing money transfers as well as important transactions and regulatory restrictions relating to the fund as, for example, the sale of properties, the diversification rules or the take-up of loans. Finally, the fund management company as well as every fund is audited by independent auditors on an annual basis.

Investment Restrictions and Leverage
An OIPF may invest in any kind of real estate all over the world. The investment may be effected either directly or indirectly via single-layer or multi-layer structures using special purpose vehicles.

As an OIPF has to apply the principle of risk diversification, after a certain investment period the portfolio should consist of more than one single property. However, there is no clear-cut rule about the minimum number or maximum size of properties. The fund is allowed to take up loans provided that the leverage of the total portfolio does not exceed a certain threshold which varies – depending on the terms of the loans – between 50% and 80%.

Valuation
According to German law, all properties or shares in property companies are regularly valuated by experts who are fully independent from the fund management company. Valuation takes place at least once a year for every piece of real estate or real estate company.

Redemptions and Unit Transfers
As the name says, the OIPF is an open-ended fund. Every investor has the right to redeem fund units at any time on the condition that the fund rules mutually agreed upon with the fund management company do not provide otherwise. As professionally managed real estate funds may not contain enough liquidity to cover every redemption request immediately, there is a set of rules that shall ensure that liquidity is generated by the management company for the purpose of redemption within a certain timeframe. Furthermore, fund units may be transferred to other institutional investors which is facilitated substantially by the fact that the portfolio is regularly valuated by external experts.
 

Taxation
Although German mutual funds do not qualify as separate legal entities, they are deemed to be corporations under German income tax law. Thus the funds are, in principle, taxable entities, but are fully exempt from income tax. In Germany, tax can therefore be due on the investor level only.