German open ended funds: was there a valuation problem?

In late 2005, a number of German open ended funds suffered significant withdrawals by unit holders. The crisis was precipitated by a long term bear market in German property investment and the fact that these funds offered short term liquidity to unit holders but had low levels of liquidity in the fund. A more controversial suggestion was that the crisis was exacerbated by a perception that the valuations of the fund were too infrequent and inaccurate. As units are priced by reference to these valuations with no secondary market, the valuation process is central to the process. There is no direct evidence that these funds were over-valued but there is circumstantial evidence and this paper examines the indirect evidence of the process to see whether the hypothesis that valuation is an issue for the German funds holds any credibility. It also discusses whether there is a wider issue for other funds of this nature or whether it is a parochial problem confined to Germany. The conclusions are that there is reason to believe that German valuation processes make over-valuation in a recession more likely than in other countries and that more direct research into the German valuation system is required to identify the issues which need to be addressed to make the valuation system more trusted.

Learning to think in a second language: effects of proficiency and length of exposure in English learners of German

The aim of the current study is to investigate motion event cognition in second language learners in a higher education learning context. Based on recent findings showing that speakers of grammatical aspect languages like English attend less to the endpoint (goal) of events than speakers of non-aspect languages like Swedish in a nonverbal categorization task involving working memory (Athanasopoulos & Bylund, 2013; Bylund & Athanasopoulos, this issue), the current study asks whether native speakers of an aspect language start paying more attention to event endpoints when learning a non-aspect language. Native English and German (a non-aspect language) speakers, and English learners of L2 German, who were pursuing studies in German language and literature at an English university, were asked to match a target scene with intermediate degree of endpoint orientation with two alternate scenes with low and high degree of endpoint orientation, respectively. Results showed that, when compared to the native English speakers, the learners of German were more prone to base their similarity judgements on endpoint saliency, rather than ongoingness, primarily as a function of increasing L2 proficiency and year of university study. Further analyses revealed a non-linear relationship between length of L2 exposure and categorization patterns, subserved by a progressive strengthening of the relationship between L2 proficiency and categorization as length of exposure increased. These findings present evidence that cognitive restructuring may occur through increasing experience with an L2, but also suggest that this relationship may be complex, and unfold over a long period of time.

The blended approach to real estate allocations: performance implications of combining an exposure to German Spezialfonds with Global Listed Real Estate Securities

This paper seeks to increase the understanding of the performance implications for investors who choose to combine an unlisted real estate portfolio (in this case German Spezialfonds) with a (global) listed real estate element. We call this a “blended” approach to real estate allocations. For the avoidance of doubt, in this paper we are dealing purely with real estate equity (listed and unlisted) allocations, and do not incorporate real estate debt (listed or unlisted) or direct property into the process. A previous paper (Moss and Farrelly 2014) showed the benefits of the blended approach as it applied to UK Defined Contribution Pension Schemes. The catalyst for this paper has been the recent attention focused on German pension fund allocations, which have a relatively low (real estate) equity content, and a high bond content. We have used the MSCI Spezialfonds Index as a proxy for domestic German institutional real estate allocations, and the EPRA Global Developed Index as a proxy for a global listed real estate allocation. We also examine whether a rules based trading strategy, in this case Trend Following, can improve the risk adjusted returns above those of a simple buy and hold strategy for our sample period 2004-2015. Our findings are that by blending a 30% global listed portfolio with a 70% allocation (as opposed to a typical 100% weighting) to Spezialfonds, the real estate allocation returns increase from 2.88% p.a. to 5.42% pa. Volatility increases, but only to 6.53%., but there is a noticeable impact on maximum drawdown which increases to 19.4%. By using a Trend Following strategy raw returns are improved from 2.88% to 6.94% p.a. , The Sharpe Ratio increases from 1.05 to 1.49 and the Maximum Drawdown ratio is now only 1.83% compared to 19.4% using a buy and hold strategy . Finally, adding this (9%) real estate allocation to a mixed asset portfolio allocation typical for German pension funds there is an improvement in both the raw return (from 7.66% to 8.28%) and the Sharpe Ratio (from 0.91 to 0.98).