At the start of 2025, there has been significant public debate in Finland surrounding the country’s open-ended real estate funds and their ongoing challenges. One of the most notable developments was the suspension of redemptions in OP-Vuokratuotto, the largest open-ended residential and commecial property real estate fund in Finland. This fund, which had about 38,000 unit holders, halted its redemptions, symbolizing the broader issues facing the market, where numerous other funds have been forced to follow suit and limit or suspend redemptions. Currently, nine funds from different banks and asset management companies have either suspended or limited redemptions.
As of 2023, there were approximately 200,000 investors in Finnish open ended real estate funds, down from a peak of 250,000 in previous years.The first such fund was established in 2012.
According to the rationale behind the government’s legislation at the time, these funds were intended to promote residential construction in the Helsinki metropolitan area and other growing urban centers. Indeed, this has largely been the case. Real estate investment has become a major driver of residential construction in Finland, and real estate funds have played a significant role in this boom.
Unlike Finland, investing in open-ended real estate funds is not allowed for individual investors in most other Nordic countries. However, such investments are permitted in many other European countries.
Market Decline and Fund Values
As of the summer of 2024, the total gross asset value (GAV) of all real estate funds in Finland was €10 billion, while the net asset value (NAV) stood at €6.6 billion. This represents a sharp decline from the end of 2022 when the market had reached a peak NAV of €11.7 billion, a drop of approximately €1.8 billion. The decline reflects the funds’ selling activity in 2024, driven by investor redemptions, as the rising interest rates raised yields for property investments, further impacting the gross asset values of these funds.
Currently, Finland has 20 open-ended real estate funds focused on properties. These funds vary in focus. Some invest in residential properties, while others focus on commercial and office spaces, logistics properties, or social care and healthcare facilities. In 2023, three new funds were launched, but no new funds have emerged since. The real estate funds had experienced rapid growth due to the low-interest-rate environment, which persisted until 2022. During this period, the funds’ importance in the Finnish real estate market grew significantly, and by the end of 2023, real estate funds owned some 20% of Finland’s investment properties (Finnish Open Ended funds 10%).
| Fund | NAV M€ | LTV per 6/2024 | Net subscriptions M€ in 2024 | Notes |
|---|---|---|---|---|
| OP-Vuokratuotto | 1103 | 31% | -83 | Subscriptions and redemptions on hold until further notice. Decision on 31.12.2024. |
| eQ Yhteiskuntakiinteistöt | 1103 | 36% | -48 | December 2024 subscriptions and redemptions on hold until further notice. Decision on 6.1.2025. |
| eQ Liikekiinteistöt | 563 | 45% | -24 | December and June 2024 subscriptions and redemptions on hold until further notice. Decision on 6.1.2025. |
| Titanium Hoivakiinteistö | 471 | 31% | -40 | Redemptions on hold until further notice. Annouced on 7.1.2025. |
| Ålandsbanken Asuntorahasto | 427 | 47% | -2 | Part of redemptions postponed from 10/2023. |
| OP-Palvelukiinteistöt | 359 | 17% | -11 | Subscriptions and redemptions on hold until further notice. Decision on 31.12.2024. |
| S-Pankki Asunto | 309 | 36% | -3 | Redemptions over K€ 5 between 8/2023 and 2/2024 have been limited |
| UB Pohjoismaiset Liikekiinteistöt | 266 | 40% | -8 | |
| S-Pankki Toimitila | 215 | 40% | -11 | |
| LähiTapiola Sijoituskiinteistöt | 184 | 17% | -11 | |
| Evli Vuokratuotto | 165 | 27% | -11 | |
| UB Suomi Kiinteistöt | 163 | 15% | -11 | |
| Aktia Toimitilakiinteistöt | 132 | 36% | N/A | |
| Titanium Baltia Kiinteistö | 107 | N/A | -7 | |
| CapMan Nordic Property lncome | 79 | 38% | -3 | |
| Evli Vuokratuotto II | 66 | 44% | 0 | Redemptions on 30.6.2024 and 31.12.2024 are postponed |
| Aktia Asunnot+ | 39 | 44% | -1 | |
| Titatium Asunto | 37 | 38% | -6 | |
| Evli Logistiikkakiinteistöt | 21 | 0% | -1 | |
| HCPBricks | 8 | 0% | 1 | |
| Mandatum AM Suomi Kiinteistöt II | N/A | 34% | N/A | Subscriptions and redemptions on hold until further notice.Decision on 23.1.2024 |
Source: Kauppalehti, KTI, Sijoitustutkimus
Real estate funds in Finland typically use leverage to increase their returns. By law, the leverage can be up to 50% of the fund’s value, but on average, Finnish funds use around 34% leverage.
Suspension of Redemptions: A Drastic Measure
To address the growing redemption issues, fund managers have amended the rules governing the open-ended real estate funds. Suspending redemptions is a severe measure that many of these funds have had to resort to. More common, however, are less drastic solutions like limiting redemption amounts or extending redemption periods. Real estate funds have significantly reduced their “open” periods, allowing redemptions only twice a year, at six-month intervals. Redemption times have now been extended to 9-12 months, and in the worst cases, a fund may even suspend redemptions entirely, compared to the 3-6 months that was typical before the crisis.
The Finnish Financial Supervisory Authority (Fiva) has emphasized that there is no statutory deadline for limiting redemptions. Imposing a hard deadline could trigger forced asset sales, which could negatively impact the remaining investors’ holdings. Therefore, funds are expected to make every effort to fulfill redemptions as promptly as possible.
Impact on Housing Construction and the Economy
Real estate funds, especially residential funds, have become key players in Finland’s housing construction sector, acting as significant customers for construction firms. However, many investors are now shifting their money to other types of investments as they anticipate the possibility of redemptions.
Finland’s economic growth has lagged behind the rest of Europe in recent years. Without the strong pace of construction driven by real estate funds, the situation could have been even worse. Investment in construction has accounted for as much as 15% of Finland’s GDP .
If real estate funds begin selling off large volumes of residential properties, the pressure to build new homes could decrease, slowing the recovery of the housing market and, by extension, the Finnish economy.
Surprise for Investors, but Not for Regulators
The troubles facing real estate funds have come as a surprise to many investors. However, to the Finnish Financial Supervisory Authority, the difficulties were not entirely unexpected. Marko Hovi, the head of the Financial Supervisory Authority’s office, stated that regulators were aware of significant differences between funds regarding how well they had prepared for various crises.
The suspension of redemptions and the growing challenges in the Finnish real estate fund sector are a stark reminder of the risks involved in this type of investment, especially in times of market volatility. While some funds are taking steps to address liquidity issues, the crisis could have long-lasting effects on Finland’s housing market and broader economy.