DWS, the asset management arm of Deutsche Bank, is weighing new restrictions on withdrawals from three of its German real estate funds, according to a report in the Financial Times. The options under consideration include caps on how much investors can pull out at once, or fees charged to those who redeem. The move would be a response to years of steady outflows that have drained the funds' cash reserves.
The three funds — part of DWS's Grundbesitz range of open-ended property vehicles — have paid out roughly €6 billion to investors since 2022, according to fund disclosures cited by the FT. To raise that cash, the funds have sold about €4.5 billion worth of buildings. They are now approaching the legal limits on how much they can borrow temporarily to cover redemptions, which is the mechanism that normally buys a property fund time to sell assets in an orderly way.
Why property funds can get stuck
The tension at the heart of these funds is simple to understand but hard to fix. Open-ended property funds promise investors regular access to their money — often daily, weekly or monthly redemptions — while the assets they hold are offices, apartments, retail parks and other buildings. Those assets cannot be sold in a day. A building sale can take months, and in a weak market it can take much longer, or require a price cut.
When a fund has more money going out than coming in, it has three main levers. It can sell buildings, which takes time and may crystallise losses. It can borrow temporarily, within limits set by regulators and the fund's own rules. Or it can slow down redemptions — by limiting how much can be withdrawn, charging a fee, or suspending withdrawals altogether.
That third option is the one DWS is reportedly considering. It is a well-worn path in European property funds. During periods of stress, several large open-ended real estate funds have imposed redemption gates or exit fees to protect remaining investors from a fire sale of assets. The trade-off is that the funds become less liquid for everyone, which can itself prompt more investors to head for the exit.
The backdrop: a tough stretch for German property
German commercial property has been under pressure for several years. Rising interest rates hit valuations hard, because higher rates reduce what buyers are willing to pay for a given stream of rental income. Offices have faced an additional challenge as remote and hybrid working reduced demand for desk space in some cities. That combination has made it harder for funds to sell buildings at the prices they were once valued at.
DWS is not alone in facing this. Asset managers across Europe have dealt with similar outflows from open-ended property vehicles. The difference is scale and visibility: DWS is a large, listed manager owned by one of Europe's biggest banks, so its fund decisions draw close scrutiny from investors and regulators alike.
The broader German economy has also been a factor in sentiment. Growth has been sluggish, and while there have been signs of improvement — including a brighter growth forecast for 2026 — the recovery in real estate has lagged. Industrial pressures have added to the cautious mood, as seen in recent unrest among German auto workers.
What it means for investors
For anyone holding these funds, the key question is what a redemption limit or fee would actually change. A gate does not reduce the value of the underlying buildings. It changes who can get their money out, and when. Investors who stay put may be protected from a rushed sale at depressed prices. Investors who want out may find they cannot exit as quickly as they expected.
An exit fee works differently: it effectively charges redeeming investors for the cost of selling assets, and the money typically stays in the fund to benefit those who remain. Both tools are designed to spread the pain of illiquidity more fairly, rather than letting the first movers take the cash and leave the rest holding hard-to-sell buildings.
There are wider read-across points too. DWS's parent, Deutsche Bank, is exposed to the fees its asset management arm earns, and to any reputational hit from restricting investor access. The episode also serves as a reminder that "open-ended" does not mean "instantly liquid" when the underlying assets are physical property. That distinction matters for anyone using these funds as a cash-like holding.
Investors in other illiquid strategies — private credit, infrastructure, some real estate vehicles — are watching similar dynamics. Redemption pressure has been a theme across parts of the asset management industry, as seen in high redemption demand at a major private credit fund. The common thread is a mismatch between what investors are promised and how quickly the assets can be turned into cash.
What to watch next
The immediate focus will be on whether DWS confirms any formal measures, and if so, which of the three funds they apply to and in what form. Fund documents and investor communications will spell out the mechanics — the size of any gate, the level of any fee, and how long the measures might last.
Beyond that, the health of the German property market is the bigger variable. If valuations stabilise and buyers return, the pressure on redemptions should ease. If the market stays weak, more funds may face the same choice DWS is now weighing: protect the fund, or protect the exit.
