AXA Real Estate Investment is liquidating its frozen EUR 2.5 bn Immoselect fund, claiming the European sovereign debt crisis has prevented it from selling enough assets to satisfy the demand among the fund's investors for liquidity.

The opened-ended fund has a liquidity ratio of 10% but the real estate arm of French insurance giant AXA said it required a ratio of about 30% to repay investors who were planning to cash in their units should the fund re-open.

In a statement AXA REIM said that potential buyers of the fund's assets had become reluctant to commit due to the European debt crisis. Consequently, the fund is not in a position to agree sufficient asset sales by the deadline of 16 November when the fund must re-open or liquidate.

AXA REIM added that it will continue with the process of selling assets and that it plans to start paying out to investors next year, probably starting in April next year.

The German open-ended fund sector has assets of around EUR 85 bn, according to comparative research published by the by the European Public Real Estate Association (EPRA). About 30% of the open-ended fund sector is closed for redemptions due to the liquidity problems the investment vehicles have experienced in the past few years.