The definition of real estate investment fund1 in Italy is found under section j), first paragraph, of article 1 in the decree law D.lgs. 24 February 1998, n. 58, so-called ‘TUF’: "autonomous real estate property, self-divided into units, attributable to several participants, managed in trust [...] the trust's assets, either open or closed, can be assembled in one or more issues of shares", while art. 36 expresses the characteristics of funds: division into shares, property autonomy, collective management delegated to a professional intermediary, a plurality of participants.
Real estate funds are managed and operated by a third party, defined as a saving management company (Italian acronym SGR)2, different from those contributing with money and/or assets to the establishment of a single property fund with the aim of investing assets exclusively or predominantly in real estate, real property rights and equity on interests in real estate companies. The fundamental feature of real estate funds is to transform the property investment from non-liquid, non-standardised and non-transparent items in financial assets (through the issuance and purchase of shares) that allow to generate cash without any obligation for the investor to acquire the direct property of a building. Real estate funds are exclusively of the closed type3. The subscription of shares is done through the payment of money or, in the case of contribution funds, by means of contributions or of transfers of real estate properties, real estate property rights or quotas in real estate companies.
The investment fund can be defined as real estate when investments in real estate activities are no less than two thirds of the total value of the fund; this requirement should be met by each fund within 24 months from its start and must be constantly honoured (the percentage is reduced to 51% whenever the fund assets are also invested, for no less than 20% of its value, in financial means representative of securitisation transactions relevant to real estate property, real estate rights or credits secured by mortgage guarantee).
The real estate fund can play both directly or indirectly and without limitation activities of real estate development and enhancement; however, it cannot directly carry out construction activities (it can sign a contract with a construction company to build or restore properties). Indirectly, the real estate fund can undertake construction activities by investing up to 10% of its value in real estate companies that have the conduct of such activities as part of their social goal. Regarding their activities, real estate funds can: borrow up to 60% of the value of their properties, real estate rights and real estate holdings in real estate companies, borrow up to 20% of the value of other properties invested in the fund, borrow to make early repayments of its shares up to an amount not exceeding 10% of the total net value of the fund.
1The first mutual funds were established in Italy by law no. 77 of 23 March 1993 
2The S.G.R. are regulated by Legislative Decree 24 February 1998, n. 58, so-called TUF and the Bank of Italy’s decision of 14 April 2005; authorised SGRs are listed in the register kept by the Bank of Italy. 
3Closed-end funds envisage that the right to redeem units is recognised only to the participants at predetermined intervals and that shares may be subscribed, subject to availability, only during the bidding stage, while reimbursement takes place normally at maturity only, with the option, if so allowed, of purchasing or selling the relevant shares on a regulated market. Income Revenue Agency circular of 27 December 2007 n. 74/E .
D. M. 24 May 1999, n. 228.
D. M. 14 October 2005, n. 256 .
D.lgs. 24 February 1998, n. 58.
Bank of Italy’s circular of 14 April 2005.
D.L. 25 June 2008, n. 112, converted with amendments, from law 6 August 2008, n. 133.
Editor: Alberto Maria SORRENTINO