GERMANY - Absolute return is back on the menu for German pension funds, but only after careful consideration and due diligence, according to Allianz Global Investors.
Last August, US-based Allianz Global Investors Capital brought an absolute return fund concept based on US index options to Europe for institutional investors only.
Since launch, the fund has raised more than €110m from "several very large German pension funds", Greg Tournant, head of structured products at Allianz Global Investors Capital in New York, told IPE during his road show for Austrian institutional investors.
Several other institutional investors have already earmarked money for the fund, which will be invested soon, he added.
Tournant said the investors selected the fund only after careful consideration and a thorough due diligence process, for which some even made on-site visits at the New York offices.
Further, two large German consultancies "specialised in alternative investments" had checked the investment and risk management process prior to the launch and approved it, Tournant added.
He pointed out that the UCITS structure, as well as the name Allianz, had helped get the investments, but that even with those good labels investors were generally much more careful when choosing funds and were asking a lot more questions.
Tournant conceded the absolute return concept was "met with scepticism" by some investors.
"There is sometimes a very emotional response to the topic, as some absolute return funds did not live up to their promises," he said. "But you cannot lump them all together."
Tournant pointed out that, for the fund, he is looking for a few handpicked, sophisticated investors who have had experience with alternatives exposures and will stick with the investment for the medium term.
"There had been a lot of talk about investing in volatility options, as people are interested in uncorrelated investments, but so far we have seen little action."
Tournant added that many investment companies also lacked the right strategies or track record to convince post-crisis investors.
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