GLOBAL - DB Advisors, the institutional investment arm of Deutsche Asset Management, will focus its fiduciary management energies this year on working with the pension funds of small and medium-sized enterprises (SMEs) in the UK.

Setting out the company’s strategy for the coming year, managing director Roelfien Kuijpers said DB Advisors was also looking to grow its fiduciary management offering in the US.

“[SME pension fund] business - both in Europe and the US - is set to expand significantly, and that is where our fiduciary management business is really geared to capture market share,” she said. “Among the smaller and medium-sized pension funds, you will see an increasing trend toward CIO outsourcing.

“We created a fiduciary management business in Germany a long time ago, and it has a long-term track record. It’s been a very successful business in Germany, and we’re now building that out in Europe and looking at opportunities to enter that business in the US.”

Kuijpers said the financial crisis had forced many SMEs to realise that managing pension funds was “not their area of expertise”.

“Fiduciary management was a trend before the financial crisis, of course - it’s been around for a long time, particularly in the Netherlands,” she said. “But the crisis has really been the catalyst for a lot more pension funds to ask themselves: ‘Is this a business we should be in?’”

DB Advisors, which has more than $225bn (€158bn) in assets under management, is known chiefly for global fixed income, liquidity management, multi-asset, overlay management and sustainable investing, an area of increasing importance to the firm.

“Sustainability is very important to us,” Kuijpers said. “In 2005, [Deutsche Bank global head of asset management] Kevin Parker identified climate change as a mega-trend. The ESG market globally is about $7trn, and about 45% of that is here in Europe.

“When the ESG market started, it had a strong focus on the US, but it’s really migrated to Europe, the centre of competence and expertise for ESG investing. We take that very seriously.”

Along those lines, she said the company was in the process of launching a “carbon overlay strategy”.

“This would look at the carbon exposure of a pension plan and then offset that exposure using derivatives in an overlay strategy,” she said. “Using this, signatories to the UNPRI will be able to demonstrate they’re not only signing up to the principles but actually embedding them into their portfolios.

“We’ve been working on it for almost nine months, and this concept will now be rolled out. We’ve found our first client who is willing to make the initial investment, and then we take it from there.”

Kuijpers said DB Advisors was also considering a fixed income frontier market offering.

“We have the well-known emerging markets, but we are currently developing a fixed income strategy for the more frontier emerging markets,” she said. “That’s a bit more esoteric, but we’ve had a number of clients ask us to look into whether it would be suitable for institutional investors.

“That’s not something we have on the platform today, but, with our capabilities, we should be able to determine whether a vehicle such as that can be prudent. Clearly, you have to have liquidity, and you have to have enough frontier markets to invest in. We’re doing that research at the moment.”

The company is also looking to expand into the UK. It has always prided itself as a significant player in liquidity management - both in the euro and US dollar markets. But it has “lacked capability” in sterling.

To remedy this, DB Advisors recently acquired a £3bn (€3.4bn) money market fund owned by Henderson Global Investors that was merged into its existing sterling money market fund, which had approximately £225m in assets.

The company is also hoping to amalgamate some of Standard Life Investments’ money market funds into its range, pending shareholder approval. SLI currently manages assets of £5.6bn, €2bn and $172m in its Global Liquidity Funds.

Kuijpers said: “The UK market - both from a liquidity management point of view and a fixed income point of view - is really important to us. We really want to expand our footprint there.

“Having a better sterling offering will go a long way toward fulfilling that. We’re working hard with UK consultants to build on our presence for fixed income mandates.”

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