GERMANY – F&C aims to offer institutional clients a socially responsible investing option next year, according to Claus Heidrich, co-head of F&C’s German branch.

He said the asset manager will, from January, offer existing and new institutional clients the choice of having their assets invested on an SRI basis.

Heidrich said that instead of offering SRI funds which exclude stocks and bonds for failing to meet SRI criteria, F&C has decided to offer a so-called “dialogue approach”.

The approach involves F&C lobbying securities issuers to persuade them to meet SRI criteria as defined by the asset manager.

“The argument of institutional investors in Germany has essentially been: We’re not in principle opposed to SRI, but we don’t want to sacrifice performance,” said Heidrich, who was interviewed by IPE in his Frankfurt office.

“By offering a dialogue approach to SRI, we are telling our clients that they can leave their assets invested and we’ll work to ensure they comply with SRI criteria,” he said.

Following its merger with ISIS, F&C has gained 11 professionals in London whose job it is lobby securities issuers about SRI criteria, whether social, environmental or ethical in nature.

F&C may find SRI a tough sell in Germany. The latest statistics on SRI demand in Germany indicate that institutional clients have invested 3.5 billion euros – or a mere 0.5% of total institutional fund volume – in the asset class.

In any case, Heidrich noted that F&C would continue to focus on gaining more German institutional market share with its key speciality: corporate and emerging market bond funds.

“German institutional clients, whether insurers or pension funds, have a strong need for diversification, and that is what our bond funds give them,” he said.

Since arriving in the German market in 1998, F&C has taken in two billion in institutional assets, 1.6 billion of which are invested in emerging market bond funds. The remaining 400 million euros are invested in either European sovereign and corporate bonds or equities.

All told, F&C has 20 German institutional fund mandates, 54% of which are from insurers and 37% of which are from Pensionskassen, Germany’s traditional pension funds.

According to Heidrich, F&C targets an above average market growth in Germany. While this was achieved during the first half of 2004 (i.e. 7% above industry average), growth slowed in the second half.

Heidrich also pointed out that there were plenty of opportunities for international asset managers in Germany’s institutional fund market, as investors were increasingly demanding specialists and global diversification.

He added, however, that there were far less opportunities among major German companies in part because of their tendency to remain with their house bank whenever asset management mandates were re-allocated.

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