GERMANY - Fidelity Investments has confirmed the launch of its new German investment company, or a KAG, which will enable it to create and administrate German-domiciled funds for institutional and retail investors.
The move came amid an almost 40% rise in institutional assets under management.
According to Klaus Mössle, the head of Fidelity’s German institutional business who joined from Deutsche Asset Management last year, the new KAG will be of considerable help in the asset manager’s efforts to win over a considerable number of midsize institutional clients in Germany.
“These clients, which sometimes have as little as €20m to €25m to invest, prefer that portfolio management and administration of Spezialfonds (German institutional funds) to be done by the same provider,” Mössle told a news conference concerning Fidelity’s results for 2004.
“Now that we have a KAG, we can meet this need, and since the clients are investing in Spezialfonds, they benefit from a cost, tax and diversification perspective,” he said.
Mössle added that while Fidelity, which specialises in European equity and bond funds, continued to compete hard for big German institutional clients, the midsize segment offered significant growth potential. The segment comprises smaller German pension funds, insurers and banks.
As 2004, ended, Fidelity counted 18 mandates from German institutional investors. Of the figure, three-quarters came from pension funds, with insurers and banks accounting for 15% and 10% respectively.
Fidelity’s institutional assets under management totalled €1.38bn at the end of 2004, up 39% from the previous year. For the future, Fidelity – with the help of the KAG – expects to grow its institutional business in Germany by 20-30% annually.
In terms of asset allocation, Fidelity has invested 85% of the €1.38bn in German institutional assets in equities, most of which are in Europe. The other 15% of the volume is invested in fixed income.
Mössle said that Fidelity aimed to raise the fixed-income share of the portfolio. “Fidelity is commonly known as a specialist for equities. We also, however, are a big investor in fixed income,” he said.
Beyond equities and bonds, Mössle declined to say what other asset classes Fidelity planned to offer German institutional clients, noting that his firm’s returns on equities were in many cases better than those of the competition.
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