GERMANY - Citing robust investor demand for so-called “master funds,” Germany’s Metzler Asset Management says its institutional assets under management (AUM) have increased by almost one-third this year.

Metzler said that by the end of 2004, its institutional AUM would total 14.5 billion euros, up 31.8% from 11 billion at the end of 2003. It attributed most of the increase to strong demand among institutional investors for its master funds.

In a master fund, back-office administration of all institutional funds are centralised within one provider, reducing costs while boosting efficiency. Metzler, like Universal Investment, was one of the first asset managers to unveil the product in the 1990s.

Metzler also said some of its institutional asset growth in 2004 came from the acquisition of four new clients in the area of pensions management, particularly where contractural trust arrangements (CTAs) were concerned.

Clients included the German arm of Boston Consulting Group (BCG), pension funds Hamburger Pensionskasse and Höchster Pensions and Benefits GmBH as well as the German consumer chemicals giant Henkel.

Under a CTA, pension liabilities are removed from a company’s balance sheet and then consolidated into a fund backed up by cash. Asset managers active in Germany, including for example UBS and Crédit Suisse, regard CTAs as the key driver of growth in the German occupational pensions industry.

Separately, Metzler confirmed that its cooperation with Russell Investment Group had finally gotten off the ground. Under the cooperation, agreed in 2003, Metzler is offering hedge- and multi-manager funds advised by Russell to German institutional clients.

A Metzler spokesman said Russell’s multi-manager fund, based on European equities, was unveiled last July, while its hedge fund only just emerged in the fourth quarter. He declined to be more specific about demand for the products.

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