German Spezialfonds have recorded “remarkably poor net inflows” from pension funds and insurance companies, the largest group of investors in those vehicles, in the first quarter of the current year, according to the quarterly report published by consultancy Kommalpha today.
Net inflows of pension institutions into Spezialfonds amounted to €525m in Q1 2024, and €674m for insurance companies, a sustained, negative trend that is continuing from last year.
Lower net inflows of pension schemes is primarily the result of direct investments in bonds becoming more attractive since mid-2022, Kommalpha’s managing director Clemens Schuerhoff explained.
From his point of view, instead, changes in terms of strategic asset allocations of pension funds don’t impact Spezialfonds investments. Schuerhoff believes that net inflows will stabilise again in the future, but not at the high level of the 2010s.
Lower net inflows might be also a first sign that the balance between contributions and pension payouts deteriorates, the managing director argued.
Kommalpha expects the relationship between contributions and pension payouts to deteriorate for demographic reasons from 2030, but that is “perhaps too optimistic,” Schuerhoff said.
Pension funds pumped cash into Spezialfonds mandates in Q1, but given the very low level of net inflows, they also returned a lot of liquidity, according to the quarterly report. Only 7% of cash remained in Spezialfonds of pension funds in Q1, net, the report added.
“This means withdrawing liquidity from Spezialfonds [to channel it] towards direct investment, in other vehicles or for business purposes,” Schuerhoff explained.
Spezialfonds for bond investments collected €6.8bn net in Q1, and a total of €2.6bn net was channelled towards Spezialfonds for mixed securities.
Kommalpha’s database shows that total net inflows of pension funds into bonds Spezialfonds amounted to only €202m from 2022 to Q1 2024.
“It is not clear whether bonds Spezialfonds have become very attractive for pension funds since the interest rate turnaround,” Schuerhoff said.
Real estate Spezialfonds recorded a fairly steady net inflow, a surprising development given the issues surrounding the real estate market, according to the quarterly report.
A total of €9.2bn net was invested in Spezialfonds in the first quarter of this year, a value below average, according to the report.
Inflows of cash were also limited in Q1, reaching the peak in January, at €16.4bn, going down in the following two months, to reach a total of €32.1bn at the end of the quarter, the report added.
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