AUSTRIA/GERMANY - Asset managers saw major outflows from institutional investors in 2008, but some pension funds are now expected to increase the share of externally-managed assets in their portfolios.

Both the German BVK retirement provision fund as well as the Austrian Pensionskasse APK say they will increase their use of external managers over the coming months, in order to increase diversification and specialisation within asset classes.

"Size does not matter in our investment decisions. We have a scenario-based selection process and are not only looking at past performance but also at the manager's organisation," explained Christian Böhm, head of APK.

He added that many of the so-called "gurus" in asset management are only good in special circumstances.

Wolfgang Kirschner, managing director for institutional business at Pioneer Germany, believes an earlier reduction in the use of external asset managers was in part linked to cost-cutting as well as performance.

"There was not only a higher turnover in asset managers during the crisis but some funds even took the management of their assets completely in-house and some asset managers lost billions from large institutional clients," said Kirschner.

"But that was only a short-term measure to quickly cut costs and in some cases funds blamed managers for a bad performance," Kirschner added.

According to Alexander Schindler, a board member at Union Investment, "many investors had to liquidate specialist mandates during the crisis and often had to cut ties with boutiques which could not offer them any alternatives because they were specialised".

He continued: "Asset Managers with a broad range of products could profit, as clients often used other products from this larger manager as alternatives.

Dominik Kremer, CEO Pioneer Investments Germany, said "there was no loss in trust in large asset managers" during the crisis.

But Daniel Just, CIO at the BVK in Germany, disagrees.

"We like boutiques because we like ‘alignment of interest'", he explained, and added the BVK uses boutiques for its hedge fund, commodity and timber exposure among other mandates.

"Large investment banks changed their view of the world in the crisis and may decide to close down a smaller arm of the company which had been doing hedge funds, or it may be that the employees might get frustrated because their company has changed its direction. But boutiques are concentrating on one business - which is also in our interest."

Both Union and Pioneer agree that risk management, and with it accountability, has become much more of an issue since the recent market turbulence, so is likely to fuel demand for external management.

"The problem is that even when an investor buys an ETF, it is himself who will have to answer for the decision if it contributes negatively to the performance," explained Kirschner. 

Similarly, markets, such as corporate bonds, are getting harder to get into at the right point in time and investors are therefore going back to external managers to find specialist mandates, he added.

Kirschner could he believes there could be increased interest in Germany in the future towards consultancy services linked to asset management decisions.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

 

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