GERMANY - Institutional investors are tendering more focussed Spezialfonds mandates and starting to trust foreign asset managers with them, according to two indepdendent studies by Kommalpha and Telos, and German investment association BVI.

According to the BVI figures, excluding real estate Spezialfonds, the net inflow into Spezialfonds was €42bn in 2011, below the record figure of €69bn for 2010, but still well above the ten-year average of €35bn.

In total, €813bn were managed in Spezialfonds at year-end 2011, a “new all-time high”, the BVI pointed out. For the first quarter of 2012 the association already reported a net inflow of €13.8bn, bringing the total to €852bn including return on assets.

In their most recent annual Spezialfonds survey, Kommalpha and Telos confirmed that 60% of the surveyed institutions want to tender new Spezialfonds in 2012.

They also found that only 17% of the 150 participating institutional investors had tendered Spezialfonds mandates as “mixed mandates” in 2011. A year before, the share had been twice as high, at 34%, and for 2009 it was 46%, Kommalpha noted in the study.

However, the BVI statistics show that 53% of the total volume of assets managed in Spezialfonds are still in mixed mandates.

According to Kommalpha “investment behaviour has changed now” towards more focussed mandates, especially in corporate bonds, while the equity share dropped further from 7% to 6.6% during 2011.

The researchers also noticed a slight reversal of the trend towards active mandates seen in 2010 back towards more passive mandates.

Both Kommalpha and BVI pointed out that institutional investors further reduced their exposure to crisis-ridden Southern European peripheral regions and that those countries were practically excluded in new mandates.

The BVI confirms the trend towards “segmented Spezialfonds”, as in master funds in which various asset managers for specialised mandates can be combined.

Per year-end 2005 around 41% of the assets in Spezialfonds were managed in segmented fund structures.

By December 2011 this share had grown to 63% while at the same time the number of segments within a master fund structure has increased to four, on average, from 2.9 in 2003, BVI pointed out.

“One of the main reasons for this seems to be the further segmentation of existing funds to cover new investment areas,” noted BVI.

According to Kommalpha the “continued decrease of foreign asset managers winning mandates has been broken” and German institutions are again trusting them with Spezialfonds mandates.

Last year 36% of surveyed investors had a share of their portfolio with foreign asset managers while in 2010 it had only been 27%.

Overall, half of the institutionals want to change their managers this year and 30% said they want to increase their exposure to foreign asset managers.

According to the BVI, German pension funds prefer KAGs of private banks or foreign banks as their Spezialfonds-provider.

The institutional investors surveyed by Telos and Kommalpha jointly managed around €330bn in assets and around 8% of them were pension funds.

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