Is the rate of expansion of the German institutional investment market on the wane? The vehicle most used by local institutional investors is the Spezialfond and according to this year’s Kandlbinder report which is issued as separate supplement with this issue of IPE, the rate of growth of these vehicles slowed in 2000.
The absolute numbers themselves are as impressive as ever with Spezialfonds assets at end 2000 of E508bn, accounting for just two thirds of the fund industry total of E764bn. But the rate of growth of Spezialfonds slowed last year to 7.2%, compared with 28.2%, the previous year.
Altogether, there were nearly 5,500 of these funds in existence in April this year, excluding property funds, according to Kandlbinder. But last year saw a decline in the number of new funds to 499, compared with 583 in 1999 and 737 the year before.
Last year also saw a break in the seemingly inexorable increase in the proportion invested in equities through Spezialfonds – this had risen from 36% at the end of 1997 to 38% in 1998 and 46.2% in 1999, but then it slipped to 42.6%. “Hardly surprising given the general trend on the equity market,” says the report. But even more remarkable has been the shift to foreign equities, growing over the five yeas from18% in 1996 to 49.5% in 2000 and has broken through the 50% level earlier this year.
But it is essential to keep last year’s results in perspective. With E45.5bn new investment in Spezialfonds, although it was down 23% on the year before, it was still among the top five years’ inflows ever.
The top investors in these funds are the insurance industry and institutional pension funds, which last year just managed to increase their share, by 52.7% as against 52.2%, says the report. The insurance industry in the year 2000 took in almost E29bn, while the pension fund investors saw its share of new business decline from 17% to14.2%.
Why the insurance industry saw this shift in asset inflows in 2000 to their own funds run by their investment houses Kags was that they “repatriated” assets from the banks and others, resulting in fund closures. The report points out some “40% of gross investments into Spezialfonds by insurance companies are derived from fund closures”. This trend which started in 1999 and gathered steam during 2000 is predicted to continue during this year.

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