The German Spezialfonds market had a spectacular increase in 1997, when assets rose 40% to DM549.6bn ($305bn) from DM389.5bn at the end of 1996. In 1995, the corresponding figure was DM305.3bn.

The number of Spezialfonds, which are investment funds available to corporates and institutions, grew from 2,917 to 3,452 in the year, which has been the biggest increase of the past decade. New funds were formed at the rate of two for each working day," points out Spezialfond consultant Hans Karl Kandlbinder, based in Grafing bei Munchen.

But the major German banks, whose Kag investment arms handle the bulk of the market, had asset growth rates of under just 37%, below the overall market increase. Of the top 10 Kag groups, Commerzbank was the only one to increase its market share in asset terms. "We recorded a 47% growth rate," says Claus Sandelbach, with the bank's investment arm in Frankfurt. "It was our biggest growth in decades."

A big change has been the increase in the numbers of fund managers in the Spezialfonds market. In the last five years the fund managers with Kags have increased from 38 to 48. Notable new entrants include ABN AMRO's Kag and PostInvest, the Kag of the Deutsche Post, the German post office, which had rapid growth.

Around 24% of the assets was invest-ed in German equities and 11% in international equities, making the highest equity exposure ever for the Spezialfonds.

Kandlbinder points out that with the higher equity exposure, the stock market growth accounts for a more significant part of the rise than in previous years.There was also a shift from German bonds to international bonds, which now account for 11% of portfolios, up from 7%, mainly at the expense of domestic fixed interest which made up 47% of investments end 1997.

Kandlbinder says one of the reasons for the increased interest funds is as a result of supervisory changes, insurance companies can now hold all of their assets through Spezialfonds provided they are invested separately in shares, fixed interest and real estate. Fennell Betson"

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