GERMANY - Union Investment saw its institutional business soar by over 20% to a record high in 2009, fuelled by investor demand for risk management and value protection, according to board member Alexander Schindler.

The institutional business assets under management at the German investment house increased to €76bn by the end of 2009 and are higher than the €72.6bn achieved in 2007.

The net inflow was calculated at €8.3bn, of which €2.6bn came from new clients.

"Assets from foreign investors made up around €1bn, mainly from Austria, Italy, Switzerland, Middle East and Asia," noted Schindler.

Institutionals largely invested in corporate bonds in 2009, in part because they "were too late getting back into equities", he added.

Other asset classes which fuelled business demand at Union included convertibles, which were used to build equity exposure, alongside commodities and equities to a certain extent.

Value protection strategies, such as Union's Immuno, as well as absolute return strategies saw increased demand.

"We are seeing a whole new quality of manager/client relations as investors are much more willing to lay open their portfolios and liability-structure and ask for advice," said Schindler.

He added the demand for risk management concepts as well as asset liability-matching had increased "dramatically", and said: "Risk management has increased in importance as many investors have seen risks in their portfolios which they had not anticipated before, like liquidity."

The "search for return" will continue in 2010 and Union has recommended investors consider corporate bonds but ensure a broad diversification as the recession could still hit the economy and lead to defaults.

Other sectors which are considered interesting by Union Investment can found in Asia "but only with some risk budget", cautioned Schindler.

Real estate will also be a topic for 2010 but the board member said there were too few reasonably priced and interesting deals on the market to invest all the money that Union could collect for its real estate funds.

As for inflation, Union has predicted there will be a gradual increase in demand for inflation-linked bonds but "opinions differ greatly" on the subject and Union does not believe there is any inflation danger over the next year or two.

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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