Institutions stem net outflows
Investment management companies with business in Germany managed around €1.4trn as of December 2007, a record volume in investment funds. This sum is divided roughly equally into (retail) mutual fund business and institutional Spezialfonds business.
Equity funds are still the predominant category in the area of mutual funds, despite massive outflows in 2007. Fixed income and money market funds follow, then open real estate funds and mixed funds. The remainder of the fund categories play a less important role with respect to volume.
Retail business problematic
Fund inflows into investment funds totalled €60bn in 2007, although half of this is accounted for by Spezialfonds and represents institutional business exclusively. Only some €24.2bn was invested in securities mutual funds, which roughly corresponds to the inflows to money market mutual funds.
There are many grounds to assume that money market fund inflows, of around €25bn, stem largely from institutional investors. This makes the significance of the outflows from equity and bond funds - around €32bn - all the more dramatic.
But healthy optimism stems from the fact that many more Germans are now using investment funds for retirement saving, although the fact that these figures concern net outflows should not be overlooked.
This means that regular inflows from savings plans offset an even greater number of disinvestments, which demonstrates that Germany has a way to catch up with other countries in terms of fund investment culture.
A further fact is that the number of mutual funds, including the various share classes, increased considerably in 2007. Whereas there were 4,529 funds in January 2007, this figure had increased to 5,317 by December last year - an illustration of the frenzy of fund launches on the part of investment managers 2007.
Institutional business positive
Institutional Spezialfonds business posted a successful year in 2007, in which a total of €28.6bn was invested.
In December alone some €11.6bn in asset inflows could be attributed to insurance companies. With an investment volume of €254bn, this group represents the largest investor group in German Spezialfonds by some margin.
Banks and other corporates follow, although it is worth noting that banks account for the greatest volume of Spezialfonds by number of funds, again by some margin. An indicator of this is the lower average volume of Spezialfonds investment in so-called Depot-A business (bank investments) in comparison with the average volume accounted for by insurance company investors.
Clemens Schuerhoff and Hans-Jürgen Dannheisig are managing partners at Kommalpha Institutional Consulting, Hanover