The arrival of the Pensionskassen system in general and defined contribution (DC) schemes in particular has boosted business opportunities for asset managers in Austria.
Austria historically has had a small domestic equities market, with low liquidity, and the Vienna Stock Exchange has been dominated by a few large companies like Bank Austria.
This has meant that asset managers have tended to look outside Austria for investment opportunities. Raffeissen International Funds, for example, has specialised in central and eastern Europe.
Christian Petter, general manager of Raffeissen International Funds, says: “There is big potential in DC schemes because there is clearly a completely different investment policy from a book reserve system. In the book reserve system, by law, only part of the fund has to be invested whereas with the pension fund you basically invest 100%. Also the book reserve is invested mainly in government bonds whereas the pension fund typically has a global asset allocation.
“This gives us the opportunity to offer more sophisticated products, in particular equity products. And in our case our speciality of central and eastern Europe is very attractive in particular for pensions funds.”
The market for pension fund money is dominated by Austria’s banks and insurers. Six out of seven of the multi-employer funds are backed by large insurers and banks (see table). This makes it difficult for new players to enter the market
Innovest, an asset manager wholly owned by Siemens, manages the Siemens pensions fund but is also looking for third party business. Johann Maurer, chief executive officer of Innovest says: “The banking groups and insurance groups have their own multi-employer schemes and of course they like to have their own investment products. So it’s very hard to get into these pension schemes.”
Innovest specialises in multi-manager investment, an idea which is slowly catching on in Austria. “We only offer asset management, so against a big Austrian commercial bank we are at a big disadvantage because we are offering only one kind of service and not the whole package,” says Maurer. “Our only chance is to deliver excellent performance and to document it in the market. If that happens we have better opportunities to get external money under management.”
Some multi-employer funds have fully embraced the idea of multi-manager investment. APK, the only multi-employer fund which does not have the backing of a large bank and insurer, operates a multi-manager investment system. Christian Boehm, chief executive officer of APK, says: “We took the opportunity to become the first supplier of pension funds and we are really the only pension fund in Austria who is without any conflict of interest in investing the money.
“I think we can prove that our approach to asset management is an advantage over our competitors. Our competitors are owned by banks and insurance companies, so they pick up the money and pay it to the KAGs of their mother company. But we are completely free to operate a truly multi-manager investment system.”