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INTERVIEW: CSAM Germany on institutional targets

GERMANY - Credit Suisse Asset Management has set a goal of raising its current assets in the German institutional fund business by 30% by the end of 2006, its Germany chief says.

If achieved, this would mean that CSAM’s institutional assets under management in Germany would rise to 5.5 billion euros from 4.2 million currently.

“Achievement of this goal would not only make us shine, it also would be proof that our business model for Germany, namely providing all the investment infrastructure for institutional clients is a huge success,” Hansjörg Herzog, chief executive of CSAM in Germany, told IPE in an interview.

Fourteen years ago, CSAM entered the German institutional market in the biggest way possible, electing to compete head-on with bigger German institutional fund providers.
Since then, other foreign asset managers have positioned themselves in Germany as boutiques to both emphasize their competence in a particular asset class and to keep costs to a minimum.

Spezialfonds providers, on the other hand, have to generate a large enough volume in order for their business model work.

But Herzog, interviewed at CSAM headquarters in Frankfurt, said positioning itself as a boutique was never an option for CSAM both because of its size and the necessity “to be taken seriously by large German institutional clients”.

He added that beyond the portfolio management in Germany led by Guy Stern, CSAM offered institutional investors access to asset managers worldwide via its network.

Still, Herzog acknowledged that CSAM was not entirely pleased with its business in Germany’s growing occupational pensions industry.

To change matters, CSAM recently teamed up with pensions advisor FEBS, which was formerly part of Swiss insurer Winterthur. The partners aim to provide full advising and asset management services to companies and pension funds in Germany.

According to Herzog, most of the future growth in CSAM’s institutional business will come from an increasing tendency among German companies to create contractual trust agreements (CTAs) to meet their pension liabilities.

Under a CTA, pension liabilities are removed from a company’s balance sheet and then consolidated into a fund backed up by cash.

Another key driver of growth for CSAM’s institutional business was the need among banks and insurers for liquidity management, he said.

Herzog also observed that real estate funds held a lot of promise for German institutional investors, adding that hence, CSAM would soon offer this product.

Meanwhile, Claudia Blumenthal, head of CSAM’s mutual fund division who also attended the interview, disclosed that CSAM would unveil a fund of hedge funds, or Dachhedgefonds, for the German market by mid-2005.

The Dachhedgefonds will not, however, be domiciled in Germany but in Luxembourg and management of the fund will be handled by sister firm Credit Suisse First Boston.

Turning to the outlook for financial markets, Guy Stern, CSAM’s chief investment officer in Germany, said that his team had taken a “neutral approach” toward equity markets.

“In late October, we reduced our equity exposure and realised our profits. Since global economic growth is expected to slow next year and returns on equities will probably be in the single digits, we’re kind of sitting on the fence right now,” said Stern, who was also present at the interview.

Regarding bond markets, Stern said: “Yields on bonds are not very attractive, but we don't expect a big sell-off in the fixed income markets in the first half of next 2005.”

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