GERMANY - Risk management in Germany has improved in the wake of the financial crisis, and institutional investors are now focusing on 'risk-less returns', according to consultancy Complementa.

In a survey of nearly 50 institutional investors, with combined assets under management of more than €40bn, Complementa found that the crisis had shifted respondents' focus toward capital preservation and maximising the target return without increasing risk.

Planned changes to strategic asset allocation - already made in some cases - included increases in bond exposure and strategic liquidity.

Commenting on the second study it has conducted with the Bavarian Centre for Finance, Complementa said: "Investments in emerging markets, as well as real estate, have profited from this and will continue to profit."

When asked about the most important conditions for higher returns in future, most respondents cited "identifying additional sources for return", as well as new takes on strategic asset allocation, combined with "suitable overlay products" and "further developments in risk reporting".

Overall, the researchers noted that risk reporting had improved compared with the first study conducted last year.

However, Complementa said the use of overlay structures was problematic. While nearly 80% of participants indicated they had such structures in place, less than half had gathered information on how an overlay migh affect performance and risk.

Further, half the institutions using overlay structures acknowledged they had failed to outline what might happen should their risk budgets be exhausted.

But the study also noted that governance structures had improved, mainly through closer cooperation with the management board and the increased number of sessions.

The researchers also found a shift toward selecting external service providers on the basis of "objective factors", such as proof of performance, rather than on more "subjective factors", such as staff.