GERMANY - Helaba Invest, a major German institutional fund provider, expects to raise its institutional assets under management by E5bn to E24bn by the end of 2005, its chief executive says.

Uwe Trautmann, Helaba Invest CEO, told IPE that he was confident of reaching the goal due to strong demand among German institutional investors for its “master funds.” In a master fund, back-office administration of all institutional funds are centralised within one provider, reducing costs while boosting efficiency.

Helaba Invest is a subsidiary of the state-owned Landesbank Hessen-Thüringen. It traditionally managed assets from Sparkassen, or state-owned savings banks.

However, Trautmann said that due to the growing popularity of Helaba Invest’s master fund, he expected most of the new business in 2005 to come from institutional clients beyond the Sparkassen. These clients include pension funds, insurers and German companies.

“If you consider that in 2004, only E800m of the six billion in new assets came from Sparkassen, it’s clear that third-party business is now our focus,” he said, adding that the Sparkassen would again account for a small portion of the E5bn in new business this year.

Overall, the Sparkassen’s assets have dropped to just 40% of Helaba Invest’s E19bn in AUM from as much as 80% 10 years ago. Of the E19bn in assets, E11bn are managed by Helaba Invest master funds.

Having attained such a master fund volume, Trautmann said Helaba Invest had emerged as one of the few asset managers who were profitable in the market niche. “The margins for master funds are very thin – ours are between 4.5 and 10 basis points,” he said.

“My view is, therefore, that any master fund provider in Germany has to attain a volume of at least E10bn for the business to pay off.”

Other master fund providers in Germany include Universal-Investment, the market leader, as well as Deutsche Asset Management, Allianz Global Investors, JP Morgan Chase and BHW Invest. Even DekaBank, the fund arm of Germany’s Sparkassen, offers master funds.

Unlike Universal and Helaba Invest, however, other providers have so far been reluctant to disclose how much volume their master funds have generated. Experts believe that in the long-term, some of the dozen master fund providers will cease to exist.