GERMANY - Investor demand for multi-manager funds in Germany increased more than three-fold in 2004, taking total volume for the funds to €414m, a new study by Cerulli Associates shows.
The study said the increase in Germany – at 324% - was the largest seen in markets where multi-manager funds are available. This includes the US, where demand for the products rose 28%.
However, the study indicated that the US is still by far the leading market for multi-manager funds, accounting for 60.9% of the €407bn in assets invested in these products.
Multi-manager funds are a recent innovation in Germany. In early 2004, US multi-manager fund specialist SEI joined forces with Germany’s Cominvest to offer the products to mainly small institutional clients. Later that year, Metzler began a similar alliance with Russell Investment Group, SEI’s rival.
Last March also saw the emergence of a multi-manager fund alliance between Deutsche Asset Management and German investment consultant RMC.
Commenting on the Cerulli study, Stephan Römer, head of Germany at SEI, said: “In terms of demand, we’re still at a low level, but the sharp increase last year as well as the increased competition in the market are clear indications that the need for more multi-manager solutions is there.”
German multi-manager fund providers argue that their product, which seeks to provide a high level of diversification, is ideal for institutional clients who fall into two categories.
Either they are those cannot afford to set up a traditional German institutional fund (Spezialfonds) or those who want an alternative amid the new International Financial Reporting Standard (IFRS).
Under IFRS, German institutional investors with more than 20% of their assets in Spezialfonds must report every single investment made by those funds. These investors worry that the requirement will increase their costs.
Römer said Germany would again see the largest increase in demand for multi-manager funds in 2005, adding that it would “be far more than 20%”.