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DeAM unveils German multi-manager funds

GERMANY - Deutsche Asset Management has rolled out the first of two multi-manager funds for the German-speaking institutional market, yet no longer believes demand for the funds will be as robust as previously estimated.

Last March, DeAM said that it had teamed up with RMC, a German investment consultant, to create multi-manager funds for global equities and for global bonds. DeAM is the administrator and distributor of the German-domiciled funds, while RMC is advising on the selection of more than 100 asset managers worldwide.

After taking in €60m in seed money from investors, including German pension funds, DeAM said it had now launched the global equity fund. It added that launch of the global bond fund had been delayed until early 2006 owing to tepid interest among investors.

DeAM also acknowledged that it had amended its forecast for demand for the funds. Originally, the German asset manager had said the funds would take in €1bn each by the end of 2007.

“That’s looks like a bit of a stretch now. I attribute this mainly to the new entrants into the market, which has spread the potential demand a bit thinner,” Matthias Dedio, head of institutional products at DeAM, told IPE.

Dedio added that DeAM nonetheless expected its multi-manager fund for global equities to take in “several hundred millions of euros” by the end of 2006.

Germany's multi-manager fund market got off the ground in mid-2003, when the Frankfurt private bank Metzler joined forces with Russell Investment Group to sell the products to institutional clients in Germany. Then in early 2004, German asset manager Cominvest began a similar alliance with SEI, Russell's chief rival.

A multi-manager fund venture involving German investment consultant FERI and Universal Investment, Germany’s biggest fund administrator, also materialised in 2004.

These multi-manager fund providers argue that the product is ideal for all German institutional investors. Smaller ones, they say, can achieve the same high degree of diversification without having to invest the huge sums – typically €50m – required for Spezialfonds, or German institutional funds.

The providers say the funds are attractive to frequent Spezialfonds investors too, as the products spare them the cost and hassle of complying with the new International Financial Reporting Standard.

Under IFRS, German institutional investors with more than 20% of their assets in Spezialfonds must report every single investment made by those funds.

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