German fund body defends hedge funds
GERMANY – The head of the German fund industry association BVI has dismissed the view that hedge funds have flopped in Germany.
Speaking at BVI’s annual news conference on Thursday, Axel Benkner said that because products like hedge funds required “a long lead time,” the industry should take a longer view of investor demand for them.
“With respect to larger volumes for hedge funds, we think that the time for this still lies ahead of us,” Benkner, who is also head of Deutsche Bank’s mutual fund arm DWS, said.
In late 2003, Benkner predicted that hedge funds unveiled by DWS would, by themselves, take in €1bn in assets in 2004. As it turns out, investor inflows to DWS hedge funds totalled €57m last year. German hedge funds as a whole took in an estimated €1.2bn in assets.
Turning to BVI’s political efforts in 2004, Benkner said the association’s proposal for a simplified private retirement savings plan was gaining support within the current Social Democrat-Green government in Berlin.
The BVI unveiled the savings plan – similar to individual retirement accounts (IRAs) in the US – in late 2003. In doing so, the association hoped to replace the so-called RiesterRente, a separate private plan unveiled by the government in 2002.
Demand for Riester has been weak, and the BVI says this is because the plan is far too complex.
Benkner said that while the ruling SPD was not yet wholly convinced by the plan, the Greens, the SPD’s junior partner in government, had already pledged its support for the BVI plan.
Benkner added the BVI would work to get legal approval of Real Estate Investment Trusts (REITs), adding that a change in Germany’s current investment law was not necessary.
Separately, the BVI said inflows to German institutional funds in 2004 totalled €17.7bn, bringing the total volume of these funds to €543.1bn.
Inflows to German mutual funds, meanwhile, amounted to €6.5bn, bringing the volume total to €459.9bn.
BVI attributed the weak performance of German mutual funds both to investor uncertainty about equity markets as well as huge outflows from money-market funds on behalf of companies who had to clean out their balance sheets at the end of 2004.