Insurers pile into German Spezialfonds in first half

German Spezialfonds received the largest share of investments in the first six months of this year from insurance companies, reversing a six-year trend where retirement schemes were the main driver of investments. Spezialfonds are the preferred fund vehicle for domestic German institutional investors.

Insurers allocated €19.3bn to Spezialfonds in the first six months of 2022, against €10.2bn invested by retirement benefits schemes, according to the latest figures published by the German fund industry association BVI.

Insurance companies overtook investments made by retirement schemes by boosting direct investments into Spezialfonds, the BVI explained. Retirement benefit schemes, including occupational pension funds, remain the largest investor group in Spezialfonds by volume, with €636bn, while insurance companies invested €560bn.

Insurers and pension funds are the main drivers of new business among investors in Spezialfonds with inflows totaling almost €30bn. 

Among other investors, banks backed Spezialfonds with €5.9bn, non-profit organisations with €4.6bn, manufacturing and service companies excluding financial services with €7.5bn and other organisations, including social security institutions, invested €0.4bn in H1, the figures show. 

Net-inflows in open-ended Spezialfonds decreased from €57,34bn in 2021 to €47.09bn so far this year. Investment funds and mandates recorded inflows of €52bn in the first half of 2022, down from €111bn in 2021, and €54bn in 2020.

Assets under management in open-ended Spezialfonds stood at €1.97trn in H1, out of a total of €3.85trn managed by the German fund industry overall. This meant AUM in Spezialfonds fell in the second quarter of the year, at the end of June, from €2.10trn in Q1, according to the figures. 

Listed securities and private equity assets make up the largest share of the assets in Spezialfonds with €1.82trn, while real asset funds total €148.95bn. 

Universal Investment has analysed €488bn in assets under administration in Spezialfonds, equivalent to around a quarter of total assets according to BVI as of 30 June.

Katja Müller, chief customer officer at Universal Investment, said: “For some time now, we have been observing that money for company pensions, Pensionskassen or insurance companies is increasingly being invested in Spezialfonds rather than directly.”

In terms of investments, the trend points clearly in the direction of alternative investments and real estate.

Müller added: “Around 16.5% of our total assets are currently invested in equity and debt capital structures such as private equity or corporate financing, and around 5.8% in real estate.”

Allocations in bonds continued to decline last year and stand now at 37.1%, but the demand for German Bunds and US Treasuries increased as they are considered safe havens with the highest liquidity, Müller said.

Allocations in equities suffered from the falling prices and fell slightly to 23.1%. However, investors expanded investment in US and global stocks, while selling European stocks in the wake of the war in Ukraine. 

“The average performance of all Spezialfonds on our platform over the past twelve months was -3.05%. Over 10 years the portfolios achieved a solid result of 4.27%,” Müller said.  

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