German pension funds’ allocations to Spezialfonds remained “extremely weak” in the third quarter of this year, as funds’ net inflows fell sharply in 2023, according to the quarterly report of consultancy Kommaplha published today.

Net inflows from pension funds in the third quarter of 2023 totalled €1bn, and net withdrawals of just over €100m in September. Insurers recorded outflows of around €700m during the quarter.

The biggest investors in Spezialfonds in Q3 were social insurance companies and public/church supplementary pension institutions, with almost €9bn capital injected in July and August, and €11.5bn in the third quarter, the report added.

Pension funds have allocated almost €11bn to Spezialfonds during the period, but only €1bn net remained in the funds, meaning that pension schemes withdrew €10bn in the third quarter, according to Kommalpha.

“Is the Spezialfonds party over for the two [main] investors [pension funds and insurers], and the demographic bomb is igniting sooner than expected? Finding an answer to this question is very difficult, and we lean towards the second reason [demographic bomb],” said Clemens Schuerhoff, Kommalpah’s managing director.

Overall, 2023 is an historically weak year in terms of net inflows into special funds. Institutional investors only allocated €31bn net to Spezialfonds mandates at the end of the third quarter of 2023, down from €61bn in the same period last year, meaning that the net inflow of funds has almost halved year-on-year, Kommalpha said.

Investors have allocated €12.1bn net in Spezialfonds in Q3 2023, an amount significantly higher than almost €4bn in Q2, but below €15bn in Q1, according to the report. The inflows of fresh cash totalled €41.6bn in Q3, around €20bn below than the amount recorded in the two previous quarters, it added.

Mixed securities Spezialfonds raised the largest amount of funds in the quarter under review with net inflow totalling €10.3bn, followed by real estate Spezialfonds with net inflows of €2.6bn.

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