Rothschild's Hengster to 'bring equities back' to German portfolios
GERMANY - Rupert Hengster, head of the new German branch of Edmond de Rothschild Asset Management, wants to bring equities back into the portfolios of occupational pension providers.
Hengster, formerly with Sal Oppenheim, joined Rothschild at the beginning of October to head its new office in Frankfurt.
"A lot is being talked about retirement provision, and everybody agrees it is a 'very important topic', but few companies or asset managers are really tackling the problem," he told IPE in an interview.
Hengster said he was convinced the trend of companies outsourcing pension liabilities would continue, but that service providers had to have a comprehensive knowledge about this difficult subject, including tax and regulatory issues, not to mention investment skills.
And for him, it is exactly those regulatory restraints that have pulled the German pension landscape into a vicious circle.
"With this regulation mania," he said, "we are limiting the investment possibilities, and those insurers that need to fill their buffers to pass stress tests are unable to do so because they cannot invest in equities."
Because of tighter risk budgets, many institutional investors are seeking excess return by tactically going into investments like emerging market equity.
"But this is not a risk-averse strategy, as it is very hard to get the market timing right, and it is also not a way to match liabilities over the long term," Hengster said.
"We have to give a broader diversification, including equities, another chance over the long term."
Using the German investment association BVI and other bodies related to occupational pensions, Hengster said he wanted to "take an active role" in painting the bigger picture of retirement provision instead of only adjusting a few screws here and there.
On the subject of the 'Direktfondsrente', the fund-based pension suggested by the BVI, Hengster was very positive.
"It is a transparent product with good portability and optimised return," he said.
He said he understood the criticism voiced by the occupational pension association aba, which had noted that fund-based pensions would lead to a further individualisation of the second pillar, watering down the principles of solidarity and collectiveness in occupational pension provision.
However, Hengster added that a certain degree of individualisation was needed, as there is no "one size fits all" model for pensions.
Further, fund-based pensions are a good alternative to other incentives to increase supplementary pension savings, he said, which often include state subsidies.
Edmond de Rothschild Asset Management Germany itself will not be issuing occupational pension products like CTAs, but offer funds on equities and convertibles for institutional investors.