Nordic institutional investors abandoning long-term SAA, says Union
EUROPE - German asset manager Union Invest is seeing increasing demand in its absolute return and capital preservation strategies, particularly among Anglo-Saxon and Scandinavian institutional investors.
In the first quarter, the net inflow into the company's dynamic capital preservation strategies amounted to €1.2bn, bringing total assets under management in this segment to more than €21.5bn.
Thomas Bossert, managing director of institutional investment at Union, said interest had increased especially among Anglo-Saxon and Scandinavian institutional investors, including pension funds, over the last two years.
"Two years ago, it was virtually impossible to generate any enthusiasm for this type of strategy among investors in these regions, but the serious crises in the capital markets this decade seem to have made them think again," he said.
Traditionally, institutional investors in these regions hold on to their strategic asset allocation during bumps in the market, aiming to even them out in the long term.
But this changed during the last crisis, and now many investors can "no longer afford long-term, static management" of their portfolios because "this approach delivered substantial losses", Bossert said.
He added: "Strategies with a short-term focus, particularly tactical management of investments, are becoming more important."
For the absolute return strategies, certain risk budgets are determined, as well as either a minimum return - for pension funds, for example - or a maximum loss cap, he said.
"This ensures the available risk budget is used efficiently at all times," he said.
Bossert expects the recent crisis to give capital preservation strategies, like Union's IMMUNO funds, a considerable boost, as past crises have done.
The IMMUNO funds started out in 1995 with €95m in assets under management and got their first major uplift in 1998 with the Asia crisis, when assets almost doubled from €587m to €1.1bn.
After the bursting of dotcom bubble, assets climbed to €10.5bn by 2003, and similarly Bossert expects assets to reach €24bn by 2014 in the wake of the most recent crisis. (see also earlier IPE story: Union reports record year for institutional business)