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Pioneer hives off German admin business to SocGen

GERMANY - Pioneer Investments has finally been able to sell off its German fund administration services business to  Société Générale Securities Services (SGSS), the custody arm of the French bank.

SGSS said in a statement the entity resulting from the acquisition, named  Société Générale Securities Services Kapitalanlagegesellschaft (KAG) mbH, will have around 180 employees.

"Clients for the activities acquired by SGSS in Munich include Pioneer Investments and
other German fund managers," said the bank.

A master-KAG is a German entity that allows consolidated management and reporting of investment management accounts with different providers. 

The old Activest, now Pioneer in Germany, entered the master-KAG business  in 2992 when KAGs were permitted to outsource investment management.

Related funds under administration amounted to €52bn on September 30 this year, though no financial details have since been published.

Juergen Scharfenorth, previously chief executive officer of SGSS' fund administration activities in Germany, will head the new business. He will report to Serge Jacqueline head of fund administration for SGSS.

SGSS has €2.5bn in assets under custody and €451bn in funds under administration, including pro forma figures for Pioneer Investments.

Earlier this year, Dominik Kremer of Pioneer told IPE that the key to the survival of Pioneer's Activest division - the name given to Pioneer's administration system for Germany KAGs - would be in its scale of economy.

The early years of Activest saw a move to the low margin business of master KAG, the German institutional investment platform that allows institutional investors to consolidate their Spezialfonds holdings with aggregated reporting and risk monitoring.

The acquisition of E.ON as a master KAG client in the summer of 2002 was a coup for the fledgling operation. Nevertheless, the deal was criticised at the time for its aggressively low pricing.

Pioneer decided services from custody to fund administration and back office were not core to the group so aside from its earlier sale of Luxembourg back office functions to Société Générale, this also meant a partial withdrawal from the master KAG business and , accordingly, the firm announced last year it would hive off that side of the operation into a so-called service KAG, retaining a traditional KAG structure for the administration of its own assets.

As Kremer explained at the time, the plan was to place the old Activest master KAG as well as fund administration for third parties and German assets in a new specialised company focusing on back and some middle office functions as well as fund administration. He stated in May of this year, the firm was still looking for a strategic partner for the entity to be known as Pioneer Investments Fund Services.

"In the beginning the majority of the assets will be the outsourced assets of Pioneer plus a large chunk of the existing master KAG assets," commented Kremer.

"The question is the business model going forward for the service KAG and the key there really is scale. The KAG really needs to decide and I'm sure they will go in that direction," he said earlier this year.

That firm has now been sold to SSGS, as the latest arrangement states.

 

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