GERMANY – The head of investments at German insurer VHV has blasted German master funds, saying they haven’t delivered on their promises.
Master funds aim to centralise administration of an institutional investor’s various funds – including keeping daily tabs on performance and asset managers. The funds first emerged in Germany earlier this century and have been booming since.
Master fund providers, which now include nearly all major German institutional asset managers, contend that their products greatly boost transparency while reducing costs for the investor.
VHV’s Bernd Baur told investment magazine Portfolio Institutionell that the master fund provided by Metzler Asset Management had not yet achieved the chief aim of “centralising administration of all assets”.
Citing an example, Baur said the master fund was unable to fully keep tabs on such exotic asset classes as asset-backed-securities (ABS) or collateralised debt obligations (CDOs).
VHV currently has €2.7bn in assets, including contributions for private pensions and life insurance.
Following the interview, there was speculation that VHV’s management board had fired Baur because he had not cleared his comments beforehand.
However, VHV spokeswoman Martina Westholt denied this. “There have been no firings. Mr Baur is still employed with our company and my information is that he will remain with us,” Westholt told IPE.
A spokesman for Metzler insisted that magazine interview had had no impact on the asset manager’s “good relations” with VHV.
But the story has put Metzler under pressure. Sources familiar with events said VHV had instructed Metzler to address Baur’s concerns about the master fund.
The sources added that it was not certain that Metzler would get a second mandate to set up a master fund for €9.5bn in assets that will come from VHV’s planned merger with life insurer Hannoversche Leben. Three master fund providers including Metzler are vying for the mandate.
Separately, Verena Volpert, executive vice president of Bertelsmann’s treasury and finance department, said she would leave at the end of 2005 to join energy giant E.ON.
Volpert is currently overseeing the creation of contractual trust agreement (CTA) to fund the media giant’s €1.9bn in pension liabilities.
Volpert said she was not sure whether she would assist in E.ON’s creation of a CTA for its pension liabilities, noting that many of the issues related to the move might be already resolved once she joins. E.ON has €5.4bn in pension liabilities on its balance sheet.