GERMANY - The chief executive of the German arm of Schroder Investment Management expects to double institutional and wholesale business in Germany and Austria for the second consecutive year in 2005.
“Our aim is to double our business by the end of the year so we can capture the bronze medal for Europe at Schroders,” said Martin Theisinger in a recent interview. “And if we achieve that, perhaps we can capture the gold medal in the year after next.”
Schroders does not publicise its assets under management for Germany and Austria. However, the UK asset manager does disclose that it has £29.8bn (€43.4bn) under management in continental Europe.
Scandinavia makes up the most of Schroders’ European business, followed by Italy, Switzerland and Germany.
Having sold its German KAG, or investment company, in 2000, Schroders’ German arm is only concerned with acquiring and retaining institutional clients in Germany and Austria. All asset management for these clients is done in London.
According to Theisinger, Schroders’ German business is split equally between institutional clients like pension funds and insurers and wholesale clients like Deutsche Bank, and independent financial advisor MLP.
He said the market’s growth prospects were excellent due in large part to an anticipated shift to more private and corporate pension saving.
“I thought the recent pensions study by Allianz Global Investors was excellent. We have underfunded (state) pension schemes in Europe, and therefore something must be done,” he said.
“I don’t know if the boom will happen in one, two or three years will come, but it won’t come in 20 years, because otherwise these schemes will explode.”
The AGI study found Europe’s market for occupational and private pensions would double to €16.4trn in 2015 from €7.4trn now. Of the €9trn in new pension assets, the study said no less than 80% would be concentrated in France, Germany and Italy.
But Theisinger said business with Germany’s pensions industry was currently being held down by a mix of overcaution and overregulation.
He noted that numerous German institutional investors, including pension funds and insurers, were far too exposed to risk-averse government debt after suffering huge losses during the lower equity markets of 2000 to 2002.
The situation, according to Theisinger, has been further complicated by overly stringent regulation on behalf of German financial services regulator BaFin, which does not want a repeat of 2000 to 2002 era.
“It’s an awful dilemma for these clients. On the one hand, they either don’t want to or can’t take on more risk. On the other hand, they need higher earnings than what they are getting to close their funding gap and deliver their guaranteed returns,” he said.
To remedy the situation, Theisinger suggests that the clients, asset managers and BaFin sit down together to discuss ways of, as puts it, “enlarging their investment universe.”
“Enlarging it doesn’t mean 100% fixed income or close to it. It means a mix of classic investment tools combined with new asset classes like funds of hedge funds, private equity and real estate,” he added.