Arriving in Munich in 2001 from Fidelity's German operation outside Frankfurt, Domink Kremer joined a considerably different asset management operation to the one he now works for.

Activest was the funds and investment management operation of HVB and had acquired its name in 1999 when HVB re-orientated its asset management activities with the sales of the former Vereinsbank's 42% stake in ADIG to Commerzbank and the subsequent sale of its 90% stake in Foreign & Colonial to Eureko. In 2005, before being subsumed into the global structure of Pioneer Investments, it had around €42.3bn in 2005; now Pioneer manages €21.6bn for German institutions and €49.6bn in total. The integration of Activest's processes and fund range is now complete.

This year also saw Pioneer take Nordinvest - a Hamburg-based asset manager with €5.3bn in assets - under its wing. Nordinvest will now be incorporated into the larger structure, preserving its "entrepreneurial spirit as an innovative asset manager", as Pioneer puts it. The firm's Swiss subsidiary, Activest Schweiz, will also be integrated with Pioneer's local business unit.

"Everything in the way we have integrated was driven from the investment side and the logic of the investment integration drives the rest of the process. The logic of our approach is that because Pioneer is a Fitch AM2+ rated machine, this needs to remain unchanged in any integration," explains Kremer.

"It's not a merging of two cultures and trying to create something new and the best of both worlds, the core is really the Fitch rated investment machine but we are very open to adding strengths that we did not have," he adds.

Activest for example, had what Kremer describes as "quite a strong team" in asset backed securities (ABS), and four people moved from Munich to Dublin to form an ABS team that the firm can start to offer outside Germany. "We have benefited from the takeover by adding that. The core of our investment machine, where we believe we are good, we will keep unchanged."

Activest's old Munich headquarters is now a satellite operation to the three main investment centres of Boston, Dublin and Singapore. Its investment operations form a local hub but are part of the global structure. "Sales and marketing is part of distribution and operations, and IT, which is more focused on outsourcing and controlling and on servicing clients, has more of a client service focus," says Kremer. "The majority of our work will be front office or services in terms of reporting and analysis that we can give to the client."

One of the benefits for the Munich operation, continues Kremer, was access to Pioneer's global research platform, which he says has opened a much wider universe of research data and research material for the portfolio managers.

He continues: "If that is your core approach in the integration then a lot of the other questions get resolved in terms of location, sales and distribution. The logic is that we want to maintain and build one unitary investment process and one machine. We do not believe in multi-boutiques."

All this, essentially, meant that the decisions about the Activest brand answered themselves. Pioneer may have been a little known name in Germany in 2005 when the firm's parent UniCredit acquired Activest's parent HVB. But the Pioneer name was strong in 22 countries, as Kremer puts it, so the Activest name disappeared.

How was Pioneer brand received in the early stages of the integration? Kremer says the attitude was one of "openness", although "in the initial phases of the group takeover there was a little bit of animosity".

He continues: "Once we actually started speaking to clients, especially Dax representatives, they are by now pretty global, and the benefits we proposed to them were that we have an increased robustness because there are now more investment and risk management people and more people in research. That helped us take them through the changes."

The strategy for institutional asset management in Germany is a classic split between direct contact and companies already serviced by HVB on the corporate banking side. A consultant relations specialist - Kremer will not divulge who - is set to join the firm on 1 July.

Harwig Rosipal, responsible for institutional business, joined in January 2006 from Allianz Global Investors' German institutional unit. A retail-wholesale distribution channel is led by Markus Gunter, who had the same role in Activest. Armin Lang is CIO of the Munich investment hub and also managing director. A recent hire is Reiner Beutler, who joins from Siemens Financial Services, for institutional sales.

How does Kremer see the German institutional market? "The German market has been quite challenged in the last couple of years," he says. "Industry flows in wholesale have gone into guaranteed funds, and on the institutional side into cash, and I have not really seen a change in that this year. Some people say that balanced portfolios will make a comeback and we are starting to get some requests in that vein but we haven't seen the flows there yet." Kremer also feels that hedge funds have as yet unrealised potential in the German market, conceding "we haven't yet been able to get the traction we would like to see".

Nevertheless he is persistent: "I have got to believe that with the performance that has been seen in hedge funds in the last year or two, and the market environment that we have, that one has to continue knocking on the door and telling the story. We are redoubling our efforts on that." Still, there has been some traction on the institutional side for the former Activest total return strategy, Kremer adds.

One area where hedge fund-like strategies are perhaps most likely to appeal to German institutional investors is 130/30 and Pioneer is actively developing products at a group level through its existing quant capability: "130/30 is in the pipeline with an expected launch in the summer, both European, global and US," says Kremer, explaining that the US will come out of Boston and European one from Dublin, but that no decisions have been made about the global product.

"We have a very competent European quant equity fund which is just over two years old and which has had some good performance. We are also in the process of creating some funds on the enhanced index side, which will partly be used in our segregated accounts but we are looking at whether our quant capability is something that we can sell a bit more strongly to the outside world and how that fits with a fundamental alpha generating approach. If we can position that well it will be something that we will look at."

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.

Now Pioneer has decided that services from custody to fund administration and back office are not core to the group. Aside from a sale of Luxembourg back office functions to Société Générale, this has also meant a partial withdrawal from the master KAG business and accordingly the firm announced last year that 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 explains, the plan is 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. As of May, the firm is still looking for a strategic partner for the entity, to be founded in the summer, and which is 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," comments 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."

This transaction, as and when it may take place, will be the last "milestone", as Kremer puts it, in the Activest-Pioneer integration. But after more than a year of change, and with the integration declared complete on the investment side, Kremer is not complacent: "In a way the ball has been and is still in our court to prove that the changes are of benefit, and we have been given the benefit of doubt. Now, in practice, the changes have to deliver and we are right in the middle of that process: we have increased the size of the Munich investment team and brought it into the infrastructure. Now is time to deliver on that promise."



Domink Kremer

Head of supervisory board, Pioneer Investments KAG, Munich
Head of supervisory board Nordinvest (Nordeutsche Investment-Gesellschaft), Hamburg
Head of supervisory board Activest
Investmentgesellschaft Schweiz, Berne
Head of Pioneer Investments, north Europe
Member of Pioneer Investments' global
management committee

remer was appointed head of the unified Activest-Pioneer operation in December 2005 and chairman of the supervisory board of he German operation following the departure of Andreas Fehrenbach as speaker of the management board in July last year. Fehrenbach, who joined HVB in 1994, had been on the board of Activest since 2002 following a two-year stint at HVB's then ETF subsidiary Indexchange, and became speaker of the Activest board since April 2003. As head of Germany, Dominik Kremer is responsible for wholesale and institutional distribution, marketing, investments, operations and IT, and product management at Pioneer Investments KAG. As head of north Europe he also has commercial and business responsibility for Switzerland, Benelux, the Nordic region and for the UK. Kremer joined Pioneer Investments in December 2001 from Fidelity, where he had been since 1994. He was head of strategic planning for continental Europe at Fidelity and headed the European key accounts department. He was also responsible for mutual fund sales in Germany and headed Fidelity's German retail and insurance company sales teams. Kremer received a BA in social sciences and law from the University of Stellenbosch in 1988, and an LLB from the same university in 1991.