Investment funds have steadily become a more important vehicle for indirect investments for German insurers and pension providers over the past 10 years, according to a study by consultancy Kommalpha.
It showed that assets under management across the insurance and pension-institution sectors grew by €800bn, or around 50%, to €2.4trn over the 10 years to the end of 2015.
German pension providers’ financial assets more than doubled over that period, from €242bn to €537bn, according to the study.
There has been a disproportionately strong trend towards investment funds, to which 60% of the growth in assets was directed.
On average, 34% of total insurer and pension-provider assets were in investment funds as at the end of December 2015, according to the study.
The proportion of pension-provider assets in investment funds grew from 35% to almost 50% over the 10-year time period, compared with 25% to 40% for life insurers.
The volume of investments in funds has steadily grown since 2008, with the insurance sector recording the highest absolute increase, of €226bn (equivalent to 122%), and pension providers the highest relative growth, of 208% (equivalent to €175bn).
The bulk of the assets in investment funds are in Spezialfonds.
Pension providers and life insurers are the biggest investors in this product, although Kommalpha noted that pension-provider assets in the sector had grown more than for insurers.
Growth in annual net inflows faltered only in 2013, according to the consultancy.
Overall, pension-provider assets in Spezialfonds grew from €16bn in January 2005 to €318bn at the end of 2015, a 20-fold increase.
The trend in investments in Schuldverschreibungen – debt securities – was also upward over the 10-year period, with net inflows of €260bn bumping this market’s share from 9% to 17%.
Overall, according to the Kommalpha study, more than 92% of the net growth in assets over the 10-year period – €800bn – came from direct or indirect investments in transferable securities.
The rest of the growth was in loans, while investment volumes in equities and deposits stagnated.
Together, the proportion of these investment segments fell, from 60% on average to 43%.
The consultancy said the figures were in line with the market trend away from the direct investments in traditional German loan instruments such as Schuldscheindarlehen (a cross between a loan and a bond) and Namensschuldverschreibungen (registered bonds) and towards indirect capital investments via funds.
It said this shift often went hand in hand with investments becoming more international and diverse, as well as a move towards external asset management.
Kommalpha also interviewed 15 investment executives at German insurers and pension providers as a qualitative research complement to the analysis of investment trends.
It said the decision-makers had a mixed outlook on long-term regulatory developments – on the one hand, fearing more restrictions on investment, but on the other, hoping for a shift towards the prudent person principle.
Overall, the mood could be described as sober, it said.
The Kommalpha market analysis was carried out with the support of Société Générale Securities Services, BNP Paribas Securities Services, Bouwfonds Investment Management and Deutschen Apotheker- und Ärztebank.