Funds of funds keep pace with the times in Germany speaking markets

German-speaking funds of funds (FoF) managers have defended their activities against criticism they have failed to keep pace with the times, and with multi-asset allocation products, which were the most popular fund sector in Europe last year.

Speaking at Fund Forum, practitioners emphasised their processes adapted to “a dramatically changed environment”, while others questioned whether pure asset allocation approaches to investing would “persist for years to come”, as correlations broke down. However, they agreed their role as fund selectors had changed markedly over recent years.

Their analysis decides how much of the €140.7bn of FoF assets in Austria, Germany, Luxembourg and Switzerland is invested. Albert Reiter, managing director of E-Fundresearch.com, noted that most funds in the region (25%) were global equities, followed by mixed asset flexible global strategies (11%), mixed asset balanced (9%) and mixed-asset conservative global programs (8%). He said balanced products are “coming back to the market in a big way”.

Tactical allocation

Sauren’s head of portfolio management Ansgar Guseck (pictured) said discussions about tactical asset allocation as a way of investing client assets has grown among his peers “because a lot of FoFs have problems selling decent product to their clients and have just been asset gatherers, not really asset managers.

“Our role is to identify promising managers and build portfolios out of diversified specialists. Some of the performance is driven by asset allocation, but we do not know which asset class will outperform over the coming months, so it is a complete waste of time to identify which markets will move.”

Markus Kaiser, CEO of Veritas Investment Trust, disagreed, in saying “the market decision comes first”. Veritas allocates using ETFs, and Kaiser pointed to the ability to use passive products in a systematic and rules-based way. “Also, ETFs give us the opportunity to invest efficiently and transparently with lower costs and a broad universe.

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