German investors wrong-footed by markets in their equities boycott

German investors may not be justified in their continuing boycott of equities, shown by the latest fund flows statistics from trade body the Bundesverband Investment und Asset Management.

Year to date MSCI Europe is up 7.39% in Euro terms, while the German DAX is up 17.52%. In comparison, Germany’s 10-year government bonds – a popular home for many allocators’ money – are yielding a paltry 1.43%

Yet statistics from the BVI for the first half of this year show investors continued putting money into bond funds – a total of €11.2bn – with a preference for US and emerging market bonds and corporate credit.

The share quota in the Spezialfonds structure, on the other hand, has continuously dropped since the onset of the financial crisis, and allocators continue asking their managers to hold off equity allocations.

However, overall Spezialfonds are still the most popular investment vehicle among the German buyers.

In the first half of the year institutional investors have allocated a total of €30.9bn to this fund type. In June alone, Spezialfonds took €11bn of the total €12.8bn inflows.

Yet according to BVI, the proportion of shares in German Spezialfonds has dropped from an average of 25%-30% between 2003 and 2007, to around one third of that figure when the crisis hit, and it has remained at this lower level ever since.

This trend marks a clear drop in risk tolerance among investors in Spezialfonds.

It is supported by studies this year by German asset managers. A survey in May by Union Investment management revealed levels of uncertainty among German investors regarding the equity market were at a five-year high.

But Thomas Richter, chief executive of BVI, is convinced this will change. He said: “Investors will start looking for more opportunistic investment options in the future. Asset classes with real value, such as real estate and equity, will be back on the shopping list.”


Photo: Munich

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