Institutional investors turn to Union Investment and limit 2011 asset falls

Institutional investors and products for them have ‘steadied the ship’ at Germany’s Union Investment, which limited a fall in its total assets to just 4%, or €7bn last year, from their all-time high of €177.4bn at the end of 2010.

The trend of attracting institutional allocators seems set to continue this year as inflows of more than €700m have already been committed to three new segregated funds in Union’s institutional real estate business.

Institutional investors provided net inflows of €2.1bn in 2011. This was a slowdown from their €11.3bn net flows in 2010, “primarily attributable to the more stringent regulatory requirements and lower risk budgets”.

But the business suffered total net redemptions of €1.5bn, compared to €8.7bn inflows last year.

Hans Joachim Reinke (pictured), the company’s chief executive officer, said: “Our institutional investors were especially impressed by our expertise in corporate bonds, money market-related funds, and dividend strategies that offered low volatility.

“We are satisfied with the performance of our business last year, when we continued to demonstrate our resilience and reliability, despite the exceptionally tough operating environment. We are in a financially sound position.”

Union reported a profit before tax of €266m this year, down 28% from the €372m it reported last year.

On the retail side, Union plans to focus on pension products, wealth accumulation, asset management and capital preservation.

Overall, new business at Union fell away quickly from June, as markets became more difficult, Reinke said.

However, net inflows were still experienced in segregated funds (Spezialfonds) for sophisticated investors €300m) and mixed funds (€1.2bn).

Open-ended real estate funds and money market funds also took net inflows of €537m and €414m.

Union’s business in fund-based, government-subsidised private pensions and capital preservation (‘Riester’) investments for retail clients – where Union is easily Germany’s market leader – generated €1bn new business, while new offerings of guarantee funds took in €1.7bn.

However, money flowed out, as expected, from maturing guarantee funds.
Investors pulled net €2.1bn from mutual funds. “The decrease in mutual fund assets corresponds almost exactly to the outflows of €2.2bn from UniOpti4,” said Reinke, as tax benefits it had offered expired in 2010.

Investors also redeemed a net €797m from equity funds, mostly in the difficult months of March, August, September and October.

“Investors were mainly reacting to external factors such as Japan’s nuclear disaster in the Spring, and the slide in share prices starting in August triggered by market participants’ nervousness in the wake of the sovereign debt crisis”, said Reinke.

He added the company had, for some time, been replacing its traditional funds with long-term investment solutions. This strategy paid off in 2011, he added, as it counterbalanced outflows elsewhere.

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