Union Investment assets climb despite turbulent six months for markets

Despite disaster in Japan and Europe’s debt havoc, Germany’s Union Investment grew net new business by 5.7%, or €500m in the first half of 2011.

But the €177bn manager says amid “significant reluctance” by retail to invest in traditional fund businesses, it continues to push towards providing solutions as well as products to clients.

Announcing its first half results the diversified asset manager also made sharp criticism of EU-inspired regulation, such as the Key Investor Information Document introduced across the industry this month.

Hans Joachim Reinke, chairman of the board of managing directors of Union Asset Management Holding, said the documents would only allow funds to be compared on past performance, not future opportunities and risks.

He also criticized demands for refunds of state subsidies for government subsidised private pensions – known as Riester pensions – as “severely damaging” to the reputation of the products, “although less than €500m of the €11.2bn paid out in subsidies since 2002 had been reclaimed, equivalent to just over 4%.

“There is absolutely no reason for talking down Riester pensions. They remain good, and they are vital because we can’t manage without private pensions.”

Reinke was also scathing about the EU Commission’s latest plans to tax financial transactions, which would also affect investment funds.

He argued, while the legislation aimed to make the financial sector repair some of the cost of the credit crunch, investment funds had not caused the crisis, nor were rescued with public money.

Taxing investment funds would be nothing more than a hidden tax rise for savers, he added. “This makes people less willing to invest in a personal pension and it penalizes active asset management.”

Reinke added Union continues to transform, at some pace, to provide solutions as well as products for investors, as retail fund buyers increasingly prefer the latter service.

Union Investment’s first response – capital preservation solutions including two guarantee fund tranches launched in the first half – took in €804m new cash.

With this, Union Investment has 49% market share of capital preservation portfolios. It has also provided PrivatFonds – similar to segregated accounts – for high net-worth customers, which had €853m of sales last half-year, and €1.2bn inflows since launch last year.

Finally, investors have taken out over 100,000 of its new long-term fund-linked savings capital growth plans this year – a 38% rise on the corresponding period last year.

Reinke said: “The eurozone sovereign debt crisis, the disaster in Japan and concerns about the soaring oil price continued to unsettle many investors and to cause massive fluctuations in the markets. Consequently, in absolute terms, the rise in assets under management by us was moderate.”

He said in the latest reporting period Union experienced net outflows of over €1.8bn from UniOpti4 and, “unlike in previous years, open-ended real estate funds have not been guaranteed sellers”.

Institutional clients allocating €2.4bn net new money this year were most enthusiastic about corporate, covered, convertible and emerging market bonds.

Union noted institutional real estate investments are set to become a “key focus area” in the future. Its UII Shopping Nr 1 retail property fund already has in excess of €300m commitments since beginning a year ago, for example.

“Institutional investors have faith in real estate funds as an instrument and they are familiar with the benefits”, said Reinke.

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