German pension funds often opt for Masterfonds mandates | New

According to Clemens Schuerhoff, managing director of consulting firm Kommalpha, pension fund allocations to Spezialfonds are mostly managed – estimated at 75-80% – in the form of Masterfonds mandates.

Official figures on the allocation in Masterfonds vehicles by pension funds remain unpublished, Schuerhof told IPE, but Kommalpha has been able to produce such an estimate based on several of its own analyzes.

The Masterfonds mandates rank in the official research behind the mixed securities funds and the Spezial funds of funds but also, to a lesser extent, other asset categories including real estate, equities and Spezialfonds bonds.

Masterfonds are divided into compartments for specific asset classes, universe and investment style via external asset managers, and are firmly established in the German Spezialfonds market.

Pension funds, and institutional investors in general, benefit from the allocation of assets in these highly specialized vehicles, leading to a separation of administration and asset management services.

The mix of investments for pension funds investing in Spezialfonds is “much more diversified” compared to the investments of insurance companies, he said. Pension funds built up very early on, about six to seven years ago, a portfolio of “alternative or illiquid investments,” Schuerhoff said.

He added that real estate played by far the most important role, but private equity, infrastructure and debt products were also under investor radar.

Institutional investors lack the resources to manage assets through direct investments with the diversification and specialization required for the many types of asset classes, hence the outsourcing of assets and portfolio management as part of the Speziafonds mandates makes sense, Schuerhoff explained.

“Of course, other investment vehicles and jurisdictions like Luxembourg also benefit, but the Spezialfonds remains the preferred vehicle for indirect capital investments by German institutional investors,” he said.

Lots of liquidity

According to Kommalpha’s latest quarterly analysis, pension fund investments in Spezialfonds have quintupled over the past decade, from 114 billion euros in 2020 to 559 billion euros today.

This is the result of a “long-term trend,” mainly due to falling interest rates and increased pressure to earn high returns, Schuerhoff said, adding that many investors “are switching from direct investments. to fund investments, from which Spezialfonds benefits to a considerable extent ”.

Cash inflows to Spezialfonds reached 75.4 billion euros in the second quarter of this year, well above 58.4 billion euros in the first quarter. Net inflows amounted to 21.4 billion euros in the second quarter, compared to 23.9 billion euros in the first quarter, according to figures from Kommalpha.

The Spezialfonds of private non-profit organizations recorded a net inflow of 7.5 billion euros in the second quarter, followed by the Spezialfonds of pension plans with 6.2 billion euros and insurance companies with 3 billion. euros.

Overall, Schuerhoff said, there is a lot of liquidity in the institutional investment market in Germany.

The activities of private non-profit organizations generated a total of 30.5 billion euros in cash at Spezialfonds in the second quarter, an extremely high amount according to Kommalpha research, compared to almost 8 billion euros in the first quarter. .

Receipts from insurance companies reached € 17.3 billion in the second quarter, ahead of pension funds with € 14.8 billion. Cash flowed into Spezialfonds, but only partially ended up in investment vehicles, with a lot of cash being taken out, Schuerhoff said.

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