GERMANY - Institutional investors in Germany are shying away from equities.
Partly due to stock market declines as well as shifts in investment policies, German institutions have dramatically decreased their traditional dependence on equities.
According to a recent study by US-based Greenwich Associates the proportion of European stocks in the average German institutional portfolio fell from 22% to 16% in the last two years, and the proportion of other stocks from 4% to 3% - meaning a total fall of 8%.
“This is a huge shift in such a relatively short time, “ said Greenwich consultant Berndt Perl.
Chief beneficiaries of the shift are bonds and cash. Bond allocations are up from 55% of assets to 60% since 2000 and cash holdings have soared from 4% of assets to 9% during that time.
German institutional investors indicated that their use of cash may decline, with the money moving into both European and non-European bonds, into real estate, and into alternative asset classes such as as private equity and hedge funds.
Twice as many German investors than not are also expecting allocations to active European equities to fall by 2004. And most expect their use of non-European equities to increase.
Other key findings include:
- 40% of German institutions hired a manager in 2002. The overall average number of managers used by institutions stayed the same, at 5.8. Hiring activity is increasingly dominated by switches rather than new hires, with around 69% of all new appointments now following a termination.- Around 33% of all sponsors fired a manager within a single year’s time.
Greenwich Associates interviewed 203 of the largest sponsors of Spezialfonds and other external asset mandates based in Germany.
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