Innovative Produktgestaltung im Asset Management

Summary

Regarding the introduction of new product ideas, the finance sector in Germany still lags significantly behind the US and the UK. After long years in lethargy and stringent legal restrictions, however, domestic finance houses are becoming increasingly innovative.

The Asset Management process is becoming more technology driven, given the broad theoretical base, better information, financial innovation, and increasingly efficient information technology. Index-linked investments, especially those offering a secure investment in shares, are currently well received. Tax-driven products are also increasingly sought by the investors. German finance houses and professional investors are preparing for a lasting transformation of the market.

Instead of a completely risk averse attitude, investors are increasingly driven by profitability and risk management considerations.

Investments are not only based on confidence, their success is measurable and can therefore be controlled. Moreover, with the coming into force of the “Drittes Finanzmarktförderungsgesetz” in 1997 another liberalisation of the overregulated German market can be expected. The introduction of funds offering a guaranteed return have stirred the markets. The clients can enter into hedging strategies at a surcharge, thus affecting the profitability of the investment.

In the long term, however, an unhedged investment in equities offers a high premium for the risk of price fluctuations, which should continue to exceed the returns offered by alternative popular forms of investment, such as bonds or real estate. In the private client sector, the continuing trend toward a broader spread of investments implies that asset management will be dominated by professional financial services providers and standard funds products. For institutional investors, high-yielding speciality fonds will be even more attractive. Reasons here are the increasing significance of the investment earnings for larger groups frequently managing their funds themselves, where speciality funds will be more popular than for the private client business.