(November 1, 2013) – The monetary easing policies of the US Federal Reserve and the European Central Bank have led German institutional investors to expand their investment horizons into alternatives, according to a German asset manager.
Most are now shunning traditional government bonds, Universal Investment said, but rather than take advantage of the improving Germany stock market, it seems the majority are more interested in real assets and private equity.
The low-rate and low-yield environment has hit investors hard, given the vast majority of their assets sit in bonds and gilts.
But now one-third of German investors said they wanted to increase their real assets focus, typically through real estate and infrastructure. A previous study carried out last month by Universal Investment also found German investors are moving away from direct property investment, preferring regulated fund vehicles known as Spezialfonds instead.
Another 29% wanted to expand into private equity or loans, compared to just 20% who want to increase their equity portion of their portfolio.
This will be a dramatic shift, if it comes to pas—currently two-thirds of German institutional investors have less than 3% in alternatives. Almost a third of respondents said they planned to increase this percentage by at least three percentage points.
The investors were also deeply sceptical about the long-term impact of quantitative easing, with 61% of them believing that while the strategy bought global economies time, it did nothing to fix the structural problems.
Gloomier still, 78% of German investors believe we are still nowhere near the end of the financial crisis, and almost all of them believed low rates were here to stay both in the Eurozone and the US.
The survey quizzed 90 investors representing more than €300 billion from pension funds, insurers, and foundations.
Related Content: What Now for Fixed Income? and Why We’ve Not Seen the Back of QE (and Why We’re Not in Recovery Mode)