German institutions increase risk appetite

Risk1Institutional investors in Germany fear they will not meet investment targets for the coming year, leading to an increased appetite for risk.

On average, institutional investors expect 43.5% of their peers to fall short of investment targets they have set themselves for 2015, according to the latest risk management survey conducted by Frankfurt-based asset manager, Union Investment.

Banks gave a particularly pessimistic outlook, with asset managers in this group expecting 49% of peers to miss their investment targets in the coming year. In contrast the lowest target failure rate was 37.8%, reported by corporate investors.

The survey also found that investors' typically strong preference for safety continues to decline, as growing importance is attached to investment returns. The percentage of respondents who identified returns as their most significant investment criterion reaches its highest figure since the financial crisis at 19%, compared to only 8% last year.

Only 64% of institutional investors claimed safety to be the most important investment factor compared to 79% last year, and those describing their investment policies as safety-driven dropped to 77% from 84%.

While the appetite for risk increased, 80% of respondents said loss avoidance was paramount and 82% cited risk management expertise as a key influence on the choice of asset manager, up 3% since 2013.

Legal risk was the most significant factor for 84% of respondents when making investment decisions, with particular focus on compliance with the regulations set by the German Federal Financial Supervisory Authority (BaFin).

Alexander Schindler, the member of Union Investment's board of managing directors responsible for business with institutional clients, says: "Investors are quite clearly of the view that low interest rates and the adverse investment climate are here to stay for the foreseeable future.

"Given the pressure on returns, investors are now more concerned than ever to achieve superior risk-controlled performance."

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