More Hedge Funds To Tackle Sluggish German Market

by Carla Johnson, Investors Offshore.com

01 June 2004

Although hedge fund sales have been disappointing in Germany since the market was liberalised earlier this year, Warburg Invest and Swiss banking group SYZ have launched a joint agreement to develop, manage and distribute the alternative products in Germany.

Warburg Invest, the German asset management company of Hamburg-based private bank M M Warburg, SYZ plan to launch German-based funds-of-funds targeted at both high-net-worth and institutional investors and will also offer alternative management services to institutions.

Geneva-based SYZ, with offices in London, Luxembourg, Nassau, Salzburg and Milan, manages $6.6 billion in assets. The funds-of-funds will be advised by SYZ alternative research and management subsidiary 3A, which has over $1.2 billion in funds-of-funds assets. 3A manages Altin AG, a fund-of-funds founded in 1996.

The German government's decision to relax hedge fund rules is part of a broader law driven by the European Union known as the Investment Modernization Act. The act harmonizes foreign and domestic tax treatment for investment funds, improves transparency for investors and eases some of the rules on companies that offer investment funds in Germany.

After single hedge fund rules were approved by the regulator in February this year, it was expected that this largely untapped market place, which has been estimated to be worth between US$12 - $16 billion, would begin to record significant growth, but both supply and demand for domestic German hedge finds has been slow since the first fund was launched in March. Some in the industry are predicting more growth later in the year with reports that insurers and pension funds are planning to slash their equity exposure and increase allocations to hedge funds by up to 30%.

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