An affiliate of Federated Investors of Pittsburgh expects to offer a family of six retail mutual funds to German investors before year end.
The move will be the first step in what ultimately will be an effort to distribute funds throughout Europe, said J. Christopher Donahue, Federated president and CEO. The mutual funds, which initially will be sold through the 2,300 sales agents of German insurer LVM-Versicherungen, should be available for sale in the last quarter of this year, Donahue said in a recent interview. LVM has approximately three million customers, Donahue said.
There are "immense" opportunities to distribute retail mutual funds in Germany and Europe, Donahue said. He declined to identify the types of funds that will be introduced.
In November, Federated formed a joint venture with LVM, establishing Federated Asset Management GmbH in Frankfurt.
Federated and LVM will share fees equally, with Federated providing asset management and LVM providing distribution.
Federated Asset Management already has won approximately $100 million in separate account business from German institutions, Donahue said. As part of the joint venture with LVM, Federated Asset Management already manages $1 billion for the insurer. In the next three to five years, Federated Asset Management hopes to have approximately $6 billion in assets under management though the joint venture, Donahue said.
Federated had approximately $115 billion in assets under management as of March 31.
Three factors make the German market attractive, Donahue said. Individual savings rates are high, Germany's government-sponsored retirement system is not adequately funded and the growth rate of equity mutual fund sales is robust, he said.
Although Federated plans to expand its fund distribution to other European countries in the coming years, the firm will work primarily on the German distribution this year, Donahue said.
Other U.S. mutual fund companies such as Fidelity Investments of Boston, Scudder Kemper Investments of New York and Pioneer Investment Management of Boston already have presences in Germany. Observers have predicted that the popularity of mutual funds in Germany will be substantial. (MFMN 12/7/98)