The retail mutual fund market in Germany is poised for a spirited comeback over the next five years, with asset growth likely to be a shade under 8% per year on cautious estimates, Financial Times reports.
The forecast is based on a profile of the fund business published by German financial consulting firm Feri , which also predicts that foreign fund complexes will outpace domestic players in terms of growth.
Despite its lackluster performance the past four years, the market holds a number of key drivers for investment in mutual funds, which, coupled with further legal reforms and market improvements, should mean that 2004 will have marked the bottom of the current trough.
"The German market has been through a torrid time," Diana McKay, managing director at Feri, told the London newspaper. "But this has been more disappointing in Germany because there were much higher expectations for the market."
Low interest rates and an en masse call for pension reform in Germany continue to drive long-term growth, but perhaps even more significant is this years Investment Modernization Act, which eliminates the fiscal advantages of life insurance policies at the end of the year. Feri expects the new legislation to be a boon for mutual funds.
McKay said that fund managers should brace for a period of intense client retention activity in 2006-2007 when many fund shareholders are likely to see their investments come back and cash out, possibly generating outflows from stock funds of more than 20 billion Euros.
Feri predicts that fund complexes are likely to see asset growth exceeding 10% per year, far outpacing that of domestic groups.