Union Investment continues to grow despite the coronavirus pandemic
- Assets under management at an all-time high
- Active management made the difference in 2020
- Stronger growth than ever in the retail business
- Increase in new business from institutional clients in the second half of 2020
- Sustainability has become a key issue
Frankfurt am Main, 18 February 2021 – Despite the coronavirus pandemic, Union Investment can look back on a successful 2020. The company generated net new business of €15.1 billion (2019: €19.4 billion), which is on a par with the figure for 2018. “This is a remarkable achievement in these challenging times – especially given that we delivered this result exclusively with actively managed fund products and not through business with passive funds or master funds, where it is possible to achieve high volumes in a short space of time,” says Hans Joachim Reinke, Chief Executive Officer of Union Investment, at the company’s annual press conference. “The investment choices of savers have barely been influenced by the pandemic. Our net inflows show that investors’ trust in fund investments has remained intact,” added Reinke. As a result of the inflows and robust fund performance, the assets under Union Investment’s management rose to a new all-time high of €385.9 billion (2019: €368.2 billion) despite some turmoil in the market towards the end of the year. Profit before taxes remained steady at €649 million (2019: €650 million). “Union Investment has weathered the challenges of 2020 well and we were able to further strengthen our position,” emphasised Reinke.
The strength of the active management came to the fore in 2020 and enabled many funds to significantly outperform their benchmarks. “Our equity funds delivered the highest relative return of the past 15 years,” explained the CEO. European equities achieved particularly impressive returns. The UniEuropa fund, for example, outperformed its benchmark index by 16.1 per cent after costs in 2020. Union Investment’s flagship equity fund ‘UniGlobal’ also generated a significantly higher return than its benchmark index, outperforming it by 3.6 per cent in net terms.
Stronger growth than ever in the retail business
In 2020, retail savers demonstrated great level-headedness and long-term thinking in their fund investments. No significant outflows were recorded despite the sharp market correction in March 2020. On the contrary, new business from private investors came to €8.8 billion in 2020 (2019: €8.1 billion), making it one of the strongest years in terms of net inflows for Union Investment in this client segment. Assets under management in the retail business increased to €173.8 billion (2019: €160.4 billion). “This result both confirms that we are doing good work and reflects the productive collaboration with our cooperative partner banks, to whom I would like to extend my heartfelt thanks,” said Reinke.
The interest of investors was once again focused on quality assets. Equity funds saw net inflows of €3.8 billion (2019: €2.7 billion). Mixed funds recorded €4.1 billion in net inflows (2019: €3.7 billion) and open-ended real estate funds €2.1 billion (2019: €3.5 billion). At the same time, demand from retail savers for sustainable investment products spiked. The proportion of net inflows from retail clients being invested in sustainable funds increased substantially over the course of 2020 to 55 per cent, compared with 9 per cent two years ago.
Traditional fund-linked savings plans were once again the backbone of new business with retail clients. The growing popularity of regular investment savings plans was not affected by the pandemic. In fact, the number of savings contracts continued to rise even during the correction in March 2020. “For us, this is proof that retail clients who use the cooperative banks’ fund-linked savings products take a long-term perspective, which is an encouraging sign for our efforts to shape the evolution of saving. Fund-linked savings plans make it easier for many clients to enter the world of investment saving and they also seem to help investors keep a cool head during periods of market turmoil,” explained Reinke. In September, the number of savings contracts rose above three million and the net number of new savings plans opened in 2020 as a whole was higher than the corresponding figure for the previous year. All in all, 470,000 new savings plans (net) were added to the books, compared with 404,000 in 2019. “We are also delighted that the savings plans are particularly effective at getting younger clients involved in fund investments,” added Reinke. The fund-linked savings plans managed by Union Investment now consist of 5.7 million traditional savings plans, Riester savings plans and plans under the employer-funded capital-formation scheme (2019: 5.2 million).
Increase in new business from institutional clients in the second half of 2020
The business with institutional investors presented a mixed picture. Certain individual companies needed to liquidate larger positions during the crisis to generate cash, but Union Investment continued to attract new business. Net inflows from institutional investors picked up after a brief period of hesitation and came to €6.3 billion at the end of 2020 (2019: €11.3 billion). Assets under management in the institutional business rose to €212.1 billion (2019: €207.8 billion). “In these times of permanently low interest rates and increasing stock market complexity, the diversification of institutional client portfolios is continuing. Overall, custody accounts contain more asset classes and a broader country allocation than in the past,” Reinke noted.
Demand from German and international institutional investors for sustainable investment solutions also remained unwaveringly high. Integrating sustainability aspects into investment strategies is increasingly becoming the norm for institutional investors and this was reflected in their invitations to tender. “Two thirds of the calls for tender in which we participated in 2020 asked for sustainability aspects to be taken into account. ESG criteria will be given greater consideration at many levels and thus remain a very important subject for us,” says Reinke. In this environment, Union Investment was able to increase the volume of assets held in sustainably managed funds both in the institutional business and in the retail business, taking the total volume from €53.1 billion at the end of 2019 to €61.0 billion at the end of 2020. The aggregate volume of all investments that take account of ESG criteria (‘assets under ESG integration’) now amounts to €278.1 billion.
Sustainability has become a key issue
In his speech, Reinke reflected not only on the 2020 financial year, but also on the impact of the coronavirus pandemic on the evolution of saving and the topic of sustainability. “Our number one finding with regard to the coronavirus crisis is that people have been saving more than ever. However, this has not been driven by long-term considerations but rather by a reduction in consumer spending in the short term,” explained Reinke. He noted that at the end of this challenging period, many people may have accrued balances in their current accounts that would further increase the volume of non-interest-bearing assets. This would have tremendous consequences for the wealth of private households because real value would be eroded. If Germans had kept their savings in current accounts, fixed-term deposit accounts and savings accounts since 2010, they would have suffered an aggregate loss of value of €130 billion. Of this total, around €100 billion would have been lost in the three years from 2017 to 2019 alone, according to calculations by Professor Oscar Stolper from the University of Marburg. “The coronavirus pandemic has conclusively quashed the hopes of anyone who may have still been holding out for a change in the interest-rate environment in the foreseeable future. There will be no change in interest-rate policy because the multi-billion stimulus packages adopted by governments will further increase public debt, which can be serviced only if interest rates remain low,” continued Reinke. Against the backdrop of the pandemic and persistently low interest rates, the evolution of saving has become even more relevant and the urgency to take action has further increased. “We will continue to make the case for a balanced approach to saving and will not waver in our commitment to this cause,” said Reinke.
He stressed that, despite the coronavirus pandemic, the subject of sustainability will remain in the spotlight of public attention and thus central to the interests of clients. While institutional investors have been taking account of sustainability criteria in their investment decisions for quite some time, awareness of this topic among retail clients has only started to increase noticeably in recent years. “To retail investors, sustainability means more than protecting the environment and combating climate change. Social aspects and responsible corporate governance have also become important factors for them,” Reinke explained. He pointed out that the transformation towards a more sustainable economy is also being driven forward at government level through large-scale investment. “This is an area in which we are already very well positioned thanks to our extensive experience in sustainable investing and a range of well-established products. At the same time, we believe that as a trustee and an investor, we have a responsibility to actively support companies on their transformation journey towards a more sustainable business model. We believe that this is the key to unlocking the greatest sustainability potential and highlights the benefits of active investment management,” Reinke concluded.
As at 18 February 2021