Foundations rely on their assets being invested very securely. What is special about managing funds for foundations? And how can returns be achieved, even in a difficult capital market environment?
Peter Roedern: Insurers and foundations have similar requirements when it comes to investment, essentially because their obligations are so long-term. A foundation's purpose has to be sustainably secured for the long term: you're basically setting it up for perpetuity. So the value of the foundation's assets has to be preserved, as it is the returns on these assets that finance the foundation's work.
Tobias Pross: Another special feature is the requirement that funds be used in a timely manner. This calls for investments that provide distributions and offer stable, regular returns. The amount of these returns is, naturally, the crux of the whole matter. For foundations, the current capital market environment poses huge challenges, which can be overcome with our hybrid investment: a combined solution which, like a hybrid car, is based on two driving forces: insurance plus investment funds. We combine security with stable and attractive returns.
What makes the Allianz portfolio concept a success factor for foundations like Bayerische Landesstiftung?
Tobias Pross: You have to bear in mind the starting position of the Bayerische Landesstiftung: the historically-related high proportion of shares, with only a few individual stocks, left the foundation exposed to market fluctuations. This resulted in value losses and reduced dividend income.
Peter Roedern: The Bayerische Landesstiftung is now ensuring that its assets have a secure foundation once again and, in order to do so, it is making use of the investment expertise and financial strength of Allianz and two other providers. With the Allianz portfolio concept, it is making a secure investment of 160 million euros with Allianz Leben, which will deliver regular, scheduled distributions while guaranteeing capital preservation. This is the most secure component used in our concept. On the other hand, our colleagues in Asset Management can also take higher risks which will deliver the returns that the foundation needs.
What does this type of combined solution offer in comparison to purely fund or insurance-based asset management? How is it possible to pull off this balancing act of combining security and returns?
Tobias Pross: We are using the portfolio concept in order to compensate, for example, for the current low yields on government bonds. In addition, there is an Allianz Global Investors special fund of 230 million euros. We have structured this in such a way that it represents a risk-optimized portfolio and promises higher expected returns. Overall, this means that in comparison to other approaches, we have considerably lower value fluctuations in our concept as a whole.
Peter Roedern: In order to further increase the level of security for the Bayerische Landesstiftung, we have also equipped the special fund with a dynamic capital preservation concept.
Will this combination of investment funds and life insurance also provide a model for other customers in future?
Tobias Pross: We have successfully implemented this model a few times already. Other foundations have also indicated their interest. Solutions of this type are also well-suited to use in company pension plans, and have been in successful use for a few years now - for instance in the automotive industry.
Peter Roedern: As an insurer and asset manager, we are able to offer our customers the best of both worlds from a single source. The Bayerische Landesstiftung is also making use of this advantage.
