Pfandbriefe in Institutional Asset Management

Dieter Wolf, MEAG

The financial crisis has the capital markets on tenterhooks and is causing
a great deal of volatility. Since 2007, the asset managers of insurance compa-nies have faced tremendous challenges in generating a sustainably positive return for their clients while keeping risk at a reasonable level.
One of the largest asset management companies in the insurance sector, MEAG has a sizeable investment in Pfandbriefe. The assets under manage-ment at MEAG total roughly €220 billion. Of this amount, some €160 billion is invested in bonds, €55 billion in covered bonds; and of that, €30 billion is accounted for by Pfandbriefe.

In recent years, Pfandbriefe have grown further in importance in institutional asset management. They offer special advantages compared with their European covered bond counterparts. For instance, Pfandbriefe stand out in a positive sense from other European covered bond jurisdictions in terms of transparency, liquidity and differentiation of the legal framework. Section 28 of the German Pfandbrief Act (Pfandbriefgesetz) represents the first time in Europe that legislators have cast uniform transparency requirements for all issuers in a legislative mold. This gives Pfandbrief investors an enforceable right to a high standard of transparency.