Given the extremely low yields on the interest rate markets of major industrialized nations of the purchase of government bonds with long maturities appears not only not attractive, but downright dangerous. The search for alternatives has begun.
The numbers are sobering: government bonds are no longer what they once were the numbers are sobering: government bonds are no longer what they once were
12th August 2010
The Rothschilds are said to have it distributed its assets in old times in shares, property and art. The Frankfurt private bank Metzler recommends the allocation of assets to stocks and bonds. For shares, the investor can assure against inflation and bonds against deflation. With the strategies of Rothschild and Metzler are assets left over centuries to preserve, untouched by war and monetary disruptions.
Many German investors prefer instead to keep their assets primarily in government bonds, fixed deposits and real estate. Given the extremely low yields on the interest rate markets of major industrialized nations, this strategy promises, taking account of inflation long term probably not the preservation of property; an asset accumulation even seems almost impossible.
On Thursday, the yield on ten-year government bonds with 2.40 percent has reached a new low. Two-year papers bring only 0.66 percent. This especially those investors come under pressure to act, which are engaged primarily in German interest papers. These include insurance companies, must ask themselves how they want to achieve the promised in their life insurance guaranteed interest of 2.25 percent over time.
Narrow returns through increases in inflation eroded
Affected are foundations that are both committed to capital preservation, but want to continue to make distributions as part of their foundation’s purpose. And many family assets have been conservatively focused on interest rate investments. Asset managers report that many clients shy away from fear of the future purchase of risky assets especially today. But they probably will not have much choice other.
Because the numbers are sobering. The German bank has calculated that promise, taking into account interest income tax and the adoption of an annual inflation rate of 1.2 percent at the current level of yields only federal securities with remaining maturities of at least six years, a real rate of return. But in times of very low yields of the purchase of bonds with long maturities appears not only not attractive, but downright dangerous. Even a possible slight increase in inflation rates in the coming years will eat up the narrow real returns of long-running federal documents.
Aegis also in the capital markets instead of just a realignment. Government bonds from developed nations were regarded for decades as the bomb-proof facilities. Today, measured by the prices of credit default derivatives (CDS), in many countries, the risk premiums for bonds chip companies lower for the surcharges as government securities. This does not apply to Germany, but for some industrial nations, whose bonds were bought as a deposit before you even admixture of German asset managers.
And while many German private investors consider bonds from emerging countries is still considered an exotic alternative that does not keep a few asset managers dynamic and less-indebted emerging long for solid borrowers than some old industrial nation that suffers from a combination of weak growth and high public debt.
Looking for alternative investment opportunities
The crisis has prompted many wealthy individuals to trust asset managers. Between these managers, competition has increased significantly. A bastion of wealth management for companies and wealthy individuals in Germany are traditionally the private houses. The debacle of the bank Oppenheim has hurt the small industry as a whole and in turn both the major banks such as the unaffiliated managers of private assets (“Family Offices”) are used.
Asset managers and investors usually tend mostly to high yield at low risk. The create lasting but a few. The best strategy was at least in very large fortune to the financial crisis, the Yale model, which was seen mainly in the Anglo-Saxon by many asset managers as a reference. The Endowment Fund of the American East Coast University Yale had started since the nineties to reduce its holdings of government bonds and default shares and in turn bring much money in so-called alternative investments such as private equity funds, hedge funds and commodities. These alternative investments bestowed on the Yale endowment fund long dream returns. Their low liquidity, compared to government bonds was shown in the financial crisis then as an Achilles heel.
The Yale model has not died with the financial crisis, but it does get scratched. The search for alternatives has begun. Asset management is as important as exciting. Therefore, this subject in the department of financial market in the Frankfurter Allgemeine Zeitung is this Friday from a multi-part series dedicated.