Property will continue to play a key role as a strategic asset
Mr Haagmann, you are responsible for the institutional business, which accounts for around half of the assets under management at Union Investment. Even in this challenging economic and geopolitical environment, growth is a declared goal. What measures do you rely on to convince customers?
We work in a growth sector and firmly believe in the potential of our institutional business. To give you a few figures: In the institutional business, we manage 252 billion euros out of a total volume of around 500 billion euros. Compared to our competitors, our growth is remarkably stable. We achieve this because we invest massively in our core competences – for example in portfolio management in the traditional asset classes of equities and fixed-income securities, as well as the real estate asset class.
What exactly does that mean in practice? What are you spending the money on, and what do you want to achieve with it?
On the one hand, we have brought new people on board in portfolio management and real estate. At the same time, we have invested heavily in IT systems. For example, we have our own global bond platform, which we are continuously developing. It pools our own and external research and covers around 1,400 bond issuers worldwide. Nine million data points are updated daily. This platform simplifies the research process considerably, and provides comprehensive insights into new issues, rating changes and potential default risks as well as current market liquidity. Such investments help us to make well-founded decisions.
The property sector has been under pressure recently. How do you intend to continue to grow in this segment?
We have further expanded our investment teams and our research, and offer more services. For example, we have entered asset classes such as logistics properties, and have also expanded our administrative services in the property sector. We have also strengthened our customer service. It is very clear to us that property will play a key role as a strategic asset in the long term.
Risk management is a key issue. There is a major risk management conference every year, and Union Investment aims to be at the forefront in this area. What are the latest developments?
Risk management is a fundamental component for us, especially in view of geopolitical uncertainties and market volatility. We continuously review our strategic asset allocation and regularly carry out extended stress tests. We use technical instruments and the expertise of our teams of experts. We develop asymmetric portfolio strategies that aim to maximise opportunities while minimising risks in a targeted manner.
That doesn't sound entirely new. Especially as the question arises as to whether a limit has been reached at some point in the area of risk management. Hasn't everything already been done in this area?
No, risk management must continue to evolve. Our approach combines macro perspectives (top-down) and company-related perspectives (bottom-up), for example from the equity or bond side. In view of the increasing complexity and constantly new dimensions of risks, this is not an area that can ever be completed. New challenges are constantly arising, which we want to cover with new risk scenarios and new hedging strategies.
Risk management is also about digitalisation. What role do new technologies such as AI play?
New technologies are essential for us to grow. We use artificial intelligence to improve and automate our processes in order to become more efficient. Blockchain is another area in which we are investing in order to be able to deliver in the future. Although these innovations are costly, they offer significant benefits in the long term.
Private assets are seen as a growing segment in asset management. How do you see developments in this area?
This is indeed a strategic growth area for us. We are already investing in property within the group, and with partners in infrastructure, private equity and renewable energies. The demand for alternative investments remains high despite higher interest rates. We would like to expand our offering in this area in the future, whether through independent growth, further partnerships, or acquisitions.
Sustainability is becoming increasingly important. How is sustainability integrated into your processes?
Sustainability is firmly anchored in our corporate strategy. We don't see the issue as a passing trend, but as a structural development. For example, we organise our annual sustainability conference. Our latest sustainability study shows that 85% of institutional investors in Germany now take ESG criteria into account in their portfolios. Over two thirds are satisfied with the results. We are focussing on sustainable transformation and have a large team of ESG experts who work closely with our portfolio managers. Of course, sustainability is an investment that incurs costs, but we are convinced that it will pay off in the long term. Good sustainability research enables us to evaluate companies from a comprehensive perspective, and to make targeted investments in those that pursue a credible sustainability strategy. Our aim is not to make already „green“ companies even greener, but to enable transformation.
Other asset managers who invest in companies that are still „dirty“ have been attacked by climate activists. Is there a remedy for greenwashing?
Greenwashing accusations can never be completely avoided, as there is no standardised understanding of sustainability, and regulation is also complex. We focus on credibility through a transparent investment process, and are convinced of the benefits of sustainability for long-term investors. Our aim is to approach this topic responsibly and pragmatically at the same time. It is also very important to embed sustainability in the minds of our employees.
Let's talk briefly about customer service. You have already repeatedly won the Greenwich Quality Leader award. How important are such awards?
We are delighted to be recognised in this way, especially in the institutional business, where the quality of our work is judged directly by the customers – and only by the customers. It may be a platitude, but such awards are a great incentive for us to keep improving, because we want to continuously deliver top performance as a quality leader in the areas of customer service and support, as well as portfolio management.
That sounds a bit like marketing …
Could be, but asset management is a business of trust. No matter how good you are technically, customer trust is the most valuable asset in asset management. You don't have to overemphasise such awards, but they are a confirmation and above all a motivation for my team and myself.
Is there potential for improvement? Where do you focus on further developing the services for your customers?
Our aim is to understand not only the regulations that affect us, but also the regulatory requirements of our customers. Our customers, such as banks and insurance companies, depend on customised support when it comes to regulation. Another important aspect is to always maintain a high level of service stability and reliability.
