1. chapter 3 / business divisions / Asset Management
Equities Bonds Balanced Real estate Other
FUND ASSETS UNDER MANAGEMENT ACCORDING TO ASSET CLASS
figures in %
72 sal. oppenheim jr. & cie. | annual report 2004
2. Asset Management / business divisions / chapter 3
Risk aversion 01
New investment legislation 02
Financial centre of Luxembourg 03
sal. oppenheim’s asset management division fuses both private banking and institutional asset
Management. This integrated approach enables the Bank to fulfil the challenges of a globalised capital market with tai-
lor-made investment products, and at the same time meet the high demands of private and institutional clients. The
expectations of these clients remain unchanged: sustainable capital appreciation and controlled risk.
The ongoing difficulties on the capital market meant that investors remained risk-shy in 2004. The initial opti- 01
mism shown in equity trading waned in the spring as oil prices continued to climb. The markets only returned
to a notable upward trend after the US presidential elections in November. Bond trading did not experience the
yield hike touted by many market participants, with capital market rates even pushing towards a record low in
the European Monetary Union. The foreign currency markets saw the US dollar continue to weaken against the
euro, spurring massive exchange losses in US securities investments.
Institutional Asset Management
New government legislation on investments compensated for the weak market impulses for positive per- 02
formance in the Asset Management division. The legal provisions, in force since 1 January 2004, have sub-
stantially boosted Oppenheim Kapitalanlagegesellschaft mbH (OKAG)’s room for manoeuvre. With the
authorisation of portfolio management activities covering areas other than securities funds, and the launch
of funds of hedge funds, OKAG had the opportunity to move into new fields of business. The revision of the
legal and tax framework also resulted in far-reaching changes for a number of divisions within the Company.
The new Derivatives Ordinance, for example, meant that additional risk control measures had to be intro-
Germany is not, however, the only financial centre to have increased its appeal by producing legislation which 03
is in keeping with practice. Luxembourg has also further adapted its legal framework and financial market su-
pervision practices to meet the requirements for efficient asset management. As well as the innovative fund types
conceived over the past few years, a new legal form was introduced in the SICAR (Société d’Investissement en
annual report 2004 | sal. oppenheim jr. & cie. 73
3. chapter 3 / business divisions / Asset Management
04 Assets under management
05 Net inflow of funds
06 Investors’ market assessment
07 Asset allocation management
08 Analysis tool for life insurers and Pensionskassen
Capital à Risque – venture capital investment company), an instrument tailor-made for venture capital and pri-
vate equity investments.
04 On the whole, the total assets managed by Oppenheim investment companies in Germany, Luxembourg and
Ireland rose by almost 12 % from an initial € 29.8 billion to € 33.3 billion.
oppenheim kapitalanlagegesellschaft mbh
Despite the improved legal framework, institutional customers showed restraint with regard to new invest-
ments. The continued strain on their risk budgets meant that investors continued to shy away from increas-
ing the risk-bearing segment of their overall portfolio to any considerable degree and opted instead for
conservative, income-oriented investment strategies. In the meantime, the trend towards bundling institu-
tional assets with master investment companies continued. As a result, the number of securities funds under
05 management in this client segment fell by 22 to 206. Net fund inflows declined by around 15 % year-on-year
to € 1.6 billion. By contrast, the assets under management from special funds and mandates increased by more
than 17 % to a total of € 15.2 billion thanks to positive performance.
06 Investors rated OKAG’s performance very highly. Performance comparisons with competitors are testimony
to OKAG’s position as one of the top German players. A survey conducted by Feri Institutional Management of
232 institutional investors with total assets exceeding € 1 trillion placed OKAG second in the “Portfolio man-
agement” scoring and third for “Acquisitions” out of the eleven private banks under assessment. Oppenheim Asset
Management was also pipped at the post in the national scoring of the “Financial News” awards for the best Eu-
ropean asset management companies, narrowly taking second place.
07 In order to strengthen its competitive position, OKAG further enhanced its asset allocation expertise in the
course of 2004. The company employed the Oppenheim asset allocation management system – a process of over-
all asset management where the investment concept and portfolio structure are adjusted to the current client sit-
uation and capital market assessment on an ongoing basis - in a client portfolio for the first time. This means that
OKAG applies cohesive, overall risk management principles to its own bond and equity components, as well as
to offers from selected product partners. The global partnerships with Pramerica and Lloyd George Management
have fared particularly well in this regard.
08 Working in cooperation with the management consultancy firm McKinsey, OKAG developed an analysis
tool for life insurers and Pensionskassen which aids in deriving the investment policy requirements of individual
companies from their asset and financial situation, in order to further enhance overall efficiency. Based on pre-
defined capital market scenarios, the Company is given a synopsis of the different investment strategies and their
74 sal. oppenheim jr. & cie. | annual report 2004
4. Asset Management / business divisions / chapter 3
customer area customer area
Observing the investment
Investment objectives, risk budget objectives and
Investment objectives, risk budget
capital market situation
master fund management
e.g. strategy to
preserve/increase value according to dynamic asset
allocation strategy using
using specified parameters
fund/segment structure – segment structure development
specified by the customer – segment manager selection
– determination of execution
no master fund reporting master fund reporting
master fund administration master fund administration
DYNAMIC REGULATION CYCLE INSTEAD OF INFLEXIBLE GUIDELINES
okag asset allocation management
annual report 2004 | sal. oppenheim jr. & cie. 75
5. chapter 3 / business divisions / Asset Management
09 Gross fund assets under management
10 New shareholder structure
11 Net fund inflows to and outflows from OKAG/OPAM
impact on balance sheets, income statements and cash flow. The analysis tool is currently being developed fur-
ther for other groups of institutional customers.
oppenheim immobilien-kapitalanlagegesellschaft mbh
Oppenheim Immobilien-Kapitalanlagegesellschaft mbH (OIK) was able to maintain its market lead in 2004 de-
spite the intensifying competition. Remarkable levels of new business led to net inflows of funds amounting to
€ 580 million.
09 OIK recorded gross fund assets under management of € 8.8 billion at the end of 2004. € 7.9 billion of this
figure is attributable to 25 real estate special funds, while the remaining € 0.9 billion is split between two other
funds. The two new funds were the result of the restructuring of real estate special funds.
OIK acquired 37 properties worth a total of almost € 1 billion as part of its active asset management activi-
ties in 2004. This was countered by 33 disposals in four countries, accounting for a total volume of around
€ 280 million. OIK now manages 508 properties in twelve countries, meaning that its global remit has expanded
further – now including, for example, additional European markets such as Stockholm and Luxembourg.
10 In April 2004, the company acquired a 10 % stake in Real Estate Capital Partners, L.P., New York, USA. This
interest is to be increased in 2005. OIK itself now has a new shareholder, Bonn-based IVG Immobilien AG, which
holds a 50.1 % interest in the company. The cooperation with IVG is providing OIK with access to the real es-
tate markets of northern and eastern Europe.
oppenheim pramerica fonds trust gmbh*
11 In a year that was disappointing for the sector as a whole, the Pramerica joint venture also managed to strengthen
its position on the German market. The mutual funds of Sal. Oppenheim’s investment companies in Cologne
and Luxembourg generated total net inflows of around € 789 million (previous year: € 1.8 billion). While
Oppenheim Kapitalanlagegesellschaft mbH (OKAG) recorded a net outflow of €106 million, Oppenheim Pramer-
ica Asset Management S.à r.l. (OPAM) enjoyed a net inflow of € 791 million. The former was mainly attribut-
able to the tactical outflow of around € 236 million from the OP Moneymarket Euro money market fund – a
development that also affected other money market funds in the sector statistics of the German Investment and
Asset Management Association (Bundesverband Investment und Asset Management e.V. – BVI).
* Prudential Financial, our joint venture partner, has decided to amend its brand name from Prumerica, used by selected business areas and companies from outside of the
United States of America, to Pramerica. Oppenheim Prumerica became the new brand Oppenheim Pramerica in October 2004, in order to establish an uniform global
76 sal. oppenheim jr. & cie. | annual report 2004
6. Asset Management / business divisions / chapter 3
Fund products with limited risk 12
OP Extra Bond Euro bond fund 13
Fund of hedge funds 14
OPFT assets under management 15
Online activities for sales and customers 16
Given the continued uncertainty on the capital markets, a large portion of the newly invested and reallocated 12
funds was placed in fund products with reduced risk, such as the recently launched OP Bond ABS bond fund.
The Worldwide Investors Portfolio (WIP) SICAV, reduced by three fund categories, increased its total assets under
management by more than 25 % thanks to abundant fund inflows, but also to the healthy performance of the
products managed by the joint venture partner Prudential Financial. The US WIP U.S. Value Fund and the WIP
U.S. High Yield Fund recorded very high inflows of funds and were given extremely positive ratings by Standard
& Poor’s and Morningstar. The weak dollar was the only obstacle to even better performance in terms of volumes.
The bond fund OP Extra Bond Euro, which focuses on the credit risks of convergence countries, was able 13
to maintain its five-star initial rating by Morningstar over the course of the entire year, and continued to earn the
confidence of many investors. It was distinguished as the best fund of its class on the German market by the
renowned fund data agency Lipper (Reuters).
The launch of the two funds of hedge funds, OP Hedge Multi Strategies and OP Hedge Multi Strategies 14
Plus, represented the most important product innovation of the year. The independent investment management
company Attica-LJH, based in London, was chosen to select the target hedge funds. OKAG determines the in-
vestment policy and the risk profile itself and monitors both on a continuing basis. The primary objective of both
funds is to generate reasonable returns with as low risk of loss as possible. The fund management for the OP Hedge
Multi Strategies is expecting average annual returns of 7 % to 9 % over a three-year period. The returns target for
the OP Hedge Multi Strategies Plus lies at between 8 % and 11 %. Returns are intended to coincide with a mod-
est fluctuation in value. Both products were the focus of a large number of sales events. Due to the predominantly
cautious coverage of hedge funds in the media, the focus was on information, clarification and public relations
for both products, as well as on the quality of their external management.
Overall, the assets managed by the mutual funds distributed by Oppenheim Pramerica Fonds Trust GmbH 15
(OPFT) rose from € 8.5 billion to € 9.5 billion. This increase of around 12 % significantly outstrips the overall
average rise for German fund providers (5 %). With a share of 12 % in the overall net inflow of funds for the sec-
tor, and a market share of 2 % in assets under management, Oppenheim Pramerica was able to sustainably sta-
bilise its competitive position amongst the seven largest fund groups in the BVI. The closure of a number of mutual
funds meant that the overall total fell to 158.
The Internet portal developed for sales partners, OPFTnet, was enhanced by a range of service functionali- 16
ties, including the integration of a portal for end customers (MyOPFTnet.de) as well as dynamic forms for fund
purchases and sales or account transfers. OPFT also further expanded the range of funds offered by other providers.
In addition to supporting fund-related measures, especially for the two funds of hedge funds, marketing activi-
annual report 2004 | sal. oppenheim jr. & cie. 77
7. chapter 3 / business divisions / Asset Management
17 OPAM basic funds and partner funds
18 OPAM increases assets under management
ties were centred around the organisation and management of a number of client events, as well as the develop-
ment of a new Internet site: www.oppenheimpramerica.de.
oppenheim pramerica asset management s.à r.l.
17 The Luxembourg-based investment company Oppenheim Pramerica Asset Management S.à r.l. (OPAM), oper-
ated as a joint venture with Prudential Financial, Inc.* since September 2002, has performed equally positively.
As well as managing several special basis funds for the joint venture partner Prudential Financial, Inc.* and the
Oppenheim Group, its management activities focus in particular on what are known as “partner funds”, which
it manages in association with renowned asset management companies, banks and insurers.
18 In contrast to a reserved sector trend, OPAM was able to increase its assets under management by more than
20 % to almost € 5 billion. This means that at the reporting date, the majority of Oppenheim Asset Management’s
mutual fund business was based in Luxembourg for the first time.
* The companies of Prudential Financial, Inc., which include one of the largest life insurance companies in the US, manage assets totalling around US$ 500 billion (as at
31 December 2004) for private and institutional clients worldwide. These companies offer a whole range of products and services, including life insurance, investment funds,
annuities, old-age provision services and management, asset management, securities brokerage, banking and trustee services, real estate brokerage franchises and relocation
services. Further information can be found at www.prudential.com. Prudential Financial, Inc. based in the US has no affiliation with Prudential plc. based in the UK.
78 sal. oppenheim jr. & cie. | annual report 2004