Annual Report 2019

Making tomorrow possible

With a solid position and an awareness of our strengths in the present, we can look boldly and optimistically to the future. We know what it will take to make tomorrow a success and we stand together to tackle challenges with a pioneering spirit and a passion for discovery.

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Asking the right questions

Society is becoming increasingly digitalised and so, too, are today’s business models. The societal impact of the coronavirus pandemic is even accelerating this process. In order to seize the opportunities offered by an increasingly digital environment, we not only need to have suitable infrastructure in place, we also have to ask the right questions at the right time. Because only if we understand our partners’ and clients’ needs exactly can we develop tailor-made solutions in line with market requirements.

For a long time, there was a consensus in many companies that improving the potential for efficiency and creating robust processes were among the core tasks of the IT department. At the beginning of this year, we saw how justified that expectation really is. Businesses were forced to find ways of protecting their staff from the risk of infection with the novel coronavirus in order to help curb the pandemic. At the same time, normal business operations had to continue without a hitch

Robust processes in times of uncertainty

At Union Investment, we managed to have nearly 3,000 employees transition to working from home in a very short space of time. This is thanks to the modern IT infrastructure which we have built up and continuously improved in recent years as well as our well established and perfectly coordinated processes. Our business operations were not affected by these changes in any way and have continued to run smoothly.

We have managed to establish technical structures for providing answers to the most important questions on current developments and sharing our assessments of opportunities and risks on the market.

Alexander Lichtenberg

Member of the Executive Board

Alexander Lichtenberg

This is evidenced by the fact that we have been able to maintain both internal communication and, in particular, communication with our partners and our mutual customers at a time when rapid developments on the capital markets have left many people feeling uncertain. We have managed to establish technical structures for providing answers to the most important questions on current developments and sharing our assessments of opportunities and risks on the market. And so, we can draw a positive conclusion. The transition to this new way of working went exceptionally well, which confirms to us that our company’s IT infrastructure is up to date and future-ready. But it also shows what more we must do in the future. We have to continue working on the resilience of our infrastructure and our processes to ensure the quality of our funds services not just now but in years to come.

As digitalisation progresses, IT is evolving from a support system into the driving force behind contemporary business models.

Alexander Lichtenberg

Member of the Executive Board

Maintaining and sharpening our competitive edge

At the same time, recent developments mean that we are facing a paradigm shift. As digitalisation progresses, IT is evolving from a support system into the driving force behind contemporary business models. So it is our job not only to ensure an effective infrastructure, but to guarantee the sustainability of our functional business model and to maintain and sharpen the competitive edge it affords us. In recent years, Union Investment has already taken on a leading role within the Genossenschaftliche FinanzGruppe in this regard, with projects such as MeinInvest and MeinVermögen. And we will keep pushing ahead.

To do so, we have to ask ourselves which new areas we want to invest in as the central asset manager of the Genossenschaftliche FinanzGruppe. We have to ask the right questions in order to seize the opportunities offered by an increasingly digital environment and develop tailor-made solutions in line with market requirements. Our constant dialogue with you — our partners and clients — is the compass that guides us in this work.

Boldly taking new paths

As the coronavirus crisis has progressed, the outlook for the new decade has changed. And yet, thanks to our firmly intact and sustainable business model, we find ourselves in a strong position looking confidently toward the future. With this wind at our backs, we know that we can achieve our aim of boldly taking new paths despite the challenging circumstances and laying important groundwork for the FinanzGruppe for tomorrow and well into the future.

Union Investment has entered into the new decade on a high note. Positive performance and keen client interest led to a record high of 368.2 billion euros in assets under management and an operating income of 650 million euros at the end of 2019.

We enter this new decade with confidence, despite the immense societal, economic and political challenges we will have to overcome in the wake of the coronavirus pandemic.

Hans Joachim Reinke

Chairman of the Executive Board

Hans Joachim Reinke

While the extraordinary current situation has created all kinds of uncertainty, one thing remains clear. The keys to our group’s success are and will always be the proximity and personal availability of the staff at our banking locations, our local connections and the trust built up between our banks and our clients over the years. It is on this foundation that we were able to navigate the eventful last few years and safeguard the success of our securities business. In the past decade we faced growing geopolitical risks, unpredictable fiscal policy and various regulatory measures, and, despite everything, we were able to more than double our assets under management. With the support of our cooperative partners, we have managed to shine a spotlight on funds as a viable method for saving and to highlight our success in working on behalf of ordinary people. Now, we must continue to build on our joint successes.

Clients’ needs in the new decade

Low interest rates and the associated challenges will accompany us and our clients — from institutional investors to retail clients — in the coming years and perhaps decades. Our task is to continue campaigning for proactive saving and investment, to illustrate long-term potential and to make it clear that zero interest doesn’t necessarily mean zero revenue. For example, the idea of securing access to the global capital markets by making small monthly contributions to an investment savings plan and thus building up assets in the long term is more relevant now than ever before. Institutional clients must overcome the same hurdles, although they require different solutions than retail clients.

For us as an asset manager within the Genossenschaftliche FinanzGruppe, it is more important than ever that we understand our clients’ needs and develop suitable solutions as rapidly as possible. Past experience has shown us that we in the Genossenschaftliche FinanzGruppe can only achieve success when we consistently act in accordance with the needs of our members and clients and invest our joint energy in developing the right solutions.

We are well equipped for the future and aim to continue engaging with new topics as successfully as we always have in the past.

Hans Joachim Reinke

Chairman of the Executive Board

For this reason in particular, we would like to maintain our close alliance with the banks in the Genossenschaftliche FinanzGruppe. We are well equipped for the future and aim to continue engaging with new topics as successfully as we always have in the past. The issue of sustainability is a good example. We addressed this early on, particularly in connection with institutional investment, and have systematically improved our performance ever since, as reflected in our Retail Clients segment this past year. In keeping with our roots as a trustee, we have consistently made it clear that we work on behalf of our clients. Our priority is not to publicly project a certain ideology. Rather, it is to act in our clients’ best interest and build assets, just as in our other business segments. And that means that we can implement whatever is asked of us, be it a client’s individual preference or a specific regulatory framework. Only in this manner can we truly fulfil our function.

Thanks to this approach, our personal contact with our clients, our active management and our many years of expertise in sustainable investment, we consider ourselves to be in an excellent position for the future in spite of the current challenges and those yet to come. One of our greatest strengths has always been and continues to be the close and trusting cooperation within the Genossenschaftliche FinanzGruppe. This company report is yet more proof that the past decade was the decade of cooperative associations and the cooperative fund business. And I am convinced that the coming decade will once again be largely defined by cooperative investment.

Planning today for what tomorrow will bring

The economy and therefore the financial markets are undergoing a fundamental transformation — one which predates the coronavirus pandemic, although this has certainly exacerbated it. But the risks involved should not blind us to the fact that many different investment opportunities are now opening up at the same time.

In 2019, the assets we manage for our institutional clients rose well above the 200 billion euro mark for the first time. Assets under management for major investors amounted to 207.8 billion euros at year end. By way of comparison, when I joined Union Investment 16 years ago, this figure was 42 billion euros. That shows how successful we and our strong partners within the cooperative group have been in ensuring steady growth throughout a period of major upheaval and challenges in asset management, such as the introduction of the Master-KVG model or the subprime mortgage crisis. Ultimately, this is solid proof of a reliable and enduring approach that combines professionalism with a consistent focus on finding solutions for our clients. This is what makes us unique on the market and will help us to overcome the challenges of the coronavirus pandemic and remain successful in the coming years.

Because when it comes to our growth, quantitative and qualitative aspects are closely linked. Over the years, Union Investment has also established itself on the market as a credible active asset manager with extensive expertise in risk management and sustainability. Neither our assets under management nor our client base would have grown so much without our ability to respond to shifting challenges with tailored solutions. This is the result of targeted investment in knowledge and technical infrastructure, a strong focus on our clients, and the dedication of our staff.

Asset managers who take a proactive approach to their future development early on will ensure they have strong growth prospects and are well prepared for challenging times.

Alexander Schindler

Member of the Executive Board

Alexander Schindler

A strong foundation for the future

The institutional investment market will continue to change rapidly. The economy and therefore the financial markets are undergoing a fundamental transformation — one which predates the coronavirus pandemic, although this has certainly exacerbated it. Asset managers who take a proactive approach to their future development early on will ensure they have strong prospects for a successful future. We are confident that we can continue our success story. After all, we have proved in recent years that we are able not only to identify the challenges we face in all key areas of asset management, but to successfully adapt to these in practice. This has allowed us to continuously expand our range of products and services and improve their quality — as can be seen from the evolution of our product range over time, the growing number of clients and mandates, and the increase in client satisfaction.We will continue along this path.

The risks involved should not blind us to the fact that many different investment opportunities are now opening up, offering promising results for investors in times of persistently low or even negative interest rates.

Alexander Schindler

Member of the Executive Board

Our clients’ needs are the starting point for everything we do. We’re seeing a trend towards greater diversification and internationalisation of institutional portfolios. That’s due to the persistently low interest rates and the growing importance of investment for businesses’ profitability as a result. In a time of interest-free risk, more and more institutional investors are looking for a way out of the quagmire by focusing on more profitable investments or alternative ones. Against this backdrop, we initiated a strategic process last year to further diversify our range of services and move into new areas. We will also be aligning our organisation and workflows with the demands of a changing world.

A need for forward-looking action

Forward-looking action is the motto of Union Investment, especially for our approach to investment. We firmly believe that capital markets are not always one hundred percent efficient everywhere, meaning they offer active managers the chance to achieve a greater yield. We also believe it is important to actively engage with the businesses we invest in and offer them constructive criticism to help ensure that they are robust and our clients’ interests are protected. This applies all the more in times of major upheaval in our economy and markets, such as the turmoil now being exacerbated by the coronavirus pandemic.

The risks involved should not blind us to the fact that many different investment opportunities are now opening up, offering promising results for investors in times of persistently low or even negative interest rates. At Union Investment, we are confident in our ability to exploit these opportunities and maximise profit for our clients by means of active management now and in the future.

Investment in a changing world

No other event in recent decades has had such an enormous impact on social, economic and political life as the coronavirus pandemic. Its repercussions will be felt for a long time still and it will take years to fully cope. More drastic change has rarely been seen. For active management, this makes highly selective investment all the more important.

For many investors, 2020 looked set to continue as 2019 had ended. Despite some initial fiscal and geopolitical irritations, our clients were able to look back on a year of successful investment as 2019 drew to a close. Union Investment’s securities funds achieved a single-year performance of 12.8 percent across all investment classes. But the new year had barely begun when the first news about the novel coronavirus reached us from China. The situation initially seemed manageable. Then, the virus spread rapidly across every continent, eventually bringing public life to a standstill.

Economic upheaval

Even before the coronavirus pandemic, the world was in the grip of far-reaching changes. The effects of the 2008/2009 financial crisis were still being felt in many areas. This is particularly true of Europe, as the persistently low interest rates show. Populist tendencies in Western democracies, growing protectionism and trade disputes were other unmistakeable signs of the times. New issues such as digitalisation and climate change had worked their way into centre stage and threatened to fundamentally change the state’s relationship with businesses and individuals, generating both hope and fear. Digitalisation awakens the spectre of mass surveillance; the fight against climate change, for some, promises a better world, while for others it seems to jeopardise their quality of life and their freedom.

In a world shaped by disparities, we must now begin to process the effects of the coronavirus crisis. Political institutions must ensure that the impact is spread evenly across society, so that the crisis does not leave in its wake a small number of winners and a large number of losers. But there is no reason to be pessimistic about the future. Times of upheaval have always been times of great productivity and ingenuity — the early stages of Germany’s post-war economic miracle are a perfect example.

To ensure strong returns for our clients, we take a selective and conscientious approach to investing. This strong foundation gives us reason to feel optimistic.

Jens Wilhelm

Member of the Executive Board

Jens Wilhelm

As our society works to overcome the crisis and move towards a new economic upturn, asset managers must look to the future to ensure that we stay on track and are able to circumvent any new risks in good time. Our portfolio management team has enjoyed a successful track record in recent years. To ensure strong returns for our clients, we take a selective and conscientious approach to investing. This strong foundation gives us reason to feel optimistic. If we are able to maintain perspective even in turbulent times and carefully weigh opportunities and risks to choose the right path, we are sure to emerge amongst the winners.

The future of asset management

For us, a successful active asset management strategy goes beyond the active allocation of asset classes and the selection of securities. Anyone who wants to stand out from the competition and continue investing successfully in an increasingly complex and volatile world must diversify their toolkit. We recognised this early on and acted even before the outbreak of the coronavirus crisis to plot a course through turbulence on the market.

Anyone who wants to stand out from the competition and continue investing successfully in an increasingly complex and volatile world must diversify their toolkit.

Jens Wilhelm

Member of the Executive Board

We consolidated our expertise in portfolio management and linked up individual areas more closely to ensure we are able to accurately identify the winners and losers of this economic upheaval. Our own topic-specific research team supports fundamental analysis for selecting crisis-proof businesses and also identifies the most important future issues and technologies. These include business models which prioritise economic sustainability considerations to safeguard long-term performance. Our ESG criteria, which are integrated into every step of our investment process, allow us to identify how future-ready businesses are and minimise our own risks at an early stage.

To achieve consistent profits even in times of low interest rates, we make use of the advantages offered by growing internationalisation, new asset classes and greater expertise. During periods of unstable markets, when increased risk is an unavoidable element of successful investment, our proven risk management system protects against losses. We also help ensure sustainable growth by engaging in constructive dialogue with businesses in our role as an active shareholder.

Taking a passive approach in a constantly changing world, relying on hope alone, means missing out on the opportunities created by economic transformation.

Jens Wilhelm

Member of the Executive Board

Seizing opportunities

Having consistently expanded our expertise from an early stage, we have ensured that we are well positioned to guide our clients safely through turbulent times. We must now hold steady and remain on course. Taking a passive approach in a constantly changing world, relying on hope alone, means missing out on the opportunities created by economic transformation. Only with a prudent and proactive selection process can we equip ourselves to successfully navigate volatile markets.

Zurück zur Übersicht

We in Europe need to invoke an evolution of saving — banks need to rethink client mandates and end investors need to move their money.

Klaus Riester

Member of the Managing Board at Union Investment Privatfonds GmbH,
Head of Sales Private Clients

Investment funds are the new savings account

Making tomorrow possible — in times when interest rates are low, we need to invoke an evolution of saving. Klaus Riester, Member of the Union Privatfonds GmbH Executive Management, says that banks need to provide uniform advice to their clients and investors need to move their money around.

Mr Riester, what would be the repercussions for banks and end investors if interest rates were to permanently remain low?

Riester: The situation in the German banking industry remains challenging. Income is suffering due to the fact that banks have to pay interest to the ECB for storing their money. Even those with savings accounts don’t have it easy because there’s no interest on conventional investment products any more — good old savings accounts have become obsolete. We assume that the current low interest rates will stick around for years to come. In fact, this trend will be reinforced by the significant rise in public debt as a result of the coronavirus pandemic. So waiting around is not a useful strategy. Instead, we in Germany and across Europe need an evolution of saving. Banks need to rethink client mandates and end investors need to move their money.

Even those with savings accounts don’t have it easy because there’s no interest on conventional investment products any more — good old savings accounts have become obsolete.

Klaus Riester

Member of the Managing Board at Union Investment Privatfonds GmbH

Klaus Riester

What exactly do you mean?

Riester: Advisors need to elucidate the situation to their clients and show them ways of reaching their goals even in times when interest rates are so low. These days, the best options are investment funds or asset management services such as MeinInvest or VermögenPlus. If banks continue to increase commission-based business in the long term, they can kill two birds with one stone. Namely, they would be able to compensate for the declining interest margin and they would fulfil their function in preserving and multiplying their clients’ assets, turning a lose-lose situation into a win-win situation.

But in reality, this still looks a little different — One in two Germans still has money in a conventional savings account or an instant-access savings account.

Riester: That’s why we need high-quality advice now more than ever that will reach even more people and let them know that investment funds are the new savings account! And they work in a number of ways. One excellent option is pro rata saving via an investment savings plan. Today’s version of saving involves regularly putting away small sums of money and building up assets at the same time. This works just as well with mixed funds as with pure equity funds. Open-ended real estate funds are also an interesting class of investment in such a low interest rate environment.

Rise in savings plans to

5.2 million

The capital markets have slumped as a result of the coronavirus crisis. Why do funds remain a prudent option?

Riester: The portfolio management team at Union Investment sees plenty of indications that rates will recover in the medium to long term. What’s more, looking back on previous decades shows that every crisis sees downturns followed by recovery periods which offer the potential to profit from rising rates. In times like these, the concept of an investment savings plan can be particularly beneficial. It ensures that investors can continue to save and can acquire securities even when prices are low. That improves performance over the long term. Investment savings have always been rewarded in this way in the past. In light of this, I do also have the feeling overall that more and more people are becoming actively engaged in managing their money and changing the way they invest.

And what is that feeling based on?

Riester: On our numbers. Our business with retail clients has continued to increase in the past year. Net inflows amounted to 8.1 billion euros (2018: 7.5 billion euros) and our portfolio increased to 160.4 billion euros (2018: 135.7 billion euros), thanks to the close cooperation we have with our partners in the cooperative network Genossenschaftliche FinanzGruppe. Open-ended real estate funds as well as mixed funds and equity funds were all the focus of investors’ interests.

What aspects are experiencing the most rapid change?

Riester: Primarily pro rata saving and sustainable investment. By the end of 2019, Union Investment was managing 5.2 million savings plans with a total volume of over 45 billion euros. We are particularly pleased to see that equity funds are showing the largest growth in popularity as far as savings plans go. In fact, in the past three years the number of equity savings plans has doubled, rising to 1.1 million. Retail clients have also realised the importance of long-term sustainability, seen in the fact that 40 percent of our new business in 2019 was in sustainable funds.

What’s important is taking clients by the hand and guiding them to the investment plan that meets their needs.

Klaus Riester

Member of the Managing Board at Union Investment Privatfonds GmbH

The number of cooperative banks in Germany has continued to decline. How do you view this development?

Riester: In general, I think forming synergies is advantageous if individual branches aren’t being sufficiently utilised. On the other hand, I do recognise the strength of the direct support that the Genossenschaftliche FinanzGruppe offers its clients. We mustn’t jeopardise this unique selling point. It’s critical that Volksbanken and Raiffeisenbanken — or cooperative banks — continue to offer first-rate advice. Many clients no longer go to the bank in person to get advice, so it’s becoming more and more important that banks offer advice services via other media, including video chat, telephone and other digital avenues. What’s important is taking clients by the hand and guiding them to the investment plan that meets their needs.

The market is changing. We’re facing new challenges. This means we need to keep developing our range of services and find custom solutions for our clients.

André Haagmann

Member of the Managing Board at Union Investment Institutional GmbH,
Head of Institutional Clients

Our aim is to become one of the most successful asset managers for institutional investors in Europe by 2025.

With the strategic project InProve, André Haagmann is setting the course for Union Investment to take on the international competition for institutional business and consolidate its role as a quality leader in customer satisfaction. The aim is to ensure that Union Investment’s institutional business remains as successful and profitable as ever.

André Haagmann
André Haagmann has managed the Institutional Clients segment since 1 July 2019. He is responsible for coordinating the executive management and other executive bodies as well as overseeing institutional business and human resources. Mr Haagmann has been part of the management at Union Investment Institutional GmbH since January 2015, and from April 2014 to June 2019, he managed the department for acquisitions and central and international account management oversight, with national and international institutional clients outside of the Genossenschaftliche FinanzGruppe.

Mr Haagmann, what is the current status of Union Investment’s institutional business?

Haagmann: Our assets under management have enjoyed steady growth in recent years. In 2019, we passed the 200-billion-euro mark for the first time. We have consistently increased our market share, opened up new markets, and gained many new clients. Our annual net sales have remained well above the market average. We were able to achieve all of this because we worked to continuously expand what we are able to do as a team and improve the quality of our services. At its heart, our success is thanks to our skilled and motivated staff.

  • As of: September 2019; * HR 2 2019; incl. proceeds of sale for TFI

  • As of: September 2019; * HR 2 2019; incl. proceeds of sale for TFI

  • As of: September 2019; * HR 2 2019; incl. proceeds of sale for TFI

  • As of: September 2019; * HR 2 2019; incl. proceeds of sale for TFI

In light of this success, why do you believe the strategic project InProve is important to provide fresh momentum?

Haagmann: Market conditions have become a lot more challenging. This is partly due to the persistently low rates of return, for example — a situation which will be greatly exacerbated by the current crisis. We will be refining the range of services that we offer accordingly. Alongside our traditional core business, including corporate bonds, shares and value-guaranteed mandates, we will be expanding the alternative investment options that we offer. One particular focus will be real estate. We’re also seeing a trend toward passive capital investment, either via passive mandates from major institutional investors in connection with special funds or via direct investments. We’ve created suitable products and strategies for this kind of investment which are already in use.

How are you responding to this trend?

Haagmann: Our aim is to become one of the most successful asset managers for institutional investors in Europe by 2025. The changes I’ve discussed mean that we need to continue refining the range of services we offer. This will include expanding our product portfolio as well as, for example, honing our understanding of our clients’ needs. We’re very clear on the fact that we want to remain a quality provider. So we’ll continue to invest while exercising careful financial judgement.

How do you take client requirements into account?

Haagmann: Our vision remains the same despite the impact of the coronavirus pandemic on the global economy. We want to take a bold and entrepreneurial approach to our future. To adjust our strategy appropriately, we need to take account of the heterogeneous nature of our business. To cite just one example, we serve clients belonging to the cooperative network Genossenschaftliche FinanzGruppe — to which Union Investment belongs — as well as foreign central banks. These two client bases have different requirements of us, our products, and our services. There’s no single solution that meets every client’s requirements.

What is the best way to meet these different requirements?

Haagmann: We’re focusing on two business units: cooperative banks and SMEs, known by the German acronym GBM, and major German and international clients, or GDI. That means that, in the future, we’ll have a dedicated sales channel that addresses the needs of clients within the Genossenschaftliche FinanzGruppe. Alongside banks, it will cover their corporate clients as well as church institutions. The other business unit, as I said, will focus on our major institutional clients from outside the cooperative sector in Germany as well as those abroad. That includes large businesses, public institutions and family offices, but we will also be meeting the needs of regulated investors such as insurance and pension companies.

Bernhard Kraus
Bernhard Kraus has been part of the management at Union Investment Institutional GmbH since January 2008. He currently oversees the GBM business unit for cooperative banks and SMEs within the Institutional Clients segment, making him responsible for banks’ own-account investing, corporate business, and, since 1 April, account management for church institutions.

Mr Kraus, what can clients expect in concrete terms from the cooperative network that Union Investment belongs to?

Kraus: We’ve recorded around 100 mergers and consolidations within our customer base in recent years. By 2025, we’re expecting to see as many as 200 more. This means that the organisations we serve are becoming larger and their requirements are becoming more complex. To ensure we can find the right solution for each and every one of our clients, we need to offer much more intensive support. High-quality solutions depend on our ability to understand and assess the specific challenges that each of them faces.

What action are you taking aside from stepping up your customer care?

Kraus: We’re looking at a paradigm shift. Negative interest rates mean that banks face the challenge of having to eliminate high investment sums, such as from corporate clients, from their balance sheets. Nobody is ever going to be happy about paying interest on their assets. What we offer can create a win-win situation for the corporate client and the bank. But we need to develop additional products that appeal to these corporate clients. Based on our experience with digital services such as MeinInvest and VermögenPlus in our Retail Clients segment, we’ll also be launching a bold digitalisation campaign. The aim of this strategy is to support banks in advising their corporate clients and to offer a quick and straightforward overview of the potential offered by an optimised asset structure.

With our new strategy Next Level Portfolio Management, we’ve taken on the challenge of achieving new quality standards in active asset management.

Dr Frank Engels

Member of the Managing Board at Union Investment Privatfonds GmbH,
Head of Portfolio Management

Active management — reaching the next level

The world of investment is in turmoil. While this is creating challenges, it also offers opportunities — particularly for active asset managers. To capitalise on these opportunities, Union Investment has developed a strategic plan: Next Level Portfolio Management.

Climate change, regulations, technology, client needs and finally the coronavirus pandemic — the upheaval in the asset management industry has multiple causes, compounded by the increased complexity and fragility of capital markets. So much change, at almost every level, has rarely been seen. The rapid pace of developments is putting active, fundamental portfolio management to the test.

“As conscientious asset managers, we have to react quickly and proactively to changes like these. At Union Investment, we responded by launching our Next Level Portfolio Management strategy, or NLPM, two years ago,” says Dr Frank Engels, head of portfolio management at Union Investment. The world is changing, and so is Union Investment. NLPM is one of the largest internal strategic plans in its recent past. “With this strategy, we’ve taken on the challenge of achieving new quality standards in active asset management.”

Staying ahead of the curve

A lot has happened since the initiative was launched, including the establishment of a topic-specific capital market research system. In-house analytical capacity reduces reliance on external service providers and is becoming more and more of a competitive advantage. Our clients expect us to be actively involved in the investment of their funds and, increasingly, in monitoring how their investments are used. This trend will accelerate as a consequence of the coronavirus pandemic. First and foremost, this concerns topic-specific research, which investigates the relevance of economic and social issues as well as geopolitical circumstances across all asset classes. “This allows us to incorporate an even greater diversity of ideas into our portfolios — and ultimately to make better investment decisions,” emphasises Dr Engels.

In order to link up our research and investment expertise more fully, we’ve reorganised all of our workflows and structures within portfolio management.

Dr Frank Engels

Head of Portfolio Management at Union Investment

Dr Frank Engels

“In order to link up our research and investment expertise more fully, we’ve reorganised all of our workflows and structures within portfolio management,” explains Dr Engels. The aim is to improve dialogue and exchange, ensuring a comprehensive overview of the capital markets. Dr Engels summarises the plan in three words: “Agility beats complexity.” He highlights the issue of sustainability, which is now incorporated into the investment process to a much greater extent.

Internationalisation in response to negative interest

Seizing opportunities to boost yields was already no mean feat thanks to the interest policies applied in recent years. Low interest rates are here to stay. When restructuring our portfolio management research system, the experts thus turned their gaze to Japan, which has been experiencing weak economic growth and extremely low inflation for some time now.

We need to make greater use of opportunities beyond our home markets.

Dr Jörg Zeuner

Head of the department Research & Investment Strategy (RIS) and Chief Economist at Union Investment

Dr Jörg Zeuner

“As asset managers, we drew one conclusion in particular from this — we need to make greater use of opportunities beyond our home markets,” explains Dr Jörg Zeuner, head of the new department Research & Investment Strategy (RIS) and Chief Economist at Union Investment. The company’s investment strategy now has a more international outlook, he says, adding that: “This diversification will also benefit our investors, and it’s a good example of what we wanted to achieve with NLPM.” In many places outside the eurozone, economic growth is higher in real terms and offers well-prepared companies better financial prospects, often leading to higher yields in the medium term. However, the coronavirus pandemic will put pressure on real returns for the foreseeable future. This makes it all the more important to take a broad, strategic view of investment classes and regions with the goal of generating additional returns for the portfolios. For example, the restructuring of many areas of the economy as a result of the coronavirus pandemic will generate new opportunities for profit. “These new trends are another area where an in-house strategic unit can provide independent analysis and solutions,” continues Dr Zeuner.

Active management is still worthwhile

According to Dr Engels, the past financial year and the first quarter of 2020 show that markets are not always efficient at every point in time and are constantly encountering major new challenges. The risks are rising rather than falling and they require increasingly complex solutions. Productive research and active, conscientious risk management will thus be essential for capital investment going forward. “We’re very well placed in this respect thanks to NLPM,” says Dr Engels.

Real estate can do more for climate conservation than almost any other industry.

Making the sustainability of real estate properties transparent

According to the Federal Ministry for the Environment (BMU)*, over 30 percent of carbon emissions in Germany are produced from building operations. The real estate industry will therefore play an important role in helping Germany achieve its climate goals by 2050, meaning it has a responsibility towards tenants, investors and other market players to be transparent.

Germany has made it a political goal to reduce net carbon emissions from real estate to almost zero by 2050 in line with the Paris Agreement on climate action. There is a lot of time between now and then. But, for Union Investment, dragging our feet for another few years is not an option, since carbon emissions — especially those of existing commercial properties — can only be reduced gradually over time. Following its Manage to Green strategy developed in 2018, Union Investment is working to develop milestones along the path to carbon neutrality which will allow the company to gauge whether it is moving in the right direction and protecting the quality of its portfolio. “Union Investment’s real estate team has already been integrating sustainability into its business strategy for over a decade,” says Jörn Stobbe, Chairman of the Management Board at Union Investment Real Estate GmbH. “In recent years, we have put a lot of effort and a lot of investment into becoming a credible pioneer in sustainability within the industry.” But how sustainable is a building really? It is essential to answer this question in order to keep making improvements. Thus, it is important to the company to make sustainability transparent, in particular when it comes to existing commercial properties.

The new “atmosphere” label from Union Investment

While new construction projects are already required by law to meet specific energy standards, clear guidelines for existing properties are lacking. In 2019, Union Investment reached an important milestone with its new “atmosphere” sustainability label, which makes the sustainability of individual buildings transparent with a single overall score. In the future, tenants, investors, real estate managers and other market players will be able to use this number to determine how their portfolio or their properties have been rated according to specific sustainability criteria.

The unique advantage of the label, which was created in collaboration with the independent consulting firm atmosgradº, is that the figure generated represents a property’s actual consumption levels in relation to the strategic goals. In other words, the score shows the percentage of the Manage to Green sustainability criteria which have already been met and how much more still needs to be done.

Jörn Stobbe

We have already been integrating sustainability into our business strategy for over a decade. Because we know that hardly any other industry has as much potential for contributing to climate protection as we do.

Jörn Stobbe

Chairman of the Management Board at Union Investment Real Estate GmbH

Weighting all factors appropriately

Heating and hot water make up a large proportion of a commercial property’s total energy requirements. As a result, it quickly became clear while the label was being developed that the key elements of the scoring model would need to include the availability and management of data on energy and water consumption as well as on waste and carbon emissions. These data must be collected for each individual building and continuously monitored. A number of other factors were also taken into consideration in the scoring model in order to represent the comprehensive approach to sustainability within the real estate sector: user comfort, data concerning the building structure, measures for optimising operation, and governance aspects such as fund management.

The real challenge lay in weighting all of the factors appropriately. The scoring model thus covers three fields of analysis. “Consumption and emissions” make up 40 percent of the rating. This element involves comparing actual data from the past year with the target data for 2030 and portfolio-specific benchmarks. Another 40 percent is based on Union Investment’s Sustainable Investment Check (SI Check). The SI Check was introduced in 2009 and most recently updated in 2018. It measures a property’s sustainability and potential using the seven criteria of building automation, resources, technology and building envelope, economy, user comfort, operation and location. The SI Check is also repeated on an annual basis. The remaining 20 percent of the final score encompasses fund strategy aspects. These include the application of exclusion criteria for tenants, reporting, and proof of sustainability certification. “With the ‘atmosphere’ label, we’ve not only developed a rating system for our own commercial properties, but one with the potential to become the market standard for the real estate sector,” Jörn Stobbe emphasises.

In addition to its sustainability label, Union Investment is taking further measures to boost the carbon neutrality of its properties:

  • An overview of the “atmosphere” label

    The label shows the degree to which targets have been achieved at a glance. The more bars are green, the more sustainability criteria have been met.

  • Energy monitoring:

    Energy monitoring is key to achieving a carbon-neutral real estate portfolio by 2050. Smart operation management thus plays an important role for existing properties, with the goal of ensuring energy efficiency and savings in these buildings. In Germany, Union Investment and the property management company Apleona launched a pilot project with ten commercial properties at the beginning of 2019 which was expanded to include another 17 properties in various locations across Europe in the summer of that year.

  • Digital platform ImmoSustain

    Digitalisation is indispensable when it comes to sustainability. This is exemplified by the new platform ImmoSustain, a digital solution that makes it possible to automatically extract consumption data from utility bills and efficiently manage the data collected. Moreover, the platform enables the automatic input of data gathered in energy monitoring.

Remaining successful in a complex and dynamic environment requires a desire to learn, joy in discovery, technological expertise and employees with a whole lot of initiative.

Rüdiger Tröndle

Head of Future Technologies and Digitalisation

Changes are coming ...

The world is growing more complex. The digital transformation is picking up speed. And the IT department at Union Investment is reinventing itself with the goal of not just implementing new developments, but shaping them. Launched in 2019, the Digital Lab is using technical innovation to turn ideas into concrete projects.

The IT department at Union Investment is bustling, because a transformation is under way. Until now, one of the department’s primary goals was to address inefficient business processes and avoid unnecessary costs by strategically implementing technology. But as the digital transformation proceeds, the focus is shifting from costs to business value, or in other words effectiveness. If technology becomes a core component of the business model, the IT department will be more important than ever in driving and shaping digitalisation. An ambitious goal that can only succeed in close collaboration with specialist departments. What is the role of the Digital Lab that Union Investment opened six months ago?

Prototypes, prototypes, prototypes

“Remaining successful in an increasingly complex and dynamic environment requires a desire to learn, joy in discovery, expertise in new technologies and employees with a whole lot of initiative. Union Investment’s Digital Lab brings together these core elements to support the success of the specialist departments”, says Rüdiger Tröndle, Head of Future Technologies and Digitalisation.

We combine our technological expertise with the specialist knowledge of our business units in order to develop digital prototypes that create added value for our colleagues, our partner banks and their end customers

Jan Rohrberg

Team Lead for innovation management and future technologies

Jan Rohrberg, Team Lead for innovation management and future technologies and Tröndle’s partner in this mission, adds: “In the Digital Lab, we are, of course, united by our enthusiasm for new technologies. The lab wouldn’t function without it. But we always focus very clearly on combining our technological expertise with the specialist knowledge of our business units in order to develop digital prototypes that generate considerable added value for our colleagues, our partner banks and their end customers.”

This involves three phases, each of which is a standalone process which can also be carried out separately from the others.

Infografik
Exemplary results

Mid-September 2019 saw the official launch of the project. Since then, the project partners have been listening to the needs of the company’s specialist departments as well as the challenges they face and have offered their support. Many digital prototypes have been developed and some have already been realised and implemented.

Digital prototypes being implemented by the Digital Lab

  • Chatbot in Human Resources

    A chatbot known as “HRbert” was recently rolled out throughout the company. The interactive chatbot can answer human resource questions, helping employees find information quickly and reducing the workload for human resources over the long term.This offers many potential applications. A prototype of a chatbot that will interact with customers is currently under development.

  • Company-wide implementation of RPAs

    Robotic process automation is currently a hot topic for many companies because it offers a fast and cost-effective way to support digitalisation efforts. Around 50 RPAs have already been tested and implemented at Union Investment. The next step is to train “smart” robots so that in the future, machine learning can be implemented in systems at different stages of maturity.

  • A document bot for attrax

    When launching a new fund, fund master data are crucial. But manually compiling these data from various information sources is extremely time-consuming. The bot independently compiles the basic information required – such as the ISIN as well as information from the subsequent detailed report, which often encompasses more than a hundred pages of unstructured text and partially structured figures in tables – and generates a clear and concise report in just a fraction of the time previously required all on its own.

  • Company presentation with 360-degree video

    How better to experience Union Investment than with a virtual reality headset and 360-degree video? Our in-house experts on employer branding have recognised the potential of this technology and will use it at exhibitions and other points of contact in future.

Building trust and rising to future challenges requires constant reflection of your own behaviour.

Sandra Hofer

Head of Institutional Business in Austria

Leading through self-reflection

Sandra Hofer joined Union Investment when she was 28 years old and has been involved in building up the Austrian company from the very beginning. Now an executive, she looks back at the skills which help her to meet even unforeseen challenges.

“When I was a child, I wanted to be a hotel manager”, says Sandra Hofer with a smile. Now she is the Head of Institutional Clients at Union Investment in Austria and has contributed in building up the market and the company. What do these careers have in common? For Hofer, it’s clear: Both require an aptitude for organisation and management. As well as this, she adds, it is important to understand and accommodate the needs of the client to maintain a competitive edge in the future. And her success is proof of this: As head of Institutional Clients, she is responsible for around four billion assets under management. In 2020, Union Investment suggested her for a programme launched by the Austrian Federal Economic Chamber and the Federal Ministry for Digital and Economic Affairs to promote women in leadership roles.

Building trust and thereby ensuring that your management can rise to the current and future challenges requires constant reflection and scrutiny of your own behaviour.

Sandra Hofer

Head of Institutional Business in Austria

Sandra Hofer

But even Hofer had to start somewhere. After discovering her enthusiasm for all economic and capital market topics at school, she completed her training as a bank clerk in an Austrian Raiffeisen cooperative bank and, while topping this off with two master’s degrees, she came across Union Investment “The managing director at the time was on the lookout for employees to expand business in Austria. While Union Investment was already well-known in Germany, it was basically unheard of in Austria at that time. I was seized by the ambition to be involved from the very beginning in building up a company in Austria that was already so well-established in its home market.

Leading others while reflecting on yourself

That was back in 2008. In 2015, Hofer, an Austrian native from Linz, took on the human resources management of her team alongside the technical supervision. Still, it is important to her to stay well-informed and maintain a good knowledge of the topics in institutional business. Her management approach is to be familiar with her employees’ goals and to build on their strengths. She meets every team member individually once a week to talk about the current tasks and challenges. Hofer emphasises that defining the framework for her employees and responding to their individual needs also requires a manager who is able to reflect on their own behaviour. “Building trust and thereby ensuring that your management can rise to the current and future challenges requires constant reflection and scrutiny of your own behaviour. For me, this is key for being able to act confidently even in unforeseen situations”, she says.

Taking time to unwind brings out the best in yourself

Over time, the 40-year-old has learned that taking a step back from everyday working life is important for self-reflection. “Early in my career, I didn’t pay much attention to maintaining a healthy work-life balance. Now I want to lead by example and show my employees that deliberately taking time to unwind is important if you want to bring your skills to the table and perform at your best”, says Hofer. To get away, Hofer likes to spend her weekends hiking, cycling and practising yoga in the mountains of Upper Austria where she grew up. Union Investment is increasingly creating opportunities such as working remotely, offering employees greater flexibility. Hofer sees this as a clear reflection of confidence in the employees, stating, “I also have the impression that the employees know this and value it.”

Early in my career, I didn’t pay much attention to maintaining a healthy work-life balance. Now I want to lead by example and show my employees that deliberately taking time to unwind is important if you want to bring your skills to the table and perform at your best.

Sandra Hofer

Head of Institutional Business in Austria

When asked whether deciding against a career in hotel management was the right decision, Hofer laughs and says, “I can’t say which challenges I would have taken on in that industry, but looking back, I’m happy with what I have experienced so far and the people I have met along the way.”

It is important to have a clear goal and to communicate it with confidence.

Annette Bierweiler

Senior Business Expert in Portfolio Management

Between martial arts and capital

Even during her graduate studies in Romance Studies and Business Administration, Bierweiler already knew she wanted to work in portfolio management one day. She is now using her experience to encourage other women in their careers in the finance sector.

Upon meeting Annette Bierweiler, one thing is immediately striking: her boundless energy. Calm and relaxed, she reminisces about the early challenges she faced as a woman in portfolio management. “During my time at university, whenever I mentioned that I really wanted to be a portfolio manager, I was treated like I was from another planet.” However, it all changed when she joined Union Investment in 1998 as a Portfolio Associate. Now, she is one of only a few women who have established themselves as fund managers in portfolio management at Union Investment, and recently she was even the first woman in her segment to be promoted to Senior Business Expert Portfolio Manager.

To unwind, I practice karate and I also love kickboxing. Kickboxing in particular requires stamina and flexibility to ensure accuracy — just like achieving professional goals.

Annette Bierweiler

Senior Business Expert in Portfolio Management

The drive which has fuelled her career also powers the mother-of-three outside work. “To unwind, I practice karate and I also love kickboxing. Kickboxing in particular requires stamina and flexibility to ensure accuracy — just like achieving professional goals”, says the portfolio manager.

Career start-up capital

She has constantly striven to achieve her goals, and now the 48-year-old is supporting other women in their careers in portfolio management — a sector which remains dominated by men. “Young professional women in particular need support to build a network. Back then, my mentor was extremely helpful.” Bierweiler, now a mentor herself, is stepping in to help young women prepare for a future in portfolio management at Union Investment.

It is important to have a clear goal and to communicate it with confidence. If you know your goals and can articulate them clearly, then Union Investment can support you.

Annette Bierweiler

Senior Business Expert in Portfolio Management

Annette Bierweiler

Her approach: utilising gender differences to a professional advantage. “We have made some progress since I was starting out. It is no longer about absorbing a typically masculine skill set. Instead, women are allowed to develop their own strengths. This is a big step towards building diverse teams, which is something we have just started working toward in portfolio management”, she emphasises. Her advice for young women professionals at the company: “It is important to have a clear goal and to communicate it with confidence. If you know your goals and can articulate them clearly, then Union Investment can support you.” This is something she values greatly in her employer.

Laying the foundation for the future

Just like the great responsibility and versatility in her job, Bierweiler states, “My aim is to lay the foundation for the future. For me, this includes achieving our clients’ investment objectives. This means I must get to know every client well, as this is what sets my job apart from the rest.” Over time, she has developed long-term relationships with her clients which are based on an established bond of trust. “A portfolio manager has to be the right match for each client. This remains very important in financial investments.”

For Annette Bierweiler, it is a basic requirement that her employer’s values tally with her personal values. For example, she says that Union Investment supports her in structuring her life to best suit her needs. “Working remotely is not to be taken for granted and is built on mutual trust. Ultimately, it isn’t easy to set clear boundaries”, she says, describing how she would like to adequately plan time with her three children while staying abreast of business which concerns her products, even in her leisure time. And then, of course, she has personal goals for herself. “I would like to do my black belt in karate. Exercise is a source of energy for me.” Energy which she can use profitably to the benefit of her children, her mentees and her clients.

Making tomorrow possible

In a changing world, we are boldly taking new paths. You can read about the successes this has brought us over the past year in the statutory section of our Company Report 2019. Download it here:

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