European expansion.
Pittsburgh-based Federated, which has four offshore funds and $4 billion of assets under management, plans to make six new Dublin-domiciled funds available to customers of LVM-Versicherungen, a German insurance company, during the first quarter, said James F. Getz, who heads the fund company's trust, bank brokerage, and broker-dealer divisions.
"We're building a model here that we want to concentrate on for the next two years, and if the model works we'll expand it to France, Spain, Italy, and other European countries," he said.
The joint venture with LVM-Versicherungen was established in November 1998.
The six euro-denominated funds -- a European stock and bond portfolio, a European equity fund, a high-quality European bond portfolio, a high-quality international bond portfolio, an international non-European equity portfolio, and a short-term bond fund -- will be the first products sold through the alliance.
They will each be seeded with $30 million and managed by Federated's 40-member investment management team in New York, Mr. Getz said.
Mr. Getz said Federated chose LVM-Versicherungen because the insurer was not in the money management business and has a distribution network of 2,300 agents. Initially the products will be available only to LVM-Versicherungen's nearly three million insurance customers.
Fewer than 4% of the households in Germany own mutual funds, compared with 40% in the United States, Mr. Getz said. Germans have mostly been buying bank deposit-related products, he added, but that is changing because they are making the transition to investment products, as Americans did 15 years ago.
"There's a tremendous amount of opportunity to grow market share here," he said.
Indeed, Germany's mutual fund market had $240 billion of assets last year, a 79% spike from 1994, according to Cerulli Associates Inc., a Boston consulting firm.
Open-ended funds have grown at a compound annual rate of roughly 16% since 1994, Cerulli said.
By contrast, the U.S. mutual fund market tops $6 trillion.
Though the fund market in Germany is dominated by domestic banks, other U.S.-based fund companies such as Fidelity Investments and Pioneer Investment Management Inc., both of Boston, also have a presence there.
Pioneer, for example, began selling mutual funds in Germany in 1969.
It sells about 10 funds through financial intermediaries such as broker-dealers and banks, and it plans to launch a few others, a spokeswoman said.
Mr. Getz said Federated is also trying to gain a share of Germany's institutional market. The fund company has three wholesalers calling on large corporations and pension plans in Germany and has raised $1.1 billion of assets since January, Mr. Getz said.
"We're finding that the German people are very much interested in investing with U.S. money managers," he said.
