Formal changeover due to Brexit.
Fiduciary services continued. Strong demand due to the global outsourcing trend and the corona crisis. Formal changeover due to Brexit.
FRANKFURT AM MAIN, November 12, 2020 – In order to be able to continuously offer all investment services even after a Brexit, Willis Towers Watson has founded Willis Towers Watson Investments GmbH. The new company will start operating on January 1st and will seamlessly continue the services already provided to customers by Towers Watson Limited, Frankfurt am Main branch.
“The demand for fiduciary management in particular has grown rapidly in recent years. We are strongly positioned here because we can offer our customers both profound knowledge of the German pension investment environment and the capabilities of an international investment team with over 1,000 employees worldwide, including more than 100 in research. In addition, by establishing a unit regulated in Germany, we are now benefiting from a direct link to the local supervisory authority with all the advantages of short communication and coordination channels, ”reports Nigel Cresswell, Head of Investments Germany at Willis Towers Watson.
Currently, Willis Towers Watson’s investment services in Germany are still carried out by the Towers Watson Limited Frankfurt branch. Due to the elimination of the EU-wide MIFID passport regulations following Brexit, Willis Towers Watson had already decided in 2018 to found a company regulated in Germany for the provision of financial services and applied for a corresponding permit from BaFin. This was in August 2020 acc. Section 32 (1) KWG granted.
Global trend towards outsourcing …
Both in Germany and around the world there is a growing trend towards outsourcing capital investments. In 2013, Fiduciary Management managed investments worth around US $ 941 billion worldwide; by 2020 it was already US $ 1.961 billion. Cresswell sees the reason for this primarily in a more challenging capital market and an increasingly complex regulatory environment: In order to achieve the necessary returns in the persistently low interest rate environment, pension funds, pension funds, CTAs, professional pension funds or foundations have to significantly restructure their portfolios. For asset classes that have proven themselves in the past, such as bonds, Willis Towers Watson predicts very low returns with high asymmetrical risk for the next few years. In order to continue to achieve the return targets, recommends Willis Towers Watson to invest more in alternatives and private markets. “This requires a significant strengthening of governance, closer and more dynamic control so that we can intervene quickly in the event of fluctuations in value, and extensive specialist knowledge. For many investors, it does not pay off to have this in-house – external purchasing is the most effective option here. “
In order to react to the international trend, Willis Towers Watson Investments GmbH will also act as a hub for investment services in other European countries.
… reinforced by the Corona crisis
“The Corona crisis is likely to cement the low interest rate environment even further,” estimates Cresswell. In response to the billions in monetary policy support to combat the crisis, the yield curve for top-rated European government bonds has flattened significantly into negative territory over the entire term. In order to still achieve the necessary returns, he believes that pension investors should make their portfolios much more diversified and sustainable than before. “Studies by Willis Towers Watson show that there is still a lot of room for improvement here,” says Cresswell. In addition, by intensifying governance, pension investors should increasingly focus on niche topics with attractive risk and return profiles and shorten their decision-making processes.
Background information on the Willis Towers Watson Investment Consulting portfolio in Germany:
The core offering is the development of strategic and tactical portfolio orientations in line with the funding goals as well as the selection and onboarding of suitable asset managers. Further offers include benchmark analyzes and the selection of custodian banks and depositaries as well as capital management companies (KVG). In this context, Willis Towers Watson is also realigning or restructuring entire portfolios and their investment infrastructure, which also includes the transition to the new target structure. Willis Towers Watson also takes over the complete capital investment in the sense of a full outsourcing (Fiduciary Management), which covers the entire range of services including risk controlling, reporting and manager monitoring in one outsourcing mandate.
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