The 2020s are marked by progressive acceleration, which is exerting massive pressure for change on the financial markets as well. Experts spoke about the opportunities and risks of the Great Progression for professional investors last week at the 34th FERI Conference. The focus was on key megatrends that have enormous disruptive potential, but also offer attractive investment opportunities. "Climate change and digitalisation are the most important drivers of the upcoming upheavals. These megatrends are highly progressive and virtually irreversible. Investors therefore need to get as comprehensive a picture as possible of the consequences," said Dr Heinz-Werner Rapp, board member and chief investment officer at FERI. The topic of sustainability, for example, is a "game changer" that will significantly change the capital investment and compliance of institutional investors in the coming years. Technological innovations such as crypto assets are also developing a progressive dynamic that is challenging the capital markets.
The topic of sustainability is playing an increasingly important role in the selection and evaluation of illiquid investments for institutional investors, as Martina Nitschke, authorised signatory and head of the investment department at Verwaltungsgesellschaft für Versorgungswerke mbH (VGV), explained in her presentation. For example, she said, the investment process has steadily evolved in recent years from exclusion criteria to the inclusion of ESG objectives in manager selection to more in-depth ESG due diligence and the definition of scoring models. "The issue of sustainability is more difficult to implement in alternative asset classes than in traditional investments. This makes it all the more important here to pay increased attention to measuring and monitoring the interrelationships of effects. In doing so, we draw on the expertise of selected data providers and service providers for reporting," said Nitschke. "To achieve high investment ratios in the alternative space, we are taking advantage of the latitude provided by the Investment Ordinance and regulation to target risk capital where it will make the greatest risk-adjusted contribution to meeting our objectives. The illiquidity of alternative asset classes can actually be an advantage in this regard, as short-term market movements do not have an immediate impact due to longer reporting periods," Nitschke added.
Rudolf Siebel, managing director of the German fund association BVI, reported on crypto-assets as a new playing field for investors. Unnoticed by the general public, Germany has implemented one of the most progressive legislations in the field of crypto-assets, he said. "Institutional investors can already invest at least 20 percent of their investments in crypto-assets. This does not only mean cryptocurrencies, but also investments based on the tokenization of assets," Siebel explained. He added that the digitization of assets in a blockchain infrastructure will radically change capital markets in the future. "The ease and speed with which digital assets can be traded may also make the function of some service providers in settlement redundant, which may lead to disruptive developments in the financial industry in the future," stressed Marcus Burkert, Managing Director Institutional Clients at FERI Trust.