The Investment World in 1968
When Universal-Investment was learning to walk, the world in Germany was a different place. Groundbreaking innovations were taking place, not only in politics and society but also in the financial market.
In 1968, gold was being freely traded again on the stock exchange for the first time since 1944, signalling the end of the "Bretton-Woods-System" of fixed exchange rates five years later. In Germany, the Exchange Expert Commission (Börsensachverständigenkommission) was founded and has been advising the Ministry of Finance on questions of capital market policy ever since.
The district savings bank Kreissparkasse Tübingen introduced a major innovation with the installation of Germany’s first ATM, although it was reserved for a select group of clients. Anyone wishing to withdraw cash from the machine needed a safe key and their own punch card for every 100-deutschmark note withdrawn.
Taken for granted today, not all that long ago these investment vehicles were visionary, not to say revolutionary.
First special institutional funds
Of course, 1968 was a special year for us for another reason. For the first time, it was possible to set up special institutional funds for institutional investors, known at that time as Individualfonds.
Previously, the only investment vehicles available to this investor group were mutual funds or direct investments, but these had long failed to address the specific needs of insurance companies, pension funds and pension plans.
In its annual report, the Bundesbank wrote the following:
"Besides rationalising the management of assets and the cost savings accompanying this, the purpose of these special institutional funds lies primarily in the value growth companies hope to generate by having securities professionally managed by asset management companies."
The concept proved a success: from the total of 13 special institutional funds in 1968 with around 150 million deutschmarks in managed assets, the volume of these funds had mushroomed to almost €1.6 trillion by the end of 2017.
Everything done by hand
In 1968, most of the routine work of a fund service provider was still done by hand. Vouchers and account statements came by post and were manually prepared for entry into the accounts. Stock and bond prices were taken from newspapers, and each statement of assets was prepared in ink. After the entries were made, the funds had to be reconciled with the aid of calculators. With so much work to do, no wonder there was hardly any time for a break, and even 50 years ago it was not unusual to find a colleague hard at work during lunchtime.
A subject of brisk discussion in 1968 was a draft law to prevent “dubious offerings” from foreign investment companies in Germany. These included investments in umbrella funds and short sales, which were commonly used, particularly in American investment funds – such practices were out of bounds for German asset managers. The Law on the Distribution of Foreign Investment Shares entered into force in 1969.
A new era
As a key element of institutional investment, special institutional funds as we know them today were still quite young in those days. In 1968, they were just taking their first cautious steps, guided as it were by the newly founded Universal-Investment. Taken for granted today, not all that long ago these investment vehicles were visionary, not to say revolutionary.