Published by Gbaf News
Posted on September 13, 2018
6 min readLast updated: January 21, 2026
Allianz Global Investors (“AllianzGI“) is considered a pioneer in the development of risk management overlay (RMO), an integrated approach that offers institutional investors risk mitigation while preserving the upside.
The RMO manager uses derivatives to manage the market risk of assets, which allows the alpha generation of the asset manager’s underlying sub-fund to remain unaffected. Risk management solutions are especially in demand among pension funds, family offices, foundations and corporate clients.
Assets under overlay (AuO) have grown steadily since 2006 and reached approximately EUR 48bn as of March 2018. This makes AllianzGI the market leader by means of AuO in risk management overlay in Germany. The team also has mandates in Switzerland, France and the Netherlands – with ambitions for further internationalisation. The recent acquisition of a large EUR 10.5bn mandate in France, despite wide-spread competition, shows AllianzGI is on the right track. The rating agency Scope has performed an Investment Team Rating based on extensive interviews and comprehensive documentation.
The main results:
The two senior managers, Dr. Henrik Büscher and Prof. Dr. Thomas Stephan, have worked in the multi-asset sector for more than 20 years. Together they have been instrumental in the shaping and continuous development of the RMO´s current range of services for institutional clients.
The twelve-strong RMO team has an average of 12 years of relevant experience each. An above-average proportion five employees hold a Ph.D. –, which Scope considers to be excellent. The high academic standards of the RMO team are further reflected via numerous, relevant supplementary qualifications like the CFA and university degrees.
Central to the investment process is the integrated approach to managing market risks by accounting for pro- and counter-cyclical components to reduce opportunity costs. The overlay is opportunity-oriented, meaning there are no predefined lower value limits. Instead it provides the flexibility to exploit opportunities. The investment and decision-making processes are predominantly rules-based.
The goal is to consistently minimise downside risks in the short term and to achieve robust growth in long term potential for returns. Specifically, the strategy seeks to mitigate downside risks by up to 50% against the benchmark over a 12-month rolling basis in very weak markets, while meeting or exceeding the expected return of the benchmark over a full market cycle.
The customised, highly flexible approach allows the RMO team to incorporate the client’s specific requirements and investment policies. In Scope’s opinion, AllianzGI can fully provide the necessary staff for this purpose. Approximately 30 mandates are assigned throughout the RMO team, resulting in each lead portfolio manager being responsible for fewer than three mandates which represents excellent value and shows significant potential for economies of scale.
Performance was strong in 2017: the realised gross return of the composite outperformed the corresponding benchmark by 94 bps, with a tracking error of just 0.32%. The risk-adjusted return (Sharpe ratio) for 2017 was 8% above the benchmark.
Scope’s impression of the performance in 2008 is very positive, as markets at the time were exceedingly volatile and heavy losses were suffered in the wake of the financial crisis. While the benchmark over the period fell by -13.2%, the composite limited losses to -2.4% before costs. (Note: in the years prior to 2017, the DMAP composite was used as an indicator of the RMO strategy’s performance. The results cannot be compared directly, but still provide a good indication.)
Allianz Global Investors (“AllianzGI“) is considered a pioneer in the development of risk management overlay (RMO), an integrated approach that offers institutional investors risk mitigation while preserving the upside.
The RMO manager uses derivatives to manage the market risk of assets, which allows the alpha generation of the asset manager’s underlying sub-fund to remain unaffected. Risk management solutions are especially in demand among pension funds, family offices, foundations and corporate clients.
Assets under overlay (AuO) have grown steadily since 2006 and reached approximately EUR 48bn as of March 2018. This makes AllianzGI the market leader by means of AuO in risk management overlay in Germany. The team also has mandates in Switzerland, France and the Netherlands – with ambitions for further internationalisation. The recent acquisition of a large EUR 10.5bn mandate in France, despite wide-spread competition, shows AllianzGI is on the right track. The rating agency Scope has performed an Investment Team Rating based on extensive interviews and comprehensive documentation.
The main results:
The two senior managers, Dr. Henrik Büscher and Prof. Dr. Thomas Stephan, have worked in the multi-asset sector for more than 20 years. Together they have been instrumental in the shaping and continuous development of the RMO´s current range of services for institutional clients.
The twelve-strong RMO team has an average of 12 years of relevant experience each. An above-average proportion five employees hold a Ph.D. –, which Scope considers to be excellent. The high academic standards of the RMO team are further reflected via numerous, relevant supplementary qualifications like the CFA and university degrees.
Central to the investment process is the integrated approach to managing market risks by accounting for pro- and counter-cyclical components to reduce opportunity costs. The overlay is opportunity-oriented, meaning there are no predefined lower value limits. Instead it provides the flexibility to exploit opportunities. The investment and decision-making processes are predominantly rules-based.
The goal is to consistently minimise downside risks in the short term and to achieve robust growth in long term potential for returns. Specifically, the strategy seeks to mitigate downside risks by up to 50% against the benchmark over a 12-month rolling basis in very weak markets, while meeting or exceeding the expected return of the benchmark over a full market cycle.
The customised, highly flexible approach allows the RMO team to incorporate the client’s specific requirements and investment policies. In Scope’s opinion, AllianzGI can fully provide the necessary staff for this purpose. Approximately 30 mandates are assigned throughout the RMO team, resulting in each lead portfolio manager being responsible for fewer than three mandates which represents excellent value and shows significant potential for economies of scale.
Performance was strong in 2017: the realised gross return of the composite outperformed the corresponding benchmark by 94 bps, with a tracking error of just 0.32%. The risk-adjusted return (Sharpe ratio) for 2017 was 8% above the benchmark.
Scope’s impression of the performance in 2008 is very positive, as markets at the time were exceedingly volatile and heavy losses were suffered in the wake of the financial crisis. While the benchmark over the period fell by -13.2%, the composite limited losses to -2.4% before costs. (Note: in the years prior to 2017, the DMAP composite was used as an indicator of the RMO strategy’s performance. The results cannot be compared directly, but still provide a good indication.)
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