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Investments
Our portfolio of assets under own management improved to EUR 41.8 billion, a level considerably higher than at the end of the previous year (31 December 2015: EUR 39.3 billion). This growth was due in part to positive exchange rate effects – primarily associated with the strong US dollar – as well as increased hidden reserves in the areas of listed equities and private equity and, above all, to a gratifyingly positive operating cash flow.
In response to the challenging interest rate environment we adjusted the allocation of our investments to the individual classes of securities in the year under review such that we further enlarged our holding of fixed-income securities rated BBB or lower while at the same time increasing the proportion of government bonds in our portfolio. In this way we can achieve increased liquidity of the portfolio and generate continued stable returns, while maintaining the overall risk level of our fixed-income portfolio virtually unchanged. We also expanded the share of the portfolio attributable to investments in emerging markets. In addition, we moved to further enlarge our portfolio of listed equities in view of more attractive purchase prices. Another step that we took as early as the first quarter was the streamlining of our private equity portfolio through the sale of older exposures. We also moved to further increase slightly the share attributable to real estate as part of the strategic expansion of this asset category. In all other asset classes we made only minimal changes in the context of regular portfolio maintenance.
The portfolio of fixed-income securities excluding short-term assets rose to EUR 35.5 billion (EUR 33.6 billion). Hidden reserves for available-for-sale fixed-income securities, which are allocable to shareholders’ equity, totalled EUR 728.2 million (EUR 635.6 million). This reflects the yield decreases observed in the course of the reporting period, especially in the area of EUR- and GBP-denominated sovereign bonds, and above all lower risk premiums on corporate bonds. As to the quality of the bonds – measured in terms of rating categories –, the proportion of securities rated “A” or better remained on a virtually unchanged high level as at year-end at 77.6% (79.8%).
Holdings of alternative investment funds increased appreciably. As at 31 December 2016 an amount of EUR 722.4 million (EUR 781.5 million) was invested in private equity funds; a further EUR 750.7 million (EUR 678.8 million) was attributable predominantly to investments in high-yield bonds and loans. In addition, altogether EUR 390.7 million (EUR 371.3 million) was invested in structured real estate investments. The uncalled capital with respect to the aforementioned alternative investments totalled EUR 1,096.4 million (EUR 837.1 million).
As already mentioned above, we were again able to somewhat increase our real estate allocation in the course of the year. Two properties were acquired in the United States for this purpose; further projects are presently under review, and the real estate allocation should therefore keep rising steadily as planned. It currently stands at 4.6% (4.4%).
At the end of the year under review we held a total amount of EUR 1.7 billion (EUR 1.9 billion) in short-term investments and cash. Funds withheld amounted to EUR 11.8 billion (EUR 14.0 billion).