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Consultant Markus Hill on how foreign asset management companies can

enter the German market – services, costs and negotiation Interview – Dennis Drenjovski / Markus Hill (Independent Asset Management Consultant)

11 February 2014, ucitsindex.com

“Immanuel Kant once noted that "experience is understanding awareness", but an interesting question

is whether experience always has a positive influence on the actions of players in the market, or

whether, under certain circumstances, they ignore experience. The German investment market has

become increasingly attractive for foreign asset managers in the last few years. Some of the driving

forces behind this could be; the ‘UCITS theme' reducing administrative and regulatory hindrances;

the professionalisation of investors there, and the development of an independent service provider

industry, with marketing, PR, placement agents, and so on”. (Markus Hill, 2012)

Ucitsindex.com - Interview with Markus Hill, MH Services

Markus Hill previously worked for SEB Bank and Credit Suisse Asset Management amongst others

before he founded MH Services in 2005. He took this step as he realized that few asset managers had

an accurate understanding of the potential of the German market in general and, more importantly, for

their own products. As only a few managers had a cost-effective, optimal approach to capturing their

sales potential in Germany he started to offer consulting services for fund management companies. We

sat down with him to talk about the latest trends in the regulated fund market in Germany and the rest

of the world.

Ucitsindex.com: Mr. Hill, recently you attended one of the most well-known industry events of

the German fund industry, the fund conference in Mannheim. What were your impressions

regarding the topic UCITS and mutual funds?

Hill: Many things in the fund industry often seem like a repeat. Besides German providers of mutual

funds also many foreign companies attended the conference in Mannheim . The procedure of foreign

vendors who want to enter the German market (" Newcits " theme , etc. ) often repeats itself. Events

are used more or less as fact finding missions, very often not in a very systematic way. Nevertheless it

can be worthwhile to have initial conversations at such events.

Ucitsindex.com: Initial conversations are one thing. But to what extend can conferences like the

one in Mannheim help to tackle the German market?

Hill : In short - by a good conversation you will not get more stupid in general . One finding may be

that semi-institutional and institutional investors in Germany are still looking for excellent managers.

The product wrapper may be an issue with certain approaches, but it does not have to. I am often

approached by UCITS-platforms from abroad. In some cases they have excellent managers on board,

but they market them manager rather opportunistically. Last year at the Fund Forum International in

Monaco and the Family Office Forum in Zurich, I had different selectors on my panels on the topics of

fund selection, asset allocation and due diligence. It became apparent that across the board institutional

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consultants, fund of funds managers as well as managers from family offices follow excellent

strategies (“Newcits”) with interest. When attending different events for investors in Frankfurt , there

is always the same tendency: Selectors like to share thoughts with selectors – without being disturbed

or irritated by mere sales issues.

Ucitsindex.com: Looking at the big picture and not only the German market: which subject or

trend creates interest at the moment when talking to market participants?

Hill: Many products and services in the asset management industry often seem interchangeable. At

first glance the only clear differentiator seems to be costs and the potential service level delivered. In

the field of third party services, the increased regulatory requirements the flood of information start to

overwhelm quite a few market participants. How do I find the right prime broker ? Where do I

structure my funds? Who is the right administrator for my funds – national or international? UCITS–

Platform or should I create my own fund? With whom should I cooperate? Which services buyed are

too expensive? How can you re-negotiate your contracts? These are all typical questions for market

participants who are still looking for potential optimization of cost and service structures.

Ucitsindex.com: Are there any solutions available in the market to answer those questions? One

would think that asset managers are well aware of these issues and can answer them themselves.

Hill: There is often a lack of awareness or a lack of internal resources to handle those issues. Often

other things are being prioritized. I experienced this first hand with many different projects: it appears

as a form of a "silver bullet " when you deliberately approach service providers to compare fees and

try to negotiate terms. To have an independent service provider do this in the interest of the company

that searches for such a service can be a big advantage. In the area of manager selection or when

approaching investors for new products or services factors such as independence, market knowledge ,

database and professional network add benefits (”Sounding Board"). The market seems to offer a

multitude of niche solutions: costs should be reduced, it should be re-negotiated or the customer's

anonymity should be guaranteed to strengthen his power to negotiate good terms (“bargaining

power”). Clients should watch out for organizations or persons with trust to use them as some kind of

“asset management diplomat”. The big issue in asset management industry can be to identify key

players in this kind of communication service – whether it is an organization or a freelancer, one size

does not fit all clients. This can be compared to issues like: How to find a good lawyer? How to

indentify a good family office for a HNWI?

Ucitsindex.com: What are the benefits for asset managers to hire such service providers?

Hill: My own experience in customized projects is that as an independent third party you can negotiate

very professionally in the customer's interest. Whether you want to initiate MOUs or whether you

want to negotiate prices - the product or service provider often offers more advantageous deals to

independent market professionals (consultants , family offices, etc. professional price negotiation

agencies). There are other key factors in the search process when the asset manager directly negotiates

with providers: Often a direct contact does not exist, often they are too small to obtain a favorable

price or they often are offered a higher price at the beginning. Lots of service providers seem to know

whether their prospective customers do know what a competive pricing is or not . One additional

factor to think about is: many prospects of potential service providers may not like to have follow-up

contact with the respective sales people. In a nut shell: A specialized service provider is assumed to

have more market-knowledge, therefore for him to get the best price in the initial offer seems to be

more likely!

(additional interviews – page 3)

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Additional information / interviews:

Family Offices, Asset Allocation, Due Diligence & Networking (Interview)

Germany: “Endowment Funds Aren’t Rocket Science” (INTERVIEW)

/interview-mh-deutscheoppenheimfamilyoffice072013

„As a fund industry location and with its interesting investors, Germany is attractive to

foreigners!”(Interview)

International Expansion & Market Entry Germany: Initial Thoughts

Feedback, additional thoughts, experience or any kind of dialouge on such context is most

welcome, please contact: info@markus-hill.com or Mary Daute (Asst. Manager)

phone: + 49 17 66 33 66 094

Markus Hill

Markus Hill (MSc in Economics) is an independent asset management consultant based in Frankfurt, Germany Professional

experience includes SEB Bank and Credit Suisse Asset Management. In addition, he worked as head of sales and PR for a

German fund boutique. Since 2005 he specialized in the management of mandates, sales, marketing, and PR (consulting,

"introducing"). Markus is also involved in selecting themes in the specialist areas of target funds with a multi-management

aspect, fund boutiques and mutual funds for institutional investors (product scouting, fund selection). Furthermore he is

actively engaged in cooperation with the market-leading Private Label Funds/Master KAG in Germany (Universal-

Investment) promoting the idea of independent asset management and was the Co-Initiator of the first all-German Consultant

survey in 2005 and the first "UCITS-survey" in 2003. Market entry into Germany, behavior of fund selectors and fund

providers in German asset management industry are often discussed by him, e.g. in his asset-management-publication MH-

Focus.Through many articles, columns and presentations (national and international) he has become a highly recognized

expert in the German asset management industry. "Industry multiplicator" is a term often used by journalists and clients to

describe his style and personality.

(Markus Hill/ MH Services assigned in the role of Media Partner for: UCITS Alternatives Conference in Zürich,

September 2011)

Markus Hill MH Services

email: info@markus-hill.com

website: www.markus-hill.com

phone: 0049 (0) 69 280 714 mobile: 0049 (0) 163 4616 179