e u r o p e a n f u n d m a n a g e r may/june 2008 >

As the military strategistClausewitz remarks: “Afterthe first shot all plans may

have to be revised.” This welldescribes a phenomenon observedafter a foreign asset manager entersthe German market. Germany is oneof the choicest markets in Europeand is at the top of the list for many

foreign investors of fund productsand alternative investments. Itseems that some companies havedone their homework andpositioned themselves successfully– profitably or not. The attitudes ofcertain other fund companies canoften make you wonder. Withoutnaming these, one frequently hasthe impression that the wheel isinvented all over again and again.

Since 2001 I have been in contactand discourse with variousrepresentatives of foreign investmentfirms with a focus on sales andbusiness development – dependantand independent offerors (fundboutiques). Questions invariably arise

concerning market entrance,products, target groups and otherregulating factors. Bused on personalexperience in practical sales with aforeign firm and branch know-how, itwas often possible to “support” oneanother (even including theexperiences with successful and“lame” investment products). It is

also helpful to talk to the investor sidewhen writing an article since theyvalue such a dialogue.

Some points that constantly ariseseem worth thinking about. Without aclaim to all-inclusiveness, there aresubject areas in market entrancingwhich either bring opportunities orprove to be stumbling blocks. Here,then, are some brief and “unfiltered”factors discussed during the last

weeks, and a lot of feedback on thesubject from experts in the field. It isinteresting to note that most of theseexperts wish not to be quoted whenit comes to the points mentioned –and “confidential means confidential”is an iron rule with me.

Does too much analysis

lead to paralysis?

Many foreign firms resort to variousmarket research sources as theiranalysis base. These sources arefirms that work in Germany, and useforeign sources of information orother openly accessible material.However, even the best figures and

questionnaires are, in my opinion, nosubstitute for a direct talk withinvestors. It is remarkable that thedecision to enter a market is oftenbased purely on figures. One wantsa certain piece of the cake withoutconsidering certain obstacles ordraws the wrong conclusions. Puremarketing principles can oftenconflict with practical, hands-onsales thinking.

Sales targets –wishful thinking?

Based on personal experience andthat of many top level salesmanagers, one can conclude that“dream” figures and bare realitymostly lie far apart. Being well-knownin a foreign market says little aboutthe prospects for success on theGerman market. German competitionis strong and there is much “captivebusiness” among the branch leadersin Germany. A foreign company orfund boutique should thoroughlyresearch its chances before enteringthe arena. A failed attempt can leadnot only to financial losses but also toa loss of reputation with investors.Unrealistic sales prognosis combinedwith a “lame” product are certain tolead to frustration for a fund companyand the responsible sales managersin Germany. An example would be

Letter fromGermany

34 > efm 36 | may/june 2008

Even the best figures and questionnaires are, in myopinion, no substitute for a direct talk with investors. It is remarkable that the decision to enter a market isoften based purely on figures.

> european focus

Foreign asset managers entering the German

market often seem to be reinventing the wheel,

observes asset management consultant Markus

Hill. Based on his conversations with investors

and industry experts, he shares some thoughts

on factors for success and stumbling blocks.

the 333rd global investment fundfound in the third quarter of the so-called hit lists.

Another interesting phenomenon:the firm that discovers – afterentering the market – that legalregulations limit its sales potential inGermany because one wanted tosave the costs of initial legalcounseling. This leads to unendingmail and telephone costs betweenthe sales force in Germany and theforeign head office. In essence,country head Germany: “I need Xand Y and Y if I want sales successin Germany”. Head office: “Youwon’t get X and Y until you’veachieved sales figures A and B.”How often does one speak of“strategic aims” when one merelymeans the “fast ticket”?

Measures – how much helps a lot?

One frequent pattern consists ofinadequate market research pairedwith a lack of commitment. Flying infrom abroad once a week to dobusiness in Germany! Firms whoseproducts can preferably be found inthe first quartile are often on the listsof recommendation of every well-known consultant and may havesome success although they fall shortof their potentials by this. Many otherfirms have had bad experience withsuch methods. Even top productsdon’t sell themselves. Institutions orsemi-institutional clients (fund offunds managers etc.) value personalcontacts to balance and complimentprofessional bulletins and data banks.

Roadshows can be successful ifthe product quality, infrastructure(processing), and sales organizationare all in place. Frequent invitations tosuch events (product choice) haveconfronted me with a wide spectrumof quality. Then there is themanagement of expectations. Thefast Euro is rare. As a rule, it is a longand hard road to fortune. Entering theretail market often calls for largepersonnel force; market transparencyis high with asset managementproducts (mutual funds) but themanagement choice of institutionalinvestors, (see consultants). Germany

also has enough foreign offerors whosurpass each other in productperformance – the ultimatecatchword! No amount of calls to theinvestors can compensate foraverage or under-averageperformance in the long run. In thearea of marketing and public relationsit is “the pig stays a pig even with agolden collar”, too.

Opportunities for

Foreign Asset Managers

It was remarkable how ofteninvestors and top sales managersemphasized the importance ofpersonnel. How do I find good salespeople? How do I go about findinggood services for marketing, sales,and public relations? Many foreignfirms have had good experience herebut have also paid a price for learning.The “purely salesman” is rarely theman with a concept or a vision. Oneis looking for the “wide-spectrum”abilities – the all-rounder with detailedproduct know-how. The institutionalclient in Germany also values the“solution provider”. A country heador even an only temporary externalservice is expected to be an idealbusiness developer: clear goalscombined with long-term profitability– i.e. “tickets”.

You may be halfway down theroad with good personnel, realisticand practice-orientated marketresearch, and an excellent product.The other half should, however, beemphasized again and again.Investment in asset managementproducts is often a long term venture.The stress of thinking in terms ofbasis points shows this aspect. Itwould be of great value if thisthinking could also prevail in theworking of the market. Hit-and-runmarket entrances are counter-productive. Foreign fund boutiques orowner-managed firms are living proofof this philosophy. Perhaps manyforeign investment “salesmen” cancast a more friendly eye on the manysuccessful domestic asset managerswho have opted for a combination ofqualified personnel and excellentproducts, i.e., investment concepts

and sales practices in accordancewith the German saying “A steadydrip can split a stone”.

Markus Hill is an independent assetmanagement consultant. Hisprofessional background includes,among others, the SEB Bank andCredit Suisse Management. Hisactivities include management ofmandates (for example: Arcturus/BGFunds) in the areas of sales,marketing, and public relations. Heis also active in the areas selectingthemes in the special areas of targetfunds with a multi-managementaspect based on special tasks withspecial themes of fund boutiquesand mutual funds for institutionalinvestors. He is further activelyengaged in the cooperation with themarket-leading Private Label FundsMaster KAG in Germany (UniversalInvestment). He is an initiator ofsuch authoritative studies on thefirst all-German ConsultantQuestionnnaire by RCP-Telos etc.Various publications here and abroadunderscore his wide-rangingactivities as branch networker.

Contact:

Markus HillSchäfergasse 42 - 4460313 Frankfurtemail: markus.hill.cologne@t-online.de

Being well-known in a foreign market says little about theprospects for success on the German market.

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