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Real Assets, SRI and German Renewable Energy Expertise

By Markus Hill, Independent Asset Management Consultant

(Published only in German, www.finanzen.net)

“Too much analysis leads to paralysis” versus “carelessly compiled”. Investors are on the lookout for

interesting investment possibilities. Product providers wish to sell products or services. Real assets, as a

class of investment, appear to be currently in great demand whereby the fields of discussion between

investors and providers are numerous: investment segment, product package, management quality, etc.

An apparently simple clear-cut constellation which might give rise to the question: Are there sometimes

investment possibilities which do not appear so easily on the radar screens of institutional investors?

Investors – Stumbling Blocks in Product Selection

Many investors such as, for example, Family Offices, foundations and insurances are currently working

increasingly in the development of product selection procedures in the real assets sector. Work is being

undertaken both internally and externally on processes to recognize and evaluate potentially suitable

investments at an early stage. One sector here is the sector of renewable energy. Examples are solar

energy, wind power, and bio fuels. Similar to the sector of forestry investments, specialized know-how

is often required in this particular investment sector which goes beyond the knowledge necessary for

merely evaluating payment flow. Insurance questions, selection of operators, location risks, etc. – all of

these questions which go beyond the purely financial aspects and are more in line with the processes in

the field of project financing (core sector: risk analysis). An additional field in which expertise is

required is that of product packaging: examples here are special funds, closed funds, bonds, direct

participation in investment, establishment of own companies.

The current situation regarding the issue of bonds is currently made even more complex by the basic

regulatory conditions (AIFM guideline, etc.). Investment companies such as Universal Investment,

DWS or Union Investment, for example, regard the sector of closed funds with great interest as a result

of the additional business potential. For investors (and also for project initiators) the question arises:

What are the core criteria for the selection of the right investment company for the renewable project?

Special Project Initiators – the “invisible” Market

The search for direct investments represents a special sector in this respect for new project initiators.

This is often optional in connection with the search for the suitable project wrapper. On the one hand in

the case of project initiators who have already successfully placed projects and on the other hand project

initiators who possess the necessary know-how but who, as a result of the bottleneck factor in

“communication” scarcely come to the attention of institutional investors. Structures which go more in

the direction of venture capital and private equity or, respectively, direct investments (e.g. in the case of

energy suppliers) than in that of the “truly classical” asset management industry.

There is a widely varied landscape of project initiators, service providers and consultants especially in

the field of renewable energy: specialist expertise which is also greatly utilized abroad. Companies

which provide special measurement technologies, experts in projecting in the fields of solar energy,

wind energy and bio fuels who frequently search “laboriously” for contacts to suitable investors.

Possible reasons: in part the regulations for investors (limitations on direct investment, risk

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management), but often also due to a lack of selection expertise among investors as a result of the

dynamics in development in the market for renewable energy.

Digression: Foreign Investors

In discussions with foreign investors in the field of renewable energy it becomes evident that

internationally the marketing activities of the German companies in the sector of renewable energy

(federal “Desertec” project, etc.) are regarded with great interest. Foreign trade chambers, domestic

chambers of industry and commerce and embassies – many of these multipliers are undertaking initial

steps towards creating a network of providers and investors. The German middle class enjoys an

excellent reputation abroad and there is open mindedness in regard to investment possibilities (fund

solutions and direct investments). There is, however, a “bottleneck” in communication: How does the

foreign investor get in touch with the German provider? Or, for example, how does an Indian Family

Office learn about the competence of the specialist German provider in the field of renewable energy?

How does an Australian private equity fund learn about a “renewable boutique” in Germany which is in

search of seed money?

Potential – Outlook for German Renewable Expertise

The German middle class, which is comparable in part with the segment of “funds boutiques”

(ownership structure, specialization) shows how this is done: solid professional competence is required

both nationally and internationally. In the area of renewable energy, German producers and service

providers are in great demand as partners. Whether as candidates for direct investment or as modules in

a finance project (funds, bonds, etc.), these companies are observed with great interest by funds

managers, private and institutional investors and also often by state investors (infrastructure). Special

companies providing support for providers (e.g., placement consultants, investment companies) already

exist or are currently in the course of being developed. On the investor’s side (development of

specialized departments) competence is being developed and the consultant market in the field of

product selection is also developing. If, in addition, this is complemented by the field for the “invisible

market” (bottleneck communication) then we can continue to hope that the booming German renewable

landscape will continue unabated!

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