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Shortage Factor Performance, Communication, and Network “Our wealth is based on communication” (Matt White Ridley, author). This thought also holds true for success and failures in light of seed money search, including the area of bond management. Good content or good performance in connection with good communication and smart, systematic networking often serves as the basis for successful efforts to find initial investors for pension fund concepts. This situation is frequently met with astonishment after some fund initiators have to dismiss their project after long, unsuccessful placement efforts. Of course, things can be done differently. Feedback, additional thoughts, experience or any kind of dialogue on such context is most welcome; please contact [email protected] or Mary Daute (Asst. Manager). Phone: + 49 17 66 33 66 094
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Seed Money, Bond Management, and Private Label Funds
By Markus Hill, Independent Asset Management Consultant
(Published only in German, www.finanzen.net)
Shortage Factor Performance, Communication, and Network
“Our wealth is based on communication” (Matt White Ridley, author). This thought also
holds true for success and failures in light of seed money search, including the area of bond
management. Good content or good performance in connection with good communication and
smart, systematic networking often serves as the basis for successful efforts to find initial
investors for pension fund concepts. This situation is frequently met with astonishment after
some fund initiators have to dismiss their project after long, unsuccessful placement efforts.
Of course, things can be done differently.
Private Label Fund Launch: It’s not “Sorcery”!
Many pension fund managers do, in a systematic or unsystematic way, deem the contacting of
investment companies such as Universal Investment, IP Concpet, Alceda, or others as a first
step of action after the identification of seemingly unique fund concepts by the fund initiator
(fund advisor, asset manager, family office, etc.). What are typical conversation subjects in
this case? Fund concepts, investment regulations, possible fund naming, necessary contract
arrangements, sale strategies or conception (which is often a weak point), and many other
matters must be discussed in order to bring the project to life. The end result should be a clean
execution and an administration based on viable marketing concepts. An exemption to this is
the matter of seed money search: if there are no real “fans” of the pension fund expert’s
concept, all future considerations won’t make it passed the dry run stage. There is no fund.
The alternative scenario: The fund has few millions and eventually disappears with time.
Another frequent case: The concept is well thought out, the network is in place, the
communication is great, and the investors get on board quickly. Add a combination of good
resources in the right market phase, and you have a successful fund initiation.
Possible Stumbling Blocks and Factors of Success
Asking members of the German Association of Independent Asset Managers (“Verband
unabhängiger Vermögensverwalter Deutschland e.V.”) about their experience with fund
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initiation and the factor seed money search holds surprising results: the failure of projects
during initial investor search are due to a lack of sustainable investor contacts. A network for
so-called road shows was not in place. Equally self critical is the belated admission that one’s
own expertise did not uphold to the scrutinizing by different institutional investors, which
were considered for initial investment (“seeding”). Pension fund expertise was not, or at least
only partially, considered or the declared performance of other products and mandates of the
fund initiator did not convince. Conversely, successful seed money searchers have a good
network (developed internally through long-term relationships or through external support), a
well thought out communication strategy, and, naturally, excellent bond management
expertise alongside good performance allocation through initial seed investors. Experts of the
branch would say: Value rises to the surface sooner or later. For many fundraisers, this is a
long-term element for successful fund initiation.
Asset Management and Economics
In a sum: Average to “bad” bond managers often invest unnecessary amounts of time in fund
initiation projects, since communication and network typically can’t compensate these factors
in the long run. In retrospect, bad fund concepts cause large corporations in the area of asset
management to be punished by stagnating resources flow or runoff, despite initial seed money
cash. The due diligence of institutional seed money investors seems unforgiving and
economically rightful—high portfolio manger quality presents itself in form of long-lasting
good performance quality and thus serves the universal public. Why should these insights
from the mainstream retail and service provider industry not be valid in the asset management
field?
Strategic Shortage: Performance, Communication, Network
In the long run, the market entry of new fund concepts in the area of pension funds is
regulated by the investors’ side during seed money search. (Frequently raised question: What
is truly new in the asset management field?) Small to medium-sized, corporate-independent
fund advisors typically act as so-called hidden champions in the successful middle class area:
focus on core competence (pension fund expertise), long term and intensive engagement with
client needs (investors) and the dismissal of opportunistic “jumping around,” in conjunction
with above-average product and/or service provider quality (performance). What is often
forgotten though is the fact that investment funds with high transparency are some of the few
products on the market with a right to return on a day’s notice; the cancellation deadline for
institutional mandates can be very short. The ideal way of seed money search may present
itself as follows: top quality (performance, track record) in combination with stress resistant
network for initial investor approach and knack for exchanging ideas. Do good and make
known your actions—the inquiry about seed money to investors can then become an act of joy
and may deliver added value as well. In other words: not inquiring with the investor results in
a missed chance for a promising investment that can lead to additional incentives. If the fund
advisor offers attractive content, he or she will be seen as enrichment (“added value”) by the
potential seed investor. Alternatively, inquiries based on average or bad concepts are seen as
nuisance or “time-waster.”
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Outlook
Perhaps, in the long run, an in-depth dialogue between fund management and investors may
lead to the early dismissal of unsustainable pension fund concepts after their efficient
examination. Excellent manager quality and perhaps a potential to optimize in terms of
network building and expansion often characterize sustainable fund concepts. The frequency
of inquiries, their method and sustainability seem improvable. Matters that are not driven by
marketing or PR in the asset management field but could be turned into success factors: as a
general rule, the development of good talent in a specific area can bring much joy—in a way,
the nursery element of the asset management industry!
Feedback, additional thoughts, experience or any kind of dialogue on such context is
most welcome; please contact [email protected] 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 multiplier" 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: [email protected]
website: www.markus-hill.com
phone: 0049 (0) 69 280 714 mobile: 0049 (0) 163 4616 179