Caduff: Mr. Hill, you have earned the nickname “Mr. Family Office” in Germany over many years. It could probably be more difficult today because there are so many institutions, advisors, and formats in this segment that are very good.
Hill: Right, there are many interesting personalities and institutions in this field, especially universities and other educational institutions, by the way, also in the rest of the DACH region. The field of family offices has an interesting form of “ramification”. Areas such as entrepreneurship, investments – direct, indirect, liquid and non-liquid, company succession, governance, shareholdings, M&A – all these facets and more are touched upon in this field. Additionally, there is still proximity and bridge to areas such as fund boutiques and foundations, charity, philanthropy, art, and politics. Individual sectors, seen through my lens as an economist, promote the diffusion of knowledge and transparency in this field through their activities. One could say that this form of “ecosystem” has a welfare-enhancing effect on everyone, so to tell.
Caduff: And you know all the major players in this field?
Hill: No, of course not all. Through many panels, interviews, investor events, and at “internal forums” and direct contacts in this segment, I may know an above-average number of addresses – on the family office side as well as on the side of the providers of services in this segment. The exchange of ideas and connections is a pleasure. The diversity also on the provider side (multipliers, research, service providers, etc.). The sheer number of single-family offices in a wide variety of forms guarantees that you will always get to know great addresses in this segment. One interesting phenomenon is that many addresses, commonly defined as a single-family office do not perceive this at all. Just this week, I had a telephone call with a representative from this segment, who pursue their asset management approach and are rather considering, although a designated investor in other asset classes, whether one should say “call a spade a spade”. With all the advantages and disadvantages: Either blocking oneself off from knowledge or permanent sales calls from product providers – expressing in the extreme, so to say.
Caduff: But you also deal intensively with small and medium-sized investment companies. Does this still give you pleasure? The big names cover everything.
Hill: Class rather than mass counts. Of course, large asset managers cover a broad field. For sure there are excellent fund managers in big names too. To your question, if I get pleasure, definitely yes I get a lot of satisfaction from it. I find the people in this particular field interesting. Usually, the ones in this field have a special talent (“gift”) in their part following a deep passion for what they do. Ideally, you have a manager that you are so convinced of – regardless of temporary performance – that you enjoy connecting them with other interesting market participants. This can be done in various stages – press (“distance marketing”), then indirect and direct contacts. It is gratifying when in the end people have found each other who appreciate one another. This is completely independent of whether the respective services (e.g. funds, advisory, etc.) fit when first getting to know each other. Often, it is more a matter of thinking in terms of the long term, as is the case in the special fund’s sector. To be honest, it has to be said that in the end, the manager’s approach and performance have to be right.
Caduff: Will there still be so many very small fund providers in the future? What do you think?
Hill: I strongly believe in creativity and adaptability in the field of independent asset managers. There will always be a demand for non-corporate experts with a high degree of specialization and a “skin-in-the-game appearance” who pursue their interests with “immense passion”. Entrepreneurial personalities have staying power, are resourceful and flexible. Of course, there is an ongoing shakeout in this segment as well. Many small houses hold their own for years with small volumes (AuM), just at the limit of what is economically justifiable. Some still manage to break through, for example, they have staying power and capital. In this market, too, there is a constant coming and going. A book author once said to me on the subject of independent asset managers, “I’ve talked to 100 different addresses and seen 100 different business concepts.” Niche providers are flexible, at least when it takes place in a market that doesn’t run like traditional institutional asset management: slide rules, performance measurement, committee decision as to the main factors in manager selection.
Caduff: If someone wants to set up a fund, what are your three most important pieces of advice?
Hill: Without claiming to be exhaustive, my piece of advice is:
1. some form of “USP”, for example, special performance history, technical expertise, reputation, network, etc.
2. patience, consistency, and pleasure in exchanging ideas with other people or in engaging other people to support one’s fund project (multipliers, network, externals, etc.)
3. financial “buffer”, you have to survive the phase of a seed money search and the time after that as well. It can be – practical challenging experience – just as hard to get zero to three million fund volume as to get from three to ten million afterward. In my opinion, these phases are often neglected.
One has a central advantage if one has a stable core seeder. Otherwise, many projects “crumble” or become “chewing gum projects”: endless, grueling, often failing in the end. I am deliberately talking about very small addresses here. With institutions (for example family offices, foundations, etc.), which are often core-seeders themselves at the beginning, there are again quite different pitfalls in the next stages, which admittedly can be avoided with a little strategic planning.
Caduff: What are you currently working on more intensively?
Hill: Regular consulting mandates (search, “investor dialog”), as usual. Interestingly, they currently touch strongly on the areas of real assets in liquid and non-liquid form – real estate developers are interesting entrepreneurial personalities, interfaces to the single-family office area are often given. Another topic that I am also very interested in at the moment is capital market expertise in family offices and fund boutiques. I am currently looking at many of the players and publications in this area: HQ Trust, Eyb & Wallwitz, Flossbach von Storch, Lansdowne Partners Austria, DJE – to name a few of many impressive addresses. It is noticeable that there are many interesting experts here, so to speak, who often publish original, entertaining publications, commentaries with added value. Right now, thematically I am preparing an interesting event in the aftermath, an interview, and some professional exchange of thoughts with participants and lecturers. The background: Before the shutdown in autumn, I had the opportunity to participate as a guest in a very interesting annual family office conference (Fürstenberg Seminars) in the Eberbach monastery in the Rheingau region. After Christmas and the last days between the year, I can pick up on the thread again. Of course, after spending a very mindful Christmas, 2020.
About the person
Markus Hill has been an independent asset management consultant since mid till 2005. His professional background includes companies such as SEB Bank (marketing/product management, investment banking) and Credit Suisse Asset Management (sales, asset management). His fields of activity include the support of mandates in marketing, PR, and fund selection. As former Head of Sales mutual funds at an investment boutique (equities and fixed income) and in external cooperation with a fund of funds manager, small to mid-sized asset management firms are the focus of his interest. Besides, he is journalistically involved with the topics of fund boutiques (fondsboutiquen.de) and the use of mutual funds by institutional investors as well as with the topic of target fund selection in multi-management approaches.
- Family offices and fund boutiques have many similarities (Interview – Thomas Caduff, Markus Hill)
- Frankfurt is always worth a trip – not only for financial professionals! (Interview – Thomas Caduff, Markus Hill)