„One often finds different perspectives on due diligence here with family offices, foundations, and classic institutional investors“

The conference „Germany Institutional Forum“ will take place in Frankfurt am Main at the beginning of December. The independent industry expert Markus Hill will moderate a panel there. Within the topic, Opportunistic Alternative Investments, topics such as investments in hedge funds, private equity, and commodities, and „miscellaneous“ will be discussed. IPE Institutional Investment Editor-in-Chief Frank Schnattinger talked to him about the panel, other conference contents, about Frankfurt am Main and about the moderation of the MH Focus Roundtable „Fund Boutiques, Family Offices and Absolute Return“, which will take place shortly before in Frankfurt on November 27. At this event, the topic of „Family Offices and Manager Selection“ will be discussed closely in connection with the topic of Liquid Alternatives.

IPE Institutional Investment: Which topics will be addressed at the conference „Germany Institutional Forum“?

Hill: The conference takes place annually and is aimed at institutional investors. A wide range of topics are addressed in lectures and panels: Convertible Bond Market, Macro Outlook, Asset Allocation, Factor Investing, Real Assets (Real Estate, Energy, Infrastructure), and Global Fixed Income. Topics such as opportunistic alternative investments, investments in emerging markets, and the integration of ESG criteria in the investment process for institutional investors will also be discussed. My experience on my panel last year on „Passive versus active management, the edition of an old debate“ is that it can be very controversial.

IPE Institutional Investment: Which specific points are taken up and discussed in your panel?

Hill: As in the previous year, I do not want to anticipate the content of my discussion and the interests of my panel members. The topic „Opportustic Alternative Investments“ will be at the center of the discussion. Participants will include Trutz Rendtorff, Chief Financial Officer of the Karg Foundation, Marcus Storr, Head of Hedge Funds at FERI Trust GmbH, and Tara Moor, Managing Director at Guggenheim Partners. My experience from other contexts is that the topic offers many starting points for discussion. I experienced Dr. Thomas Rüschen of Deutsche Oppenheim Family Office AG as a moderator at the Private Wealth Forum of the Markets Group in Munich in October. He had discussed the topic more with a focus on semi-institutional investors and HNWIs. Our panel in Frankfurt will focus on the question of which alternative investments can still generate attractive returns for institutional investors in risk-adjusted terms: What role does private equity play in a diversified portfolio? What alternatives are there in the area of hedge funds and commodities? Are there investment alternatives that are perhaps often only accessible with increased due diligence effort and a special know-how network? In the current low-interest-rate environment, the tension between a liquid and non-liquid alternative investments is perhaps also worthy of additional consideration. The role of product packaging could also be an issue. Real assets – direct investment, AIFs, listed equity, these topics could also be of additional interest. In due diligence, one often finds different perspectives in family offices, foundations, and classic institutional investors.

IPE Institutional Investment: Do you have a specific opinion on the panel’s topic area?

Hill: No, the panelists have their area of knowledge. I can only make suggestions. What I notice again and again is that nowadays the area of liquid and non-liquid products, including direct investments, is viewed much more „holistically“ on the product selection side of institutional and semi-institutional. This can be seen, for example, from the fact that the area of equity investments – especially venture capital and private equity – is also found in combination with the selection of direct investments in the area of real assets (real estate, etc.), for example, and that the specialist areas of investors are also involved in an intensive exchange of ideas within the organisation. An indicator for this could also be that these topics and the experts are often no longer strictly separated from one another, even at specialist conferences, and that there is a greater willingness to discuss them on an „interdisciplinary“ basis. Family offices and foundations, but also pension schemes and consultants, represent a special area here, with „soft“ demarcation from insurance companies or pension funds. Perhaps this impression of this site is also since 2015. I have accompanied small events twice a year with Prof. Dr. Carlos Jarillo as a moderator. As the author of the book „Strategic Logic – The Sources of Long-Term Corporate Profitability“ and manager of a value fund, one of the topics has been frequent before semi-institutional investors: Value Investing – differences, advantages and disadvantages of liquid fund management approaches (classic, more liquid mutual funds) versus non-liquid product solutions (private equity). At the last meeting in Munich, interestingly enough, in connection with my panel topic at the German Institutional Forum, the connection between value investing, sustainability, and the selection criteria of commodity investments were also discussed.

IPE Institutional Investment: In the run-up to the German Institutional Forum on November 27, you organized a separate event in Frankfurt on the topic of „Fund Boutiques, Family Offices, and Absolute Return“. What is the focus of your event?

Hill: This MH Focus Roundtable is an investor event on a very small scale, which will be held at the premises of MM. Warburg & Co. in Frankfurt. Reiner Konrad from the Multi-Family Office will give a presentation on „Family Offices, Fund Boutiques & Manager Selection“. Dr. Björn Borchers from Warburg Invest will give a lecture on „Liquid Alternatives – Volatility as an alternative source of return“, Manfred Gridl from Gridl Asset Management will give a lecture on „Our response to the ECB interest rate policy“. (See also attached photo). I will give a short intro and moderate the event. It will be a breakfast exchange of ideas in a small group.

IPE Institutional Investment: Why did you choose this topic?

Hill: Since 2013, I have always been able to accompany panel discussions with fund selectors on the topic of due diligence of funds (liquid and non-liquid). I am also familiar with the field of fund selection from my work, as well as from supporting fund boutiques in special topics. For three years, including in 2018 – in addition to FundForum International also at funds excellence in Frankfurt – I have been able to discuss these topics even more exclusively with family offices. The idea was born, so to speak, from many professional discussions with product selection managers on the family office side – in one-on-one meetings on projects (manager selection and fund concept checks at fund boutiques) and in connection with moderation, lecture and article topics that I have worked on. It is interesting to note that fund boutiques are another special field. Here, areas such as business start-up, life cycle, seed money in addition to track record, fund size, and investment process are also interesting fields of discussion. Factors such as manager personality, specialisation, skin-in-the-game, independence, and, last but not least, long-term thinking on the entrepreneurial side appear to be even more decisive. Not to forget: These independents do what they love!

IPE Institutional Investment: Which topic area are you currently looking at more closely

Hill: Opportunistic Alternative Investments can be interpreted in different ways, maybe I just interpret it in my way. One approach would be to look at the things that often don’t need to be sold in principle. These include many providers from the mid-market, „boutiques“, with products and services that are certainly „needed“ but which one often does not encounter or only with difficulty. On the one hand, this category exists because the providers do not market themselves aggressively or do not want to aggressively „advertise“ themselves in this form, and on the other hand, because this approach to marketing is often less recommendable for these providers, also for reputation reasons. Here one gets to know again and again addresses, which offer excellent quality. The performance is right, the professional background is right, you come from the target group to which you provide these products, you are invested in your products yourself, etc. – a market that I see completely separate from the more „market scream“ classic investment product market. To put it in a completely value-free way, the starting positions for both product categories are simply different: One has something that is needed, but nobody knows about it. The other has something that may not necessarily be needed or there is an enormous surplus of comparable competitors – inevitably the sales approach is different. Interesting here are many entrepreneurially set up AIF structures in many areas – real assets in various, especially niche areas, as an example. In the family office sector, such things are often found, combined with the unwillingness to offer one’s products, which one is convinced of with skin-in-the-game, to third parties. Here, for reasons of public welfare, a helpful maxim would often be appropriate: „Do good and talk about it!

IPE Institutional Investment: Thank you very much for the interview.


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