From the 11th to the 13th of June the FundForum International will take place in Berlin for the third time. The independent industry expert and IPE Institutional Investment author Markus Hill will be hosting a panel discussion this year again. The topic he will be discussing is of asset management, due diligence in connection with the areas of ESG, impact investing and asset allocation with decision-makers from family offices. He will also host a panel of family office representatives in Frankfurt on June 19, 2018 at the funds excellence. Here, too, the topics of asset management, risk management and portfolio management know-how are discussed as in practice. Already in April of this year he moderated an event with Professor Dr. J. Carlos Jarillo („Strategic Logic – The Sources of Long-Term Corporate Profitability“) on the subject of value investing and private equity, which also discussed one of the central issues of ownership-based approach to fund boutiques and family offices. Editor-in-chief Frank Schnattinger spoke to him about these current topics, their connection and topics that could be discussed more extensively while keeping in mind of past or future events at family offices and Asset Managers.
IPE Institutional Investment: In June, you will moderate your panel discussion on family offices and due diligence in the asset management sector in Berlin and Frankfurt. Which topic will you address in Berlin this year and who are the participants?
Hill: FundForum International will be held in Berlin for the third time this year. In the last three years, I moderated panels with fund selectors in Monaco. Like in the past years the topics of due diligence, manager selection and product selection will be addressed again. In 2017, topics such as impact investing, fund boutiques and co-investments as well as the topic of club deals were discussed. To be noted at this point that the discussion is increasingly distancing from pure liquid products towards more not liquid approaches, up to direct investments. I say this on the fact that the FundForum International is indeed one of the largest fund-related events worldwide, covering liquid funds. I have observed the product world in the last years and keeping this in mind, we will once again address topics such as due diligence, ESG, SRI and impact investing this year. The intensity at this point is to be discussed together. How do I choose a liquid product? How do I choose not a liquid structure, like a direct investment? Where do similarities exist in the process, what are the differences? What are the consequences for asset allocation? To be fair, one should also say that in the areas of ESG and SRI, also impact investing, many product selectors themselves are in a search process. To the question: Are we talking about fashion or mainstream? I am looking forward to the discussion with Thomas Rüschen (Deutsche Oppenheim Family Office AG), Antje Biber (FERI Trust), Christoph Kind (Marcard, Stein & Co.) and J. Christian Stadermann (Logos Patrimon).
IPE Institutional Investment: After the FundForum in Berlin, what topics will you be addressing at the panel in Frankfurt am Main at the funds excellence? Who will discuss with you in Kap Europa?
Hill: In Frankfurt, we will discuss topics like portfolio management, risk management, product selection and transparency. Specifically, the question will be in the direction of: Are family offices the better asset managers? Of course, a daring presentation, knowing that it’s a total challenge. At least the topic can be discussed in a structured way, allowing a discussion as to, what customers expect from a good portfolio management. In addition to the point, if family offices – pro and contra – can and should use own products for customers. What are the advantages, what are the disadvantage of „skin-in-the-game“ in family offices? In general, it is also about how to operate a portfolio manager / customer expectations, how to select products and, of course, we will also talk about fund boutiques. Ownership approach, family offices and independent asset management – there is always a common connection with the discussion. An interesting point, not yet voted on, could be: How do family offices become aware of interesting independent adresses? But I do not want to prejudge the discussion here. It is also always important to me that the panelists feel comfortable with the topics. Participants in Frankfurt will be Beat Guldimann (Barometer Capital Management), Dr. Ing. Dirk Rüttgers (Do Investment AG), Matthias Jörss (Landert), Christoph Weber (WSH Deutsche Vermögenstreuhand GmbH) and Cyrus Moriabadi (Martagon Family Office AG).
IPE Institutional Investment: Starting from the topics of the panels mentioned above, do you see any other issues that could be discussed?
Hill: The time is very limited during panels. Often a constructive stripe of thematic fields, one cannot really discuss in depth. In my opinion, this is not the purpose of such events and to over claim it. For the past years, I have been moderating various panels with family office representatives, where I have received ample feedback on fund concept. The exciting thing for me is usually the exchange of ideas at the professional level with the panelists, in front of the panel, or often afterwards. I noticed that there is a lot of knowhow on the family office side. Their approach for selecting products and managers is cautious and astute. Many a times one finds a very pleasant, sympathetic form of humility. What do I mean by it? It is often openly admitted that in some areas not everything is covered. Many of the representatives in the product selection area have to cover different areas for the principal, in this case, of course, this is very pronounced in the field of single family offices. Often, the selection of target investments is not considered in isolation. In the real sense, it does not hurt to look out of the box. Liquid funds, AIFs, other types of securitization but also direct investments are not considered as a completely separate area. Club deals or co-investments are not so much a technical, issue but often a question of trust, competence and communication. Visibility and communication seem to me to be an important factor in optimizing the selection of investments. Many of the family office representatives are not too keen to receive product sales calls. The conversation setting is not optimal to begin with. A company (supplier), a product line at the end reduces either to buy or not buying. It may appear to serve a purpose like a family office representative which is then disliked by many. Of course, you can see it so that you should not be too sensitive or you have a more professional view here. What is forgotten here is that even the investor representative also appreciates when he can obtain value-added information from another person. My impression from innumerous discussions, not only with family offices, is that many are grateful for references to new managers, like to view many different product approaches in current offers. To a great extent in the area of fund boutiques, where one is always amazed at the information bubble in our industry. Regardless of how often advertising is used at fund boutiques: PR, events, mailings – a large proportion of advertising, except for addresses with a very large marketing budget, does not seem to arrive at the selectors or only in small parts. I’m often surprised what good boutique addresses are not on the radar, although they would actually qualify for a more in-depth exam. One possible reason for this, one guess: economics of attention on the selector side, hardly networking of boutique agents with the investor side – perhaps combined with the factor „stingy marketing approach“. To put it in a nutshell, my experience from many direct discussions with product decision makers is rather that they are grateful for a market overview and hints on interesting approaches. However, one should honestly say that taking a look at approaches of products and approaches does not mean that a ticket is immediately drawn by the investor. Especially with the seed money search or with very new or small-volume boutique approaches you have to kiss many frogs. There are fanfares, but it takes time to identify many of these fans in direct conversation. Interestingly enough, vice versa I often receive very interesting input from the discussions. Due to my many discussions and reasons in fund concept checks, I often refer to competitor concepts. This often prevents you from reinventing the wheel.
IPE Institutional Investment: Are there any other topics that you are currently working on more intensively?
Hill: From my presentations at events with Prof. Dr. J. Carlos Jarillo over the years, I have become more and more aware that a key element in dealing with family offices, fund boutiques and value investing is the long-term thinking. Family offices and independent asset managers live up to this idea convincingly. This long-term idea is often associated with the ownership approach. Many of the independents have invested their own money in the fund and a lot of their own know-how. I would like to expand the skin-in-the-game factor by using the reputation and work that many of these addresses bring to their lifework. Most of these „artists“ love what they do. Someone who takes such risks – having their own name associated with a product, possibly investing their own money, constantly using their own working hours – is really thinking long term. This also applies to family offices offering their own products. Due to this thinking, I am increasingly concerned with sustainability, SRI, ESG and impact investing. I know that some of these topics are seen as fashion, prior to this thought, it’s part are well established and are extremely attracted an interest to investors. If you’re in the small and mid cap sector of fund boutiques and value investing, you will find similar areas of expertise in sustainability products. Rating, awards, certifications are one facet. A fund manager, however, in the sustainability segment cannot ignore the fact that he has to do his homework too. Specifically on the micro level to achieve good performance results. In the area of impact investing plenty of task under process as to how one can link people, know-how and which investments? Even in the long term you will not get by to generate decent performance. Most of the fund initiators I’ve met come from a professional side and do not want to promote another charity sector. I studied economics myself – rather a sound politic study, would never have wanted to work in the field. From a societal point of view, long-term thinking in the investment area for me seems to be pleasantly well-oriented. There are also some „shadows“ in sustainability. Currently, I am simply speaking for technical reasons with various providers and investors in this segment. It will take time to reach in the investors. Interestingly, at a presence there seem to be tailwind on the regulatory side too. The fact written about this segment in the press does not necessarily mean that investment is always quick. It applies to what I have stated above: Once again, many small, interesting addresses are often not on the radar of the investors. Incidentally, this applies to liquid fund concepts, AIFs and to direct investments. Admittedly, this also applies to traditional investment concepts without sustainability orientation. Startups, venture capital, private equity etc. – many people with common interests do not initiate a dialogue for a long period, which is to be regretted. Maybe everything is a disease of our time: Information Overflow!
IPE Institutional Investment: Thank you for the interview.