Comment: Asset managers, family offices, and foundations – trust and know-how beat “performance myth”?

“If asset managers are trending towards the average over the long term, then I can buy the index directly”: This is an opinion you will find again and again when you talk to certain investors, including foundations. This point of criticism is often taken note of with a shrug of the shoulders in combination with helplessness (“resignation”) by representatives of investment companies of actively managed funds. Of course, this discussion is not over, active and passive product worlds are still struggling for interpretative sovereignty. The death of temporary market inefficiency (active investment opportunities) is by no means a foregone conclusion, professional expertise in low-interest phases is in demand: active fund management remains a constant in the investment sector, briefly commented: What can asset managers and family offices achieve? Where could misunderstandings arise? Why don’t the trees grow to the sky?

Success factors for cooperation

Foundations are faced with an extensive universe of product variations: Direct investment, endowment funds, mixed funds, asset management funds, etc. If one puts aside the discussion about marketing concepts of asset managers and assumes sufficient database supply (ratings, rankings, “hit lists”): If the majority of asset managers tend towards average (performance) in the long term, other factors may perhaps play a role in the selection of service providers and gain additional weight:


It is interesting to note that these aspects often take a back seat to the pure consideration of common manager selection procedures (“beauty contest”) due to the lack of quantifiability. Of course, the consultant is on the safe side if he has to rely heavily on the figures: performance, volatility, drawdowns, and many other points. Of course, processes, team, risk management, etc. are also considered. It is often forgotten that “small” foundations, in particular, cannot afford these elaborate procedures – the usual procedure “heuristics” then often consists of following the house bank philosophy. (The core question can be: Is the house bank solution the only target-oriented solution for “small” foundations or are there other approaches that can be used or supplemented?)


Lawyers, tax consultants, and auditors live on the trust of their clients (“Trusted Advisor idea”). Due to the diversity of providers in these segments, competition is very tough, as in the asset management sector. The services are often regarded by clients as “commodities”. Due to the complexity of the service (How do I recognize a good lawyer? What makes a good asset manager?), the final evaluation of the service appears difficult to many clients. In these areas, the relationship of trust, in addition to sympathy, is very important. Specialist knowledge is considered a “hygiene factor”.

It seems interesting to note that asset managers and family offices, for example, may have difficulty “measuring” the quality of lawyers. Foundations are often faced with a similar issue: How can I tell if I am receiving good legal advice or how can I tell if my house bank always offers the best advice? Either the above-mentioned specialists look after your mandates on the basis of tradition (willingness to change often less pronounced with clients) or recommendation by third parties. In addition, some providers actively engage in public relations work – “discreet” professional visibility very often facilitates initial contact and arouses interest. (By the way: it is not easy for lawyers either to “measure” the quality of family offices and asset managers – recommendations can create a reputation risk).

Excursus: Trust – capital management companies (KVGen) and fund boutiques

Many asset managers have set up funds with KVGen such as Universal-Investment, Alceda, Ampega, and other companies. Price competition in this area is intense – although comparisons often lead to the conclusion that price cannot be the only criterion. Where the “core services” (pricing, reporting, etc.) are roughly the same, it is often the customer service and the respective client advisor who are the central added-value components at the end. Since for many asset managers and also family offices the mutual fund serves as a kind of “showcase” for new customer acquisition, KVGen can provide targeted assistance if the quality of the staff is appropriate, an example: In case of doubt, this can also mean – in a very trust-building manner – that potential customers are advised not to invest in a fund!


The interests of banks, asset managers and family offices in the servicing of “small” foundations can perhaps be briefly discussed by looking at the poles of “turnover orientation” and “portfolio orientation” (mixing ratios are equally valid):

*Is my bank, independent asset manager, or family office – example: manager of FO public funds – heavily dependent on “selling products” as often as possible or are there forms of remuneration that prevent a focus on this “support strategy”?
*As a foundation, do I have the feeling that my counterpart – beyond the mere sale of products or services – enjoys and is interested in foundation topics (“affinity”)?
*Does my advisor give me the feeling that I am an interesting client even as a “small” foundation?


In the case of asset managers who have been successful for many years, one should be able to assume that know-how in the specialist area is available. When buying mutual funds from asset managers (banks, family offices, etc.), you can use the relevant information – databases, ratings, rankings – to help you. In many cases, a “small” foundation can use this as an efficient means of making a selection even without consulting. Provided, of course, that the decision-maker at the foundation has a certain level of investment knowledge. In the current phase of low-interest rates, many mutual funds with mixed approaches (diversification) will of course continue to be a standard investment instrument for “small” amounts. Knowing full well: “hit lists” only show the past, manager 1 from 2014 can be manager 25 in 2015. If one assumes that many “small” foundations, in particular, do not have full-time investment specialists, this results in an interesting field of consulting for many independent asset managers.

The current phase of low-interest rates could mean the end of many foundations in the medium to long term, whose financial resources have already been perceived by experts in the past as rather insufficient. Banks support many foundations, banks have a lot of specialist expertise – in combination with the market knowledge of independent asset managers and family offices, all parties could only gain know-how. Perhaps new cooperation models will emerge in the asset management industry, and from an economic point of view, a continuous diffusion of expertise is only advantageous.

Investor education is often a protracted process, which often cannot be directly linked to sales, which then lead to portfolios – those who are convinced (“I love the idea of foundations!”) benefit from this in the long term: The exchange of ideas and charity thoughts, the feeling of doing something good, is also a motivational tool for many asset managers!


If one considers asset management for “small” foundations not only from the point of view that those responsible for foundations carry out their asset management exclusively with the aid of databases for public fund selection, then the current market situation provides a welcome opportunity to enter into more dialogue with asset managers. The decisive factor appears to be whether the foundation managers feel enough “pressure of suffering” in the current market situation to initiate from time to time well-trodden paths.

With product providers or service providers outside of group structures, additional knowledge about the possible investment universe can often be discovered. This does not necessarily contradict the traditional house bank concept – opening up new fields of expertise, actively seeking contact with independents, maintaining proven contacts – the motto is: do one thing and don’t let go of the other!


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