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Comment: Fund boutiques and entrepreneurship – a recipe for success versus “stubbornness“

“I only know that it has to be different to make it better” (Thorsten Schröter). Change is part and parcel of the asset management industry, and it is the driving force behind it. One would think that in the field of owner-managed asset managers with their own funds (fund boutiques), this philosophy is lived with dynamism. “Hidden champions”, “asset management approaches” and the advantages of specialization are often cited in this context.

It is true that there are many excellent asset managers who are active in the private label fund sector. What is often missed in the discussion is the aspect that there is also a large number of mediocre to “below average” managers. In the perception of private clients and institutional investors, these addresses play a subordinate role.

Business cycle and fund launch

Many classic asset managers often pass through the stages from individual securities advice to so-called standardized asset management. Often the fund asset management, the own fund or the fund of funds follows at the same time or shortly thereafter. Many asset managers have gone through these stages, regardless of the sequence. Many investment companies such as Universal-Investment, IP Concept, AmpegaGerling, and others have in the past set up or are currently setting up funds with this customer segment. Special factors such as the fund launch “hype” generated by the introduction of the flat-rate withholding tax also played a role in this business cycle and have additionally contributed to the fact that many asset managers today manage funds that do not give them and their clients lasting satisfaction.

Strength can become a weakness

It seems interesting to look at some aspects which, especially in the field of owner-managed asset managers or fund boutiques in general, could lead to failures in fund launch. One reason for this could be that funds are managed by managers with a fund volume of between, for example, €2-8 million. Another trivial explanation could be that the asset manager decided to launch the fund for purely opportunistic reasons (market cycle, timeliness, earning potential). Another reason may simply be that the fund launch was due to purely administrative constraints (efficient support of a large number of customers).

Less discussed is a phenomenon in owner-managed companies, which could have unintentionally led one or the other asset manager into a dead end (no convincing funds, bad PR through transparency of funds): Conventional “stubbornness” and resistance to advice. With the same stubbornness and perseverance, with which one conquered oneself its existence in a hard contested market surrounding field, one pursues its goal with the once met decision to the fund edition. No resignation, no consideration from a meta-perspective, no revision of the decision once made – factors such as overestimation of one’s own capabilities (portfolio management) or even fear of losing face can play a role.

Keep a sense of proportion

Keep a sense of proportion or as per the german saying “let the church remain in the village”. The topic here is not an unreflected “asset manager bashing”. The phenomena of inadequate performance in asset management/client advisory services described above can be found at the level of direct mandates as well as at the fund level, and as a phenomenon in private banks, family offices, consultants, and affiliated asset managers. Keyword: the not entirely uncontroversial law of normal distribution. Or: There is always only a certain number of top performances. It is often forgotten that even group-bound organizations with a large distribution network cannot finance large fixed cost apparatuses forever using unimpressive products. In the medium to long term, transparency and regulation will further increase strong market-clearing pressure.

Outlook

This is the question the industry could ask itself against the background of increasing regulation density in the area of asset management and fund launch: What can be done to ensure that regulation and market pressure do not lead to a sustained weakening of the position of independent asset managers as a valuable part of the advisory culture?

Fund pooling, cooperations, PR – these are all attempts to help the patient who has been suffering for many years; it would be a pity to rely only on the power of the factual (“fund death”). Whether there is a final solution to the issue should be part of a search process for the entire industry: What added value can an independent asset manager who possibly manages an “average fund” offer? The mere fact that a great many of these managers have been on the market for a long time could perhaps be an indication that the independent manager offers added value to the client even without a large sales force!


Source: www.institutional-investment.de
Photo: www.pixabay.com

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