“Our time is partly robbed and partly cursed, and what is left is lost unnoticed” (Seneca). As is well known, time is a key factor in the discovery of independent talent in the asset management sector, including family offices. The impression is often created that this factor is not given sufficient consideration in communication with potential investors. What are “hygiene factors” for a successful approach? Where is there potential for optimization for independent asset managers?
Time and standard information factor
The process of quantitative and qualitative due diligence in the fund boutique segment for family offices has become more professional in recent years. Standard information such as peer group comparisons, performance, volatility, etc. is available in a wide variety of forms. Intensive reporting supplements these quantitative factors. Many selectors use this information for pre-filtering. Using individual databases or various databases in combination is standard procedure. Here many addresses write their handwriting, so to speak. Even in this seemingly simple procedure, however, the first “predetermined breaking points” in fund analysis are already apparent. Usually, some independent asset managers complain that in certain cases they do not feel they are in the “right” category by analysis houses. In some cases, this feeling corresponds with the information from selectors that they take a critical view of the classification of asset managers at analysis houses. It often seems helpful to develop a feeling for what the individual approach is comparable to in direct conversation with the manager. This also provides opportunities for asset managers to highlight their strengths and differentiating features in family offices.
Sympathy for independent asset managers in family offices
A problem for many smaller fund houses is that often only limited resources are available for marketing. Now there are different approaches to this. On the one hand, family offices can be approached with a “spreader box”. Every fund selector on the family office side (multi-family office as well as a single-family office) is used to being contacted by a large number of providers. As the majority of the discussions are very likely to focus on product promotion, there is often little interest on the part of the selectors in spending too much time on initial contact with due diligence by telephone: “Send us documents and we will get back to you if necessary” is an answer that is often given. Here, valuable opportunities are often lost in the first contact. If it were determined in advance whether there is any interest at all in the fund manager’s approach, both sides would save a lot of valuable time here.
Value, growth and expertise potential
Expertise at a high level is recognized by many of those responsible in family offices. If a deep specialization exists as a distinguishing feature, for example in the areas of value or growth investing, even “small” houses often meet with increased interest. Regardless of current performance figures, in one case or another, there are approaches to talks that can lead to the in-depth due diligence of the provider. One reason for this may be, for example, that the family office is also heavily involved in the value investing concept in other investment areas. Subject areas that are occupied by providers also send signals. Value investing and long-term thinking are often equated – the thinking for the principal in the single-family office is subject to a similar rhythm. In addition to this, the research know-how of houses in the growth area of small caps appears to be interesting if the selectors in the group are also interested in the areas of venture capital and private equity. The transitions here appear to be fluid; value investment interest and private equity activities can also go hand in hand. Many value investors in the liquid sector appreciate it if investors remain in the fund for the long term; more or less temporarily illiquid product concepts can also be found here.
Communication and the time factor
Fund selectors are people, people do not want to be seen as a mere means to an end. A fact that is always reflected in the dialogue with the family office representative, as mentioned above, to the point: Is my counterpart also interested in my interests in the long term, or is this just about the purely opportunistic “unloading products”? In cases where more complex, communication-intensive products, services, or approaches come into play, this aspect gains additional importance. Space for communication – openness, time, and trust are typical elements of this ongoing process. Independent asset managers with direct private customer contact are familiar with this factor. Interestingly, this insight is often only partially taken into account when it comes to the area of mutual fund sales to family offices. Besides, there are also complaints from providers that decision-makers on the family office side allegedly take too much time to make a decision.
To be fair, it has to be said that the above-mentioned situation also appears to be partly transferable to sales in general. Communication appears to be more difficult when, at the beginning of the discussion chain, so to speak, “square things should be talked triangularly”. If the first time I get to know you, the main focus is on the opposite side giving me money – as soon as possible, of course – then this can by no means be entirely conducive to a tension-free, pleasant atmosphere in the conversation!
Due diligence, capital management companies, and fund boutiques
Expertise in direct contact between fund boutique and family office can be a bridge to communication. If a provider has this resource, the question arises as to whether this expertise will also be used by the family office in the next step. Another is the use of multipliers in the fund industry. Media, placement agents, and advisors of various kinds can play a role here in communication with the fund selector, not only in the family office sector.
It is often forgotten that many capital management companies also have distinctive expertise in the field of fund boutiques. It is interesting to note that, in addition to the purely professional approach of many of these specialist houses, the added value is created by their know-how of the relevant target groups. On the one hand, some of these houses also set up funds for family offices, both in the public fund area (private label funds) and in the special fund area. Starting points here are often not only in the liquid (e.g. classic value and growth funds) but also in the illiquid area (real estate, private equity, etc.). The particular interest here may also be capital management companies that have additional sales know-how in the area of fund boutiques. Such a constellation offers the additional advantage that these houses are in intensive dialogue with family offices due to their product range. Therefore, it provides a good overview of the investor’s investment preferences.
Many family offices are intensively involved in the due diligence of fund boutiques and their concepts and products. From direct mandates for public funds and special funds to the seeding of interesting fund concepts, there are opportunities for cooperation for both sides. The decisive factor is whether current interests on the family office side do not conflict with potential short-term thinking on the provider side. This interest applies both to German providers and to providers from abroad. As in many areas, the ancient Greek proverb applies here as well in the long term: The same always approaches the same! ( Alike corresponds with alike!)