“Reality is what it is. We do not create reality, yet we can still try to discover and transform it.” At first glance, this highly disputed quote by philosopher Hans Blumenberg may sound simple and understandable. An examination of regional and national network structures of providers and investors within the asset management industry can lead to interesting conclusions. Studies and case observations can often provide first clues as to why many product providers are either successful or fail. If, for example, one looks at private label funds and fund boutiques, more such interesting conclusions can be drawn: Should only the cold, hard facts count during the selection process of service providers or managers (fund advisors)?
Asset Managers and Communication
The aforementioned phenomenon is also applicable to the selection of the proper investment company for one’s own fund selection or for the selection of the “right” sales employee, consultant, or external service provider. Social relationships and networks affect selection behaviors—this point is frequently forgotten during trade discussions. The asset management industry is dominated by numbers, and there is a clean process that results in the selection of ideal products and service providers—or so they say. In reality though, on a small or large scale, things may look different.
In all likelihood, the fund industry is not strictly ruled by computers or “robots in human disguises,” but has rather fine nuances. Human meets computer, but human also meets human—communication is the grease that keeps things running smoothly. The existence of media, conferences, and personal contacts seems to suggest that less calculable factors also play a role in the selection process.
Private Label Funds and Investment Companies
Obviously, hard facts such as market position, cost structures, and measurable service packages are key factors for the selection of investment companies for private label fund launches. The chosen approach of fund initiators for the launch of a new fund can vary: if one has previously satisfactory launched a fund, the same, “old” investment company (e.g., Universal Investment, IP Concept, Hansainvest, etc.) could be approached for the new fund mandate. If sufficient experience is missing, the popular way of getting cost estimates and selecting the “cheapest” companies for further interviews is typically chosen. Based on personal experience, I wish to point out that the seemingly most cost-efficient provider is not necessarily the best fit for the fund initiator and his or her project. The shock and clean up (maybe even change of mandate) or quiet acceptance of one’s personal bad decision is an all too common experience in practice. Another possible way, but also a very resource intensive one, is the systematic “inquiry” of the investment companies’ service packages—not in terms of mailing questionnaires, but in the sense of systematic investigation of the answer to the pertinent question: Is the investment company a good fit for me personally and my skills as fund initiator?
Staff Quality and Staff Motivation: The Often Underestimated Factor
During the systematic process (quantitative, technical, and qualitative), a key point is frequently forgotten: the quality of staff of the investment company. The account manager is pivotal for the fund launch in this context. For example, if the account manager is familiar with different asset management approaches, and if he or she is highly motivated, he or she can work out fund launch approaches that seem rather “complex” at first.
A potentially important, sale-related technical point is whether the account manager has personal experience and communication with fund-of-funds managers, private banks, and family offices and can quickly determine the product potential. Here, the “human touch” is at work—soft factors so to speak. At this point, the fund initiator’s capability to gain internal and external experience with different firms counts, so that unwanted surprises are warded off. This factor is also relevant to other, even technical or administrative, issues.
In addition to simply inquiring about estimates with investment companies, some potential fund initiators could benefit from some basic homework before their fund launches: the selection of the relevant investment company based on qualitative, soft factors. In hindsight, this approach often pays off—the “cheapest” provider does not have to be the best. In the end, getting to know one another better brings not only joy but can make a big difference; this is especially true in light of the fruitful client-provider context.