“Our wealth is based on communication” (Matt White Ridley, book author) – a thought that can certainly be applied to success and failure in seed money searches, including bond management.
Good content or good performance combined with good communication and intelligent, systematic use of the network often form the basis for the successful search for initial investors in bond fund concepts. This fact is frequently received with astonishment when one or the other fund initiator has to abandon a project at a loss after long, unsuccessful placement attempts. Of course, there are more ways of doing this.
Private label fund edition: No “witchcraft“
For many pension fund managers, the first typical steps after the fund initiator (“fund advisor”, asset manager, family office, etc.) has identified a unique fund concept are to talk to various investment companies such as Universal-Investment, IP Concept, AmpegaGerling, or one of the many other providers on the market, either systematically or unsystematically.
What are the typical topics of conversation here? Fund concept, investment guidelines, possible fund naming, necessary contracts, sales concept – often a weak point – and many other points must be addressed to fill the potential project with life at some point. In the end, there should be clean handling, administration with a sustainable marketing concept. Excluded from this is usually the topic of seed money search: If at the beginning the first real “fans” for the fund concept of the pension expert are not found, all considerations remain pure dry exercises. There is no fund.
Alternative scenario: the fund has a few million and then often disappears into oblivion after a while. Frequently also the case: Concept well thought out, network there, communication is right and investors quickly jump on the bandwagon. In combination with good inflows of funds in the right market phase, the fund launch is successful.
Possible stumbling blocks and success factors
If one speaks more frequently with individual members of the federation of independent trustees Germany (VuV) after your experiences with the edition of funds and the element Seed Money search, one experiences amazing things: The failed projects with the first time investor search are explained mostly openly and honestly by the fact that one does not have even load-carrying investor contacts. The network for so-called roadshows was not available.
However, with hindsight it is often admitted just as self-critically that the company’s expertise did not stand up to the scrutiny of various institutional investors who would have been considered for initial investment (“seeding”): The pension expertise was not conceded, or only in part, or the proven performance in other products and mandates of the fund initiator was not convincing. The successful seed money seekers had a good network, a superior communication strategy, and of course excellent bond management expertise in connection with good performance attribution by the first seed investors.
The industry expert would say: sooner or later, value floats upwards. For many capital seekers, this seems to be a long-term constant for successful fund launches.
Asset Management and Economics
In a nutshell: mediocre to poor bond managers often invest unnecessarily much time in the fund launch project, since communication and network cannot compensate for these factors in the long run. Even large companies in the asset management sector are subsequently penalized with stagnating inflows of funds or even outflows of funds in the case of poor fund concepts, and even the initial seed money does not help.
The due diligence of institutional seed money investors seems merciless and economically just – good portfolio manager quality ultimately benefits the general public in the form of sustained good performance quality. Why should insights from the regular world of goods and services not be valid in the asset management world?
Strategic bottleneck: performance, communication, network
In the long term, the investor side regulates the market access of new fund concepts in the bond sector in the seed money search. Small to medium-sized, group-independent fund advisors generally act like the so-called hidden champions in the successful field of German SMEs: focusing on core competence (bond expertise), long-term and intensive attention to customer needs (investors), and the rejection of opportunistic “jumping around”, combined of course with an outstanding product and service quality (performance).
People often forget: The investment fund with high transparency is one of the few products on the market with daily redemption rights and short notice periods for institutional mandates.
The royal road in the search for seed money might look like this: Top quality (performance, track record) in combination with a strong network when approaching first-time investors and natural pleasure in exchanging ideas: Do something good and talk about it – then the request for seed money is almost a pleasure for the investor and also brings added value. In the sense of if he is not approached, the opportunity for a promising investment is missed, which could also be an additional incentive. If the fund advisor offers attractive content, this is also seen more as enrichment by the potential seed investor, alternatively, the inquiries with average to bad concepts are seen as a nuisance and time-consuming.
Perhaps in the longer term, more in-depth dialogue between fund managers and investors will lead to unsustainable pension fund concepts being efficiently examined and rejected at an early stage. Sustainable fund concepts are often characterized by excellent manager quality and perhaps there is still potential for optimization in the area of network construction and expansion.
The frequency of addresses, systematics, and sustainability, seems to be expandable. These are topics that are not marketing- or PR-driven in the asset management industry but could rather be developed as success drivers. As a rule, it is a great pleasure to promote the development of talents in an industry – the nursery element in the asset management industry, so to speak.