FUND BOUTIQUES & PRIVATE LABEL FUNDS: Funds of funds, fund selection, athletics and Arnold Schwarzenegger (Interview – Lars Kolbe)

Many funds of funds use fund boutiques for the allocation. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Lars Kolbe, Managing Director of Aqualutum GmbH, about the advantages and disadvantages of using independent asset managers in portfolio management. They discussed the stability of approaches to boutiques, due diligence, and seed money as well as crash prophets, athletics, and Arnold Schwarzenegger.

Hill: How long has the topic of fund boutiques accompanied you?
Kolbe: I started building up a fund database as a working student in 1991 at a family office. At that time there were about 800 funds in Germany, mainly from the asset managers of the big banks. The only foreign funds at that time were Templeton and Pioneer. Boutique funds were de facto not available. It was not until the second half of the 1990s that this changed with the founding of Ennismore (Ex-Barings Manager) and Thames River, which offered these fund managers an independent platform. The era of German boutiques only began at the end of the 1990s. A pioneering role was played by Dr. Jens Ehrhardt, who launched his FMM Fund back in 1987 via the then BHF Bank.

Hill: How do you use fund boutiques for the allocation in the fund of funds?
Kolbe: Fund boutiques play a central role in our m4-masters select. The fact that the managers are usually also the founders of the company ensures the stability that is rarely found in the funds of the big houses. There, manager or team changes dominate almost like in the Bundesliga. (German League) Frequent „strategy changes“ – such as recently at a German market leader – also show what these companies prefer to deal with, namely themselves. On the other hand, we appreciate it when we can engage specialists for different markets or segments who only deal with their particular topic from morning to night. On the other hand, if a company is known for value investing in established markets suddenly launches India or biotech funds, we sell immediately. These companies have entered the monetization phase through this unusual „shift“. This is legitimate but without us. It is also important to remember that investment strategy and fund volume should match in fund boutiques. It is precisely here that we have recently seen some glaring cases of mismatch. The performance of funds has been correspondingly weak for some time.

Lars Kolbe, Managing Director of Aqualutum GmbH
Lars Kolbe, Managing Director of Aqualutum GmbH

Hill: What lessons have you learned for due diligence of boutique strategies against the background of the Corona crisis? What was different this time, remarkable, possibly „weird“?
Kolbe: There wasn’t a lot new adjustment. It was again interesting to observe how isolated crash prophets exert an irresistible attraction in the crisis. Sadly, always an ex-post. And unfortunately, they can never tie in with their „out-performance“. Apart from that, it should be noted that it has become much more difficult to collect seed money as new starters. But that was the case before Corona. But now it hasn’t become easier.

Hill: What occupies you intensively at the moment, if you are not dealing with independent asset managers?
Kolbe: I prefer to read biographies of successful personalities. This ranges from Arnold Schwarzenegger, whom I hold in high esteem (who was often underestimated by many) to NIKE founder Phil Knight. For a decade and a half, he had to fight against great resistance. Today the company is the world market leader in sport’s shoes and sportswear. Here I can also make the connection to my great passion, the sport. After my own competitive sports career in athletics, I have remained true to sport. Today I train a group of talented young sprinters in my home club. And this is where the circle closes: small against big! Boutiques against corporations. I have always loved this fight. Not without success.

Hill: Thank you very much for the interview.

*) Markus Hill is an independent asset management consultant in Frankfurt am Main.


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