Foundations, family offices, and asset managers – social workers and Trusted Advisor ante portas?

“Too much analysis leads to paralysis” (Unknown). Foundations currently have an interesting or difficult position in the fund industry – depending on your point of view. The low-interest-rate environment forces this group of investors to look for solutions beyond the world of bonds. It can be interesting for the specialists there to build up more know-how by approaching product providers. It can be difficult to deal with the information overflow problem that may arise. Consultants are often called upon in the industry, also in the mutual fund sector. External help is not always necessary. Bringing owls to Athens has very often not been worthwhile. Where is a good information base available? Where can blind spots lie in the selection process? Are there internal and external solutions?

Quantitative factors in fund selection

As is well known, mutual funds suffer from the “whip of transparency”. The basic information can usually be found on the so-called factsheet. Performance, drawdown, fund currency, costs, etc. There are a large number of data providers where mutual funds can be compared and analyzed according to a wide variety of formats. Large foundations can engage external consultants for the selection of products or set up internal departments with experts. Medium-sized to small foundations are often denied this option. One consolation may be that increasing the complexity of the information gathering process may not necessarily lead to better decisions. Very many of the institutions that cannot initially secure external support are doing quite well with tools from the world of mutual funds (databases, etc.) to identify suitable managers or funds.

Financial information on key figures such as Sharpe Ratio, Tracking Error, Treynor Ratio, etc. is publicly available. In a condensed form, there are also often professionally comprehensible presentations and explanations on fact sheets and from database providers. Admittedly, it does not hurt to have studied finance/capital market theory. At least for the interpretation and classification of these figures. Another question is whether a good selection of fund managers, purely in quantitative terms, always represents the optimal solution.

Reporting, controlling, documenting fund manager services – many service providers in the market can work well and efficiently with figures (past!). It is up to each foundation to build up internal or external solutions.

Qualitative factors in fund selection

The mutual fund represents a transparent structure for the public presentation of the fund manager’s performance. The performance of large, group-linked asset managers or asset managers is often already known due to large marketing budgets. Many small to medium-sized, independent asset managers are currently actively seeking greater visibility with foundations. On the one hand, one can find oneself in the above-mentioned databases, on the other hand, one often learns about many addresses by word of mouth. There are even houses that manage “billion-dollar” assets, but they are by no means on the radar of many investors.

In addition to the quantitative factors on the factsheets, other information such as fund category, fund structure, etc. can be found. A so-called “transparency report” can provide additional information in a specially prepared format. Topics such as equity quota and investment structure, investment instruments, and certain quality criteria are prepared here by external specialists if the foundation does not have the know-how itself to create such a form of reporting tools. This information can also help select managers or products. A special example in the foundation sector: To what extent are sustainability criteria taken into account by the fund management when making investment decisions?

The eagle’s-eye perspective: social worker (“supervision”) and trusted advisor

In the field of social work, there is an area of supervision. This term coaching is often associated, rightly or wrongly. If one wants to bring the new German term “Trusted Advisor” into play, then one judges the information gathering topic of the foundations at least once on a meta-level. In other words, the eagle’s perspective can often help to set up efficient decision-making processes.

“Supervision (Latin for an overview) is a form of counseling for employees, including those in psychosocial professions. Supervisions are led by a supervisor, who usually has an appropriate qualification or additional training. In supervision, individuals, groups, and organizations learn to examine and improve their professional or voluntary activities. To this end, the participants agree on goals with the supervisor” (source: Wikipedia). By no means does this instrument aim to define the economy as “sick”, rather this reflective approach is being re-introduced into the economic sector under the label of coaching. Also, foundations generally do not need a trained supervisor for the topic of manager selection. However, it is possible to build a bridge to the role of the Trusted Advisor through this professional approach.

Trusted Advisor – by no means a scientific term: One can understand this term for example as a “neutral advisor”, as a coach, as a classical advisor. Often one finds also institutionalized forms of support by the term of the “Stiftungsoffices”, following the term Family Office. This role, of advisor, can be assumed by various functionaries. From family offices, from asset managers, from classic consulting service providers, also from classic institutional asset managers. It seems crucial that certain neutrality is maintained in the Foundation’s advisory process. “A certain neutrality” does not exclude that these Trusted Advisors may offer their products or services. The client, in this case, the foundation, should only be given a transparent picture of the possible interests and fields of conflict of interest and then be able to make a free decision. If internal resources should not be sufficient for issues such as manager selection, external support can be purchased here under certain circumstances. The market for foundations and “trusted advisors” as potential contractual partners is growing increasingly. Bundling, processing, creating transparency is a need for some investors. There is enough information for the decisions, what is needed is probably a kind of “chief editor” who can assess and weight the information professionally to optimize decisions.

Investment companies as Trusted Advisor

Investment companies can also be used in part as an advisor for the selection of funds suitable for the endowment. Many houses such as Universal-Investment, Ampega, Hansainvest, or IP Concept (and many other houses) set up private label funds in the endowment segment. Many of the funds already bear the term foundation in their fund name. Similar to what is described above in the Trusted Advisor section, the term sometimes falls short in this area. Of course, there are many regular mixed funds (besides so-called asset management approaches), which are suitable for the investment of endowment funds, in addition to the endowment funds mentioned by name. As the first point of contact for information, at least once on the website, these providers of private label funds are often well suited. The interests of the investment companies are also transparent: one wants to set up funds, one wants to administrate.


Many offers for the identification of funds suitable for foundations or the selection of asset managers or family offices suitable for foundations (e.g. those with their products) can be identified by researching foundation investors. Here, there is almost rather too much than too little information. Some foundations already have an excellent command of these processes internally. There may be a bottleneck in the case of small and medium-sized foundations that require analysis. Here, the self-defined Trusted Advisors mentioned above must provide satisfactory answers. Heretical said: Do you “love” foundations as a customer group and delve into their needs, problems, topics or do you consider foundations only as another sales channel among many – is there the desire for a long-term partnership or does the short-term, opportunistic product sales interest (similar to service providers) rule? This question needs to be answered – the discussion has only just begun and can be followed with great excitement!


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