“Money alone does not make you happy. It also includes shares, gold, and land” (Danny Kaye). Real assets will continue to meet with pronounced interest among institutional investors in the coming years – keywords: private debt, infrastructure equity, and real estate. Markus Hill* spoke for FONDSBOUTIQUEN.DE with Alexander Scholz, Telos GmbH, about the results of the recently published Telos study on this topic and the importance of ESG criteria and impact investing in this segment. Additional topics of the conversation were the rating of crypto funds and the allocation of crypto assets, the announcement of a webcast on the topic of the Real Asset Study as well as a short outlook on the topics of the currently upcoming 13th Wiesbaden Investor Day.
Hill: Mr. Scholz, in our last meeting you talked about real assets and digital worlds. What has happened at TELOS since then?
Scholz: Actually, we could turn the whole thing around now and talk about digital assets and real worlds.
Hill: What do you mean?
Scholz: About a year ago, we entered into strategic cooperation with Distributed Ledger Consulting GmbH (DLC) in the field of crypto fund ratings. DLC is a consulting company and expert in distributed ledger technologies (DLT) such as blockchains as well as all topics associated with digital assets in the financial market environment and TELOS as an established rating agency for qualitative analyses of asset management processes thus virtually establishing the connection between two worlds – that of classic asset management and that of digital asset management.
Hill: That means TELOS is now also entering the digital world of asset management.
Scholz: You can put it that way. We see an increasing institutionalization of the topic of digital and crypto assets. This is supported not least by the financial supervisory authorities and the EU. Particularly noteworthy for institutional investors is the legislator’s directional decision to allow special AIFs to allocate up to 20% in crypto assets by §282 of the German Investment Code (KAGB). An initiative at the EU level (draft EU regulation for crypto markets – MiCA), which de facto equates crypto assets with classic assets, also supports this development.
Hill: So you assume that institutional investors will increasingly look at so-called digital and crypto assets?
Scholz: Do we now expect a “run” on crypto assets by institutional investors? No! But we do see a growing interest in the topic among this group of investors. At our Wiesbaden Alternative Conference last year, TOBAM gave a presentation on Bitcoin in the context of an overall asset allocation. This met with great interest among the investors present. The results of our special fund market study this year also confirm this trend. In the US, institutional investors are already several steps ahead and have already integrated crypto assets as a building block in their asset allocation. This approach is supported by several studies that show a positive influence of a certain allocation of crypto assets in different portfolio constructions on the Sharpe ratio.
Hill: Are there already concrete rating projects in this area?
Scholz: Even if crypto asset funds are not springing up like mushrooms, there are certainly initial offers in this area. We are currently about to complete the first crypto fund rating, which we are carrying out together with our cooperation partner DLC. We will publish the rating results shortly. We are also in contact with other fund initiators in this regard. So more ratings are likely to follow.
Hill: Does TELOS still operate in the real world?
Scholz: After I made a plea for “real” life last time, it would be fatal if I only talked about virtual things now. Joking aside, we are currently in the final preparations for our investor conference on 23 June. After it was challenging to plan and hold a present event in the last few years due to Corona, we can be more relaxed this year, even though we were not affected as much as other big events such as the Institutional Money Congress. We had an easier time there with our more familiar format. With some creative scheduling and a portion of luck, we could also hold our Investor Day as a face-to-face event in 2020 and 2021.
Hill: Does the event have a specific theme?
Scholz: We hit the bull’s eye this time. With the title “Creative solutions in volatile times – debt, interest rates, politics 2.0”, we are addressing all the current topics that are of concern to investors. On the topic of inflation, we have also been able to win Prof. Dr. Thomas Mayer from the Flossbach von Storch Research Institute as a recognized expert keynote speaker. In the other lectures, capital investment experts from national and international asset management companies will have their say – including some representatives of your special field “fund boutiques”.
Hill: Together with artis Institutional Capital Management, you recently published a comprehensive study on the investment behaviour of institutional investors in the field of alternative investments. Can you tell us a few highlights?
Scholz: First of all, thanks go to the many participants, without whose participation the study would not have been possible. In total, more than 60 investors with an investment volume of around 1.2 trillion euros answered the questions of our study on the investment topics of real estate, alternative assets, and ESG. In this respect, the results are representative. Real estate continues to be a popular asset class among institutional investors, although the growth dynamic here seems to be declining. This is not least due to a certain saturation in investment quotas – many investors have reached their maximum quotas. There is only limited demand for new types of use. Private debt and infrastructure equity are likely to become the new stars in the coming years. Massive increases on the part of institutional investors are planned here. Energy themes in particular are favoured in infrastructure and private debt. For initial investments in the private debt asset class, real estate themes are the focus of institutional investors. The topic of sustainability has gained further importance – triggered both exogenously by regulatory requirements, but also in particular in the internal perception on the part of institutional investors and the consideration of ESG aspects when investing in alternative assets. The topic of impact investing is also attracting increasing interest from investors. We also discussed the findings from the study in an entertaining webcast that will go “viral” soon – actually a nice combination of real values and virtual communication. By the way, many thanks at this point for your moderation of the panel. Each of the “panelists” in the round enjoyed the professional discussion on the topic of real estate, alternative assets, and ESG. Sebastian Thürmer (artis Institutional Capital Management), Bernhard Graeber (EB – Sustainable Investment Management), and I (Telos) were able to address various aspects of the study. The perspective of Mr. Graeber, with his many years of experience as a portfolio manager and as a “buyer” of projects in the areas of solar and wind power (due diligence, regulation), was able to bring additional aspects to the results of our study (artis & Telos) into the discussion. This input from him also led to ideas and thoughts on alternative questions for us, and we would like to take this opportunity to thank him as well!
Hill: What other projects does TELOS have coming up in 2022?
Scholz: Even though we have focused primarily on qualitative analyses, we are not ignoring the world of numbers. For some time now, we have also carried out a quantitative evaluation in addition to the qualitative aspects in our fund ratings, which are then incorporated into the overall rating. Shortly, we will also carry out this quantitative assessment separately from qualitative ratings and make it available to investors. We have designed the quantitative rating in such a way that it allows us to draw good conclusions about the quality of the asset management processes and the risk management.
Hill: With all the projects, is there any time left at all for your hobby?
Scholz: Fortunately, the evenings are getting longer again. In the meantime, one can cycle until 9 p.m. again. And if I run out of time, I still have the virtual world in the basement.
Hill: Thank you very much for the interview.
Telos GmbH: www.telos-rating.de
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