“Experience is an understood perception” (Immanuel Kant) – the question appears relevant whether experience always positively determines the actions of market actors or can be ignored under certain circumstances. In recent years, the German fund market emerged to be increasingly attractive for foreign asset managers. The UCITS issue, the removal of administrative and regulatory barriers, the professionalization of investors, and the emergence of an independent service provider industry (marketing, PR, placement agents, etc.) could be the driving forces behind this development.
It has long been recognized that great asset management talent can be found outside Germany. New fund editions at investment companies such as Universal -Investment, LBB Invest, HSBC Trinkaus, and other “promoters” of bank-independent fund advisors show that the sales market in Germany is inviting. Even the established, group-dependent houses such as DWS and Union Investment are following the market for foreign asset management expertise with great attention.
Whether “small” or “big” managers from abroad, the experiences made often show great similarity. It should be noted in passing that even domestic providers can hardly ignore this wealth of experience at the “micro-level”. There are successful market entries naturally interesting appears rather, without claim to completeness: Which factors can represent possible stumbling blocks for the market entrance?
Underestimating market potential – the applied handbrake
Foreign managers from the USA, Canada, and Australia often regard Europe as a single unit, which, due to language affinity, must first be processed from London. “Hit-and-run” entry, preferably paired with administrative “construction sites” are usual procedures. For Asia, many managers currently consider their market more attractive (Singapore, Hong Kong, etc.): Europe appears to be insecure, on the “descending branch”. In case of insufficient market cultivation or negative market assessment, is forgotten that Europe, and especially the predominantly German-speaking Europe (Germany, Austria, Switzerland) is a very attractive sales market.
Not only size seems attractive, but also the variety of sales channels and target groups. If, for example, you approach the project “Market Entry Germany” with limited resources, you may be able to show a quick success. It is often forgotten that only a small part of the market potential is used. It may be beneficial for the sales objectives of the “Head of International Business Development”, but for the foreign asset manager as a whole, a more profitable scenario in the long term can be envisaged. Budget and resources could often be expanded for the sales task, to take advantage of market opportunities in Germany on time.
Misjudgment of potential market penetration
Closely connected with the misjudgment of market potential is the so-called “tonnage thinking” in the sense of: “A large address must bring large turnover” with many foreign providers. Or also: “The consultant as the first point of contact will fix it”. Popular sometimes seems to be: “If I’m registered on a platform for sales, then the investors will notice me”.
Strategic partners of a suitable size have negotiating power, there is no guarantee that inclusion in a Preferred Partner List or a so-called “watch list” alone will replace active fund distribution in Germany. Consultants are recognized know-how centers – foreign providers often forget that many consultants are also dependent on their customers actively tendering for mandates; not to mention the struggle between time-consuming “filling out RFPs” and high margin pressure in beauty contests. Here, too, a convenient way seems tempting (asset manager lists), which should perhaps still be supplemented with additional sales activities. A similar theme can be found in platforms where sales partners can order funds. The passivity of this sales approach stands out. Of course, it should apply: Do one thing, don’t leave the other!
Personnel deployment, milestones, and target group
Many foreign asset managers naturally have a focus on the domestic market. In many cases, the handling of foreign markets is entrusted to a Head Of International Business Development or a regular sales employee as a special project. Of course, there are differences between fund boutiques of a certain size and houses that, for example, manage hundreds of billions of dollars depending on the group. Even the most dedicated, internationally active sales employee quickly reaches his or her limits. Travel, meetings, protocols, follow-up calls, and visits are time-consuming.
With a “market entry sideline” (project) there is an even greater danger that much potential for market penetration is wasted. Alone the number of funds managers, banks, family offices, corporates, etc. distributed over the different investor addresses (decentralized structure in Germany), overtaxes many companies. It is also often forgotten that the data material of foreigners often seems insufficient (target group databases – “white craters” instead of “white spots”!)
With inadequate personnel deployment, it is often difficult to sell successes internally in market entry projects. A certain number of trips, a few conversations – many of them perhaps connected to me purely as a “fact-finding mission” – do not represent a market entry strategy in asset management sales in the long term. How do you want to define and achieve milestones if you just stick a toe in the water for a long time, so to speak?
Reaction management, expectations, and priorities
From the three possible stumbling blocks mentioned above, it is often possible to deduce interesting ways of reacting from foreign suppliers. If too much is expected in too short a time, sales projects are stretched out over a long period and investors in Germany are then surprised that professionally attractive asset management addresses are never really noticed. Speculation: Perhaps the foreign manager’s management has not done certain homework internally or externally. Or the internal promoter of the project “Market Entry Germany” has a hard time in the company due to constantly changing priorities (“Asia is now more interesting than Europe including Germany!”). Sales then follow the “stop and go” pattern.
Another way of reacting can be to stick to a bad strategy but to double the efforts. An example of this can be the provider who packages an average performing hedge fund strategy in the UCITS coat and thinks that German investors would appreciate such products. Accountability, revision of decisions, change of direction – all fields that offer a lot of potential for optimization in the future, not only in the asset management industry.
As described at the beginning, there are many successful market entries in Germany. Therefore it seems all the more interesting that the above arbitrarily selected points are always important for market entries. Although the mentioned experiences show that there are critical factors with the market entrance, these are often not considered complete or in parts. Maybe it has something to do with the fact that many experiences want or have to be made “on their own”.
Perhaps there is mistrust among foreign managers towards internal or external know-how and support. Or perhaps there is a very simple rule in processing experience that could be translated into wise action. KISS: Keep It Simple, Stupid – Time is a precious resource, preparation takes time. Also with projects like market entries often helps to step back, wait, analyze – in terms of good preparation often forms the basis for long-term sales success in Germany!