FUND BOUTIQUES & PRIVATE LABEL FUNDS: Family Offices and Fund Boutiques – Seed Money, Incubators, and Goethe (Comment – Markus Hill)

Drill thick boards have a long breath and a lot of knowledge, all this in combination with deep pockets – this, or something similar, could be the success factors for an incubator in the area of investment funds.
Similar to the terms family office and fund boutique, the slow, level-headed “breeders” in the investment sector have a wide variety of expressions. Why are incubators interesting and why do you find so few in the market?

Talent and Innovation

Lupus alpha is known as a fund boutique. On the one hand because of its convincing performance, and on the other hand because of the way it was set up at the time and the subsequent closure of its talent hotel for “emerging managers”. The special feature of this model was that it deliberately focused on lesser-known managers (track record etc.) and had done grassroots work in the hedge fund strategies segment for the industry. Regardless of the outcome of the experiment, the company has thus gained additional excellent know-how in the evaluation of complex, innovative strategies.

Talent and Tradition

In contrast to the above-mentioned “greenfield approach” at Lupus alpha, there has been a small industry of incubators in the asset management sector for years. These are hardly noticed. Old wine in new bottles, these are the typical addresses for seed money inquiries for “classic” fund concepts in the liquid and non-liquid fund sector. Similar to the area of family offices and club deals, much of the communication here takes place within an almost closed community. Of course, there are also “emerging managers” here, but interestingly enough, they often find more traditional concepts with often lower levels of innovation in seed money. Managers with a solid background, asset management history, a special characteristic in the family office sector are managers that you often develop yourself: First a specialist mandate in asset management, later your fund using the know-how, network, and infrastructure of the family office. Of course, there are exceptions, such as the area of asset management and AI (artificial intelligence) – many managers without a classical financial background, but equally subject to the pressure of having to deliver convincing real results in addition to initially convincing backtesting results.

“Ambiguity tolerance” and social work – self- and external definition for incubators

Classic seeders for fund projects can be found in the Family Office area. Entrepreneurs like to talk to entrepreneurs, understand entrepreneurs, and like to support entrepreneurial action. One loves consistency, is a long-term thinker. Names are often hollow – family office, investment office, private office, asset managers, classic independent asset managers, AIFM structures, etc. are often and gladly used in marketing: It is interesting to note that many of these organizations would not describe themselves outwardly as incubators. In classical supervision (social work) there is the nice phrase “If you don’t define yourself, you will be defined!”. If one would discuss these topics with different houses in the market like Paladin, Greiff capital management, or Lansdowne Partners Austria, an interesting dialogue would result. As in the classic family office sector, the advantages and disadvantages of visibility in the market are assessed differently.

Role of networks for incubators and fund initiators

Multipliers, investment companies such as Ampega, Hansainvest, Hauck & Aufhäuser, and other service providers can play a more prominent role in this segment. Those houses that, in addition to pure administrative services, manage to offer convincing answers to the seed money question in the long term will have competitive advantages: For talents who have incubators on their side, but also for talents who, so to speak, operate as a “stand-alone solution” without a traditional organization. Parts of the industry are developing in small steps in this direction. Consultants, multipliers, and providers with added value in terms of know-how, network, and services are valued by long-term capital, and long-term capital also requires industry know-how and exchange of knowledge. Funds are long-term projects, as Goethe already said: “Not art and science alone, patience wants to be at work”.

Markus Hill is an independent asset management consultant in Frankfurt. His areas of expertise are marketing/sales / PR and manager selection. Hill deals intensively with private label funds, fund boutiques, and the use of public funds (fund selection) for institutional clients.

The above text reflects the opinion of the respective columnist.

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