FUND BOUTIQUES & PRIVATE LABEL FUNDS: Family Offices and Fund of Funds – Asset Allocation & Manager Selection versus costs?

“I have no special talent, I am just passionately curious” (Albert Einstein). When talking to semi-institutional and institutional investors, one often encounters only restrained interest in the topic of funds. Reasons such as costs and the original positioning of this product category in the retail segment are often cited for this. If one assumes that there can be interesting fund managers in this category in comparison to the “asset allocation approaches” usually managed in the market (managed accounts, segment funds, special funds, fund asset management) – what arguments would there be for a more intensive engagement with this product category?

Used by family offices and independent asset managers

Multi-family offices and asset managers use funds of funds as a tool to allocate client assets efficiently. What are the advantages of this process? Orders can be standardized, there is no need for time-consuming individual orders for many customer portfolios, there is access to certain institutional tranches in the case of mutual funds, the amount of discussion required for all parties involved when an order is placed is greatly reduced, “whip of transparency”: the customer can compare the “fund of funds” cost pool with asset management or mixed fund concepts or with conventional asset management approaches on an individual security basis. ETFs can also be used at any time with these approaches and hedging is simplified by the product wrapper, with various risk management approaches also available here.

Markus Hill, independent asset management consultant in Frankfurt am Main
Markus Hill, independent asset management consultant in Frankfurt am Main

Niche, fund volume, and “valve

Of course, traditional institutional investors naturally differ in their capabilities compared to semi-institutional investors, who mostly serve as intermediaries for access to the retail sector (HNWIs, etc.). Of course, there is also a gray area here, which can be assigned in certain parts to the area of foundations, pension funds, and “smaller” asset management consultants. Here, too, funds of funds represent an ideal problem solution, especially for small volumes in the boutique segment, at least at the beginning of the fund history. Compared to the classic “segment funds” and special funds, the fund of funds manager has the possibility with small fund volumes to use a large number of asset managers in the fund via mutual funds in his concept. Above a certain investment size, it is usually more efficient to pursue one’s strategy with classic institutional investors in a special fund. Here, however, funds of funds can often serve as an “accelerator” for boutique managers. In the area of asset management for wealthy private clients mentioned above, boutique managers in the fund of funds area can also serve as a complement to the product range of family offices, private banks, and asset managers. Why does this “valve solution” arise in the wealth management sector? One reason may be that, for diversification and reputation reasons alone, one cannot or does not want to cover the allocation only with funds of one’s own house (expertise, know-how, special fund approaches, etc.).

Specialization, expertise, network, and know-how

Many of the interesting funds of funds approaches can be found at specialized capital management companies, but also at specialized addresses in this segment, some addresses also serve as incubators in the boutique sector (Ampega, Universal Investment, Sauren, Greiff capital management, Lansdowne Partners Austria, FERI, etc.). Without making a statement about advantageousness in the area of costs or performance: Just to check the skills in the segment asset allocation can be worthwhile – after all one of the most demanding areas in asset management!

Markus Hill is an independent asset management consultant in Frankfurt am Main. Contact:; Website:


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