Private label funds, seed money & the strategy of the long bank

“The strength lies in calm” versus the strategy “We’ll put it off for a long time” – fund projects often operate within this area of conflict. Many fund initiators often underestimate the time factor in the project stages of conception, structuring, seed money search, and sales. What are the typical phases of a fund project? What are the often unrecognized costs of entrenched behaviors?

Fund projects and the time factor

The time factor in fund projects often appears less in focus than the concentration on technical or administrative issues. It is often forgotten that extra resources are required in all phases of the potential project (launch of funds and other product covers). Many projects often drag on “like chewing gum” over a long period. One reason for this is a lack of resource allocation – personnel, know-how, budget, time, etc. On the other hand, the day-to-day business may take such a toll on the fund initiator that his or her project can only progress in stop-and-go mode.

An exception is projects where it is not clear at the beginning whether, for example, a fund or a solution can be in the area of direct investments (examples real assets, infrastructure, etc.). The search phrase for an optimal solution is often simply more time-consuming in another form: More experts, providers, and investors have to be approached until the solution becomes apparent:

*What is already on the market?
*What is the strength of your concept – seen through the eyes of investors and experts?
*What gaps in the product or project universe can be filled?
*Are there regulatory pitfalls in the “packaging topic”?
*With which investor do I open doors with my expertise?
*What is a realistic time frame for the fund project?

Phases in fund projects and time commitment

Roughly speaking, one can perhaps distinguish the following phases in a fund project, which often merge into one another:

a) Idea / Concept
b) Structuring
c) Seed Money Search
d) Distribution / Fund Management

First one can say that experts from the Portfolio Management and/or very “staff near-thinking” coworkers (product management, marketing, etc.) with fund initiators in many cases naturally strongly concern themselves with the phases a) and b). The strategic bottleneck factor capital commitment for the project “yes”, “no”, “maybe” or even “maybe later” as investor feedback may receive too little attention here.

Time management – idea, structuring, and seed money

It is noticeable that many fund projects are “cooked” internally for a long time conceptually. What does that mean in extreme cases? A lot of time was invested in developing the “perfect” concept. A lot of energy – preliminary talks, market observation, provider selection “administration” – is focused on one of several project stages. Although potential target investors are systematically approached in certain cases, the number and quality of the prospect selection often offer the potential for optimization. One quickly loses a year and has nothing else in hand except three soft, non-binding seed money commitments. Experience shows that “when the going gets tough – nothing melts away as quickly as a seed money commitment” (expert quote).

The problem is well known in the market, but many fund initiators, who do not usually see themselves in the role of “communication” and “sales”, are often in limbo: a lot of dry practice, a lot of time spent, and in the end a long, arduous journey in search of investors. Of course, other ways of proceeding could slowly gain acceptance in the market: streamlining the idea and structuring process in combination with promptly obtaining investor feedback – what is often forgotten here is that those investors who are involved in the product management process at an early stage may also be potential target investors for convincing concepts.

Opportunity costs of self-chosen passivity – sales and fund management

Seed money search is a phase – who gives the starting signal to move from the dry run “conception” to the practical fund management level? With contentwise basic concepts – speak: the quality of the fund manager or fund advisor convinces – the factor sales are treated now and then somewhat stepmotherly. Unfortunately, it is not the case that every good or excellent performance convinces itself. Here the eye of the needle often lies in the thinking: word-of-mouth propaganda is enough, why pay time, money, and personnel for sales.

In short: Non-visibility in the market only leads to an influx of potential customers who simply happen to come across the fund manager by chance. Forget the high opportunity costs of this passivity, expressed by way of example: If I actively approach 100 investors with the convincing concept within two months, this can be more profitable (in terms of inflow of funds or awareness of new fund projects) than waiting for randomly incoming investor inquiries without action!

Trivial solutions in this area are obvious but are often only activated with the handbrake on due to different priorities in the company: Establishing and expanding internal or possibly external sales activities. That time can be bought with money often seems unclear to many initiators. Many a recommendable fund concept would be allocated by investors if it were only discussed once. Too many of the competitors drum in the market – certainly worthy of discussion – with success. Serious appearance, communication frequency, and of course excellent performance in combination is the common concept for success.

Excursus: Fund initiator – portfolio manager or entrepreneur?

A question, which one could ask with a new fund project: Would it not be an advantage, if the fund initiator should not understand itself rather as Vetriebler and entrepreneurs, less than pure Portfolio managers? Not in the practical function – everything can be developed and/or bought internally and externally – but with the mental approach perhaps mentally different paths would result in the project management, which one could go. More momentum, more focus with promising approaches, and, even in extreme cases, the courage to “stamp out” a beloved project promptly when it is recognized after a certain time that a project cannot be implemented or perhaps only much later.

Investment companies as “mentors” for time management

“In the peace lies the strength” – capital investment companies such as Universal-Investment, Hansainvest, Ampega, etc. concentrate on independent fund initiators. Naturally, potentially fund initiators can concern themselves in the first project phase with the topic conditions – hard facts, more easily to work on, to categorize. However, it can be much more important to gain clues about the success potential of your project in the first phase of the fund project. The above-mentioned companies, as well as many other addresses in the market, are know-how centers that can be a building block in the feedback process – many projects are running there, the issue of conditions should not obscure the view: The cheapest fund administration without investors for the fund should not be the core of efforts to breathe life into a fund project.

An alternative in the other form: Even an internal or external short project, to quickly recognize clarity about fund launch potential. It may be simple, but simple things are often ignored: The integration of service providers and investors through direct dialog in the right project phase can save a lot of time and costs for the fund initiator.

Tendency – factor time and professionalization

The real assets sectors (infrastructure, renewables, real estate, etc.) have provided many impulses in the area of product management. Due to the current regulatory environment in these areas, a new service provider industry is also developing. Externally, it does not always have to be better than internally: many companies are increasingly building up their know-how, for complex and less complex products.

Many initiators are also not influenced by fashion trends: There are still successful renewable energy concepts, and of course there are also apparently simple successful long-only concepts on the market. All these ideas among fund initiators deserve to be discussed professionally with potential investors: The fund initiator, who quickly conducts a qualified dialogue with the investor, can save a lot of time and money when launching the fund and sow the seeds of sales success!


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