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  • Nestled in the heart of Europe, Luxembourg stands as a global financial powerhouse, defying its modest size. Beyond its scenic beauty and rich history, Luxembourg boasts a unique fusion of expertise, extensive networks, and a thriving private market ecosystem that continues to captivate a discerning business audience. In this article, we delve into what sets Luxembourg apart as a hub for private markets and alternative investment funds while exploring the dynamic interplay between personal networks, expatriate communities, and the flourishing business landscape of the Grand Duchy.The Grand Duchy’s Formula for SuccessLuxembourg’s allure in the world of private markets and alternative investment funds owes much to its regulatory prowess. Operating under a robust regulatory framework, Luxembourg seamlessly combines stability and flexibility, fostering an environment where innovation thrives, and investor confidence remains steadfast. This equilibrium attracts asset managers, private equity firms, and hedge funds seeking smooth access to European markets.Moreover, Luxembourg’s extensive tax treaty network and EU passporting rights offer unparalleled access to investors and markets across the European Union. This strategic positioning has been instrumental in attracting capital not only from within Europe but also from beyond its borders. The Power of Personal NetworksWhile regulatory and logistical advantages are pivotal, Luxembourg’s true strength lies in its interconnected personal networks. In a nation where a thriving expatriate community fosters an environment of opportunity, personal relationships often form the bedrock of business ventures. Business leaders, financial professionals, and entrepreneurs converge in Luxembourg, forging a unique environment where ideas, funds, and expertise flow seamlessly.These networks extend far beyond Luxembourg’s borders. The Grand Duchy has long served as a melting pot of cultures and nationalities, attracting professionals from around the world. This diverse expatriate and business community cultivates a dynamic setting that transcends international borders.Navigating the Alternative Investment LandscapeLuxembourg’s prowess in the private markets and alternative investment funds arena is unmistakable. It has solidified its status as a premier domicile for alternative investment structures, encompassing private equity, real estate, and infrastructure funds.  Here are some reasons: Expertise: Luxembourg boasts a deep multilingual talent pool of professionals with specialized knowledge in alternative investments, from fund administrators to legal advisors, ensuring the expertise required to manage complex structures is readily available. Global Distribution: Luxembourg’s extensive distribution networks enable fund managers to access a diverse array of investors, a priceless asset in today’s globalized investment landscape where access to capital is paramount. Efficiency: The country’s efficient regulatory framework, coupled with its cutting-edge fintech infrastructure, streamlines fund operations and enhances transparency, providing investors with robust oversight. Sustainability: Luxembourg leads in promoting sustainable finance, with the government’s unwavering commitment to ESG (Environmental, Social, and Governance) principles aligning with the global shift toward responsible investing.The Luxembourg Advantage in Private MarketsLuxembourg’s appeal in private markets transcends access to capital or favorable regulations; it’s the vibrant, interconnected ecosystem that truly sets Luxembourg apart. The Grand Duchy’s private markets industry thrives because of the close-knit relationships that facilitate deal-making and innovation.The Role of Industry AssociationsLuxembourg’s success story in the fund industry is greatly indebted to industry associations such as the Association of the Luxembourg Fund Industry (ALFI), the Luxembourg Private Equity and Venture Capital Association (LPEA), and also Luxembourg for Finance as public-private agency. These associations play pivotal roles in shaping the future of the fund industry in the country. Through their collaborative efforts, these associations have enhanced Luxembourg’s reputation as a top destination for private markets and alternative investments, reinforcing the nation’s commitment to excellence and innovation. ALFI (Association of the Luxembourg Fund Industry): ALFI has been at the forefront of advocating for the Luxembourg fund industry, celebrating its 35th anniversary in 2023. It provides valuable insights, conducts research, and fosters a collaborative platform for industry stakeholders. ALFI’s initiatives have created an encouraging environment for innovation and growth in the fund sector. LPEA (Luxembourg Private Equity and Venture Capital Association): The LPEA is instrumental in driving the private equity ecosystem in Luxembourg. LPEA actively promotes knowledge exchange, networking, and the adoption of industry best practices, further strengthening the country’s position as a leading private markets hub. Luxembourg for Finance: Luxembourg for Finance plays an integral role in promoting the Grand Duchy as an international financial center. It acts as a catalyst for attracting financial institutions and investors while facilitating dialogue between the public and private sectors. Future OutlookIn the future, Luxembourg remains well-positioned to navigate the evolving landscape of private markets and alternative investments. The Grand Duchy is at the forefront of embracing emerging trends in the industry, including digitalization and the growing importance of ESG criteria in investment decisions. These forward-looking initiatives are expected to further strengthen its status as a leading financial hub with global reach.ConclusionIn conclusion, Luxembourg’s distinctive blend of expertise, extensive networks, and a thriving private market ecosystem has solidified its global leadership in alternative investments. Bolstered by its deep ties with expatriate and business communities and supported by industry associations like ALFI, LPEA, and Luxembourg for Finance, Luxembourg’s business environment encourages innovation, collaboration, and embraces diverse perspectives.For sophisticated business and fund professionals seeking an integrated financial platform in private markets and alternative investment funds, Luxembourg isn’t just a location; it’s a strategic nexus where talent, capital, and networks converge. This unique ecosystem continues to shine as a beacon of financial excellence, emphasizing the lasting influence of relationships and industry collaboration in the world of finance. Thorsten Lederer, with over 25 years of experience in the financial sector, including senior roles at Citigroup and ABN AMRO, currently serves as a Senior Advisor at Trustmoore Luxembourg. Trustmoore is known for its excellence in delivering tailored fund administration and capital markets services. Mr. Lederer’s finance blogs, covering topics such as distressed debt, private equity real estate, and middle-market investing, complement his frequent appearances as a moderator and panelist at private markets conferences. Thorsten Lederer, Senior Advisor, Trustmoore Luxembourg Trustmoore:

  • Report on the Forum Bundesbank event at the head office of the Deutsche Bundesbank in North Rhine-Westphalia on 16 November 2023 The United Kingdom (UK) finally left the European Union (EU) at the end of the 11-month transition period on 1 January 2021. Some observers predicted difficult times for the British economy in the run-up to this and forecast a high migration of jobs from London as a financial centre to the EU, for example to Frankfurt and Paris. Has this happened? How has the British economy developed since then and what are the future prospects for the British economic model post-Brexit and the important financial centre of London? Johannes Gerling, representative of the Deutsche Bundesbank in London, addressed these and other questions in his presentation at the Deutsche Bundesbank’s head office in North Rhine-Westphalia on 16 November 2023. There is great interest in the topic, as developments in the UK and London are of great importance both for the financial centre of Frankfurt and for the North Rhine-Westphalian economy. Structure of the British economy and the role of the financial sector The structures of the British and German economies differ significantly. In order to better understand current developments, some background information should be provided first: –  The British economy in comparison1:                                                 UK                              Germany (DEU)            Population:                66.97 million             84.08 million            GDP                           $3.07 trillion              $4.07 trillion            GDP per capita         $45,850                     $48,433 The British economy is significantly less export-oriented than the German economy (GBR approx. 31 %, DEU approx. 48 %)2 and strongly characterised by the service sector (GBR approx. 80 %, DEU approx. 70 %)3 – this is particularly evident in foreign trade (DEU: clear dominance of goods exports; GBR: almost balanced ratio between goods and service exports) The financial sector is of particular importance to the UK economy (share of value added approx. 8% (e.g. DEU: approx. 4%), jobs in the financial sector approx. 1.1 million, 405 thousand of which are in London). The EU is by far the most important trading partner for the UK, although its share has been declining for some time (exports 42%, imports 50% of total trade in 2022). A deficit in bilateral trade in goods with the EU of £117 billion contrasts with a surplus of £25 billion in trade in services. New framework for EU trade relations Two agreements form the essential basis for new relations between Great Britain and Northern Ireland and the EU: The Withdrawal Agreement primarily regulates the rights and obligations arising from the UK’s long-standing membership of the EU, including payments to the EU budget. The Northern Ireland Protocol as part of the agreement prevents a “hard border” between Northern Ireland and the Republic of Ireland, but at the same time introduced a new customs border between Great Britain and Northern Ireland. The agreement came into force on 1 February 2020 and provided for a transition period for the UK to remain in the EU single market until the end of 2020. The trade and cooperation agreement primarily regulates trade relations and fishing quotas, but also cooperation in areas such as law enforcement, justice and research. It was signed on 24 December 2020 and came into force on 1 January 2021. It enables the largely duty-free movement of goods, but does not prevent the creation of new, non-tariff trade barriers (customs documents, product safety certificates, etc.). The free movement of persons between the EU and the UK no longer exists. Similar to other modern free trade agreements, the trade and cooperation agreement essentially only contains very general agreements on trade in services that hardly go beyond the level of the corresponding WTO standards (World Trade Organisation). In the area of financial services, the UK is basically treated like any other third country. A corresponding equivalence decision by the EU, which would form the basis for EU-wide market access, currently only exists in the area of central counterparties (CCPs)4. The financial market dialogue newly established between the EU and the UK does not conceptually go beyond the EU’s exchange formats with the USA and Japan, among others, and does not decide on market access issues. After Brexit was finalised, relations were initially severely strained as the British government refused to implement the Northern Ireland Protocol agreed with the EU, including new customs controls between Great Britain and Northern Ireland, in accordance with the treaty. An important step towards normalising relations between the EU and Great Britain is the “Windsor Framework” from February 2023, as it addresses some of the key issues surrounding the Northern Ireland Protocol: Trade and customs issues:Establishment of so-called “Green Lanes” for goods that remain in Northern Ireland (quasi abolition of customs controls), acceptance of GBR standards for food in Northern Ireland by the EU (must bear “not for EU” labelling). Simplifications also for medicines. Parcels to friends and family and from online shops no longer require customs documents. Greatly simplified entry for pets. Specific customs problems for steel are eliminated. Subsidies and VAT:Restriction of Brussels’ right to have a say on subsidies affecting Northern Ireland. Extensive exemption of Northern Ireland from EU VAT rules. Sovereignty and institutions:”Stormont Brake” allows the UK to suspend the application of new EU internal market rules in Northern Ireland (EU can respond with “targeted remedial measures”). There are new foundations for cross-border financial services post-Brexit: The implementation of Brexit on 31 December 2020 created new conditions for market access in the EU. EU-wide passporting was lost. Instead, EU equivalence decisions and a “patchwork” of national access regulations apply. The UK granted EU institutions a transitional period of up to three years through the “Temporary Permissions Regime” (even longer in some areas). The EU did not offer any such transitional arrangements for British institutions; these existed or exist in part at national level in the member states. In addition, far-reaching special powers were granted to the British institutions. In addition, far-reaching special powers were created for the British supervisory authorities (Temporary Transitional Powers) for

  • “One should be absolutely wary of predictions, especially those about the future” (Mark Twain). Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Michael Heise, publicist and chief economist of HQ Trust, about the connection between the fields of economics and family office as well as the challenges for investors in the current interest rate environment. Topics addressed included the ECB, interest rate policy, inflation and the implications for capital market returns. These topics, as well as the topic of alternative investments, will also be the focus of discussion this week at the Private Wealth Forum Germany and the Private Debt Investment Forum in Munich. Hill: As an economist, where do you actually see the connection to the topic of “Family Office & Asset Allocation”? Heise: Advising families on how to secure and increase their assets is an extremely exciting task. In my view, it is closely linked to global economic developments, which play a major role in determining long-term trends on the financial markets. In this respect, a passion for economics is a good prerequisite for advising family offices. For economists working in the financial business, which has been the case for me since 1995, the special challenge is not only to present academically interesting analyses, but also to generate instructions for action for investors. And they are, as you know, subject to the merciless judgment of the markets. That’s what makes the work so exciting. Hill: Why do you think the ECB has been so late in responding to inflation? Heise: The sudden rise in inflation in recent years has surprised the vast majority of forecasters in its rapidity. However, this is no excuse for the central banks. The European Central Bank, in particular, held on to the thesis that the rise in inflation was only temporary for far too long, so it took countermeasures very late. The ECB’s first interest rate hike took place in July 2022, when inflation had already reached almost 9%. How did this late reaction come about? Of course, it can be argued that our forecasting models do not work so well in times of massive shocks such as the COVID pandemic and the Ukraine war. More importantly, the European Central Bank had just revised its strategy in 2021 and a very expansionary policy stance emerged. As late as the end of 2021, the ECB announced a long period of low key interest rates as part of its so-called forward guidance, thus shaping market expectations. This assurance then prevented it from raising interest rates in a timely manner. In doing so, it would have undermined its own announcements. Michael Heise, Chief Economist, HQ Trust GmbH Hill: What’s next for inflation and the ECB’s key interest rate? Heise: In my estimation, the ECB’s key interest rates will remain at the level they are at now until early summer 2024. In view of the weak economy in the euro zone and the fact that inflation figures are falling, the ECB is unlikely to tighten monetary policy further for the time being. Of course, the decisive factor is the development of inflation. Significantly rising commodity prices or aggressive wage increases could change the picture. Hill: What are the implications for capital market yields? Heise: With the current direction of monetary policy, capital market yields are likely to move more or less sideways at current levels. Significant interest rate cuts by the central banks would only be expected in the event of a stronger recession, which most forecasters do not currently see coming. So I don’t think you should position yourself for falling interest rates. Hill: We had a preliminary discussion about our panel at the Private Wealth Germany Forum in Munich. What other topics are important to you there? Heise: It will certainly be a very interesting panel. I’m particularly looking forward to discussing different scenarios. What is the likelihood of a recession, a severe economic downturn? A recession scenario would have very different capital market implications. I assume that opinions differ here. Hill: What additional issues are you currently facing? Heise: This week is all about alternative investments. On October 18, I will be giving a keynote at the Private Debt Investment Forum 2023 here in Munich. Private debt investments have developed very strongly recently and have attracted high demand. However, they are also affected by macroeconomic developments and risks. There’s a lot to discuss there. Hill: Thank you very much for talking to us. Michael Heise has been an independent consultant and publicist since 2020, as well as chief economist of the asset manager HQ Trust GmbH in Bad Homburg. He studied economics at the University of Cologne and earned his doctorate. His professional career led him via the German Council of Economic Experts (Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung) and the positions of Chief Economist at DG Bank and DZ Bank to the Allianz Group in Munich. Heise is an honorary professor at Goethe University in Frankfurt. PRIVATE WEALTH GERMANY MUNICH FORUM (MUNICH, 17.10.2083): PRIVATE WEALTH, FAMILY OFFICES, ECONOMICS & Finanzplatz Deutschland (München, 17.10.2023) – “Panel Discussion: Fixed Income: Rising Trends Shaping Today’s Landscape Inflation is at its highest rate in four decades. Central Banks may continue to raise rates. Given this precarious moment in time, investors are left wondering if the 60/40 portfolio is still viable, in light of correlations between stocks and bonds. This panel will aim to answer such key questions as: • How much higher will the ECB raise rates and how quickly could they cut rates? • How will the ECB reduce its balance sheet and for how long? • How is liquidity in the bond market and what is the impact on fixed income portfolios? • Could this be a year with bonds and stocks up? How does that affect investing behavior of clients? Moderator: Markus Hill, Managing Director, MH Services – Panelists: Martin Friedrich, Head of Economic & Market Research, Lansdowne Partners Austria – Michael Heise, Chief Economist, HQ Trust – Timur Shaymardanov, Senior Product Specialist -Xtrackers Index Strategy &

  • “It is not enough to know – one must also apply. It is not enough to want – one must also do” (Goethe). Fund regulations, family offices, and foreign fund companies, factors for location quality, and roadshow dates in London and Frankfurt am Main – Markus Hill spoke for FONDSBOUTIQUEN.DE with David Gamper, Managing Director, LAFV Liechtenstein Investment Fund Association about current developments in Liechtenstein as a fund location. Hill: How is the Liechtenstein fund industry doing? Gamper: In 2022, the Liechtenstein fund industry showed an extremely successful performance overall despite a challenging environment. It achieved a remarkable result with a record number of 113 new single or partial fund launches. This increasing number of fund start-ups is of particular importance for a location specializing in private label funds and shows that more and more fund initiators are convinced of Liechtenstein as a fund domicile.Net inflows also reached a new high of 5.8 billion and were able to largely offset the losses on the stock markets, causing assets under management to fall only slightly from 70.4 billion to 69.3 billion. Which represents a decline of only 1.6%, while the European fund market recorded an average loss of 12.8%. In the first half of 2023, new fund startups were partially more restrained than last year. However, the good order among the members suggests that this situation could change rapidly. Hill: What else has happened since our last interview about a year ago? David Gamper, Managing Director, LAFV Leichtenstein Investment Fund Association Gamper: It is gratifying that not only the funds but also the number of fund companies operating in Liechtenstein are continuously increasing. The fact that two new companies have joined in the last 12 months and two more are in the process of being licensed shows that interest in Liechtenstein as a fund domicile continues to grow. Particularly noteworthy is the admission of Luxembourg-based Axxion S.A. as the first foreign member of the association. It is a significant step indicating that foreign fund companies have recognized the advantages of Liechtenstein as a location for their funds. The possibility of passporting enables them to launch their funds in Liechtenstein and distribute them from Liechtenstein to other markets in the European Economic Area. The membership of additional foreign service providers in the Liechtenstein Investment Fund Association (LAFV) also underscores the growing interest in Liechtenstein as a fund domicile. Overall, these developments show a positive signal for the fund industry in Liechtenstein. Hill: Do you see any particular trends in the Liechtenstein fund industry? Gamper: It is particularly noticeable that family offices are increasingly setting up funds in Liechtenstein. It could be related to the fact that Liechtenstein is a member of the European Economic Area but, like Norway and Iceland, is not part of the EU and uses the Swiss franc as its currency. Another factor could be the significantly lower inflation compared to the EU area. In addition, the political and economic stability along with the fact that Liechtenstein has no national debts therefore, are major contributing factors. In conclusion, Liechtenstein is exceptionally appealing as one of about a dozen countries globally with AAA credit rating. We have also noticed that in addition to our core markets of Germany and Switzerland, inquiries from non-German-speaking Europe are increasing. It shows that internationalization is progressing, which is visible from the fact that Liechtenstein funds are currently distributed in 25 European countries. Liechtenstein has thus developed into a signaficant cross-border location for private-label funds. Hill: What asset classes are you focusing on? Gamper: Due to our specialization in private label funds, the fund initiators determine in which asset classes the funds are launched. In this area, the spectrum is very broad and includes private equity, real estate funds, hedge funds as well as niche products such as crypto assets, mezzanine capital, cat bonds, and many more. One notable development is the (re)rise in popularity of UCITS funds. Two years ago, their share was just over 20%, while in 2023 it has risen to about 37%. These funds have their focus mainly on equities. Fund initiators repeatedly express that the management companies from Liechtenstein, which are referred to as service KVGs in Germany, have extensive expertise, especially in niche products, and show great interest in implementing these strategies in funds. Expertise and interest are not equally available in all countries. Hill: There was another roadshow in Germany this year to present the fund location. How was the response and what is planned shortly? Gamper: So far this year, we have only been in Munich, but we were pleased with the gratifyingly high number of participants and the excellent feedback. We were able to report numerous positive developments, including the impressive figures from previous years and Liechtenstein’s outstanding performance in the Moneyval Assessment about combating money laundering and terrorist financing, as well as in excecution of the Automatic Exchange of Information (AEOI). We are planning two more events in the fall:  October 12th  in London and November 8th in Frankfurt. Events in Munich and Hamburg are on the agenda for next spring. Tentative dates for these events are either March 12 and 13 or April 16 and 17, 2024. Hill: Thank you very much for talking to us. David Gamper is the Managing Director of the LAFV Liechtenstein Investment Fund Association, the official representative body of the Liechtenstein fund industry. The LAFV’s mission is to promote the development of Liechtenstein as a fund center and thereby further improve its attractiveness for fund providers and investors. Link to website: LAFV Liechtenstein Investment Fund Association EVENT INFORMATION PRESENTATION OF THE LIECHTENSTEIN INVESTMENT FUND ASSOCIATION IN LONDON Did you know that the Liechtenstein fund domicile ranks seventh in Europe in terms of the number of funds? Did you know that the Liechtenstein fund domicile specializes in white-label funds? Did you know that Liechtenstein funds are distributed in 25 European countries? Learn more about the Liechtenstein fund domicile and its attractive framework conditions, on 12 October 2023 at 4:30

  • On February 23rd, NACUBO1 released its annual statistic of US Endowment returns for the fiscal year 2022 on its website2. Once again, numbers stood out, with losses being lower than what could have been expected from the performance of broad equity and bond markets. Exhibit 1: Endowment Reurns, 07/1998 – 06/2022 Sources: Bloomberg, NACUBO, University Endowment Annual Reports, Lansdowne Partners Austria Endowments are one of the oldest classes of institutional investors, and we believe they are interesting role models. For those inclined to take notice of longer-term developments – and we do count ourselves into that group – their investment returns provide an interesting benchmark. Investors of all kinds might want to consider. Exhibit 1 summarizes data we have collected over the years. It shows the development of $1 hypothetical dollar invested on June 30th, 1998. In addition to endowments of different sizes, we show our proxy for traditional asset management3. Two observations stand out from the chart: Large endowments have outperformed smaller ones, by a significant margin All endowments have outperformed traditional 50:50 equity – bond portfolios. On the following pages, we discuss the following: Why have endowments achieved these results, and what can we learn from them? And: How does the Lansdowne Endowment Fund take advantage of these insights? The Endowment Style of Investing Endowments originated in 17th-century England, when the colleges of Oxford and Cambridge University received gifts to support their operations and ensure their independence. Because these donations were meant to sustain an institution, which otherwise has no income, the recipient colleges became the ultimate long-term investors. Their investment purpose is to effectively preserve for future generations the university’s ability to serve society by creating knowledge. The investment style of these institutions has been researched and documented repeatedly, most recently in a paper published 2020 in the Financial Analysts Journal4. According to the authors, the following are the key pillars of their success: A truly long-term focus, leading to an ability to bear elevated levels of risk. Broad diversification across traditional and alternative asset classes. Early adoption of new asset classes as they become investable (early mover advantage – e.g., an early move into equities from the mid-1930s onwards, later a move into hedge funds between 1980-2000 and private equity between 1990-2010) The ability to behave in a counter-cyclical fashion; the authors of the above-mentioned study were able to show in particular that, as a class of investors, large endowments actually decreased their equity allocation in the run-up to major stock market crises, and later increased it in the aftermath. Lastly, while many other investors have adopted factor investing and moved from active to passive strategies, the leading university endowments have largely abstained from these trends, and stuck with active asset management. Risk-adjusted Returns US Endowments have outperformed traditional 50:50 portfolios, even before accounting for costs5. However, when it comes to investing, we always need to consider risk as well as the return. This old adage is particularly relevant when analysing endowment returns. Since 1998, the annual return of US endowments has displayed a volatility of 10.5%. For large (>$1 billion) endowments, that number has reached 12.2%; and the large Ivy-league endowments have exhibited an annual volatility of 13-15%. Exhibit 2: Endowment Returns.Versus-Risk Analysis Sources: Bloomberg, NACUBO, Lansdowne Partners Austria Therefore, exhibit 2 provides a fairer comparison, summarizing the last 24 years of investment results by comparing both risk and return. We can see clearly now that endowments have provided their superior results by employing substantially more risk than a 50:50 portfolio; but their returns cannot be accounted for because of risk alone: The dotted line in the chart shows that, even at equivalent levels of risk, traditional asset management would not have provided the same level of returns. Endowment Investing – the “UCITS” way Can endowment returns be replicated in a liquid, daily-tradable format? To answer this question, let’s dissect the aforementioned list of characteristics of endowment investing, taking each in turn: Long-term focus. Although the Endowment Fund is just over 3 years old, the set of rules governing its asset structure has been designed with the long-term in mind. The main factor determining its return – the strategic asset allocation – is based on 7-year models. It is determined using risk metrics that are calculated over the longest possible time horizon, employing 3-, 6- and 12-month periods rather than just monthly or weekly statistics. Broad diversification. The Endowment Fund uses all possibilities available under its mandate to reach for idiosyncratic sources of return. In total, 17 asset classes encompassing roughly 130 countries are covered by its investment process. Early adoption of new asset classes. We keep an open mind when integrating non-traditional asset classes into the portfolio. Allocations to “niche” asset classes like convertibles, frontier market equities or insurance-linked securities are set based on a stringent, mathematical process. No ‘conventional thinking’ is allowed to influence these allocations. Counter-cyclical focus. Because our allocations are based on forward-looking, valuation-based models, strong performance of a particular asset class is more likely than not to trigger a downward adjustment in our expectations the following year. With lower return expectations, allocations will be revised downwards. Thereby, an element of sell-high, buy-low is entering the process. Exhibit 3 provides an example, showing that our allocation to convertible bonds has been adjusted in the opposite direction of the performance leading up to the revision repeatedly now. Active management. Our implementation relies heavily on active managers, with a sufficiently long track record, whose investment approaches have been studied and vetted by our team. The results have been encouraging (Exhibit 4). Exhibit 4: Active Management – vs Peer Groups Sources: Scope Fund Services GmbH, Lansdowne Partners Austria Exhibit 3: Convertibles – Allocation vs. Performance Sources: Bloomberg, Lansdowne Partners Austria Lastly, it is important to also mention the differences in replicating this investment style via a UCITS fund. The most important one concerns the level of risk. The majority of the asset classes we employ does not provide enough risk to match the

  • Real estate, USA, internationalization, and the importance of professional due diligence of target investments are currently increasingly discussed among institutional investors. Markus Hill spoke for FONDSBOUTIQUEN.DE to Martin Stoss, BVT Holding” about his passion for the US real estate segment, due diligence factors in the selection of properties, the specifics of the US market, and the importance of the different market segments locally. These remarks were also underlined during the panel discussion held in May this year as part of the “Real Estate, Alternative Investments & ESG” study. Hill: What area do you oversee in your company? Stoss: I have been with BVT for about two and a half years as Managing Director for the US division. Before that, I worked for a subsidiary of Deutsche Bank as well as PGIM, one of the global top ten managers, with assets under management of around USD 1.5 trillion, as Executive Director (Portfolio Management) for the regions Asia, Australia, and the USA. At BVT, my activities include the fund conception of closed-end real estate funds under German law as well as for institutional investors under Luxembourg law. In addition, I am responsible for portfolio management, acquisitions, and sales as well as investor reporting. As a civil engineer with a focus on construction management, I have long had an affinity for real estate. For about 20 years I was responsible for real estate funds at Deutsche Bank (5 years) and later PGIM (15 years), which invested in all major economic areas or economies of the world. This allowed me to gain extensive knowledge of the real estate markets and economies in Asia, Australia, the USA, and Europe. As a result, I can evaluate economic developments in a global context and identify the potential impact and opportunities on the real estate sector of a specific economic area at an early stage and implement them strategically. Martin Stoss, BVT Holding Hill: Why are you so closely involved with the U.S. real estate market? Stoss: In my view, the US market continues to be very interesting due to the following points. The U.S. is the world’s largest economy, with a gross domestic product of $21 trillion (2021) and the tenth-highest per capita income (2020). With over 330 million inhabitants, this makes it the country with the third largest population in the world, after China and India. In the U.S. you will find the largest commercial real estate market in the world with very high transparency (JLL Transparency Index: 2nd place), excluding condominiums as a category. The country has a tax system and a currency that is the world’s reserve currency. According to the Global Firepower Index, it has the strongest army in the world. The population there is growing at a rate of one percent per year. It is also worth noting that the U.S. is in an excellent position in terms of demographics; the country is characterized by a young population structure. We are not so well positioned here. At 47.8 years, Germany has the oldest average population after Japan at 48.6 years. 18.5% of the population in Germany is younger than 20 years. The population of the USA is on average 38.5 years old, almost 10 years younger than in Germany. Likewise, 24.8% of the population is younger than 20.   Hill: Why invest in the residential segment in the U.S.? Stoss: The USA currently lacks around 2.5 million apartments. Annual new construction activity is not sufficient to close this gap. We are building apartments in the high-end Multifamily Class A segment, where there was a shortfall of around 500,000 apartments in Q1/2023. Demand for rental housing is rising steadily in the USA, particularly in the East Coast and Sunbelt markets. Reasons for this include steady population growth, social change, and significant increases in home prices. Due to the sharp rise in interest rates, purchasing a home has become unaffordable for many potential buyers. This is increasing the demand for rental housing. It should also be borne in mind that on average around one million new households are formed here every year. We also find the very high liquidity in the market interesting, with a transaction volume in the multi-family sector of around USD 350 billion (02/2021-02/2022). One also finds a form of “inflation protection” through lease terms of around one year in the residential sector. Returns here are in the range of 11% to 13% p.a. Multi-family has outperformed all other commercial real estate classes (hotel, industrial, office, and retail) for more than 15 years. According to NAREIT as of Q2/2023, apartments with a total return of +6.27% are far ahead of the common asset classes office with -18.1% and retail -2.0%. (For office and retail the return is negative!). These are REITs. When reviewing potential new investments, we are strongly research-driven and put the potential investment through its paces. What are the key points for us in this approach? We focus on markets where we have a high level of expertise (East Coast: Greater Boston., Washington, Orlando, Atlanta). The supply vs. demand factor in these markets. Here, we closely examine how many new projects are planned and under construction in the surrounding areas. It is important to know how many apartments have historically been built and leased per year (absorption rate). In this way, we want to ensure that a sufficient number of tenants can be found for the apartments that have been built. We monitor population trends very closely. We also monitor the areas of employers (number of jobs and industries) and the distance to the largest employers. The segments that seem most attractive to us are high-tech, med and ed (medicine and education), aviation, public administration, and large military institutions (research, medicine).  What other factors are important for us to analyze? The quality of the housing stock and the planned residential buildings, analysis of the ACTUAL rents of the competing properties, verification of the achievable rents after completion, transport connections, and an attractive environment for the potential tenants (gastronomy, sports

  • “Financial Centre North Rhine-Westphalia”, Financial Centre Frankfurt, Economy, Innovation, Germany Finance & Cooperation of Financial Centres – Markus Hill spoke for FINANZPLATZ-FRANKFURT-MAIN.DE about these topics with Heinz Joachim Plessentin, former coordinator of Fin.Connect.NRW at the Ministry of Economics of NRW. Further components of the discussion were additionally the areas of venture capital, ESG, and transformation as well as the contents of the study “Germany as a financial centre as a cornerstone of the European financial system”. Hill: Fin.Connect.NRW has attracted attention beyond the state borders. Compared to other financial centres such as Frankfurt, the financial centre initiative is still relatively young. What are the special features, what is the unique selling point of Fin.Connect.NRW? Plessentin: Indeed, the structures in North Rhine-Westphalia are special. The state has a rather decentralized organization with several major centres such as Düsseldorf, Cologne, and Münster. North Rhine-Westphalia is Germany’s second-largest banking center after Frankfurt, with a focus on Düsseldorf. Next to Munich, Cologne is the strongest insurance location. The state is an important location for industry, medium-sized businesses, and science. Accordingly, Fin.Connect.NRW is not a city-based initiative, but an overarching state initiative that brings together all the players. Fin.Connect.NRW is the financial centre initiative focusing on sustainable, climate-neutral, and digital transformation and its financing. We also have the classic financial center topics on the agenda: location marketing, human resources, innovation & fintech. For example, InsurLab Germany in Cologne is the largest industry initiative to promote digitization and innovation in the insurance industry. Heinz-Joachim Plessentin, Fin.Connect.NRW & Markus Hill Hill: For a financial center initiative, the ecosystem and networking are crucial. Networking is essentially based on contacts in the financial industry and the business sectors, personal trust, and mutual appreciation. Who is on board as a cooperation partner in Fin.Connect.NRW? Plessentin: Fin.Connect.NRW will further expand NRW’s financial ecosystem, especially given the major economic challenge of transformation. The competitiveness and performance of a financial center and sustainable finance in the broader sense depend to a large extent on the performance of the ecosystem. We “span the arc” from science to finance to the “real economy”. The real economy is represented by the NRW Chamber of Industry and Commerce, the credit industry associations, and the NRW headquarters of the Deutsche Bundesbank are also founding members. Furthermore, in addition to the insurance industry, the stock exchange, private equity companies, NRW.BANK, the Center for Innovation and Technology in North Rhine-Westphalia, or ZENIT for short, the Institute of German Business and the Institute of Energy Economics at the University of Cologne, bank and business professors, and consulting firms such as BCG and zeb are part of the initiative. Hill: That’s impressive. Who is coordinating the initiative? Plessentin: We see diversity as a strength. Fin.Connect.NRW is primarily about the topics. The structures are still developing. At present, coordination lies with the Ministry of Economic Affairs, SMEs, Climate Protection and Energy of the State of North Rhine-Westphalia, specifically with my colleague Dr. Dirk Schlotböller and myself in particular. In line with the Future Contract for North Rhine-Westphalia (coalition agreement), Fin.Connect.NRW is being strengthened. On June 14, 2023, the state parliament of North Rhine-Westphalia resolved to strengthen the Fin.Connect.NRW financial center initiative. Specifically, the state parliament has instructed the state government to strengthen the financial center initiative Fin.Connect.NRW and the networking between stakeholders such as companies, the credit industry, insurance companies as well as other players. On this platform, the players are to be able to offer tailor-made financing instruments for syndicated financing with several lenders and to mediate partners. A comprehensive information campaign is to be developed to raise awareness of Fin.Connect.NRW among the relevant target groups. The first NRW climate protection package adopted by the cabinet also includes strengthening Fin.Connect.NRW by awarding it an office, which will start work on November 1, 2023. Hill: I would like to ask you to elaborate on the conceptual cornerstones. Is diversity a strength of the financial centre? Plessentin: Yes, we are convinced of that. A study by Germany Finance and Zeb (study entitled “Germany as a financial center – a cornerstone of the European financial system”, in cooperation with the Chair of Banking and Financial Services at the University of Hohenheim, Prof. Burghof, on which I was involved) proves that diversity is an advantage and a strength of the financial system: The German financial centre is an excellent fit with the decentralized, medium-sized economic structure and German federalism. The structures of the economy and the banking sector are very similar. Our financial center consists of several leading regional financial centers with different focuses. This corresponds to the well-known structure of the German real economy, which is diverse, high-growth, international, and stable. New challenges have to be mastered. A diversified economy has a good chance of doing so. The sustainable transformation of the economy – the megatrend of the 21st century – and its financing require a departure and massive innovation, investment, and funding. To explain: Fin.Connect.NRW is a founding member of the Germany Finance working group, along with Frankfurt Main Finance, Finanzplatz Hamburg, Stuttgart Financial, and Finanzplatz München Initiative (with observer status); Berlin Finance Initiative was added. The participating organizations have thus initiated a joint platform to further promote continuous exchange among each other and to provide a central point of contact for people from Germany and abroad interested in Germany as a financial centre. Hill: How does the cooperation at Germany Finance work? I ask this also against the background that I know and appreciate Frankfurt very well, come from NRW/Cologne, and know that cooperation between countries, financial centres, and organizations is often not that easy. Plessentin: The cooperation at Germany Finance works well and collegially. This year, the spokesperson role is in Frankfurt, and 2024 it will be with Fin.Connect.NRW. As Germany Finance, we have achieved a lot together with studies on the financial centre, the fintech location, sustainable finance, and in the spring with the consultation on the attractiveness of the financial sector for young people. The cooperation also works well

  • USA, Canada, Europe, Renewable Energies and Infrastructure – Markus Hill spoke for FONDSBOUTIQUEN.DE with Sebastian Thürmer, artis ACM, about current trends in real estate, alternative investments, and ESG. The base of the conversation on various topics such as direct investments, special funds, and the private markets segment was, among other things, the recently conducted study “Investment Preferences of Institutional Investors.” Hill: You are currently raising money for North American investments from German institutional investors. Product initiators are directly talking about a solid increase in demand from these investors. Is that true, and why is that? Sebastian Thürmer, artis ACM Thürmer: Compared to Europe, the USA and Canada score with better long-term economic data, positive demographic prospects, attractive location conditions, a proactive industrial policy, and low energy prices. In Germany and Europe, we have been observing a kind of deindustrialization of the economy, for example relocation, for some time now. Capital investors are now joining this trend. This development is not without reason; after all, the U.S. and Canada specifically offer a high degree of legal security, which countries and regions in Asia cannot provide. In principle, however, this attitude is somewhat a vote against Germany and Europe, since many investors no longer understand political decisions in energy policy or the ignoring of structural problems. It is increasingly causing uncertainty and annoyance. This trend was also clearly expressed in the study “Investment Preferences of Institutional Investors” initiated by artis Institutional Capital Management and Telos Rating. You kindly discussed the survey of the study with me, Alexander Scholz (TELOS), Martin Krause & Martin Stoss (BVT Holding) in a podcast in May of this year, and I am naturally looking forward to the publication of our exchange of ideas soon. You are also moderating a panel on “Real Estate, Alternative Investments, ESG – Challenges for Family Offices & Institutional Investors” at the P5 THE PROPERTY CONGRESS by Dr. Dominik Benner on July 7 in Frankfurt. Mr. Scholz will be there, as well as Dr. Benner himself and Jan Paul Becker. An interesting mixture of experts, especially a different approach of family offices on this topic will be addressed. Hill: So, institutional investors are turning away from Germany and Europe? Thürmer: I disagree with this assessment, but investors are currently more open to non-European investments than they were a few years ago and are increasing their quotas. The investment focus of German institutional investors remains their home region. Moving forward however, they will prefer asset classes which are more independent of economic cycles. Hill: Are you discussing the energy infrastructure issue? Thürmer: Energy infrastructure is indeed one of the mega topics, but it covers only one subarea in the infrastructure sector. Infrastructure investments will gain enormous importance in the coming years. Thematically, the energy sector is at the top of the agenda for institutional investors as the core of the energy transition. However, it is also a fact that some institutional investors are irritated by energy policy or the rampant heating debate in Germany and are delaying investment decisions. I am not yet aware of any investment being on hold, but the discussion and the consequences are damaging Germany as a business location. As a combination, the infrastructure sector will have to be more broadly positioned in the future. Topics such as transport infrastructure, i.e. passenger and freight transport, as well as social issues such as health and education, have not yet been implemented or have only been implemented to a tiny extent. The huge need for investment in energy, digitization, or sustainable transport topics requires a great deal of capital. Accordingly, infrastructure investments in the portfolios of the insurance industry or pension funds will see massive growth in new businesses moving forward. Hill: Is there a likelihood that the rate of infrastructure investment will overtake that of real estate in five or ten years? Thürmer: Whether real estate or infrastructure will have a greater weighting in the overall allocation in five or ten years is pure speculation at present. Both asset classes have their importance in capital investment and therefore also their justification. Both asset classes are related to each other anyway and interlock over time. Some professional investors have already merged both areas. Hill: How do you currently assess the asset classes real estate, private equity, and private debt? Thürmer: We see a slight economic upturn worldwide in 2024, declining inflation figures, and, as a result, possibly falling interest rates again. That would be a good breeding ground for these asset classes. Institutional investors are currently quite reluctant to invest in real estate. Price levels have fallen in the past 12 months, in some cases significantly. This is accompanied by sharp rising rents. This makes real estate more attractive again and is likely to have an impact when interest rates fall. Institutional investors will probably continue to focus on residential real estate, as opposed to commercial real estate. New-build properties and existing properties built close to the new-build are then considered worthy of investment. For older buildings, the cost estimate of energy refurbishment is often fraught with risk. Private equity investments are traditionally very highly credit-financed, some deals are questionable. With a declining interest level, the situation is easing as well. I see private debt as a vital building block for the future. Compared to the USA, this asset class still plays a niche role in Europe, but with very high growth potential. Lower interest rates should help this asset class disproportionately. Private debt will have a significant impact on the traditional bond markets. Due to regulatory factors such as the Basel capital adequacy rules, banks and savings banks, which still account for the lion’s share of loan financing, will be much more reserved in new business, hence investors and project developers will be forced to resort to alternative providers. Investors benefit from high-yield premiums. Hill: Thank you very much for the interview. Sebastian Thürmer is the Managing Partner of artis Institutional Capital Management GmbH based in Frankfurt am Main, an

  • Dr. Henning Schröer built up a family office for the Merz family in Frankfurt and managed it for more than 10 years. With fidubonum (, he now advises wealthy families on strategy and structural issues, which also includes advice on setting up custom-fit family office structures. Markus Hill spoke with him for FINANZPLATZ-FRANKFURT-MAIN.DE about topics such as family constitution, asset strategy and the requirement profile for family officers against the background of his own experience in setting up a single family office. In addition, his personal motivation for this professional field, his own teaching and publication activities, keyword “Annual Family Office Conference”, as well as his personal views on the Frankfurt-Rhine-Main region were addressed. Hill: Mr. Schröer, you have set up your company, fidubonum KG, and offer strategy and structure consulting for high-net-worth families. What do you mean by that? Schröer: High-net-worth families, like all other wealthy individuals, face the challenge of investing their money in such a way that it corresponds to their own risk/return perception. However, they also have to deal with many additional issues: the family has to organize among themselves and clarify who will make the decisions on its assets on its behalf. The centrifugal forces within the family, which tend to increase with the size of the family, must be contained by trust- and community-building measures so that the family remains capable of forming a unified will. And the more complex these family demands and the assets are, the more urgently the family needs a family office, where I help to structure and establish. Hill: That sounds very complex. What qualifies you for such broad-based consulting work? Schröer: I built up a family office for the Merz family in Frankfurt and managed it for over 10 years. In doing so, i was able to deal with all the issues mentioned above – and many others – in great detail. Since I have been self-employed, I have also looked after several other families. In addition, I also deal with these topics scientifically, write essays and give lectures. My large network also benefits me, and I often hear how other families have tackled some challenges. In addition, I work with many cooperation partners, from whom I learn on the one hand and who can go into depth on the other, where this is impossible with my generalist approach. Dr. Henning Schröers, FIDUBONUM Hill: In a world of ever greater specialization, is such a generalist approach still in demand? Schröer: Absolutely! In these complex issues, where legal, tax, asset management, personnel, psychological, and planning aspects all come together, you need someone capable maintaining an overview. Where an orchestra of specialists is playing, someone has to conduct. However, many questions are solved by the generalist, and, above all, he avoids some wrong paths. In this respect, generalists and specialists should not be mutually exclusive but complementary. If you had to do without one of the two, then it would be better to do without the specialist rather than the person who can guide the family through this complex process from start to finish. Hill: Can you describe this process in a broad outline? Schröer: It should always start with the so-called owner strategy. Here, the family has to be clear about its values and goals and the purposes of its asset management. It also makes sense to define the roles of the individual family members and the rules for dealing with each other. If there is still a family business, the family should also position itself clearly and uniformly to it. The whole thing is best in a family constitution. It then forms the basis for developing the overall asset strategy, determining which asset classes are to be invested in, and with which risk-reward profile. It should then also include tax optimization, the financing structure, and any liquidity requirements. With these guardrails in place, one can then develop an asset class strategy and investment plan for each asset class. Hill: So you have a roadmap for investing and for some family goals that go beyond that. But the family probably also needs a suitable organization to implement this roadmap, right? Schröer: Exactly. Structuring this organization is the second essential part of my advisory process. And this part, too, can be divided into three areas: Family governance, which is intended to ensure the cohesion of the family. This involves joint activities, facilities, and communication structures for the family members, but also their education. It also includes crisis and conflict management. The second area is corporate governance. This refers to a company and board structure that conforms to the strategy and is intended to ensure, through monitoring and consulting, that the operational management pursues and achieves the family’s strategic goals. The third area and the bracket around everything is the family office. It can support the other two areas, but also take on tasks that go far beyond them. Hill: Are there clients who go through this whole complex process with you? Are they your ideal clients? Schröer: They do exist, e.g. when an asset has been managed more or less alone by the founder of a company and he is thinking about spreading the responsibility over several shoulders because he wants to retire slowly. Or in the case of a sale of a family business, after which the family is suddenly sitting on a large pile of money and one needs to clarify for what purposes, with what goals, and, above all, how it should be invested. In these situations, it is a special privilege to be able to approach all questions in a completely structured manner and to develop and implement tailor-made solutions in a greenfield environment. But it can be just as exciting to support the establishment of a family office, for example, when the strategic framework is already clear and the family and corporate governance structures are essentially already in place. Hill: Is the establishment of a family office you are special hobby horse? Schröer: At

  • Fund boutiques, medium-sized companies, US real estate, infrastructure investments – Markus Hill spoke for FONDSBOUTIQUEN.DE with Martin Krause, BVT Holding, about the current challenges for a niche player in this segment. Topics such as ESG, renewable energies, due diligence, and the pleasure of exchanging professional ideas (“Real Estate, Alternative Investments & ESG”) were addressed as much as racing bikes and the Alps. Hill: You describe your company as a niche player, what do you mean by that? Martin Krause, BVT Holding Krause: As a medium-sized company with short decision-making paths, we offer our investors niche products such as participation in U.S. project developments of Class A apartment complexes, which investors generally cannot implement themselves, but which enrich existing portfolios. In this respect, I would describe us as a fund or investment boutique where investors get “special” solutions. In addition to our current range of funds, such as a Luxembourg SICAV-RAIF in the Residential USA segment for institutional investors, our strength lies in being able to “tailor” individual solutions to fit exactly. In other words, BVT stands for flexibility coupled with professional expertise. This also includes our ability to respond to the individual reporting requirements and wishes of institutional investors. Hill: As a medium-sized company, you are also active in various “niches”. What additional fields does BVT cover? Krause: Investing money where it works productively: In 1976, the BVT Group was founded by Harald von Scharfenberg – and his founding idea remains unchanged today. Investments in tangible assets play a very important role in this. With over 45 years of management and structuring experience in real asset investments and a total investment volume of over 7.7 billion euros, BVT is one of the most experienced houses on the market. From the very beginning, i.e. since 1976, the focus has been on US real estate – and for the last 20 years, we have been concentrating on the US apartment market. Over the years, we have added German real estate, energy and infrastructure, private equity, and portfolio concepts. Particularly in the current environment of discussions about renewable energies, CO2 reduction, and ESG, I am happy to refer to BVT’s pioneering role in the energy and infrastructure segment. It has been active in this field since 1988 and was the first issuing house in Germany to launch a mutual fund investing in wind power plants. So for us, renewable energy generation is not a trendy topic that we are now jumping on; as a pioneer in this field, we focused on sustainable energy generation at a very early stage. BVT founder Harald von Scharfenberg experienced the power and potential of natural energy as a child. On the family’s ancestral home, there was a mill that, like many large estates at the time, was powered by water. Although located far from industrial centers, the family decided as early as 1896 to use the mill’s surplus energy to electrify the estate. Thus, for our company founder, there was a predefined path to combine ecology and economy in a new asset class. BVT’s long-standing commitment to developing renewable and sustainable energy projects was consistently continued in 2019 with the decision by BVT Kapitalverwaltungsgesellschaft derigo to sign the international PRI initiative. In doing so, it acknowledges and commits to taking ESG criteria into account at the company level and in the investment process and, as a result, to responsible and sustainable investing in selected asset classes. About your question “What does BVT do?” I could, of course, go much further – a current and, in my opinion, very convincing example of our conceptual activities could recently be gleaned from the press: EnBW Energie Baden-Württemberg AG sold a minority share of 24.95 percent in its subsidiary, the transmission system operator TransnetBW, to Südwest Konsortium Holding GmbH. The consortium, led by SV SparkassenVersicherung, includes more than 30 savings banks, banks, insurance companies, and corporations from Baden-Württemberg. In their press release, the partners involved point out: “The investment of the investors of Südwest Konsortium is managed by the capital management company Derigo GmbH & Co. KG, which is experienced in the infrastructure sector. Hill: What were you working on more intensively at the moment? Krause: As already described, one of our core areas is US real estate. Here we are permanently challenged, be it in examining and connecting new projects, the support of the leasing phase, or the subsequent property sale. These processes are very labor-intensive, especially for our US colleagues, but as a rule, we – and above all our investors – are rewarded with good results in the end.  At the moment, we are noticing that many institutional and private investors are scrutinizing their portfolio composition in the wake of geopolitical and economic developments and the increasingly present effects of climate change. Often, this develops into the realization that a greater focus on renewable energy and sustainable infrastructure is necessary and profitable. Our existing investors are also coming forward and actively asking for further investment opportunities, for example in wind or photovoltaic parks. In parallel, energy storage systems are moving into the spotlight. The question of the economic viability of storage is still complicated at present, but it can be said that investments in storage are particularly profitable in combination with wind and PV parks. The advancing electrification leads to a broadening of the possible spectrum for infrastructure investors. Therefore, it is probably not surprising that, based on our decades of experience, we are currently in the process of preparing a renewable energy fund that combines precisely these different aspects. According to our planning, this fund should be available to institutional investors in the fourth quarter. Hill What to look for in due diligence in the U.S. real estate segment? Krause: In our core area of U.S. real estate, BVT operates directly on-site, and has done so since the 1970s – the purchase or sale, asset management, and tax service for investors is carried out in our offices in Atlanta and Boston. We pay close attention to

  • “Knowing is not enough, we must apply. Willing is not enough, we must do” (Johann Wolfgang von Goethe) – Markus Hill spoke for FINANZPLATZ-FRANKFURT-MAIN.DE with Dr. Dominik Benner, CEO of Benner Holding GmbH, about the P5 THE PROPERTY CONGRESS taking place on 6.7. – 7.7.2023 in Frankfurt. History, motivation, and selected program key points are addressed. “Beyond Crisis” is the current motto. The real estate industry receives a new forum for the professional exchange of ideas – know-how, workshops, lectures, and networking – the Main metropolis again underlines its importance as a central “info hub” in Germany for the industry. Real estate, macro outlook (Hans Werner Sinn), and challenges for family offices and institutional investors will be additionally addressed in a panel discussion. Hill: You are organizing the event P5 THE PROPERTY CONGRESS in Frankfurt on July 6 to 7, 2023. How did the idea for the event come about, what is the thinking behind your concept? Benner: The origin is our magazine THE PROPERTY: Here we started two years ago, meanwhile we have 10,000 readers and the magazine is known nationwide. To make it live, a podcast came in 2022, where we interview the management of the real estate industry every two weeks in the podcast. And as a third step came the idea to start a conference after the magazine and podcast. Not as a trade fair and not as a fireside evening, but as a cool conference format where you can take something with you professionally. Hill: Hans Werner Sinn will talk about the topic of inflation and real estate. We have a panel after that where this topic will be looked at and discussed through the lens of practice. Where do you see the challenges for real estate investors in the coming years? Benner: The yield curve will stay up longer than expected, prices will still fall a bit. But what is critical are two things: The massive vacancy rate for offices and retail, which will result in massive devaluations. And secondly, the issue of compulsory redevelopment, because whether at the EU level or through Mr. Habeck, the industry is facing major tasks and uncertainties here. And uncertainties are known to be poison for investors, which then also has an effect on new construction, which no longer takes place, no matter what the government wishes. Dr. Dominik Benner, Benner Holding GmbH Hill: What other topics can you look forward to in July? Benner: We have put a very strong focus on ESG, Proptech, Portfolio & Construction, and Financing. Always with the motto of the conference: “Beyond Crisis”. Because we don’t want to mope around but look at how you can emerge as a winner in the crisis. And here we have top speakers, excellent workshops, and extensive networking for our participants. And we are placing some surprises on site. Hill: You chose Frankfurt as the venue. What do you particularly like about this city? Benner: I feel like a Frankfurt boy, so I’ve always wondered why no relevant real estate format takes place in this great city of all places. That’s why we deliberately chose Frankfurt to implement the biggest real estate event there. And since Frankfurt is in the middle of Germany and has very international players, this fits very well with our P5 congress. Hill: When you’re not dealing with platforms and real estate, what does Dr. Dominik Benner do to clear his head? Benner: I have three small children, where nights are short (laughs), but it gives me a lot of strength. And since we have a lot of trade as well as gastronomy in addition to real estate, there’s plenty we can do together as a family on the weekends. The children now love the diversity of our group, even though, they often don’t understand how things are connected. Hill: Thank you very much for the interview. Real estate, alternative investments, and ESG – I look forward to our discussion round with you in Frankfurt! Dr. Dominik Benner, Benner Holding GmbH – As Managing Partner, Dr. Dominik Benner heads the company and its investments. After studying business administration at the University of St. Gallen (Bachelor, Master), Switzerland, and at Insead Fontaineblau and San Diego, Dr. Benner received his doctorate as Dr. oec. HSG. After holding various management positions and procuration at Bilfinger Berger, Dr. Benner was appointed Managing Director within the juwi Group in 2011, where he held several management and project positions. Since 2014, Dr. Dominik Benner has been the Managing Partner of the holding company as well as of the investments. He is also a member of the advisory board of several companies. P5 THE PROPERTY CONGRESS: “The new platform for the real estate industry. The impetus for something new: There are many good real estate events, but they are either focused only on certain parts of the industry, locally, or for political exchange. There was a lack of a new communication platform with a major congress. That’s why we got together as real estate investors from the areas of private and institutional investors, family offices as well as project developments and came up with the idea of the P5 Property Congress. Where P stands for Property and 5 for the main topics of existing real estate, ESG, financing, construction, and PropTech.” (PROGRAM, TOPICS & HEADS P5 THE PROPERTY CONGRESS: P5 THE PROPERTY CONGRESS: Panel Discussion – “Real Estate, Alternative Investments and ESG – Challenges for Family Offices & Institutional Investors in 2023” (11.10 – 11.50 a.m., 7.7.2023) – Panelists: Dr. Dominik Benner (Benner Holding GmbH), Florian Schmitt (VBG Invest AG), Jan Paul Becker (Jan Paul Becker Institut GmbH), Alexander Scholz (Telos GmbH) – Moderation: Markus Hill (FINANZPLATZ-FRANKFURT-MAIN.DE) P5 THE PROPERTY CONGRESS (BEYOND BORDERS – 2023 – host country Turkey): “With the ‘Beyond Borders’ initiative, we want to think beyond borders. A successful networking platform like the P5 Property Congress serves as a bridge between industries, nationally and internationally and that is exactly what ‘Beyond Borders’ represents. That

  • “If you love what you do, you will never work another day in your life!” (Confucius). Markus Hill* spoke for FONDSBOUTIQUEN.DE with Prof. Dr. Demir Bektić, FINVIA, about “Family Office & Joy” fund selection, real assets, geopolitics, and portfolio management. Topics such as a professorship in finance, networking, and at FundForum International in Monaco will be addressed the current positioning in selected asset classes, Frankfurt am Main and “Platz am Tisch”. Hill: What are you currently responsible for, what topics are you passionate about, and how did this interest lead to working in family offices? Bektić: I currently hold the position of Head of Portfolio Management at FINVIA and am a member of the Investment Committee. Before joining FINVIA, I held senior roles in institutional asset management and hedge fund management. Additionally, I work as an adjunct professor of finance at the International University of Monaco and an independent expert on the committee of the Bundesverband Alternative Investment e.V. (BAI) for the annual BAI Science Award. After completing my studies in business informatics at the University of Mannheim and obtained a Ph.D. in factor-based investment strategies from the Technical University of Darmstadt. Lately, the professionalization and institutionalization of various aspects such as asset controlling, reporting, analysis quality, and advisory services have greatly contributed to the convergence of asset management and wealth management. These developments have emerged due to the increasing complexity of financial markets and the growing demand from clients for integrated solutions that address their investment needs and broader financial goals. Wealth management has always held a special appeal for several reasons. It often involves building and maintaining personal relationships with clients, which I find personally rewarding as it requires more direct interaction and client engagement. Additionally, wealth management offers a more holistic range of financial services beyond investment advice. Overall, I firmly believe that my previous experience in institutional asset management and hedge fund management is a valuable asset in the world of wealth management as well. With the ongoing convergence I mentioned, the transition will become even more seamless in the coming years. However, I must admit that the team, the start-up atmosphere, and the strong commitment to digital technologies were decisive factors that attracted me to FINVIA. Prof Dr. Demir Bektić, FINVIA Hill: What exactly does FINVIA do? Bektić: As a Multi-Family Office, FINVIA brings together exceptional advisory services and established Family Office offerings, leveraging the capabilities of digital technologies. Our approach is comprehensive, taking into account all aspects of our client’s wealth and providing them access to a wide range of asset classes, including alternative assets. We prioritize independence, conducting thorough analyses of our client’s needs and delivering tailored advice to optimize outcomes. In addition to the core services provided by a Family Office, we offer our wealth management solutions on the liquid side, complementing areas such as Real Estate and Private Equity. Our clients can choose from three equity solutions and one bond solution. Moreover, we facilitate the traditional selection of external asset managers and funds, and we have recently expanded our offers to include hedge fund investments. At FINVIA, we believe in an integrated approach that combines personalized attention, cutting-edge technology, and a diverse range of investment options. By prioritizing our client’s objectives and conducting meticulous assessments, we aim to achieve the best possible outcomes. Hill: What topics are you looking at more closely at the moment? Bektić: Currently, we are discussing several topics. To address all of them in detail would exceed the scope. Therefore, I will outline the key topics in bullet points. In terms of the liquid side, we are currently focused on gold. Stocks continue to be interesting, although we recently implemented a more defensive approach and are currently particularly focused on the healthcare and basic consumer sectors. In terms of regional focus, we prefer Europe and Japan over the United States. For bonds, we still prefer inflation-linked securities. Due to rising interest rates, combined with an inverted yield curve, time deposits have also become attractive again. We currently have limited interest in thematic products. As for overarching themes, we are closely monitoring hedge funds and factor investing in general. Particularly concerning factors (often referred to as styles or risk premia), we have high expectations. It is crucial to have comprehensive and detailed knowledge of the various factors driving the markets. Through careful analysis of these factors, we can further optimize portfolios and align them with individual goals. This leads to cost reduction, increased efficiency in the investment process, and rationalization. We are confident that identifying factors will be a crucial part of our investment strategy and will help us better manage return expectations as well as risks. I regularly discuss these and other interesting topics at various events. I would like to highlight two event formats in particular: On the one hand, “Platz am Tisch,” a nonprofit organization that promotes diversity and equal opportunities for young people is close to my heart not only because of my background. On the other hand, the Fund Forum in my second home, Monaco, provides an exclusive opportunity to meet the world’s leading investment firms in one place and engage with industry leaders. I look forward to our discussion on June 27th at our Family Office panel on the topic of “Challenges for Family Offices in 2023” and am also eager to the questions, you will be asking. Hill: What other topics are on your agenda for 2023? Bektić: The topics engaging us in 2023 are diverse. As a Family Office, we invest for the long term and think in terms of a decade. We generally classify secular trends into five areas: geopolitics, society, economy, technology, and capital markets. For example, in geopolitics, we focus on topics such as a multipolar world or deglobalization. In society, we consider issues like sustainability or demographic shifts. Regarding the economy, inflation and fiscal policy will continue to concern us. In the realm of technology, we pay attention to recent developments in areas like artificial

  • “It occurred to me while I was riding my bicycle.” (Albert Einstein). Markus Hill* spoke for FONDSBOUTIQUEN.DE with Alexander Scholz, Telos Gmbh, about the Investor Survey 2023 “Real Estate, Alternative Investments & ESG”. Topics such as private debt, infrastructure, US real estate, and risk management for institutional investors are addressed here as well as the topic of podcasts, “Funds, Bikes & Espressi” and the Wiesbaden Investor Day. Hill: Mr. Scholz, at the beginning of the year, together with Artis, you surveyed institutional investors about their investment behavior in real estate and alternative investments. What were the main findings of the survey? Scholz: First of all, I would like to thank all participants very much. The higher the number of participants, the greater the significance of the study. With almost 60 German institutional investors once again taking part, we can justifiably say that the study has a very high informative value. If we look at the results, we can see a certain reluctance on the part of institutional investors – a “catching of breath”, as it were. Especially in the real estate sector, the euphoria of recent years has come to a halt. A significant expansion of real estate quotas is not to be expected – but neither is a sell-out of existing properties. Alternative investments, infrastructure, and renewable energies continue to be in vogue. In private debt, as in real estate, a certain restraint can be felt. Hill: To what do you attribute the reluctance of investors? Scholz: A lot has to do with the development of interest rates. Regulated institutional investors in particular had to accept noticeable losses on their bond investments. This has not only reduced investors’ available risk capital but also led to a – passive – increase in alternative quotas. As a result, institutional investors are waiting for their commitments made in previous years to be called up before initiating reallocations. Another effect of the increased yields is that institutional investors can now also meet their commitments with traditional investments such as government bonds, covered bonds as well as corporate bonds. To put it bluntly: I can easily get 2.5% with a mix of 50% government and 50% corporate bonds. Even if this is certainly too short-sighted. A reasonably diversified asset allocation with liquid and alternative investments is still the right approach. Alexander Scholz, TELOS GmbH Hill: Are there any other trends that you can also derive from the study? Scholz: In real estate and alternatives, we can see an “internationalization”. Investors in these segments are also increasingly looking for investment opportunities outside Germany – for example, US real estate. In principle, investors are behaving in the same way with real estate and alternatives as they did in the past with the classic liquid asset classes. Instead of the DAX and REX as in the past, equities and bonds from emerging markets are now normal portfolio components. Hill: What about the topic of sustainability? Has this moved out of the focus of institutional investors due to market developments? Scholz: In parts, yes. The high inflation with all its consequences (rising interest rates, recession, etc.) coupled with geopolitical events has pushed the topic of ESG somewhat into the background. Nevertheless, it must be clearly stated that asset managers who do not seriously address the issue will have a difficult time winning new mandates in the future. The supervisory authority alone will take care of this through its requirements – such as the 8th Amendment Act for SGB IV investors. At this point, I would also like to refer to a videocast, in which the results of the study are discussed in more detail. Thanks for the moderation of the roundtable, I was very pleased about the interesting exchange of ideas on the results of the study with Sebastian Thürmer as well as on the topic “USA & Real Estate” with Martin Krause and Martin Stoß from BVT Holding. Investors who are interested in the study are welcome to contact us at We will certainly also talk about some of the results of the study at our joint panel in Frankfurt am Main on July 7. I am looking forward to the discussion with Dr. Dominik Benner (Benner Holding GmbH), Florian Schmitt (VBG Invest AG), and Jan-Paul Becker (Jan Paul Becker Institut GmbH). There we can also talk in more depth about other topics such as due diligence, performance, returns, and the current challenges of family offices when investing in liquid and non-liquid assets. Hill: What other strong current do you perceive among institutional investors? Scholz: The year 2022 has left deep marks on portfolios. In this respect, the topic of risk management is gaining in importance. When asked what institutional investors value when selecting managers, the criteria of risk management was mentioned most frequently, ahead of the performance. Other important factors are transparency, communication, and customer service. The cost factor plays a much smaller role than in previous years. Hill: That’s interesting. Can you say that quality comes before price? Scholz: Ultimately, yes, although this certainly does not mean that investors will now accept any price. In any case, it is worth analyzing the quality of processes and risk management in detail when selecting an asset manager. Hill: You mentioned the very challenging environment for investors. What specifically are you proposing to investors? Scholz: We at TELOS do not make any concrete investment recommendations. But perhaps investors will find a few suggestions and ideas at the Wiesbaden Investor Day on June 22. Further information is available on our homepage ( under the heading “Events”. Hill: Let’s leave the world of the capital markets. How did the spring go in sporting terms? Scholz: With the weather this spring, I could have switched to water sports. The rain and the low temperatures obstructed the works of my plans. Even a planned “training camp” with our small team “Funds, Bikes & Espressi” (at this point I greet Stephan Jacobs from Active Fundplacement, Peter Kerger from MBMs/GreenVesting, and Olaf

  • OUT OF THE BOX by José Carlos Jarillo By starting to discount just a mild recession, or even a “soft landing”, markets have been more optimistic in the last months. In other words, a slowdown in economic activity that is important enough to lower inflation to acceptable levels but is short of being a serious recession. The next few months will tell us whether this optimism is warranted. However, an issue that we have already discussed (and will continue discussing, since it will not go away) could have a very negative impact on economic activity and is currently not being discounted: the lack of abundant, reasonably priced energy. Logically seen, mankind consumes as much energy as it produces. Inventories, however, make a difference. If we have ample stocks, we can consume more than we produce … for a while. Conversely, if we produce more than we consume, we need to put the excess amount into some sort of inventory, whose capacity will necessarily be limited. For physical reasons, stocks cannot be very large compared to consumption. The world oil stocks, for instance, fluctuate around the equivalent of 4 weeks of consumption. Natural gas is stocked during the summer and is basically consumed during the winter. Uranium, which is exceptionally energy-dense, can be stockpiled for a few years, but very few other commodities have stocks that are equivalent to more than a few weeks of normal consumption. In reality, there are two kinds of stocks: those that are included in the previous paragraph (physical accumulations of the commodity in some sort of “warehouse”), and the amounts of the commodity lying underground in mines or fields that are already producing or are ready to produce. We don’t count them as “stocks” (instead as “reserves”), but these are commodities ready to be produced if/when there is a need. It’s obvious that demand cannot exceed supply beyond the “cushion” provided by stocks. In other words, if stocks are not replenished, it is only a matter of time until consumption is cut, or production is sharply increased. In the real world, stocks cannot be reduced to zero, because any commodity’s supply chain requires a lot of inventory for itself: In the case of oil, this is the content of pipelines, oil in transit on ships, minimum inventories in refineries, etc. This need for a minimum stock is especially pressing in terms of key commodities, since no country can afford to be deprived of energy for even a short amount of time (which would have economic and geostrategic consequences). The world has spent the last few years running down its inventories of crucial commodities. First, the inventories “above ground”, i.e., the visible ones: World oil inventories (source, Energy Information Agency) However, inventories “in the ground” are far more important, because they are much larger than inventories “above the ground”. As we said, ready inventories amount to a few weeks of consumption, whereas producing reserves can go on for a few years. And these “in the ground” inventories are also declining fast. Figure 20 shows the amount of new oil and gas that developments approved for investment each year can produce. For the last few years, the world has been approving a production capacity equivalent to about one third of what we are consuming for development. Although, “above ground” inventories are not yet zero, the total amount of oil and gas available for consumption is decreasing relentlessly. As soon as the above ground inventory hits uncomfortably low levels (which is about to happen in the next few quarters), the world will realize that there are no oil or gas fields capable of refilling them while maintaining the usual level of demand. An important price spike can be expected. Will this derail inflation’s current positive trend? Possibly. But, whatever the case, it will make maintaining an orderly economic activity without enough energy extremely difficult. In fact, it’s interesting to note that when “normal” energy is not available, societies turn to whatever is at hand to keep functioning. The following chart shows that amount of CO2 generated in Europe and the details regarding Germany. This country, with its Green Party in government, and whose conservatives proclaimed its “Energiewende”, is burning record amounts of low-quality coal (abundant in Germany) to keep everything going, even though it is only facing a smidgeon of natural gas scarcity. We will see this kind of behavior increasingly within the next few years. Related posts: FINANCIAL CENTRE SWITZERLAND & FUND BOUTIQUES: SWISS VALUE DAY – Intrinsic Values, Case Studies, Strategic Value Investing & Fireside Chat (10/6/2022, Zurich, Strategic Investment Advisors – SIA & BWM Value Investing) – Fund Boutiques FUND BOUTIQUES & Private Label FUNDS: Value Investing, Commodities, and Inflation – Sharing Alpha & Ray Dalio (Interview – Alex Rauchenstein, SIA Funds AG) – Fund Boutiques FONDSBOUTIQUEN & PRIVATE LABEL FONDS: Value Investing & Commodities – SIA Video Call (Veranstaltungshinweis, 11.2.2022, SIA Funds AG) – Fund Boutiques FUND BOUTIQUES & PRIVATE LABEL FUNDS: Swiss Financial Center and Commodities – “THE WORLD FOR SALE – Money, Power and the Traders Who Barter the Earth’s Resources” (Book Review – Urs Marti, SIA Funds AG) – Fund Boutiques FUND BOUTIQUES & PRIVATE LABEL FUNDS: Financial Center Switzerland & Frankfurt, Asset Management, Value Investing, Commodities & Networking – Zurich, Commodity Day, MainNizza and Economic History (Interview & Event Information – Alex Rauchenstein, SIA Funds AG) – Fund Boutiques FUND BOUTIQUES & PRIVATE LABEL FUNDS: Value Investing, Commodities, ESG – China, Oil, Nuclear Energy & General Patton (Interview – Urs Marti, SIA Funds AG) – Fund Boutiques

  • “According to THE ECONOMIST, Frankfurt is a very liveable city; moreover, the cultivated professional exchange of ideas on asset management topics is a great pleasure here.” Frankfurt as a financial center, know-how, asset management & social media, investor education, fund boutiques, family offices, Don Bosco, ESG and impact investing – IPE D.A.CH Editor-in-Chief Frank Schnattinger spoke with Markus Hill about these topics as well as expert discussions on site about an investor study by Telos & Artis and the Consultant Day by Caceis. In addition, topics such as “Swiss in Germany” and Frankfurt in India were discussed and indications of activities in the 2nd half of 2022 were given. IPE D.ACH: Frankfurt is one of the 10 most liveable cities in Germany. Did this result surprise you? Hill: According to THE ECONOMIST, Frankfurt is a very liveable city. Moreover, the cultivated professional exchange of ideas on asset management topics is a great pleasure here. You are right in your formulation, the astonishment. For many fans and “opponents” of the city, it came as a surprise, unexpectedly. Of course, it surprised me. In the meantime, I have taken the city to my heart, but I also know its somewhat unsavoury sides. By the way, this observation can be applied to many cities, including my original home, Cologne. I posted two messages about this ranking on my “Financial Center Frankfurt am Main” channel on LinkedIn. The first posting (article: “Frankfurt is better than ever to live in”, FRANKFURTER NEUE PRESSE) received mostly positive feedback. The second, critical posting (article: “Frankfurt am Main: Were the decision-makers on crack?!”, DIE ZEIT) received some very interesting reactions. I thought it was very good, especially since the potential for optimizing the city was specifically addressed here. Since I look after a few professionally oriented communities on LinkedIn in addition to my “Frankfurt promotion hobby” (FONDSBOUTIQUEN, PRIVATE LABEL FONDS, FUNDS BOUTIQUES, CAT BONDS), I follow the communication dynamics on these different channels with great interest. In my opinion, the asset management industry on average is still somewhat reserved, on the hunt for, and also uncertain when it comes to social media and asset management. What is interesting here above all is that there seems to be a gap between the generations. To various representatives of the traditionally oriented “print media faction”, this medium still seems somewhat mysterious, perhaps even “dubious” in parts. I was probably lucky enough to have been very actively involved with this topic area since 2013. Even today, I am still a learner, and make mistakes – especially the younger generations who seem to be more fluid in their thinking in this regard, so to speak, they work and sometimes live very intensively with these media (LinkedIn, Xing, Instagram & Co.). With all the advantages and disadvantages, the old can still learn a lot from the young. Of course, one should not forget one negative aspect – only social media without an analogue world should be considered a danger. Education needs attention span, the ability to concentrate, and frustration tolerance, here there are undeniably very negative effects of these media. By the way, when it comes to Frankfurt, things are always very passionate – in contrast to the purely technical discussion on my other LinkedIn channels. I simply like Frankfurt very much, even though I was born in Bonn and moved from Cologne to Frankfurt in 1996. As a Rhinelander, this “village with skyscrapers” has won a deep place in my heart! IPE D.ACH: You also support, promote and organise local events from time to time. What makes the Frankfurt location so interesting? Hill: As I have said earlier if you get more involved with the local networks, neo-German “ecosystems”, it becomes very clear that there is a diversity of opinions, know-how, nationalities, leisure activities, and more. As described above, one can be divided into opinions. It is undisputed that the financial center of Frankfurt in Hesse has a wide-ranging area. From an economic point of view, it can be compared, for example, with the networking and expansion of the Ruhr area. With the one, decisive difference: Darmstadt, Wiesbaden, Frankfurt, and Hesse as federal states – of course, the economic power here locally is completely different. Universities, cooperations, the airport, the international diversity, and the undisputed role as a financial center are all points in favour of Frankfurt. Then there’s the central location in Germany – you can get everywhere quickly, and “everywhere” in Germany is also quite easy to reach. The Museum Embankment, Eintracht Frankfurt, the ECB, and the unique Frankfurt skyline – are some of the many points that make this location interesting nationwide and internationally, not only for events and the exchange of ideas. And no – I don’t have a contract with the Frankfurt Tourist Office, but I am admittedly a little less neutral in my views. I was also impressed by the activities of local organizations such as Frankfurt Main Finance, Wirtschaftsförderung Frankfurt GmbH, and FrankfurtRheinMain GmbH International Marketing of the Region. As with me, one cannot deny a certain bias in these organizations. But the fact is that these and many other organizations in the “Frankfurt fan network” cooperate excellently, often passing the balls to each other on the spot. IPE D.ACH: You work as an asset management consultant. Which topics are you currently following with greater interest? Hill: Value investing, commodities, funds of funds, real assets, and ESG and impact investing. These are areas I have been looking at more closely for a long time. Here I look less at the product shell and the packaging. Mutual funds, special funds, liquid versus illiquid (AIF), direct investments – interestingly, as is so often the case, this is where things get very interesting at “the edges” when observing the market. In the first half of the year, I had one of many opportunities to exchange ideas in addition to these areas by moderating various panels or events with points of contact to these topics. Once again, Frankfurt as

  • “Family Office in a Box”, foundations, asset allocation, funds of funds, fund selection, and fund boutiques – Markus Hill spoke for FINANZPLATZ FRANKFURT MAIN with Martin Friedrich, Lansdowne Partners Austria GmbH, about these topics as well as about the importance of capital market research for one’s investment process, 3-year track record, as well as the pleasure of exchanging professional ideas in Frankfurt, am Main. Hill: What exactly does the term “Family Office in a Box” mean in the context of your house? Friedrich: That is a really interesting question. I sometimes use this term to succinctly describe the Lansdowne Endowment Fund that I initiated. The term fits very well for several reasons: Firstly, it is a classic total wealth concept: the fund is massively diversified in itself, and yet can be conveniently invested via a single securities transaction. Secondly, many high-net-worth families implement a comparable investment process as part of their in-house asset management. Family offices – just like endowments – are institutional investors with deep pockets and a long-term investment process. So we share the same investment philosophy with family offices, even if there are regulatory differences in the actual implementation. Hill: What exactly is behind the term “endowment approach” and in what sense exactly is there a connection to the generally known term “foundation” in the German-speaking world? Friedrich: Well, the literal translation of endowment is probably even “foundation”. Endowments have been known in England for hundreds of years. The idea is quite simple: to endow non-profit institutions such as universities or hospitals with assets that secure the institution’s existence and thus also ensure its independence. Endowments do this by subsidizing the operation of the beneficiary institutions – in the case of Yale University, these contributions account for about a third of the entire budget! Seen in this light, the purpose of endowments is often comparable. Admittedly, there are also differences, especially in terms of regulation and the design of investment policy. In Germany, the state has taken the liberty of influencing the “business development” of foundations to a much greater extent than is the case with US endowments. Martin Friedrich, Lansdowne Partners Austria GmbH Hill: What does your investment process look like in concrete terms? Friedrich: We offer our investors an investment process that is typical for large institutional investors. I can say this with authority because I have dealt with many such institutions in the course of my already almost 30-year career in the financial market. I have learned that of course, every institution is individual. Nevertheless, such assets always have a strategic asset structure, which of course has to be implemented. In the case of endowments, mandates are almost always given to external managers. Thus, strategic allocation and manager selection are elementary basic components of such an investment process. We then add tactical allocation and overlay strategies. These process steps are also frequently found among institutional players, even if the scope and design vary greatly in practice; clearly, opinions differ here. But the principle of structuring one’s investment process into a value chain of several successive steps is beyond debate. Hill: What significance does capital market research have for you here? Friedrich: Well, we haven’t talked about the investment success of our identity donors yet. But, especially the Endowments US elite universities like Yale, Harvard, or Stanford are really interesting role models. One reason for this is that these institutions created highly specialised investment offices staffed with experts from around the middle of the 20th century onwards. These units then benefited from the proximity to capital market research that was and is conducted at these very universities. As a result, Yale’s endowment has delivered annual returns of over 12% since 1998 – in a period when stocks have delivered 4.5% and bonds 4.7%. The Lansdowne Endowment Fund takes advantage of this observation by consistently using scientifically validated methods in our design and optimization processes. Likewise, we are constantly working on the further development of our models using scientific methods. Hill: You are a fund of funds manager. How do you identify excellent fund managers? Friedrich: In the same way as other institutional investors: through databases, search requests, and personal interviews. The criteria for selection are always the same: first, the quality of the people behind the funds. Secondly, the qualification of the players. Thirdly, we try to understand their motivation: what incentives are given to the decision-makers by the organisation surrounding them. In investment management, there are always so-called principal-agent conflicts; depending on the design of the incentive systems, these can be largely mitigated or intensified. Finally, we must of course understand the investment process of our target funds as well as possible. We may have a slight advantage here because we run tactical models for the endowment fund asset classes. This forces us to understand the return drivers and risks of the individual capital market segments very well. Equipped with this knowledge, we can discuss it with our managers at eye level. I hope that this helps us make good decisions when it comes to selection. Hill: What role do fund boutiques play in this process? Friedrich: Boutiques play an important role in our fund. In asset management, a bigger team is not always better. Small units that are efficiently managed and have short decision-making channels can often act very successfully. Their independence helps them to remain true to their style. However, we have to assess on a case-by-case basis whether the team has all the necessary resources available for its task. Hill: You now have a 3-year track record for your fund. How has the fund performed during this time? Friedrich: I recently looked at an old presentation from 2019. At the time of the fund’s launch, we had formulated the expectation of being able to generate a return of 3.91% on average over seven years with our special asset structure. I was told at the time that this was too little. Today, with a total return of 13.1%, we are at

  • “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. Alexander Scholz, TELOS GmbH 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

  • The blockchain industry is shaking up the traditional financial system and bringing countless new products and solutions to market. However, there are still many challenges to be solved. Companies are therefore taking the challenges into their own hands, reshaping the industry and designing new models for success. The Frankfurt School Blockchain Center sees its role here as offering motivated entrepreneurs, executives, and young professionals a wide range of educational opportunities, consulting, events, and industry insights so that these interested parties can help shape the industry with the right know-how and thus drive digitalization in Europe. Authors: Jan Carlos Janke, Philipp Sandner Introduction The crypto industry and its innovations are steadily advancing. There are now exciting global developments, as can be seen in the example of El Salvador’s pioneering role, where Bitcoin was introduced as the national currency. Now, other countries are following suit, such as the Central African Republic and Panama, which are also introducing Bitcoin as a legal currency. Additionally, the number of startups in the crypto industry, as well as investments in Decentralized Ledger Technologies (DLT) and Decentralized Finance DeFi, is steadily increasing. Recently, topics such as Non-Fungible Tokens (NFT) have also become very talked-about as they redefine the concepts of digital expression, culture, and ownership. However, it can also be observed that the rapidly evolving ecosystem makes it difficult for many to stay up to date with content. The more the industry advances, the more often one encounters challenges that need to be solved together. Current industry challenges include Resilience to hacks and security breaches,clear guidelines for KYC/AML reporting while maintaining privacy,Uniform clarification of tax regulations at the EU level,reliable candidates for open jobs in the industry,clear rules on how to enforce DAOs as a legal entity, andestablish reliable interoperability between Layer 1 ecosystems and real assets. The challenge regarding Web 3.0 and cryptocurrencies in Germany is to drive digital socialization and develop expertise. Shaping technological progress is essential for Frankfurt am Main as a business location, for Germany, and Europe. The Frankfurt School Blockchain Center contributes to this by providing a platform for managers, start-ups, technology, and industry experts to exchange new insights and best practices. With our partners, we work on innovative concepts regarding Decentral Finance (DeFi), Central Bank Digital Currencies (CBDC), and digital transformation. FSBC’s portfolio spans research, consulting, education and events. Philipp Sandner: “The future is decentralized: Blockchain will change our society, turn companies and the financial sector upside down, and also the way we deal with and live diversity in leadership and technology. It is now up to each of us to be part of this change.” Jan Carlos Janke: “Blockchain, specifically digital identities and DeFi considering NFTs and DAOs will dramatically change the future. Either business areas will adapt to an ever-faster pace of change or disruption is inevitable. Accordingly, the Frankfurt School Blockchain Center aims to actively shape the industry.” Goals and Projects of the Frankfurt School Blockchain Center What is the Frankfurt School Blockchain Center? The FSBC is a think tank and research center primarily focused on exploring the impact of blockchain technology. In addition to general research and prototype development, FSBC organizes numerous educational opportunities for students and executives, including on-campus courses, workshops, and conferences. What is the focus? Currently, FSBC focuses on crypto-assets, digital securities, the digital euro, tokenization of assets, Decentralized Finance (DeFi), and Non Fungible Tokens (NFTs). Which projects? Specifically, we are hosting the Crypto Assets Conference (CAC), the DLT Talents program to train women in the blockchain space, the DeFi Talents program, and the NFT Talents program, which will launch in June 2022… We have also co-founded the Digital Euro Association (DEA), the International Token Standardization Association (ITSA), the digital asset consulting firm, and the DEC Institute as an organization that certifies blockchain knowledge among executives. The following are some of FSBC’s initiatives: Master in Blockchain & Digital Assets begins by explaining how blockchain technology can be the foundational infrastructure for the financial and capital markets of the future. This includes crypto assets and DLT solutions for businesses. Students will acquire the necessary skills and technical foundations to lead purposeful and IT-driven organizations undergoing financial, digital, and strategic transformation. The program is therefore specifically designed to meet the needs of managers or professionals who want to remain fully employed while studying while acquiring expertise to develop their business. TheBlockchain Academy is the Knowledge Hub of the Frankfurt School Blockchain Center and includes free access to many videos from the conferences and events with our partners.TheBlockchain Academy is the perfect complement for a career boost. It is a comprehensive 12-hour course that explores in detail the three critical aspects of successful blockchain projects. Technology, Application, and Implementation are divided into 13 sections and 65 topics in the Blockchain Masterclass and represent the first important step into the world of Blockchain with subsequent certification. Crypto Asset Conference is a leading European crypto conference for building professional networks. This conference brings together a wide range of industry experts and thought leaders to discuss current trends in DLT, blockchain, and crypto-assets at the highest level through presentations, discussions, and pitches. These have seen a significant surge in popularity in recent years, both on a private and institutional level. Panel discussions will cover a wide range of crypto topics, including bitcoin, decentralized finance, digital securities, and their infrastructure, as well as the digital euro and digital identity in decentralized networks. The DLT Talents program promotes ambitious women for leadership roles in the blockchain space, as the blockchain community is 90% male-dominated and the program aims to change that. The program is free of charge for female participants. You can apply to participate at this link. The “DeFi Talents” program has recently been launched and supports young and innovative talents in the field of Decentralized Finance (DeFi). The program empowers motivated individuals to immerse and participate in blockchain technology and DeFi in particular. In this way, participants achieve the foundation for a successful career in the blockchain industry.

  • “Don’t give up what’s important to you just because it’s not easy” (Albert Einstein). Impact Investing, Asset Allocation, Financial Education – Markus Hill spoke for FONDSBOUTIQUEN.DE with Peter Brock, 4L Capital AG, about the current challenges for investors in the field of impact investing. Topics such as greenwashing, single-family offices, the federal initiative Impact Investing (BII), and “Diversity & Connecting the Dots” were addressed as well as bicycle races and music. Hill: How important will impact investing become in asset management? Brock: Impact investing, in general, should become the “new normal” for all investors. The earth’s important problems, climate change, but also issues such as advancing population growth and migration, must also be brought to a solution with capital – it is already known to be 5 to 12, if not later. The 17 Sustainable Development Goals of the United Nations, SDGs, with their respective sub-goals define these financing gaps very precisely. Only impact investing can make a real positive contribution to solving these goals in the real economy. ESG investing is not enough. It avoids a few “harmful business practices,” but by itself, it does not make a positive environmental or social contribution to improving the world. Impact investing will, therefore, in my view, increase and – after a period of much green or impact washing – hopefully eventually be taken seriously by all market participants. At this point, I would like to emphasize once again that we, the 4L Impact Family, condemn green- and impact-washing. As a 100% Impact Investor, the Family Office 4L Vision GmbH and also the Impact Asset Management 4L Capital AG is the spearhead in “Deep” Impact Investing – As a Family Office we can afford this and want to cause more private (of course also institutional) capital to flow in the right direction. We value transparency and also support public discourse on the topic with Impact Investing Magazine ( In the family office sector, you often find an engaged discussion on how best to enter into specific impact investments that meet the high demand for returns and impact at the same time. We are positioned here and, based on our expertise, we also promote our special know-how and our products/services in the “Verbund”. With 4L Capital AG, we offer access for interested parties to impact investing investments in all asset classes – from liquid equity portfolios to our global 4L Capital impact equity fund (an Art. 9 funds), to illiquid corporate and venture investments or impact venture funds. Hill: How do you view impact investing in general at the moment, where can we go from here? Peter Brock, Managing Director at 4l Capital Brock: Impact investing is much more prevalent in the Anglo-American region. There are many reasons for this, first and foremost the welfare state is set up differently and also financed differently. In Germany, philanthropy, with its very broad foundation landscape, has a very special status. In our country, we still need to convince people of the value of true impact investing, and the ecosystem needs to be strengthened. Market participants such as the 4L Impact Family, but also the Bundesinitiative Impact Investing (BII), for example, are doing a lot to ensure that supply and demand are linked with professional intermediaries. I chair the BII’s Family Office Working Group to set up more lighthouse projects there as well and to promote a marketplace for impact investing. In this case, I am primarily concerned here with venture capital issues, which certainly fundamentally enable the highest impact. Where is the journey going, I would like to speak for us, not for the industry as a whole. Together with 4L Capital and other partners, we are currently considering launching an impact venture fund-of-funds to facilitate access to impact venture funds as well, as to diversify, and increasingly enforce professional standards in the impact sector. Last but not least, to stop the impact-washing! Hill: What is the importance of financial education in the impact investing segment? Brock: In my opinion, financial education is fundamentally and severely neglected in the education of children and young people. Interestingly, neither in schools nor at universities do pupils learn much about how to manage their (private) assets. – Financial education is therefore very important to transfer private, entrepreneurial wealth to the next generation in a sustainable way. Today, more than ever, it is required of the NextGen not to earn the capital with “bad” business practices and then philanthropically give it back to society in a small part at the end. Many NextGens take a fundamental sustainable approach to “making money” and also donating. Impact investing is particularly important in this regard. As part of a strategic philanthropy approach, investments with capital preservation and even a financial return, as opposed to donations, allow capital to be permanently invested to support sustainable projects. Donations, on the other hand – which certainly continue to have their uses in many situations – can only be used once. Impact investing typically pursues long-term projects or ventures that are also commercially sustainable and that pay for themselves over time, thus creating a lasting impact. Again, I apologize here for advertising on my behalf, of course, there are many other interesting players in the educational landscape of “finance”. My start-up ( is dedicated to showing the next generations of wealthy entrepreneurial families how to successfully structure and sustainably transfer larger assets to the next generation. By looking at all the assets (family business, private capital, but also human and social capital and “family value”) and structuring and managing them using best practices. Hill: Diversity is a big buzzword today, and this can also be related to interests. You are active in many fields. In which areas are you active and where exactly do these activities come together? Brock: I’ve been freelancing for about four years, since my career ranging more than 25 years in large financial institutions in the UK and Germany, very recently also at EY Ernst & Young. My freelancing outside of

  • INSTITUTIONAL INVESTORS ONLY – Additional Information / Registration: INFORMATION: Strategic Investment Advisors (SIA) and BWM Value Investing (BWM) invite you to the first “Swiss Value Day” on Friday, June 10th in the Zunfthaus zur Meise, Zurich.Building on the popular “Natural Resources Day” held since 2018 by SIA, the managers of Switzerland’s two oldest value funds invite you to the Swiss Value Day. The agenda will be the following: 08.45   Registration09.00   Welcome by Alex Rauchenstein, CEO & Partner SIA and Urban Müller, Client Relations BWM09.10   “Intrinsic Values and Discounts” by Georg von Wyss, Founding Partner & Portfolio Manager BWM09.25   “Strategic Value Investing” by Marcos Hernandez, Partner & CIO SIA09.40   Fireside chat on Value Investing moderated by Mark Dittli, Managing Director & Editor-in-Chief of The Market with Prof. J. Carlos Jarillo, Founding Partner SIA, Marcos Hernandez, Partner & CIO SIA and Georg von Wyss, Founding Partner & Portfolio Manager BWM10.30   Coffee break10.45   Investment Case Buzzi Cement by Pietro Buzzi, Chief Executive Finance Buzzi11.30   Investment Case Devro by Rutger Helbing, CEO Devro12.15   Investment Case Fossil by Sunil Doshi, CFO Fossil The event will close with a buffet lunch.Please confirm your attendance by registering ( Kindly note that we have limited space available and registration is handled on a first come, first served basis.We are looking forward to your participation.With best regardsSIA Team SIA Funds: www.s-i-a.chBWM Value Investing: Related posts: Value Investing, Commodities, and Inflation – Sharing Alpha & Ray Dalio (Interview – Alex Rauchenstein, SIA Funds AG)Swiss Financial Center and Commodities – “THE WORLD FOR SALE – Money, Power and the Traders Who Barter the Earth’s Resources” (Book Review – Urs Marti, SIA Funds AG)Value Investing, Commodities, ESG – China, Oil, Nuclear Energy & General Patton (Interview – Urs Marti, SIA Funds AG) Photo:

  • Foundations, Asset Management, “Virtual Day for Foundation Assets” – Markus Hill* spoke for FONDSBOUTIQUEN.DE with Tobias Karow,, about current challenges for foundations in asset management and the importance of fund boutiques in this area. Additionally, topics such as foundation law reform, fatherhood, and cinema as well as the genesis of the own event format were addressed. (Event note “3rd Virtual Day for Foundation Assets,” 4/27/2022: Hill: How did you come up with the idea for the “Virtual Day for Foundation Assets” event series? Karow: I have been working in the foundation sector for more than 10 years, and have moderated and accompanied hundreds of events. But what has never existed during this time is a congress on all aspects of managing foundation assets. There is such a thing for all capital collection agencies, but not for foundations. Somehow nobody dared to do it, even the big foundation events do not only focus on the topic of foundation assets. When we, with our platform, were confronted with the question of whether we, as an online company, should perhaps do online events, listening in on the market was overwhelming.  That was in November 2019. Six months later, there was the Virtual Day for the Foundation Assets, as a pre-produced video stream, then last year we made a real TV show out of it together with Stifter-TV and RenditeWerk. We’re now making the first breakfast TV show all about foundation assets so to say. Hill: What are the main topics this year? Tobias Karow, Karow: Regardless of the geopolitical challenges, which somehow we all didn’t see coming, other fundamental issues are crucial from a foundation perspective. We are talking about EUR 200, 300, or even 400 billion in foundation assets, and if all of that earns zero interest, there will be no money for the foundation’s purposes. If, however, we manage to increase the return on these assets by 1%, then there will be EUR 2, 3, or 4 billion more available for solving social problems. And that’s what drives me when I put the issues together. We are looking at how foundation assets can improve their economic standing, how foundation assets should be invested with a view to 2030, and also to break away somewhat from the current temperate environment. We will also be looking at the reform of foundation law, which will be passed in 2021 and come into force in 2023, as this can be a real game-changer for foundations. Hill: What role do independent asset managers (fund boutiques) play in asset manager selection for foundations? Karow: If a foundation needs an external sparring partner, then fund boutiques can play a vital role. The advantage of independent asset managers is their independence, their freedom of thought, and their ability to provide feedback, which is why they are best suited to help foundations overcome their skepticism toward consultants. Unfortunately, asset managers tend to get lost in generalizations about the management of foundation assets; a foundation often does not know which solution to the task of “managing the foundation’s assets” the manager stands for. The fact that he deals with the foundation’s assets in a trustworthy manner is not information, but a matter of course. Hill: Foundations are an interesting topic. What else are you currently more interested in? Karow: I’m already concerned about the world we’ll be living in in the future. As a young father, even more so. Will it be a world in which we stand up for democratic values, in which we uphold freedom, or will this be different in the future? I’m also concerned about how the working environment will be in the future; as an online platform, you’re very fluidly positioned, and you can function very well in many circumstances, but can manufacturing companies still do that? In the next lockdown? And wanting to save everything forever won’t work either, we as a society can’t sustain that. And what I’m missing is an optimistic picture of the future. Do you know what’s currently playing in theaters? Something with Dumbledore and the end of the world, that’s not my thing. Hill: Thank you very much for the interview. TOBIAS KAROW: “The MünchnerStiftungsTag, it’s good to have it again. It was the last foundation event we had the pleasure of being a guest at in 2020. This year, on July 1, 2021, the MünchnerStiftungsTag will be held digitally, and the program also has the digital world as a theme. The aim is to discuss how digital day-to-day foundation practice already is and what we remain. We have already found three Digissentials in advance.” Related posts: FINANCIAL CENTRE FRANKFURT: Foundations, Economics, Digitalization & ESG – Frankfurt as Center of Competence (Interview – Tobias Karow, STIFTUNGSMARKTPLATZ.EU) – Fund BoutiquesFINANCIAL CENTRE FRANKFURT: Foundations, Asset Management, ESG – “Crime, Rollski & Gin” – Virtual Day for Foundation Assets – 12.5.2021 (Interview – Tobias Karow, STIFTUNGSMARKTPLATZ.EU) – Fund BoutiquesFamily Offices, Fund Boutiques and the Financial Center Frankfurt (Interview – Markus Hill, Thomas Caduff, – Fund BoutiquesFUND BOUTIQUES & PRIVATE LABEL FUNDS: ESG, SRI, “Lightning & Enlightenment” – Shareholders for Change, CAT Bonds and River Amazon (Interview – Tommy Piemonte, Bank für Kirche und Caritas eG) – Fund Boutiques

  • The Swiss financial center is globally known as a center of competence in wealth management and private banking. Markus Hill spoke for FUNDBOUTIQUES.COM with Markus Schwingshackl, Centro LAW, about trends in the industry, family offices, wealth planning, lawyers’ role in this segment, and the increasing importance of alternative investments, art, and digital assets. Additional topics such as criminal defense, startups & blockchain, the passion for street art, design, and creativity were also part of the conversation. Hill: You work as a lawyer in the areas of wealth planning and family offices. What’s your assessment of the wealth management and private banking industry today? Schwingshackl: I would say the industry is in transition, facing new and more demanding client expectations.For a long time, wealth managers were the one-stop-shop for all wealth-related needs of affluent clients. Their private banking service could do everything, although without the option of specialization.Meanwhile, wealth owners have access to an abundance of information, leading to higher expectations regarding offerings and services. They are used to obtain services from various specialized providers in other areas and industries, seamlessly combined in a single user interface.Wealth management has been a few steps behind, and many wealth managers do not yet comprehensively offer such ecosystems to provide a similar customer experience.Wealth owners expect and demand a high level of service and accessibility within a coherent framework that they can define and control. Technology makes it possible for wealth owners to outsource the management of individual asset classes to different service providers and maintain an overall view of investment performance and the data required for decision-making.In addition, the entry barriers for alternative investments have become lower in recent years, so modular and customized platforms can be built for individual wealth management. Hill: What other changes result from this evolving situation? Schwingshackl: Wealth owners sometimes see their wealth manager as a mere custodian of their assets, mainly differentiated by soundness and lending capabilities. But I would not write off the importance of wealth management.In addition, there’s a wealth owners’ desire and tendency to replicate as much as possible of the wealth management value chain or internalize it within their framework. This can be, for example, in-house private equity or venture capital teams or a private trust company.From there, it’s just a short step to the family office as a management unit for providing personalized financial services to an entire family.We can also say that more wealth owners are taking control of their assets in their own professional structures, to which various service providers and product suppliers contribute under their coordination and supervision.The role of a wealth manager is still essential to preserving and protecting wealth. On the one hand, leading wealth managers are building their own platforms and marketplaces for external services, and on the other, family offices quickly reach their limits when it comes to regulation.Wealth managers are taking the steps they need to provide a more seamless service. They are looking to expand their data storage and security services and develop new offerings with corresponding customer benefits. The transition means a more valuable and responsive service for wealth owners. Markus Schwingshackl, Centro LAW Hill: Given the availability of information and offerings for wealth owners, why would they need a wealth management lawyer? Schwingshackl: That’s an excellent question. Lawyers are in a similar position to wealth management since customers question the correlation between the value and price of services.This is increasingly being countered by transparent pricing and individual package solutions, flat fees, and bonus models. I prefer such models over the standard hourly rate, as it takes on results-based risk with my customers. Furthermore, it is essential to generate added value for customers besides legal and tax advice.Let’s take as an example how my firm offers added value through a multi-stage, structured process in wealth planning to create an individual framework:We start by assessing the family’s history, values, and vision. This may seem esoteric at first glance, but it is modeled on the product design of technology firms who have clear ideas about the specific benefits of their offering, the problems they solve, the way they do it, and a sharp customer focus.It’s called customer-centricity, and this approach is ideally suited for wealth planning.How? The related needs and expectations are identified based on a family’s history, values, and vision. These bring the necessary clarity to the purpose of wealth and engage the whole family to last over time. They also determine the optimal environment for the individual services by projecting negative experiences into the positive ideal, helping wealth owners to develop a vision for their wealth and a concrete framework for their unique wealth management setup.However, as a lawyer, I also work with advisors such as governance experts and investment strategists. In addition to coordination, my task is to consider all circumstances and findings to derive the concrete legal and tax implementation.The entire process takes place in a virtual, cloud-based project management environment that does not require emails and provides clients with real-time visibility into tasks, costs, and current status.We don’t just preach platform thinking. We put it into practice as a law firm by acting as a network of independent experts. Hill: What is the resulting legal and tax implementation for wealth plans and family offices? Schwingshackl: The above principles and findings are tested in a value proposition. Specifically, all services are challenged based on their benefits and possible substitutes.The example of a family office can illustrate the use of the value proposition. If wealth owners were to focus their family office solely on themselves and their own needs, they would risk that family members don’t accept the services as desired and look for substitute options.Wealth plans and family offices are created with an absolute focus on the best performance in realistic, highly individualized areas with the entire family’s involvement. This also means that if there is no prospect of outstanding performance, we look for the best provider in the market to integrate into the structure.There are many legal and

  • Investments in the U.S. real estate market are now an integral part of institutional investors’asset allocation. In this context, the Canadian real estate market currently still represents aniche for many of these investors. In this segment, too, there are many specialized”boutiques” with focused know-how. Markus Hill spoke for FONDSBOUTIQUEN.DE with SvenMatten, RECan Global GmbH, about various aspects of the Canadian real estate marketconcerning the real estate report “Real Estate Canada Market Summary 2021 & Outlook2022″. Hill: Why are you so intensively involved with the Canadian real estate market? Matten: The Canadian real estate market has very positive momentum, is robust andsustainable and offers comparatively high yields in a stable environment and AAA currency. Ihave permanent residency status for Canada, have been professionally active in bothGermany and Canada for many years, and thus have insights into the Canadian market. Oneof my activities over the past ten years has been the establishment of an investment fundfocused on Canadian renewable energy, which I now advise. I have also been keeping an eyeon the Canadian real estate market for many years and consider it to be extremelyattractive, especially from a German perspective, in terms of investment and valuedevelopment potential. Through my local activities, I have also been able to establishcontacts with many years of experience. This is the basis for RECan Global’s managementteam in Canada and Luxembourg. I manage our office in Munich. This combination enablesus to offer everything from a single source at a high level and with extensive experience in aclosely networked team of partners with our asset sourcing and management as well as aLuxembourg fund structure and German reporting. Hill: What are the most interesting findings from your study? Sven Matten, RECan Global Matten: The Canadian real estate market in my view a hidden champion in a safe-havencountry. The numbers in the real estate market report also show that. In my opinion, thepositive influence of the Canadian government’s immigration policy should be highlighted.More than 400,000 people immigrate to Canada every year, not into the social systems,however, but mainly into the labor market. Around 65 percent of these immigrants haveentered through special labor market programs. This means they have jobs, and they earnmoney from day one. Even in times of pandemic, this drives both the Canadian commercialand residential real estate markets. Gross domestic product is expected to grow 4% in 2022,up from 4.5% in 2021. Despite the pandemic, the employment rate rose by 123,000 (+0.8%)in December alone. The unemployment rate fell to 5.9% in December 2021, the lowest level since the pandemic began in March 2020. Full-time employment in Canada is 234,000(+1.6%) higher than in February 2020. The consumer price index (CPI) is up 4.8% in 2021. TheBank of Canada projects inflation to fall back into the 3% range in 2022 and to return to thetargeted 2.0% in 2023. Hill: Where do you see similarities in investors looking to the U.S. and Canadian real estatemarkets? Matten: Well, it takes sustainable global thinking as well as a diversified portfolio to invest in”more distant” markets and currencies – to point out one commonality. And of course,investors are united by the search for lucrative, ESG-compliant investments that delivernecessary returns at the end of the day with low risk. At this point, let me turn again directlyto Canada. The country is extremely stable politically, the Canadian dollar has a AAA rating, itis a robust and organically growing market with record investments in residential andindustrial real estate, and it promises investors attractive returns with comparatively low-risk potential, especially from a German perspective. Hill: What do you deal with when real estate markets are not on your agenda? Matten: Well, there are many things if I had more time. Film projects are particularly close tomy heart. I founded Paradigma Entertainment in 1999. The company focuses on theproduction of high-quality independent diverse feature films for an international audience.In addition to developing its projects, the company and its partners specialized in filmfinancing, with a focus on private equity and venture capital. In addition to the German-speaking region, activities focused on productions in Canada together with Canadianpartners. In this respect, the circle between Germany and Canada closes again. Hill: Thank you very much for the interview. Sven J. Matten is the co-founder and driving force behind RECan Global. As ManagingDirector, he acts as a link between the team and RECan’s partners in the EU and Canada. Inaddition to his leadership roles at RECan, he focuses on investor relations, strategy, andbusiness development. Sven has more than 20 years of experience connecting EU-basedinvestors with investment opportunities in Canada, along with good knowledge of theinvestment process between the EU and Canada. As a German citizen with permanentresident status in Canada, Sven moves freely between both countries. RECan real estate market study Canada: RECan Global – RECan Conference – Real Estate Canada Market Summary 2021 & Outlook 2022 RECan Global: Related posts: FUND BOUTIQUES & PRIVATE LABEL FUNDS: Financial Centre Liechtenstein, Family Offices, ESG, CAT Bonds, Cryptoassets, Real Estate and Mezzanine – Summer, Hiking and the Liechtenstein way (Interview – David Gamper, LAFV Liechtenstein Investment Fund Association) – Fund Boutiques FUND BOUTIQUES & PRIVATE LABEL FUNDS: ESG, Family Offices, Real Estate, Blockchain, AIFM – Liechtenstein, Switzerland & “Win-win Factor” (Interview – David Gamper, LAFV Liechtenstein Investment Fund Association) – Fund Boutiques FINANCIAL CENTRE FRANKFURT: Digitalization & “Asset Class Data Centers” – Real Estate, REITs and ESG (Michael Jakobi, contagi Digital Impact Group) – Fund Boutiques „The USA has the world’s largest investable real estate market with high transparency, liquidity and legal certainty“ (Interview – Dr. Patrick Adenauer) – Fund Boutiques

  • Caduff: Mr. Hill, you like to be called “Mr. Family Office” in the German financial center. Why are you so interested in this area of business? Hill: The original idea of a family office is to manage a family’s capital to the best of its knowledge and belief. What I find interesting about this segment is the possible variety of activities, depending on how the organization is structured: managing conflicts of interest, networking experts, neutrally evaluating and selecting products and services, and also the demand for “special services” (seeding fund concepts, direct investments, “M&A projects,” succession issues, governance, etc.). I experience the representatives of this segment as pleasantly inquisitive and with a wide range of interests, not only in terms of product topics. Art, culture, entrepreneurship, politics – one often senses here that there is active participation in the fate of the community. It is not for nothing that close ties to foundations and universities can often be found. Incidentally, some of these elements can also be found in fund boutiques: Entrepreneurship, independence, and the quality of being a “believer” – as is often found in family officers: You do what you love to do. I have been self-employed since 2005, and before that, I always had fields of activity in which I could exchange ideas with a very large number of experts from a wide range of disciplines. As an economist, I also appreciate the “eagle’s eye view” on certain topics, which I guess is also called the joy of networked thinking – in combination with professional expertise. Caduff: The term “family office” is not protected, and some traditional asset managers use it as an embellishment. Does that bother you? Hill: Not at all. Every pot finds its lid. Excellent family offices probably suffer less from this because they don’t want to sell “anything”. Since the job description of a family officer seems to me to be very attractive, it may even have a positive aspect: Many professionals may have learned for the first time through the controversial discussion that these very interesting jobs exist. Diffusion of knowledge in an industry does less harm, after all. Similar to the term fund boutiques, it seems to me that the term family office has not yet been exhaustively discussed and defined from an academic point of view. I am following the publications of various experts with interest. It is not yet clear to me who will ultimately win the upper hand on the definition. But I also understand the criticism of some representatives from the segment of classic single-family offices. Here I perceive a “nose-rubbing” from time to time when it comes to the topic of group-linked multi-family offices and the topic of “proprietary products & pseudo-neutrality”. One should always take a close look at the individual organizations and their representatives here: Of course, there are also excellent professionals here who know that they are competing in the family office services segment. I have no fundamental reservations about “proprietary products”. On the contrary, one of my current projects is to discover special fund concepts through exchanges with many family offices (in addition to asset managers, fund of funds managers, etc.), where initial due diligence and investments have already taken place. Especially here, one often comes across interesting funds that are hardly known, as these were primarily designed for the investment of family assets. Sometimes these are recommended to “Friends & Family” without much marketing effort. For this reason alone, I would like to see a more differentiated discussion on the topic of proprietary products in the family office segment. Family officers often discover and create products and services that then benefit “colleagues” and other investors! Markus Hill, independent asset management consultant Caduff: You are also heavily involved with funds from smaller and medium-sized providers. What’s so exciting about that? After all, there are more than enough large addresses. Hill: That’s right. There are many large and good addresses, and I would like to make that clear at this point. In a fund selection project, I do not exclude this segment from the analysis. If a corporate flagship product should be “better” – why should one select a “bad” fund boutique? Fairness is not a disadvantage. The “small” independent houses, in my opinion, give a lot of pleasure in due diligence. Why is that? Many of these contractors have excellent expertise in their particular fields. This expertise is then combined with the factors of entrepreneurial biography, independence, and skin-in-the-game (“own money in own fund”). These concepts are often referred to as “high conviction”: In the truest sense of the word – conviction in the expertly managed segment (stocks, bonds, investment style, “exotic” asset classes, etc.) combined with conviction in one’s entrepreneurial skills. It is a pleasure to speak with many of these hidden champions of the financial industry. Incidentally, this is one reason why many family offices and independent asset managers enjoy exchanging professional ideas with the fund boutique representatives. And, it’s often forgotten, specific to these groups: They all do the things they are passionate about. Caduff: Let’s move on to your business model – what exactly do you offer? Hill: I come from the “special projects” corner. Manager search, seed money search, fund concept feedback surveys (direct professional exchange of ideas with the investor side), etc. At first, I worked in Product Management, later moved to Marketing & Sales, and then “slipped” back into the Fund Selection & Fund Boutiques segment by working with a fund of funds manager. Through the cooperation with Universal-Investment at that time, I came to write about the fund boutiques & private label funds segment. Two years ago the fund company Ampega gave me the impulse (impulse & support) to set up my website with the title Because of this project, there is an additional opportunity to make smaller boutiques a bit more visible in the market. Social media, press, interviews, often also direct contact to investors (no substitute for sales – rather

  • “When the government debases money to defraud all creditors, this process is given the polite name of inflation” (George Bernard Shaw). The topics of value investing and commodities are currently the subject of intense discussion among institutional investors against the backdrop of the current inflationary push. Markus Hill spoke for FONDSBOUTIQUEN.DE with Alex Rauchenstein, SIA Funds AG, about the possible positioning in this environment, the rating concept of Sharing Alpha as well as planned event activities in 2022. These considerations were rounded off by an interesting literature reference regarding future trends in geopolitics (Ray Dalio). Hill: How do you see value investing and commodities developing in 2022? Rauchenstein: In our eyes, there are very good investment opportunities for value and commodity investors in 2022 as well as in the next few years with corresponding return opportunities. For us as value-oriented investors, it is very fascinating to observe how the relative valuations for so-called growth stocks have once again almost reached a new high towards the end of the year. But as we all know, the pitcher goes to the well until it breaks. Since the beginning of the year, the pendulum has now swung in favor of value stocks, the upcoming turnaround in interest rates and the very high growth expectations already priced in for many growth companies are probably the two main reasons for this. Briefly a few points on our behalf, admittedly a bit “promotional”, exceptionally – valued our Long Term Investment Fund Classic is currently very attractive with a P/E ratio 22 of 11x, an expected dividend yield of 3.2%, and a price/book value of 1.7x. The values for our commodity fund look similar. Commodity stocks in particular currently offer very attractive investment opportunities to protect themselves from the decline in the value of money and thus maintain their real purchasing power. Due to a lack of replacement investments in this area, the next few years will be characterized by decreasing availability of many raw materials. Accordingly, well-positioned companies in this area will benefit in the coming years. Hill: You received an award from Sharing Alpha last year. What is the concept behind this rating approach? Rauchenstein: Yes, our Long Term Investment Fund Natural Resources was the winner in its category (commodity equity funds) in 2021. We’ve been on this platform since last year and we find the concept very interesting because, with SharingAlpha, a fund is rated by fund selectors in terms of its ability to outperform in the future, not simply based on historical performance numbers over the last three or five years. In addition, the fund selectors are in turn also measured against their ratings and are thus able to build a track record as good fund selectors. Both our company and our two funds received very high marks on SharingAlpha. Hill: What issues and activities do you have coming up in 2022? Rauchenstein: This year, a few formats are planned. Here, in brief, are the most important key points in terms of events. On Feb. 11, we will host an investor zoom call. We will participate in Finanz’22 on 4/27 and 4/28 and Value Day on 6/10 in Zurich. We are also planning a lunch presentation at Mannheim in June and Frankfurt this September. Hill: Besides portfolio management, you are open to many topics. Are you reading anything in particular at the moment? Rauchenstein: Yes, “The Changing World Order” about the rise and fall of nations by Ray Dalio. It’s also of particular interest to me because the area of commodities and geopolitics has often been a topic of discussion at our Investor Zoom Calls and local events. Strategic metals, oil, USA versus China, etc. – Urs Marti, for example, as a commodity fund manager, often has very interesting views here. Especially since he is also a passionate reader and likes to think outside the box, we can often pass the balls to each other here in the discussion. It is often underestimated that many investors have a very great interest in such discussions. Hill: Thank you very much for the interview. SIA Funds AG (Strategic Investment Advisors Group) / Event note «institutional investors – 11.2.2022»: Related posts: Value Investing, Commodities, ESG – China, Oil, Nuclear Energy & General Patton (Interview – Urs Marti, SIA Funds AG)China, Geopolitics, Commodities, Value Investing and South Tyrol (Interview – Urs Marti, SIA Funds AG)Value versus Growth, Commodities, India, Youth and Inner Peace (Interview – Alex Rauchenstein, SIA Funds AG)Commodities, Value Investing, Family Offices and Hugo Stinnes (Interview – Urs Marti, SIA Funds) Photo: Sack

  • Dear ClientsWe would like to draw your attention to our conference call on Friday, February 11 at 10.00 AM to which you are kindly invited.(In case you won’t be able to attend: The call will be recorded and you can find the link on our homepage under News.)The purpose of this call is to inform you on the development of our funds in 2021 and since the beginning of the year as well as to give you an outlook for the current year.   The following people will present: Prof. J. Carlos Jarillo, Founding PartnerMarcos Hernandez, CIO/PartnerUrs Marti, PartnerAlex Rauchenstein, CEO/Partner SIA Team Information on registration: SIA-Funds: Related Posts: Value Investing, Commodities, ESG – China, Oil, Nuclear Energy & General Patton (Interview – Urs Marti, SIA Funds AG)China, Geopolitics, Commodities, Value Investing and South Tyrol (Interview – Urs Marti, SIA Funds AG)Value versus Growth, Commodities, India, Youth and Inner Peace (Interview – Alex Rauchenstein, SIA Funds AG)Commodities, Value Investing, Family Offices and Hugo Stinnes (Interview – Urs Marti, SIA Funds) Photo:

  • Mindfulness means that we dwell completely on what we are doing without allowing ourselves to be distracted” (Dalai Lama). Markus Hill spoke for FONDSBOUTIQUEN.DE with Alexander Scholz, TELOS GmbH, about topics such as fund boutiques & COVID crisis, “webinar fatigue” versus face-to-face, as well as ESG and the importance of so-called alternative asset classes in this asset manager segment. Additionally, topics such as “Old Man & Nylon Clothes”, Taunus and Giro d’Italia were discussed (event note: Wiesbaden Alternative Conference, Nov. 4, 2021). Hill: Mr. Scholz, you regularly conduct market surveys of institutional investors with TELOS. Are there any targeted surveys among them regarding specialized, smaller asset management fund boutiques? Scholz: We do not conduct market surveys specifically aimed at smaller asset management companies. But in the satisfaction survey, which has been conducted annually since 2004 and in which institutional investors are asked about their satisfaction with their asset managers, we differentiate between three size categories – “Large Asset Managers” (from 150 billion euros AuM), “Medium-sized Asset Managers” (51 to 150 billion euros AuM) and “Smaller Asset Managers” (up to 50 billion euros AuM). In this respect, we have a long data history, at least in terms of investor satisfaction. Hill: That sounds exciting. How do the fund boutiques compare to the other categories? Scholz: In the early days, the smaller asset managers were still significantly underrepresented in the mentions. That is, they hardly played a role in the portfolios of institutional investors. However, this has changed significantly in recent years. In the meantime, the group of smaller asset managers accounts for more than ¼ of the mentions. This clearly shows that fund boutiques are increasingly accepted and selected by institutional investors. Alexander Scholz is Managing Director and shareholder of TELOS GmbH Hill: So what about investor satisfaction with “their” fund boutiques? Can you rather classify them under the category “it was a nice try” or is the quality of the fund boutiques rated positively? Scholz: Here, too, there is a clear positive trend. The satisfaction ratings have continued to improve over time. In the recent survey, in particular, this trend has accelerated once again. Particularly in the customer-related criteria such as customer service and advice or the proactive approach, the smaller asset managers scored better than the two larger categories. The smaller asset managers were able to play off their flexibility and individuality very well in the COVID phase. Hill: Do you guess as to what that might be due to? Scholz: Without knowing for sure, but possibly it’s due to the absence of customer service due to the home office arrangement. At smaller asset managers, employees were often more likely to be in the office than at the larger houses with their open-plan offices. The larger providers have relied more on online support, e.g., via webinars, for this purpose. This was also positively received by investors in the early days. Over time, however, this became routine and the “appeal” of the new was lost. I think investors increasingly longed for an individual, personal discussion. Hill: So you could say that the fund boutiques are the winners of the COVID restrictions. Scholz: Partly, certainly. Nevertheless, in parts, the situation was and still is difficult for the fund boutiques as well. Most investors have allocated free funds with portfolio managers. Winning new clients without face-to-face meetings is a very difficult undertaking. But looking forward, the smaller asset managers can certainly benefit from being closer to their clients. Hill: What about other criteria? Have the fund boutiques improved there as well? Scholz: Yes, that is the case. For example, in the area of ESG competence, the smaller asset managers have improved significantly. In reporting, the satisfaction of institutional investors has also increased. This shows that the fund boutiques are becoming increasingly professional and are adapting to the requirements of institutional investors. Hill: TELOS also acts as a consultant and supports institutional investors in manager selection. How do you perceive the fund boutiques here? Scholz: Due to the increasingly complex asset allocation of institutional investors with more and more asset classes and strategies, specialized fund boutiques are also coming more into focus here. This applies to special investment styles or concepts in the liquid segment, but also in particular to the so-called “alternative asset classes” such as real estate, infrastructure, private equity, or private debt. It is precisely here that specialized fund boutiques are increasingly coming into their own. This is also reflected in the responses to the satisfaction survey.Incidentally, at our investor conferences, such as the Wiesbaden Alternative Conference on November 4, the presentations by the fund boutiques, some of which are not yet so well known, also meet with great interest among investors. Hill: So all in all, a very positive picture for fund boutiques. Mr. Scholz, allow me to ask you a question away from your day-to-day work. What are you involved with outside the business world? Scholz: As a member of the midlife crisis generation, I spend most of my free time on my racing bike – “old man in tight nylon gear,” as it were. In doing so, I can enjoy nature and clear my head. Fortunately, I share the hobby with my wife, so we often go on rides together in and around the Taunus. In the passive area, too, the topic of road cycling dominates for me. For example, I am currently reading the book “Pellegrina: An Italian Cycling Pilgrimage”. In the book, a journalist describes her impressions of a pilgrimage to the pilgrimage sites of the Giro d’Italia. Recommended for cycling and Italy fans. Hill: Thank you very much for the interview. Alexander Scholz is Managing Director and shareholder of TELOS GmbH. Before joining TELOS in June 2016, he was Deputy Head of Institutional Sales at GAM Germany. Overall, he has more than 20 years of industry experience in the area of asset management consulting, fund and investment analysis, investment controlling and reporting portfolio management, and customer service at asset management companies and banks.

  • When a foundation puts together a fund portfolio today, it does so in the knowledge of the low-interest rate and the key performance data of various funds. What suggestions could foundations get from decision-makers in family offices? Possible keywords here would be a calendar year, investment style, performance as a hygiene factor. If one assumes a natural pleasure in exchanging ideas and curiosity on the selector side, all sides can enter into a professionally fruitful dialogue – as a rule, one does not become dumber through a conversation; here, too, the “qualified diversity” (QD) factor can be enriching in investment decisions! Family wealth is often something shrouded in legend, it is often a mass that is hardly tangible from the outside. It is hard work to preserve these assets and to manage them. Family offices take on this task. Much of what they do has similarities with what foundation stewards have to do in day-to-day practice. Ideally, foundations also have a very long-term investment horizon and do not have to focus primarily on performance. They follow an overriding goal in the management of their foundation assets: the realization of the foundation’s purpose. In this context, mutual funds are often used, often labeled “endowment funds”. It might be interesting to take a look at how a family office would approach fund selection. If the parameters are fundamentally similar to those of a foundation, then perhaps parallels can be found for the selection of foundation funds or funds suitable for foundations. This brings us directly to the first point: A family officer – and other fund selectors, too, of course – would rarely be irritated by a label such as “foundation fund”. He is generally interested first in the figures, investment process, investment style, etc., and less in the prose on the front of the product flyer. For a family office, endowment funds are a fund category like any other. You could often basically just talk about balanced funds, which in one format or another are a bit more accommodating to foundations in their needs. Funds – substance versus label A mixed fund is selected by a family officer according to its task in the portfolio, and this can vary. Either a mixed fund is a low fluctuation basic investment, i.e. a building block to fill a foundation in the portfolio. Then it is more defensive mixed funds, which then may well include endowment funds. In another case, however, the mixed fund can also be the building block with which a distribution component is to be brought into the portfolio. Both tasks also have to be “taken care of” in the foundation’s assets, with the focus on the ordinary return, i.e. the distribution. What a foundation can learn from a family office, however, is how to define the scope of a fund and, based on that, how to analyze certain performance data. A family officer who is not “foundation-minded” would, however, always disregard fund categories and compare foundation funds with income funds, for example, because these two categories could be used to accomplish the task at hand. Likewise, they would free themselves from looking solely at performance. For family officers, performance is often a hygiene factor; it provides orientation, but it is not the central criterion for fund selection. Return is considered with risk, and the asset manager’s track record, for example, is equally important. In addition, it could be a question in the future whether a fund grants ESG criteria a comprehensible role in its investment policy. Currently, an interesting controversy is still taking place in expert circles. The increased consideration of ESG criteria (time horizon argument, opportunities for influence – direct and indirect, etc.) may mean that performance could suffer in the short to medium term. Markus Hill ESG ante Portas For some time to come, the topic of ESG may be viewed with a different focus by different groups of investors. Foundations are required by their very DNA not to invest in anything that – roughly speaking – harms the common good. Family assets are likely to be invested according to the same overriding motto in the future. Accordingly, family offices will confront the funds they prefer in this regard with questionnaires and naturally also demand an open approach to the subject. Foundations can also take a leaf out of the family office’s book and demand – in their case – foundation-specific information. Family offices would never be satisfied with a factsheet and an annual report as a source of information; they would want to know what was done in the fund in this or that phrase to be able to assess the management quality. A key point when selecting asset managers: can a fund deliver what it promises over the long term, in terms of performance, in terms of distribution, in terms of drawdown, in terms of correlation, in terms of asset allocation? Practically no family officers would look only at the last year or the last three years for a fund; he would always expect a stocktaking since the fund’s inception. At the very least, a set of information that has been available since inception. Conversely, this also means that family offices take time off from the calendar year, and that can be a valuable cornerstone for foundations. The family officer tends to think in terms of capital market scenarios and adjusts the portfolio accordingly, for example, to be a little more offensive or a little more defensive. Regulatory freedom, thinking in terms of generations – this is perhaps a key advantage of this approach. In addition to breaking away from the calendar year, family offices often use another approach to managing the portfolio: mixing investment styles. For the various, long-term scenarios, one investment style is better and the other investment style is less suitable. However, since no one knows which scenario will ultimately occur, a mix of investment styles and also strategies is a good idea. The positive effect of this technical measure is primarily

  • Do wealth managers need to, and can they reinvent themselves? Do wealth owners still need a wealth manager? Given the news of misconduct and negative consequences for investors, the industry’s creativity to move into new fee areas, and the rise of digital challengers that offer a distinctive client experience and more competitive pricing models, this question certainly arises. Still, the alternative of working with multiple vendors and coordinating segmented relationships is not easy to implement. This article highlights some of the pain points of the current wealth management offering and ways to address them. Defining terms Wealth management covers a broad range of financial services and is, in a sense, the big brother of asset management, which is often also referred to as investment management or asset management, since wealth managers typically offer this service as well. Traditional wealth managers take a technical approach to increase and preserve the value of financial assets by making active investment decisions on behalf of their clients. Wealth managers take a holistic view of their clients’ assets for comprehensive wealth planning. This approach is also regularly described as private banking or private wealth management and, compared with traditional asset management, takes into account other dimensions, such as wealth planning and estate planning, to ensure the protection of assets and their preservation over generations. Wealth management and asset management can also overlap in investment advice, which is a narrow sense that includes recommendations to buy, hold or sell financial instruments. Markus Schwingshackl is an attorney and founder of the boutique law firm Centro LAW In practice, one finds a wide range of definitions and terms for sometimes the same service, so the author does not claim interpretive authority. However, in the following, the terms wealth management, asset management, and investment advice will be based on the above definitions. Conflicts of interest A typical scenario is that when a wealth manager sells and actively promotes its financial instruments or products issued by companies in the same group, there is an increased risk that it is acting in its interest and not in the best interest of the client. In other words, there is a potential conflict of interest. The good news is that regulators require wealth managers to act in the best interests of their clients, disclose potential conflicts of interest, and ensure fair treatment if a conflict of interest cannot be avoided. However, there is a risk that wealth managers try to comply with regulatory requirements merely in the fine print of their terms and conditions. What can be done in such cases? One asks whether a possible conflict of interest is associated with the products whose purchase is recommended. Especially if it is an in-house product, one should be given alternatives that are equivalent but more advantageous in terms of cost and complexity. Although this information is required by law, it is always important to ask. And if it is recommended that an existing position be replaced with a new product, one should also immediately ask for confirmation that the expected benefits of switching outweigh the costs involved. Open architecture and best-in-class In an open architecture, a wealth manager acts as a so-called one-stop store, offering a wide range of both in-house and third-party products. Combined with a best-in-class approach, the client should receive a wide range of objectively market-leading products, regardless of whether they are in-house or third-party products. Sounds good, but do you get the best, or are proprietary products preferred? The regulation requires wealth managers, detached from the sales approach, to put policies and processes in place to ensure they are acting in the best interests of their clients. However, it is once again up to the client to seek more detailed information on how to manage conflicts of interest. Clients should certainly ask for the details on internal policies to know the extent to which proprietary products are placed and under what terms. Due diligence on products comes at a price, so know exactly what you are paying for. The investment advice If one receives investment advice, the wealth manager must generally recommend suitable investments. This obligation also includes avoiding conflicts of interest that could negatively impact the assessment of the suitability of the investments for the client. Concentration risk is an important detail to consider in this regard. It is part of the suitability assessment to ensure that clients do not take concentration and credit risk by investing in too many products from the same provider. These risks are managed through diversification, and one should not put all eggs in one basket. Therefore, it is not advisable to buy all investment products from one product provider, no matter how good they are. Again, the relevant regulation requires disclosure, control, and management of risks and conflicts of interest. However, it remains up to the customer to find out details and concentration thresholds for third-party and proprietary products. The asset management The above also applies if the investment process is completely delegated to the wealth manager under an asset management mandate. This circumstance may seem reassuring, as one no longer has to worry about investment decisions. Nevertheless, things need to be looked at more closely. For example, if one pays asset management fees and holds a fund of funds from the same wealth manager in the portfolio, which in turn invests in in-house funds, costs accrue at multiple levels in favor of the same service provider, and there should be good reasons for this. The treatment of in-house and linked products needs to be understood in detail not only for the sake of cost but also to ensure that one is invested in the best products and achieves appropriate diversification. The alternatives Although global assets are growing steadily, wealth managers face challenges as asset owners have become well-informed, have had good experiences with high-tech and high-touch industries outside of finance, and expect to price based on value delivered. Unmet expectations of trust and transparency are driving them to seek solutions

  • “What we do today decides what the world will look like tomorrow.” (Marie von Ebner-Eschenbach) In an interview with Markus Hill, family entrepreneur Florian Riedel, Krebs & Riedel Schleifscheibenfabrik, talks about impact investing, sustainability, and the multigenerational approach. The similarities between the real economy and the financial sector are also described from the perspective of the family entrepreneur. Hill: Sustainability is currently often equated with “impact investing” in the financial industry. How does a family entrepreneur see it? Riedel: Impact investing can set important accents, but will not save our world on its own. This is because impact investing can only address a small part of the assets that emit CO2. A small brickyard in India or a coal-fired power plant owned by the Chinese government cannot be reached with capital market instruments. I believe that only ownership encourages a caring approach to the environment, to resources, to everything. “Ownership approach” and “skin in the game” are buzzwords that may come to mind. The studied economist, which we both are, would speak of the “internalization of external effects”. In the end, it’s always about the same thing: Act as if it were your property. And if, in addition to “skin,” your genes are also involved, for example in the form of your offspring, it becomes truly sustainable. Hill: What is special about family business? Riedel: The name says it all. It’s the family and multi-generational approach. Several studies show that family businesses invest very generously in expanding the business and in research and development, precisely because the investment horizon doesn’t just extend to retirement age. The entrepreneur who sets up his business in such a way that the next generation can continue to run it and sees this as the core of his corporate responsibility is acting sustainably. In addition, he must be innovative so that he has something to bequeath. In his case, it is not the stock options that are granted to the manager as an incentive so that he behaves like an entrepreneur rather than a civil servant, but the thought of his children. Hill: Where do you see the overlaps and synergies between finance and the real economy? Riedel: Many family entrepreneurs only know the financial sector through their house bank or as an investment of their private assets. Then there is the investor who sees the family business as a possible takeover target, perhaps works together with the entrepreneur in a minority position for another 5 years, and then makes an exit. For the family business, however, this exit pressure means that it is no longer a family business as soon as it is clear that a sale is imminent in the medium term. Active cooperation between the financial sector and the family business could be very fruitful, provided that the limitations of the desire for control on the part of the entrepreneurial family and the multigenerational aspect are sufficiently respected. Hill: Thank you very much for talking to us. Florian Riedl is Head of International Business, Sales, and Finance at Krebs & Riedel Schleifscheibenfabrik. Krebs & Riedel Schleifscheibenfabrik: Related articles: The Single Family Office Investment Committee (Guest article – Markus Schwingshackl, Centro LAW) “Family Office Management vs. Private Wealth Management”, Asset Management, Trusted Advisor, Art, Mittelstand & Digitalization (Interview – Dr. Maximilian A. Werkmüller, LL.M., Professor of Finance and Family Office Management – Allensbach University)

  • As someone who has been an investor and fund manager in the commodities sector for over 20 years, it is hard to avoid reading this book presented here, “THE WORLD FOR SALE” ((Javier Blas & Jack Farchy). I didn’t want to read it, as one could expect the usual unqualified litany of evil capitalists and exploiters in the commodities sector. But far from it. The book reads like a thriller and gives an exciting insight into many backgrounds of the global conflicts and crises of the last decades. Due to the own activity and as a resident of a canton where an estimated 70% of the world’s metals are traded, one has seen some of the described mines and areas oneself, had conversations with CEOs, plant managers, and miners over a beer (or two). Likewise, there are the stories of the landlord of the regular pub, where certain people always entered the pizzeria through the side entrance – for fear of a repeated kidnapping attempt by CIA / Mossad (“rumor mill”). And in certain years world stars had an appearance in the insignificant Saturday evening program of Swiss television. (The reason for the visit was the appearance at the annual company party in a gymnasium in the Swiss province). Enclosed are some “random” reflections, splinters of thoughts, impressions about the content of the book, without any claim to completeness. Introduction – Impressions – The last swashbucklers Benghazi 2011: The Libyan civil war is in full swing, but the rebels are running out of fuel. At the request of the Quatari, the CEO of Vitol flies into the war zone. The rebels need cash. Theoretically, it didn’t pose much of a problem. Vitol could deliver the fuel across the Mediterranean to the port of Benghazi, and in return receive crude oil from the oil fields the rebels controlled – via a pipeline to Tobruk, near the Egyptian border and far from the war zone. However, Vitol was also willing to act as a bank for the rebels. A common approach in commodity trading with customers who are short of cash and can later repay the loans in physical deliveries. After what must have been a good dinner with the Prime Minister at 10 Downing Street, it happened with the consent of politicians: Washington guaranteed a sanctions waiver and allowed US companies to buy Libyan oil from Vitol. And, of course, there was a NATO drone. While London and Washington supported Vitol’s mission, they were not prepared to intervene in an emergency. Landing in the middle of a war zone, Ian Taylor knew he would be on his own. After Vitol’s intervention, the balance of power in the conflict shifted virtually overnight. The availability of fuel in the remote deserts of North Africa was always a critical factor in the war. For the same reasons, the desert fox Rommel failed in WW2. The pioneers Theodor Weisser began to tremble as he approached the Soviet border in 1954. As a soldier, he had been a prisoner of war and the memories of the camp were still vivid. Nevertheless, he was determined to see through the mission he had begun in Hamburg, to buy oil and not return home without a deal. It was not long before the Soviet bureaucracy took notice of him and dinner with Evgeny Gurov was arranged. As head of Soyuznefteexport, this man controlled the entire Soviet oil trade. Weisser’s company Mabanaft was selling fuel in West Germany, losing money and needing oil. It was the beginning of a long-lasting business relationship. Weisser was a pioneer. After years of depression, war, and stagnation, an era of prosperity and growth began. Trade routes opened up everywhere. Nationalism and protectionism gave way to free trade and global markets. In New York, Ludwig Jesselson had similar visions. A young metal trader who had fled Nazi Germany. His firm, Philipp Brothers, would later rival Wall Street’s largest banks and dominate global commodities markets. In Minnesota, a grain trader would grow his firm, Cargill, into the largest privately-held U.S. company. Author: Urs Marti, Partner at SIA Funds AG The history of commodity trading dates back to the time when people began to settle. For centuries, merchants and their companies could probably be described as flying traders and adventurers. They traveled the world in search of valuable goods to sell back home. The greatest success story of this kind was the East India Company, which controlled India for decades. The Godfather of oil In the 1970s, OPEC would turn the oil market and the world economy upside down. The dominance of the Seven Sisters (Standard Oil Jersey, Shell, Anglo-Persian oil (BP), Standard Oil New York, Standard Oil California, Gulf, Texaco) ended, crude oil became a tradable commodity and power shifted to the traders. A young trader at Philipp Brothers recognized this development, which Weisser had recognized before him. His name was Marc Rich. The last bank in town In the early 80’s Jamaica was effectively bankrupt. Soon oil could no longer be bought and the memories of the riots caused by the oil crisis in the 70s were still omnipresent. No one was willing to increase the country’s credit lines anymore. Marc Rich & Co had significant investments on the island. Jamaica was one of the largest bauxite and alumina producers in the world. Over the weekend, 24 hours before Jamaica ran out of oil, Rich organized 300000 barrels for unloading in Kingston. A tanker on its way to the U.S. East Coast made a stopover. Before that, a contract was not even signed. The government of Jamaica would never forget this “favor” and the island would become a source of profit for decades. (Other chapters worth reading, titles: Paper Barrels, The Fall of Marc Rich, The Biggest Closing-Down Sale in History, Communism with Capitalist Influences, Big Bang, Petrodollars and Kleptocrats, Destination Africa, Hunger and Profit, The Billionaire Factory, Merchants). Among numerous other examples, it also describes the emergence and growth of some companies such as

  • In the German literature of Romanticism, which begins around 1800 and extends in its offshoots well into the 19th century parallel to other cultural-historical currents, the complex of topics of economics and wealth is discussed for the first time on a noteworthy scale. Previously, discussions on the meaning and function of wealth and fortune and the representation of economic knowledge had little to no space. This changed in German Romanticism, in which, among other things, the antithesis of art and economy was raised. The functions of monetary wealth and questions of economy and prosperity can be exemplified by three exemplary texts by Joseph von Eichendorff, Ludwig Tieck, and Richard Wagner. Joseph von Eichendorff: From the Life of a Good-for-Nothing  is one of the best-known and most valuable texts of German Romanticism. The good-for-nothing is the rather work-shy son of a miller who is sent out into the world. He stands out as a romantic and (life) artist who looks optimistically and courageously into the future, lets life come to him wandering and adventurous, and still finds happiness in the end. He shares this attitude with other figures of Romanticism, striving for individuality and freedom and distancing himself from the prescribed patterns of behavior of working bourgeois society. He tries to implement his ‘romantic’ attitude in everyday life and to free himself from the shackles of a society focused on acquisitiveness, economization, and the safeguarding of a bourgeois lifestyle (cf. Peters, 2020, 106). Although the good-for-nothing dreams of bourgeois existence, “to save money like the others, and in time certainly to bring it to something great in the world” (Eichendorff, 2007, p. 469), his character disposition is not suitable for this. The good-for-nothing reveals glaring weaknesses in dealing with numbers and the responsibility entrusted to him; a lack of commercial or economic competence makes it difficult for him to enter the bourgeois world of gainful employment in the long term. His basic romantic attitude is in complete contrast to the expectations and demands of an economizing society; economic knowledge cannot be reconciled with the character of the romantic. What functions, then, are attributed to economic property and knowledge? First of all, it seems to be a foregone conclusion that these qualities are regarded as original to the bourgeois sphere. The good-for-nothing, as a romantic character, seems to be overwhelmed by even the simplest calculations, because he is all too easily distracted by numbers. He ascribes to these completely different properties than they have in mathematical-commercial terms. The signs for certain values and economic quantities are turned into funny symbols and personifications to make things bearable. They have completely lost their original meaning, their significance for economic and commercial processes is completely taken away. The de-economization of numbers stands for the romantic basic attitude of the good-for-nothing and his impossibility to find his way in the bourgeois world. Dealing with numbers and possessions is perceived as incompatible with the romantic way of life. Ludwig Tieck: The Rune Mountain In Der Runenberg (1812) by Eichendorff’s contemporary Ludwig Tieck, a young man is corrupted by foreign gold and falls into madness and paranoia. At first, the main character Christian succeeds in everything in the investment of money (economic competence!), the family becomes rich and respected. But Christian increasingly falls into a negative vortex. He talks “crazy, especially at night, he dreams hard, often walks around the room in his sleep for a long time without knowing it, and tells wonderful things”, always talks about the “stranger” and no longer dares to go out into the field and garden. Christian’s only worry is that the stranger who left him the gold might reclaim his money, and in search of more wealth Christian disappears into the titular Rune Mountain. Although he returns later, his trail is lost after the final goodbye. His family and fortune perish as a result. The Rune Mountain is very interesting from the point of view of economic psychology or economic psychiatry. As Othmar Hill (2011, p. 182) writes: “It is said that money does not make people happy, but it calms them down. But we know from happiness research that this is not so at all. Many among us are confused about is cause and effect of this issue. Who possesses money, loses by no means its existence fears, but vice versa: Who accumulates fears, whose life greed increases and he/she requires ever more money. This does not calm down, because money has no therapeutic effect, but acts only as a symptom plaster. From this point of view, it simply cannot be true that a lack of money should be the cause of all our unhappiness.” One finds this assessment again in Ludwig Tieck’s Runenberg. Great fears of loss arise from the acquisition of gold so that Christian strives for more and more gold to counter these worries. The fairy tale impressively shows that this does not succeed, but leads the hero and family to ruin. Christian appears as a pathological case who completely perishes from his “greed for life” (Hill, 2011, p. 189)! The author: Prof. Dr. Patrick Peters The function of money is thus that of psychological shock. Tieck makes the newly acquired gold the cause of all evil, which shakes a friendly, petty-bourgeois family to its foundations and, after a brief phase at the top of society, leads it to the abyss. Wealth has no positive role, it does not promise happiness, but is the catalyst of bad, as Christian’s character, which is romantic, becomes a completely broken one, but intoxicated by gold until the end. The romantic world of life is completely unhinged by the acquired fortune. As in the good-for-nothing, material possessions are the contradiction par excellence to the romantic ideal. Richard Wagner’s Ring of the Nibelung tetralogy combines the medieval Saga of the Nibelungs with the Norse collection of myths, the Edda, and has turned the Saga of the Nibelungs into a German national epic. In the first part, Das Rheingold, Wagner opens the

  • Europe in general and Germany, in particular, are not taking the easy way out when it comes to shaping a sustainable future. As generally accepted as the UN’s sustainability goals are, as much as the words Ecological – Social – Governance (ESG for short) are on everyone’s lips, the attitudes and actions on how these are to be achieved diverge. In Germany in particular, there is an immense will to fulfill the goals set in all areas and in the best possible way – technical progress should be egalitarian, democratic, and in line with data protection; the energy turnaround should protect the environment without jeopardizing economic growth. We are trying to solve and overcome the conflicting goals and limits that we inevitably come up against with a great deal of (technical) expertise and even more capital investment. In the area of digitization and its underlying infrastructure, the ambivalence becomes even clearer. On the one hand, this is a key building block for ESG: be it the replacement of the business trip by a virtual meeting, online access for educational purposes in the countryside, or information on the actions of public authorities freely available on the Internet – to name just three examples. On the other hand, digitization consumes large amounts of resources, be it electricity for data centers or rare-earth for batteries and devices. It also sets new hurdles in social and professional participation and is subject to criticism due to data collection and analysis, especially by (American) large corporations. Unfortunately, the “solution” to this tension often amounts to stagnation – regulatory requirements alienate investors, NIMBY (Not in my Backyard) protests prevent or delay critical projects, and processes are not digitized “for data protection reasons. The fact that this ultimately helps neither the climate nor society seems to be of secondary importance. In Frankfurt, a city that has evolved from a banking capital to the data capital of the EU, the challenge is evident in practice: despite the unquestionable availability of capital, expertise, and infrastructure, the city on the Main is neither at the smart city level (Hamburg) nor among the top startups (Berlin/Rhein-Ruhr/Munich) in Germany, let alone in Europe. The city also struggles with its role as the (world’s largest) Internet hub and important data center location – difficult energy supply, unused waste heat, displaced businesses – to name just a few points of criticism. Michael Jakobi, contagi Digital Impact Group The new governing coalition in the city parliament is striving to remedy the situation with a digitization strategy on the one hand and regulatory requirements on the other, and in doing so is taking the operators of the data centers to task, for example on the issue of waste heat. The new Telehouse Datacenter in Kleyerstraße is already a pilot project in which waste heat from the data center is to be used to heat a new development in cooperation with Mainova. However, this – very positive – example is not a one-size-fits-all solution, as the conditions at other locations are far less optimal, not to mention the cost-effectiveness of retrofitting existing infrastructures. Frankfurt will therefore also have to face the challenge of developing holistic concepts in terms of digitization and digital infrastructure – based on sound data and involving not only the data centers but also a large number of other stakeholders from startups to hyperscaler’s (AWS, Google, Microsoft & Co). The fact that these stakeholders are located in Frankfurt and the entire Rhine-Main area in a geographically very confined yet internationally networked space is an important component here that brings both human and technical advantages. So while corporate servers exchange data with low latency and mainframes enable the use of artificial intelligence, human decision-makers and specialists can physically come together to find solutions. No one believes that this topic will lose its complexity and importance in the next few years. On the contrary, against a backdrop of dwindling resources and advancing climate change, social inequality, and political tensions, we need digitization more than ever – for greater efficiency and social participation, learner administration, and faster processes in general. The fiber rollout that is finally in full swing, together with 5G and its possibilities to help existing approaches such as IoT, AI, M2M, etc. make a breakthrough, are important building blocks here, as are clouds and applications. To summarize: Only when data centers and the applications running there are seen as part of a complex ecosystem, as part of social change and the energy transition, and significantly more players are involved, can the promise of “ESG – positive” digitization be realized. Whether in Frankfurt, Germany, or Europe, this creates a historic opportunity to shape the digital transformation in a humane, climate-friendly, free, and democratic way. AUTHOR: Michael Jakobi, LL.M. is a consultant and project manager in the field of digital innovation & infrastructure at contagi Digital Impact Group – Quelle: Linked Digitalization & “Asset Class Data Centers” – Real Estate, REITs and ESG (Michael Jakobi, contagi Digital Impact Group) Photo:

  • “Good relations only hurt those who don’t have any” Luxembourg is known as a hub for business, progress, and innovation. It is characterized not only by its exceptionally strong political, cultural, and business relations with its surrounding countries, but also by a high degree of internationality. Due to its economic stability, Luxembourg was once again awarded this year with a AAA rating by Moody’s. But it is not only due to the excellent economic conditions that makes the only Grand Duchy in the world so attractive as a location for companies that are nationally and internationally active. Above all, it is the easy access to a broad and diverse network that is essential for business success. Those who set up their business there, benefit from short distances and from numerous initiatives and events that are accessible to everyone. To make new contacts and explore business opportunities even during the pandemic, a wide variety of digital event concepts have been launched – in addition to the numerous physical events. A perfect starting base for networkers. But where to start? Which organizations deal with the topics that are relevant for me and where to find fitting events? Hereafter, we give a brief overview – from the financial industry to the startup scene. Financial industry Luxembourg is not only the world’s financial center with the highest degree in internationalization, but also the largest fund center in Europe. Organizations such as the Association of the Luxembourg Fund Industry (ALFI) and the agency for the development of the financial center (Luxembourg for Finance) offer numerous events to promote exchange within the industry and provide a tremendous transfer of knowledge. In addition to that, LuxFLAG, the label association for sustainable financial products, bundles all important information on sustainable finance in the Grand Duchy. Meanwhile, more than 125 banks from over 25 countries are based there, and the number of FinTechs is also rising continuously. They favor the transfer of know-how and contribute with their product ideas to meet the banks’ increasing need for innovation and digitalization. The LHoFT (Luxembourg House of Financial Technology) as a central FinTech Hub promotes the close cooperation of financial, technology institutions and FinTechs to bring together innovative solutions, resources as well as the right contacts. Furthermore, the LHoFT acts an interface for venture capital firms, investors, financial service providers and associations to represent mutual interests and bring together partners with the same ambitions. Click here for the current event overview. Startup Scene The author: Sonja Becker is Sales & Business Development Manager at Zortify, Luxembourg’s startup scene offers much more besides FinTechs. The ecosystem is thriving with over 350 startups in ICT, space, FinTech, HealthTech, CleanTech and Cybersecurity. In total, there are over 15 incubators, accelerators, and innovation hubs. In addition to the LHoFT, the House of Startups (HoST) unites the Luxembourg-City Incubator (LCI) under one roof and is an initiative of the Luxembourg Chamber of Commerce. Funding programs such as Fit4Start annually showcase the most promising startups and their ideas, giving banks, business angels and venture capital investors a good insight into the thriving startup scene. In 2021, the new platform Startup Luxembourg has been launched. It bundles all important news around the dynamic ecosystem. The portal is a public initiative of the Ministry of Economy and Luxinnovation, the national innovation agency. It brings together the most important players, from founders to companies and investors. Internationalization – Luxembourg builds bridges Networking does not only take place locally, but also across national borders. Especially in times of the pandemic, it is even more important to build and maintain business relationships abroad. The extensive program of the Chambre de Commerce (e.g. Go International or GET2Know Your Neighbors) offers an ideal opportunity to open up new markets and establish contacts digitally and remotely. Various business clubs in the surrounding neighboring countries of Germany, Belgium and France provide the opportunity to take a look beyond the national border. They promote the exchange of experiences and interests between companies from different business sectors. If the EU is not yet far enough for you, you can benefit, for example, from the excellent and long-standing relationship between Luxembourg and China. In addition to the organizations mentioned above, CHINALUX promotes bilateral trade relations between the two countries. This initiative brings together people with different linguistic and cultural backgrounds and creates a common understanding – the basis for successful cooperation. Click here for an event overview. „No man is an island…”  (John Donne) … and this is true not only in private life, but also in business. No one can be successful alone. It is the people who accompany, shape, inspire, encourage and/or motivate us on our way there. Exchanging experiences with different people from different fields not only brings a welcome change to the daily work routine, but also offers fresh ideas and helps to look at topics from a different perspective. Authenticity is the key to success. And do not forget, networking is not a one-way street and always works in two directions. Let’s make it happen. Sonja Becker is Sales & Business Development Manager at Zortify, a Luxembourg-based tech company developing innovative AI-based product solutions for better decision making in HR and Investment. Previously, she worked in business development at Hauck & Aufhäuser and has 15 years of experience in sales support, client acquisition, corporate communication, and project & event coordination. Zortify: Source: LinkedIn Photo:

  • The single family office investment committee Unlike institutional players, not all family offices do have an investment committee. However, the investment strategy is at the core of every single family office to ensure its alignment with the family’s purpose of wealth. Ultimately, the financial objectives need to coherently complement the family’s values and purpose of wealth in the family office governance framework. Since a strategy is only as good as its execution in this article, we will guide you through the process of building a family office investment committee. As with investment strategies, we don’t believe in standard approaches. We recommend a tailored system that caters to your family office’s individual needs. The investment committee’s essential foundation and roadmap is the investment strategy. One that defines the purpose and objectives, standards, processes, review and reporting procedures, and practices to remediate performance mismatches. What is a family office investment committee? We keep the answer short since, for some, this may be basics: The family office investment committee is the guardian of the family’s wealth and executes and implements the investment strategy in the family’s best interest, avoiding and managing conflicts of interest. It monitors investment options to diversify and manage risks in a prudent and disciplined investment process. Do you need an investment committee? This is the most critical question to ask. With a solid and precise investment strategy, you may want to fully outsource execution, monitoring, and control to external professionals since in-house structures require a dedicated framework that comes at a cost. Independent service providers with no affiliation to wealth and investment managers offer cost-efficient solutions replicating the family office investment committee’s functions and avoiding conflicts of interest. Next to their independence, you should focus on their investment manager selection process and their reporting quality. Regular reports will provide you and your family office with the required objective operational and financial information to evaluate the results in light of the investment strategy’s objectives. Such data should lead to clear findings on cost, performance, and strategy alignment across asset classes and managers. Depending on the strategy’s complexity level, the outsourcing model can deliver control and the basis for informed decision-making at attractive costs.  The author: Markus Schwingshackl, law firm Centro LAW Suppose your single family office has specific asset class expertise, e.g., alternative investments, and the investment strategy is rather complex due to the particular asset class exposure. In that case, complete outsourcing may not be the ideal solution to tackle such niche requirements. Instead, you can consider a governance model embedded in the single family office but with a mix of in-house and external committee members. Finally, the investment committee can comprise only internal members, with the most sophisticated option being a fund model where your own legal entity manages assets in an institutional governance framework. This first part of the process requires a detailed analysis of the gaps to fill with the investment committee and evaluating the feasible solutions’ costs and benefits. The analysis outcome may reveal shortfalls in investment selection and monitoring, continuity of capabilities, or risk management. The suitable investment committee model can then be defined to implement the investment strategy’s objectives based on those findings. The role of the family office investment committee You should follow one main principle for all potential models: The investment committee is not an investment manager but interprets, directs, and consistently oversees the investment strategy’s execution. With that, it ensures the diversification of the entire portfolio within the set risk and return parameters. Its core duty is the investment manager and advisor selection and conducting all necessary controls and reviews of strategy alignment, performance, and costs. Only a strict separation of investment management and oversight will enable disciplined long-term strategy execution. If investment management is performed in-house to a certain extent, you should treat that part like all other external investment-related services to assess the overall investment options’ congruity. Since a family office strategy should reflect the family’s values, vision, and purpose, the investment committee in its investment-related decision-making and evaluation needs to align goals, objectives, and the strategy’s vision with consistent risk parameters in a diversified portfolio. The underlying investment process management includes a regular assessment of the investment strategy and eventual recommendations to adjust risk and opportunity specifications. Governance framework The investment committee governance framework is tailored to the family office’s needs and the complexity and size of assets under management. While there’s no standard number for committee members, an odd number is helpful for decision-making. There can be voting and non-voting as well as permanent and non-permanent members. Next to roles, behavior, and expectations, committee members should have clear guidance on the decision-making process and documentation requirements. For investment manager selection and monitoring, the performance parameters and objectives should already be defined in the investment strategy. The governance framework has a focus on the duties and processes of the investment committee. It’s comparable to a code of conduct to ensure loyalty, objectivity, and acting in the family’s best interest, reasonable costs, monitoring and control, avoidance and management of conflicts of interest, and the prevention of unlawful or prohibited transactions. Policies then govern the process and procedures, including formal requirements for investment manager selection, monitoring, and controlling. Typical pitfalls In our experience, we see two typical pitfalls here: family dominance and technical overload. An investment committee requires the delegated authority to execute the investment strategy. While the family should have an active interest in the committee’s activities, it can be tricky with family members taking formal roles. It may impair the other members’ objectivity and even dilute potential liabilities if things go wrong. Family office CEOs are often a sound alternative with investment skills to perform such a mandate and ensure family representation. If you deem a family member’s participation essential, a non-voting membership could solve the issue. The governance framework should be concise and clear with policies and processes enabling the investment committee’s compliance with its objectives and duties rather than over-complicate execution and causing formality

  • Financial Center Liechtenstein – Asset Management, Fund Launch, and the Liechtenstein Way. Markus Hill spoke for FUNDBOUTIQUES.COM with David Gamper, LAFV Liechtenstein Investment Fund Association, topics on diversification, digitalization, ESG, family offices, crypto assets, CAT bonds, real estate, and mezzanine financing. Additionally, the information on innovation and rating of the location and the conversation rounded off by an interesting note on Liechtenstein, nutrition, and hiking. Hill: In which asset classes are a particularly large number of funds currently being launched in Liechtenstein? Gamper: In contrast to the domiciles of Luxembourg and Ireland, where the large asset managers dominate, the Liechtenstein fund center specializes in private label funds. The entire ecosystem is geared towards this and it is also the main topic at the association. It is quite typical that there are no particular focal points, but that the asset classes are very broadly diversified. It’s just a site for boutique funds. One thing is very noticeable, however, and that is that many sustainable funds are being launched. More and more fund initiators are making a point of classifying their products as so-called light green (Art. 8 Disclosure Regulation) or dark green products (Art. 9 Disclosure Regulation). It is becoming increasingly apparent that sustainability is no longer a niche, but mainstream. This is good for the domestic fund industry because in my view Liechtenstein is already relatively advanced in terms of sustainability. I am thinking, for example, of the asset manager test conducted by the FUCHS | RICHTER testing body last year, or the country’s leading position in solar energy and organic farming, as well as the many sustainable projects. David Gamper, LAFV Liechtenstein Investment Fund Association Hill: How do you explain this broad diversification of asset classes? Gamper: The starting point for the broad diversification in asset classes is the wide-ranging expertise. There are many family offices and foundations in Liechtenstein that have been involved in the management and structuring of various asset classes on all continents for decades. Of course, this knowledge is also available in the other financial sectors and at the Financial Market Authority (FMA). In addition, one also deals with new asset classes if this is requested by the customer. This applies to both market participants and the regulator. Individual solutions in particular are a strength of the financial center. Cryptoassets are just one example. After all, the first fund of this type was founded in Liechtenstein over three years ago and there is already a well-developed ecosystem for this fund category. There are also token-based fund units.Even with other asset classes, which tend to be peripheral topics but often have a low correlation to traditional investment products, many fund initiators are amazed at the expertise with which certain topics are approached because the experience is already there.A striking feature of Liechtenstein, in general, is its liberal basic attitude. In contrast to the restrictive attitude of other countries, the FMA is also open to new ideas but combined with the necessary diligence. A fund initiator once put it this way: “From our point of view, Liechtenstein as a fund location is very open to innovation, but at the same time very solidly positioned. This is the combination we were looking for.”The combination of innovation, experience and a liberal attitude means that fund projects that are not prevalent are also implemented. These include crypto assets and trend-following strategies on crypto assets, CAT bonds, physical precious metals, and mezzanine financing. The latter represents a hybrid form between equity and debt and serves as an equity substitute for real estate developers. If the developer uses mezzanine capital in addition to his equity, he can reduce his equity investment and use the funds released to finance further projects. Hill: What other issues are currently occupying the association? Gamper: The shortest possible time to market is an increasing requirement of fund initiators and at the same time one of the greatest strengths of Liechtenstein as a fund domicile. Recently, a fund initiator told me that the entire process from the initial contact with the fund company to the approved fund took one month. That is extremely fast, the fund company worked at top speed, which is certainly not always possible. Nevertheless, the time to market in Liechtenstein for a regulated fund is even shorter than for unregulated funds in other jurisdictions. However, we are also constantly working on optimizing the processes.As an association, we provide information about the Liechtenstein financial and fund center. For the fall, we are planning talks in Düsseldorf and Munich with the Bankers Association and the Association of Independent Asset Managers Roundtable. In addition to the opportunities in the financial center, we always inform about the fact that Liechtenstein adopts European law and thus also fund law, which has the same classification as Germany concerning tax conformity and transparency since 2015 and the FMA Liechtenstein is a full member of the European supervisory authorities. Facts that are often not yet known. Next year, if the situation allows, a larger event is then planned in Frankfurt.The subject of taxes is always the topic. For example, we recently had a tax information sheet prepared for German, Austrian and Swiss investors in Liechtenstein funds.We also invest in continuing education in the fund sector. The current focus is on sustainability and compliance. In addition to combating money laundering and terrorist financing, compliance with international sanctions was the topic of the last workshops. The last point, in particular, is much more profound in the fund sector than it seems at first glance.We are currently in the start-up phase of a digitization project to optimize data delivery and data preparation for our funds. One of the reasons is the increasing demand from data providers, as interest in Liechtenstein funds is growing. In Liechtenstein, we have the unique situation that the interest association is by legal mandate, the official publication organ. Thus, all relevant information about the funds domiciled here can be found on the LAFV website. Hill: Beyond the fund industry –

  • “Las Vegas is busy every day, so we know that not everyone is rational.” -Charles Ellis One question that has haunted us since stock exchanges have existed is how decisions are made in the capital market. Rationalism gave rise to some of our central variables and represented the central current of philosophy. In simplified terms, human beings are supposed to use their minds to make decisions and thus make only rational decisions. The aspect of “perfect rationality” as well as the doctrine of homo oeconomicus was already taken up by Adam Smith in 1776 and is still widely recognized in the literature today (Standard Finance), even if the practitioner’s hair may stand on end at the thought of a person thinking explicitly rationally.Where the doctrine of homo oeconomicus and the “fairy tale” of perfect rationality is exhausted, behavioral finance and neuronal finance come into play. Behavioral finance traces decision-making back to psychological, cognitive, cultural, and social factors (see Figure 1) and thus proves to be much more practical. These influences on our decision-making are evolutionary, have stood the test of time over millennia, and have contributed to human survival, among other things. Figure 1Quelle: Victor Ricciardi, Helen K. Simon (2000). „What is Behavioral Finance“ Business, Education and Technology Journal Fall Although these influences on the financial market player cannot be eliminated, nonetheless proves advantageous to be familiar with the influences on decision-making. It is because our decision-making is quite fundamentally influenced by the perception and evaluation of opportunities & risks as well as by the handling of losses, but also gains. People tend to assess themselves and their abilities along with their prospects for gains higher than they are. It leads to a distorted and partly wrong perception of risks. Men in particular are subject to the phenomenon of “overconfidence.” Numerous studies show that men are more willing to take risks and, statistically speaking, trade significantly more often. “Overconfidence is a very serious problem. If you don’t think it affects you, that’s probably because you’re overconfident.” – Carl Richards Hand in hand with overconfidence goes the phenomenon of confirmation bias. Confirmation bias is the tendency to ignore or give less weight to information that does not fit the trader’s opinion or decision. For example: If we buy a stock, we look for and select mainly such information that supports the decision to buy the stock. This is because people always look for consistency in their behavior – if inconsistency or dissonance appears, we try to reduce it. The solution when dissonance arises is therefore a selective and distorted perception and weighting of information (“subtraction”).This can even go so far as to abandon entire trading and investment strategies to which the investor had originally subscribed to justify the investment decision made in retrospect (financial cognitive dissonance). Losses outweigh profits “Trade out of a fucking position” is one of the basic rules of thumb that every trader knows. And yet, with poorly performing positions, the question regularly arises again: sell or hold? But why do we find this decision so incredibly difficult every time? More than 35 years ago, Kahnemann (Nobel Prize winner 2002) and Tsversky found out in the context of their Prospect Theory that the evaluation of losses and gains under uncertainty is not rational or linear and thus deviates significantly from mathematical models. This is because: losses weigh more heavily than gains and have diminishing marginal returns to a valuation with increasing magnitude (see Figure 2). Figure 2Source: Wikimedia Commons One would think that the valuation of the “win 50€” scenarios should be the same as the valuation of the “win 100€, lose 50€” scenario, since the result, i.e. a profit of 50€, has the same value. However, losses weigh two to three times as heavily as gains, which is why scenario 2 feels statistically worse. So we tend to measure our losses not rationally in monetary units, but in regret (“Regret)”. The larger the (book) loss the larger the Regret. The larger the Regret, the more difficult the decision to sell will be. The conflict between selling or holding creates an inner conflict that we as individuals would like to avoid if possible. The solution: holding very bad positions to avoid regret, so that the result in the portfolio is to hold particularly poorly performing positions.In addition, selling a poorly performing position means realizing losses and, at the same time, admitting to a poor investment decision combined with a possible loss of reputation within the social environment (herding). These high emotional thresholds when selling bad positions lead to an asymmetry within portfolios (disposition effect). Contrary to theory, winners are sold too early while losers are held too long. What does this mean for the financial world? After this excursion into psychology and sociology, we, therefore, conclude that human decisions are highly dependent on many uncontrollable parameters and are certainly not rational – decision-making is consequently prone to error, regardless of whether fund manager or private investor. The current state of knowledge shows that the error devils of behavioral finance can be reduced or avoided if fixed trading processes are established or algorithms, AI or other technical tools accompany the decision-making process. “The investor’s chief problem – and even his worst enemy – is likely to be himself.” – Benjamin Graham There are already some fund boutiques that have discovered novel approaches for themselves. Especially fund boutiques with their comparatively high agility and affinity for future trends give institutional as well as private investors access to financial products that are suitable to minimize the influences of behavioral finance. Especially in terms of private investors, various studies show that this group is particularly subject to the influences of behavioral finance and other heuristics – especially problematic in an increasingly democratized financial world, which more and more private investors are discovering for themselves in the wake of the Corona crisis. The solution there is only one: Financial education, starting in early adolescence. That’s why financial education is also close to

  • Switzerland is often considered the center of competence in the CAT bond segment. “Big is ugly” – Markus Hill spoke for FUNDBOUTIQUES.COM with Dirk Schmelzer, Plenum Investments AG, about strategic success factors for asset managers in this “niche market”. The market share of natural catastrophe risks in the CAT bond market is approximately USD 33 billion or 68% measured against the total market (USD 48 billion). The CAT bond fund market (UCITS) holds USD 8 billion worth of CAT bonds, with the three largest funds accounting for USD 6 billion. The question arises as to the optimal or maximum fund size. Hill: In your opinion, is the CAT bond fund market optimally diversified? Schmelzer: Although the CAT bond market offers a high degree of diversification due to a large number of independent risks available, the strong focus on U.S. risks, which in turn are characterized by concentration in a few regions, creates a highly lopsided risk profile that exposes investors to U.S. hurricane risks in particular. While diversification away from hurricane risks has limited feasibility due to the scarcity of diversifying risks in this market, risk diversification within the U.S. hurricane segment is very much possible and indeed warranted. Hill: To what extent does a fund’s risk-return positioning drive its maximum investment capacity? Schmelzer: Basically, CAT bond investments can be used to implement a very wide range of different risk/return profiles. However, very conservative but also very dynamically oriented risk/return targets inevitably lead to a limitation of the investable universe. If the focus is also on avoiding risk concentrations and the associated reduction of potential losses in the event of extreme events (tail risk reduction), the investment universe is further reduced, as CAT bonds with a high degree of overlapping risks must be excluded or at least allocated at a greatly reduced level. Such selective investing CAT bond strategies can only be implemented with a limitation of the investment volume. Dirk Schmelzer, Plenum Investments AG Hill: How big is the risk of dilution if you exceed the optimal fund size? Schmelzer: On the performance side, the risk of dilution is relatively small; we consider the implications on risk management to be more serious. There is a risk that CAT bonds with a high correlation to existing positions have to be bought to be fully invested. This leads to undesirable concentrations of risk in the portfolio. Hill: What investment capacity do you see in mutual funds that replicate the market? Schmelzer: Here, the question arises primarily in terms of the liquidity offered to investors in such vehicles. Ultimately, the composition of the fund’s investor base is also an important factor. Hence the question cannot be answered in general terms, but in our view, such funds should not exceed an investment volume of around 5% of the outstanding CAT bond market. In other words, the current critical fund size is about $1.5 billion. Hill: How does fund size affect diversification behavior? Schmelzer: The larger a fund, the greater the pressure to invest in all outstanding CAT Bonds to maintain a high investment ratio. This makes it hard to avoid high-risk correlations in this market that is heavily focused on U.S. risks, which increases the risk of significant losses, should a natural catastrophe occur in the U.S. Hill: Isn’t the broker in a better position knowing that huge funds are forced to invest into the new issuances because they have to redeploy about a third of their assets under management during renewals? Schmelzer: I think we are talking about mutual dependencies here. The fund manager is indeed dependent on receiving corresponding allocations to cover his investment needs. But the broker is also dependent on being able to place his new issues, and large investors play a vital role in this. The placement pressure for huge funds is, therefore, more pronounced than for smaller funds. Hill: What optimizations are in the offing if you are targeting market-like returns? Schmelzer: Since the natural catastrophe market is not efficiently diversified per se, the question is how to realize efficiency gains. This question is reflected in our “quality concept”, in which we focus on per-event covers (per occurrence), i.e. avoiding so-called “all-natural perils” covers on a loss-aggregating basis and where we aim for high regional and global diversification with little overlap of peril region exposures across the holdings in the fund. We thereby underweight low-return bonds with low diversification benefits that, should a very large catastrophe occur, will be triggered as well as higher-return investment alternatives. This allows us to raise the average expected loss and thus the absolute risk compensation without increasing the risk of large losses in the fund (tail risk). To achieve this goal, we rely on strict selection and a restriction to a small number of individual positions that are less correlated with each other. As these individual positions are closer to the risk, their sensitivity to smaller insurance losses increases. This applies in particular to transactions that aggregate losses and are exposed to so-called secondary risks. We, therefore, place a strong focus on per-event covers in the selection process and substantially reduce loss-aggregating structures for secondary perils. In short, we should get a similar tail risk behavior as the index with increased returns. Hill: What impact does the “quality concept” have on optimal fund size? Schmelzer: Maintaining the quality of funds targeting market-like returns imposes a significant constraint on investment capacity to take advantage of the limited supply of suitable positions in the CAT bond market. A constrained capacity is thus not a means to reach this goal, but merely the logical consequence. After all, if you invest in a niche asset – to which CAT bonds belong – you should be limiting the “capacity” of a CAT bond fund, unless you want to build a market portfolio, which in our view is not efficient. The capacity issue is further exacerbated if one does not have the entire investment universe at one’s disposal due to the investment objectives. To cut a

  • “In a city like Frankfurt, one finds oneself in a peculiar situation; ever-crossing strangers point to all corners of the world and awaken a desire to travel” (Johann Wolfgang von Goethe). Vienna – Frankfurt – Vienna: Markus Hill spoke for FINANZPLATZ-FRANKFURT-MAIN.DE with Martin Friedrich, Lansdowne Partners Austria GmbH, about his private and professional impressions from 16 years in Frankfurt. Cosmopolitanism, investment banking, family office, fund management and schnitzel are some keywords of the exchange of ideas. (Event announcement SCOPE & FUND FORUM INTERNATIONAL – 8.6. & 16.6.2021). Hill: Mr. Friedrich, you are Austrian and live in Vienna, but you also know Frankfurt very well. Where does that come from? Friedrich: Well, I have spent most of my professional life in Frankfurt. I came to Germany in 2002 and worked in the Rhine/Main financial center for almost 16 years. During that time, the city has developed a lot. When my wife and I moved in in 2002, Germany was so badly affected by the international economic slump that it was considered the “sick man of Europe.” I also remember that it was practically impossible to buy anything on the weekend, as most shops closed Saturday around noon. Even many restaurants often were closed on Sundays.Today, Frankfurt is a completely different city. It has become much more open to the world, we have made friends who really come from all over the world. Unfortunately, everything is closed at the moment, but before the lock-down I enjoyed taking part in life in Frankfurt and appreciated not only the opportunities for professional development, but also the sports and leisure activities on offer. Hill: Why did you originally come to Frankfurt? What later drew you back home? Friedrich: Before I came to Frankfurt, I had worked in London, for the U.S. investment bank Morgan Stanley. The immediate reason for my move was purely professional: at the time, it was decided that my occupation, looking after fund managers in Germany, could be better handled from Frankfurt. So I followed my job, literally. The situation was not unlike was is happening today due to Brexit, it just took place 20 years earlier.Years later, upon leaving Morgan Stanley, I worked for a multi-family office in Bad Homburg, HQ Trust. Of course, I count the pleasant time I spent there as one of my Frankfurt years, especially since it was also, from a professional point of view, an excellent preparation for the move to Vienna. The primary motivation was, once again, professional: Lansdowne Partners Austria offered me the opportunity to launch my own fund based on the investment strategy I developed. Martin Friedrich, Lansdowne Partners Austria GmbH Hill: Where did you like to spend your time in Frankfurt the most? What are your fondest memories? Friedrich: Three places come to mind: first, of course, we really enjoyed the range of good restaurants; sitting on the terrace of the old opera house on a beautiful summer evening, for example. We also often went to the Austrian restaurant on Weißadlergasse, Salzkammer – it’s just a stone’s throw from Goethe-Haus and serves excellent Austrian cuisine!On weekends, we often hiked the Feldberg; as Austrians, we are automatically drawn to the mountains, it seems. I remember that once every winter, there was always a dog sled race around the Feldberg. I thought that was very nice.Finally, I don’t want to hide the fact that I am a passionate golfer. And the Frankfurt Golf Club – which turned 100 years old in 2013 – is truly a jewel. Standing there on the 18th tee and enjoying the view of the skyline has always been something special for me. Hill: Thank you very much for the interview. ScopeExplorer Manager Conferences”After the rally of the past 12 months, the focus of many investors is on equities. No doubt about it: equities belong in every multi-asset portfolio. But which asset classes still belong in it? And most importantly, how much of them? In an interview with André Haertel, multi-asset strategist and portfolio manager Martin Friedrich explains why the Lansdowne Endowment Fund invests in more than 15 other asset classes in addition to equities, and how return and risk aspects are balanced in the best possible way.” (QUOTE: Scope Group, Lansdowne Partners – ADDITIONAL INFORMATION: LINK)Fund Forum International VirtualAlternative markets outlook in choppy waters – Macro updates, demands and megatrends: what can we expect from global and Europe’s alternative markets ahead of 2021? Economic shifts and key trends that could impact the industry and asset allocations. Moderator: Martin Friedrich, Head of Economic and Market Research and Portfolio Manager, Lansdowne Partners, Austria  Randall Kroszner, Deputy Dean for Executive Programs and Norman R. Bobins Professor of Economics, The University of Chicago Booth School of Business LINK: Fund Forum International Virtual – 16th June, CET 14:00 – 14:30) Source: LinkedIn Related posts: Financial Markets, Volatility & Speculation – Emerging Markets ante portas! (Martin Friedrich, Lansdowne Partners Austria GmbH)Inflation & Fiscal Policy– Simbabwe ante portas? (Martin Friedrich, Lansdowne Partners Austria GmbH)Behavioural Finance & Cat Bonds (Martin Friedrich, Lansdowne Partners Austria GmbH)Inflation, Asset Allocation, “SPACs & New Market” Zimbabwe (Interview – Martin Friedrich, Lansdowne Partners Austria GmbH)Family Offices, Cat Bonds, Fund Selection & “In Nature’s Casino” (Interview – Martin Friedrich, Lansdowne Partners Austria GmbH)

  • Venture capital (VC) as an asset class has increasingly become the focus of interest for a wide range of investors in recent years. In 2018, more than CHF 1 billion was invested in VC for the first time in Switzerland alone, and as much as CHF 2.3 billion in 2019. VC has become attractive for investors, as such investments can be used to diversify portfolios, improve the risk/return profile and invest directly in innovations. However, to successfully implement VC investments, it is important to consider and understand some key points. Innovation theory According to Schumpeter’s theory of innovation, a distinction must be made between invention (generation of ideas, products, or processes), innovation (translation of these new ideas into marketable products or processes), diffusion (widespread adoption of the products and processes in the market) and creative destruction (industrial transformation through radical innovation). The particular attraction of investing in VC is that the introduction of revolutionary products and services is arguably the fundamental driver of sustainable and long-term economic growth, but at the same time can destroy the relevance and power of firmly established institutions and organizations in the short term. Mastering the dynamics of innovation This has been pointed out by James M. Utterback, professor of technological innovation and innovation at MIT, among others. He noted that existing organizations must consistently move away from past successes and embrace innovation – even if it undermines even their traditional strengths. In this regard, Utterback distinguished three phases of innovation – emergence, transition, and maturity. The degree of innovation falls continuously over the time axis concerning the product, while process innovation behaves inversely to this. The intersection usually represents the “dominant design”. An example of this would be Ford’s Model T at the beginning of the last century about automobiles. In the later maturity phase, on the other hand, standardization, integration, and, in particular, process optimization represent the central elements. S-curves vs. Gauss Accordingly, VC investors do not think in terms of the Gaussian bell distribution, but rather in terms of S-curves, which were coined by Everett M. Rogers, the father of diffusion theory. Using an S-curve, progressive innovations are depicted that are required to maintain the achieved market share in the face of newly burgeoning competition once the bell curve peaks and begins to fall again. Ralf Konrad, LAFV Liechtenstein Investment Fund Association & VP Fund Solutions Ubiquitous disruption Many researchers, authors, and consultants use the term disruption to describe any situation in which an industry is shaken and previously successful market players begin to stumble. Disruption does not explain innovation or success in the business sector, nor will it ever do so on its own. Accordingly, new products do not necessarily have to be disruptive to enable corresponding commercial success. In successful investments, many different forces are at play, each of which is decisive – often even those that may not appear decisive at first glance. Attractive returns can be achieved with venture investments Over the past 15 years, measured by the CA Global Venture Capital Index, VC investments have generated returns of 11.8% per annum. With investments in the two upper quartiles of the comparison group even 18% p.a. could be generated. In the same period, the S&P 500 Index could “only” gain 8.8% p.a… Furthermore, investment opportunities in the VC segment have improved significantly in recent years. New investment managers increasingly succeed in achieving top performance with remarkable consistency. The performance dispersion is still relatively high, but overall it has dropped significantly compared to the past. While venture investments in the period 1991-2001 during the tech bubble were characterized by a high loss ratio of 51.5% and an impairment ratio of 65.6%, these values have decreased to 20% and 40.9% respectively in the period 2002-2015. (Source: Cambridge Associates LLC) Although, as described, important ratios have improved significantly, VC investors need patience and staying power due to the illiquidity of the underlying investments. Although a loss ratio of 20% is a significant improvement over earlier times, it is still a relatively high figure. In the global private equity sector, for example, the loss ratio is only 8.6%. Exciting returns are therefore also accompanied by higher risk in this case.   Overall, the risk/reward ratio for VC investments has improved considerably in recent years. As a result, such investments are also becoming interesting for new groups of investors who previously did not consider VC due to the risks involved. Since digitization has only just begun in many business areas and at the same time the venture sector, measured at around USD 340 billion, accounts for less than 0.5% of global equity market capitalization, there should continue to be plenty of interesting investment opportunities for talented investment managers despite larger inflows in this segment. Structuring and settlement through funds Due to the improved risk/return profile of VC investments, diversified products that invest in this asset class – namely Private Label Funds (PLFs) – are becoming increasingly popular among investors. In addition to diversifying and spreading risk across multiple investments and investors, PLFs have other key advantages for the parties involved in fund construction. These include the professional provision of services ranging from advice on structures to support in day-to-day operations by the AIFM. After the selection of investments by the fund manager, these services are elementary for the success of the investment in VC. Apart from that, PLFs in cooperation with an experienced AIFM enable a cost-efficient fulfillment of regulatory requirements to make these investments accessible to investors. In addition, PLFs enable basic investor needs such as reporting, liability risks, efficient tax administration, and participation in existing knowledge, processes, and systems. The services and expertise made available to VC investors through PLFs can thus represent significant added value. However, the inclusion and full consideration of the specific needs of this particular asset class is crucial for success. Among other things, independent business processes, good governance as well as a reliable, flexible, and expandable infrastructure that takes full account of the latest developments are

  • Switzerland, asset management and commodities – the financial center offers a diverse range of “Center of Competence & Networking”. Markus Hill spoke for FONDSBOUTIQUEN.DE with Alex Rauchenstein, SIA Funds AG, about trends in value investing and commodities. Background of the remarks was the own event series on this topic in May this year (Last date: 27.5.2021, 11.00 am), where among other things points such as inflation, “5-Sigma-Event”, ESG, oil, and uranium were addressed. Together with his colleagues Prof. Dr. Carlos Jarillo, Urs Marti, and Marcos Hernandez, his team will again hold a commodity day in Switzerland (10.9.2021) and discuss this topic with institutional investors on-site in Frankfurt am Main (14.9.2021). (A recent reading reference on the topic area by Urs Marti: “The World for Sale” – Authors: Bloomberg journalists, Javier Blas & Jack Farchy). Hill: You had a webinar last week with your colleague on Value Investing & Commodity Stocks. What was the feedback on your event, what topics attracted particular interest? Rauchenstein: We see that investors are interested in the commodity theme and that they want to protect their portfolios against potential inflation risks. In our eyes, a well-diversified portfolio should also include some commodity stocks, because this allows purchasing power to be maintained even if prices rise. The valuations of many of these companies are so attractive that not even a rise in commodity prices is necessary. But since we expect this increase due to tight supply for many commodities, we consider commodity stocks to be very attractive. Put another way: Investing in commodity stocks gives you a good hedge against possible inflation, but this hedge can also be very profitable. Alex Rauchenstein, SIA Funds AG Hill: During your presentation, you presented an interesting thought on value investing and the “5-sigma event.” What exactly is behind this term? Rauchenstein: If you compare the Value / Growth ratio since the launch of these indices in 1975 and evaluate them quite simply statistically with the mean and + / – 2 STD (standard deviations, or sigma), you find that before the TMT bubble burst, this ratio stood at + 2 STD before a renaissance for value stocks began. Last fall, this ratio stood at + 5 STD, an absolute extreme event (see chart below). In our eyes, this speaks for a renaissance of value stocks. Hill: This week, you and your team will be hosting another webinar on 5/27. Who will be there this time and what additional topics will be discussed on this date? Rauchenstein: Yes, on Thursday, 5/27, we will still be holding our customer webinar in English, which will be attended by all of our SIA Funds AG partners – that is, Prof. J. Carlos Jarillo, CIO Marcos Hernandez, Urs Marti, and myself. At this event, we will additionally discuss in detail the development of our funds, the Long Term Investment Funds Classic (Global Value), and the Long Term Investment Fund Natural Ressource. Hill: Looking beyond the webinar dates, are you currently already planning “live events” with your investors again? Rauchenstein: Yes, like last year, we assume that “live events” should be possible again in the fall. Accordingly, we have planned this year’s Commodity Day on Friday, September 10, in Zurich. This is the fourth time we have held this event, also with external specialists from individual companies in this field. Likewise, on Tuesday, September 14, our lunch presentation will take place for the ninth time at the MainNizza in Frankfurt. Our whole team is already very much looking forward to holding face-to-face events again. We would be delighted to welcome you back again. Hill: Thank you very much for the interview and your invitation. There will certainly be another opportunity for interesting discussions in Frankfurt in September. Additional information “Commodities 2021 Event Series”: Value Investing & Commodity Stocks (videorecording) SIA Funds AG: Related articles: Value Investing, Commodities, ESG – China, Oil, Nuclear Energy & General Patton (Interview – Urs Marti, SIA Funds AG)China, Geopolitics, Commodities, Value Investing and South Tyrol (Interview – Urs Marti, SIA Funds AG)Value versus Growth, Commodities, India, Youth and Inner Peace (Interview – Alex Rauchenstein, SIA Funds AG)„Our most loyal clients are often family offices, we have noticed this more and moreover the years“ (Interview – Prof. Dr. J. Carlos Jarillo)“Long-term corporate profitability is the primary consideration for investment decisions, not the daily published share price” (Interview – Prof. Dr. J. Carlos Jarillo) Photo:

  • Deutscher Stiftungstag, MünchnerStiftungsTag, Virtueller Tag für das Stiftungsvermögen: Three events where the financial center Frankfurt is again represented with professional expertise (examples: DEKA, HELABA, KfW, Stiftung Polytechnische Gesellschaft, DIE STIFTUNG, etc.). Markus Hill spoke for FINANZPLATZ-FRANKFURT-MAIN.DE with Tobias Karow, STIFTUNGSMARKTPLATZ.EU, about topics such as diversification, family office, ESG, digitalization, and reputation management. The topic of insight knowledge management, the alignment of event formats, and the special importance of the Association of German Foundations as a Center of Knowhow were also topics of the conversation. (Additional info / event notes: MünchnerStiftungsTag & Digital – 7/1, 6/7 – 6/11 & 5/12/2021). Hill: What topics will you be covering at your event? Karow: We’re looking at the topic of foundation assets 2030, so how foundations are investing their assets today for tomorrow. It sounds trivial at first glance, but many foundations honestly have to set the course, so that they don’t find themselves without decent returns tomorrow. Therefore, we offer suggestions on what should include in the investment guidelines, what the diversification requirement is all about, and what role the business judgment rule could play. Hill: In your opinion, what should and should not be included in the foundation’s assets? Karow: It’s impossible to make a general statement like that, but one thing, in particular, pays off from an endowment perspective. Investments that don’t deliver an ordinary return must have a hard time with foundations. After all, it is the ordinary returns that allow foundations to realize their purposes; capital preservation is simply secondary to that. However, many foundations look first at precisely this, which is why many foundation assets are misallocated, with too many low-interest bonds, too few equities, and too few alternatives. What foundations also need to sort out for themselves is the topic of sustainability or ESG. ESG is risk management from a foundation perspective, and it is reputation management. Or would you still donate money to a foundation in the future that cannot tell you that it handles its assets professionally? Tobias Karow, STIFTUNGSMARKTPLATZ.EU Hill: Is there also a link to family offices in your activities in the foundation segment? Karow: I see the bridge to family offices in the role that family offices take on, which would also be a suitable one for foundations and their managers: that of portfolio controller. Many foundations will hardly be able to actively manage money themselves due to a lack of time and professional resources, but it is possible to keep an eye on asset managers and then change the manager if necessary. Hill: The German Foundation Day will take place from June 7 to 11, 2021. This year it again offers a very interesting program, and the financial center Frankfurt is also represented with economic expertise (DEKA, HELABA, KfW, etc.). Where do your topics overlap, where do you complement each other’s expertise? Karow: Indeed, the German Foundation Day (Federal Association of German Foundations) is the largest industry gathering in Europe, and it is rightly the case that foundations and foundation experts head for it first. There are certainly overlaps with our Virtual Day for Foundation Assets, because Stiftungstag naturally also addresses the topic of foundation assets, with prominent figures. Our #vtfds2021 is certainly the less prestigious format, we set the accents on the topic of foundation assets perhaps a bit more on the micro-level. And of course, our format is a free live stream. Hill: What other interesting formats in terms of knowledge management are there in the foundation sector? Karow: In terms of pure foundation events, it’s the MünchnerStiftungsTag, which takes place on July 1 and this time is a digital event. The topic here is digitalization and where foundations currently stand post-Corona. In March, we also held the Digital Social Summit, a great event with an excellent program that attracted around 1,000 spectators. The webinars of our event partner at #vtfds2021, RenditeWerk, are also still well attended, which may have something to do with the fact that the format existed before the pandemic and is now enjoying a high level of acceptance. Hill: Thank you for the interview. MünchnerStiftungsTag (July 1, 2021): TOBIAS KAROW: “The MünchnerStiftungsTag, it’s good to have it again. It was the last foundation event we had the pleasure of being a guest at in 2020. This year, on July 1, 2021, the MünchnerStiftungsTag will be held digitally, and the program also has the digital world as a theme. The aim is to discuss how digital day-to-day foundation practice already is and what we remain. We have already found three Digissentials in advance.” Deutscher Stiftungstag (7.6. – 11.6.2021): Virtueller Tag für das Stiftungsvermögen (12.5.2021): Source: LinkedIn Quelle: Related articles:  Paulskirche, Resilience, Silicon Valley & Slowness (Interview – Ortrud Toker, Author)dazzling economy, real estate, startups, sustainability & networking (Interview – Ulrich Siebert, author, restaurateur, Frankfurt)Digitalization & “Asset Class Data Centers” – Real Estate, REITs and ESG (Michael Jakobi, contagi Digital Impact Group) Photo:

  • “Ability of calm consideration – beginning of all wisdom, source of all goodness!” (Marie von Ebner-Eschenbach). Due to the low-interest rate phase, many investors are looking for investment alternatives, in a wide variety of “niches”, keywords: Insurance-Linked Securities, CAT Bonds, Subordinated Bonds. Markus Hill spoke for FUNDBOUTIQUES.COM with Rötger Franz, Plenum Investments AG, about the special challenges and opportunities that currently arise for portfolio managers in the segment of subordinated bonds of insurance companies. Topics such as the size of the market, diversification, and the depth of expertise in analyzing individual stocks are addressed, as well as regulation, timing, and the boredom factor. Hill: Why should investors be interested in subordinated insurance bonds? What makes the sector so attractive? Franz: We live in times of permanently low-interest rates. Even optimistic estimates expect only moderate interest rate increases. Subordinated insurance bonds still offer permanently higher yields than other sectors in this environment. BBB-rated insurance bonds offers up to 100bp higher yields. To this end, the insurance sector has had the lowest default rates of any sector over the past 40 years. Going forward, this is likely to decrease even further as regulation has been significantly improved once again following the introduction of the Solvency II supervisory regime in 2016 and other countries have followed or will follow suit.Furthermore, we expect steady growth in the restricted Tier 1 (rT1) segment. Although rT1 issuance volumes will be nowhere near T2, the new issue by Allianz has shown that there is interest in this new bond class even among the best-capitalized market leaders. Rötger Franz, Plenum Investments AG Hill: Why do you think subordinated insurance bonds trade at a discount relative to other sectors? Franz: There are several reasons. For one, the sector is relatively complex, and traditional and generalist approaches of credit analysis often not fully applicable to insurers. This means that investors have to build up and maintain specialized knowledge. However, subordinated insurance bonds are only a relatively small niche of the overall market, so in the past, only very large asset managers or niche players had specialized knowledge here. On the other hand, the cost pressure of recent years has led to the large and medium-sized asset managers in particular, and also investment banks, withdrawing from such niches. Most investors also rely too much on ratings, even though in the vast majority of insurers are rated much lower than their solvency ratios would suggest. This loss of knowledge encourages risk-averse behavior on the part of investors and thus leads to spreads widening. Hill: Aren’t investments in subordinated insurance bonds also covered by other, more broadly diversified funds? Franz: Certainly many broadly diversified funds also invest in subordinated insurance bonds. While these can realize a general “sector discount,” they cannot identify mispricing and realize the significant alpha potential on a single name basis. Either these track the index or underweight more complex sectors like insurance. Hill: Is now a good time to buy subordinated bonds from insurers? Franz: We think so. While spreads are very tight right now, we still see clear potential for further compression. In addition, some mispricings have emerged again in recent weeks. It should also not be forgotten that insurers – unlike other sectors – will tend to benefit fundamentally from rising interest rates. Hill: There is a lot of talk at the moment about grandfathered perpetuals and the end of grandfathering in 2026. Are there still many good investment opportunities here? Franz: “Grandfathering” and its end in 2026 is an old topic that is largely priced in. In addition, there is an extremely high call discipline for institutional bonds issued by insurers. Blindly buying bonds issued before 2015, therefore, makes no sense in our view. However, there are still some opportunities in retail bonds. Here, however, the question is not whether these will be called in 2026, but before. But such an assessment requires a deep analysis of the issuer’s capitalization and capital management strategy. Hill: Doesn’t an allocation to rT1 mean too much risk? Franz: An increased risk resulting from possible coupon defaults and conversion into shares or write-downs is indisputable. But it is nowhere near as high as the spreads suggest. It is important to know that insurers on average hold almost twice the required solvency capital. Many insurers have also defined clear triggers for how they react to falling solvency ratios and with what countermeasures. These triggers are usually far above a regulatory capital shortfall. It should also be noted that in many lines of business, such as reinsurance or industrial lines, a financial strength rating of at least A- is a prerequisite. This provides an additional incentive for insurers to maintain a good capitalization. If you compare this to the additional spread of an rT1 bond, you come to the clear conclusion that the higher risk of an rT1 bond is not only well manageable but also well rewarded. Hill: You’ve been involved with the insurance sector for many years. Don’t you ever get bored with it? Franz: No, we’ve had deregulation in Europe, US Workers Comp crisis, Dotcom Bubble, 9/11, KRW, Great Financial Crisis, Nat Cat 2011, Sovereign Risk Crisis, steadily falling interest rates, 20 years of Solvency II development and implementation, 25 years of IFRS 17 development and now Covid-19. There’s always been a lot going on and there will be in the future too. Hill: Thank you very much for talking to us. Rötger Franz has more than 20 years of international experience in the coverage of the insurance sector. Mr. Franz was sell side credit analyst at Société Générale and 10 times in a row he was ranked as the best insurance analyst in the Euromoney Fixed Income Research Survey. Previously, he was as lead analyst responsible for the coverage of the leading primary insurers and reinsurers at the rating agency A.M. Best and has experience in M&A, Equities and Accounting. He holds a master-equivalent degree from the University of Cologne (Dipl.-Kfm.) with a focus on insurance science.

  • “Be courteous to all, but friendly with a few, and let those few prove themselves before you put your trust in them.” (George Washington). Family offices, art investments, asset management, trusted advisors, courses of study, and more – Markus Hill spoke for FONDSBOUTIQUEN.DE with Dr. Maximilian A. Werkmüller, LL.M., Professor of Finance and Family Office Management, Allensbach Hochschule, about the job description of the family office and the special challenges and trends in this segment. In addition to differentiating the special field of family office from classic private wealth management, the conference will also address topics such as “single-family office versus multi-family office,” digitalization, asset allocation, legal advice, and the importance of family-managed companies. Hill: How did the idea for the Family Office Management course come about? Werkmüller: I had been a lecturer in foundation and tax law and tax-optimized asset succession at the EBS Finance Academy since 2000. It became apparent early on that the topics of holistic wealth planning were very popular with postgraduates, i.e. with those undergoing in-service training, at least at that time. At the latest since the subprime crisis in 2008 and the years that followed, it was clear that students’ interest in traditional banking had waned and that the topic of family offices, in particular, was increasingly becoming the focus of interest. However, the idea of turning this into a subject and offering it as part of a master’s degree program only came about in cooperation with Allensbach University. In this respect, we can claim to be a pioneer in a field that is only gradually becoming accessible to students in initial academic training. It is undisputed that the family office has now established itself within the framework of the recognized advisory professions. The number of multi and single-family offices has also been rising steadily for years. This also results in interesting job prospects for career starters. We are a little proud that we, at Allensbach University, can make a valuable contribution to getting young people interested in this profession and motivating them to start their careers. Hill: Which area in the course is currently attracting increased interest? Werkmüller: The subject of family office management is very multifaceted and therefore offers good opportunities to set your focus. Since most of my students come from traditional business management backgrounds, the focus is still on capital market-oriented topics. Numerous bachelor’s and master’s theses are dedicated to this subject area. However, I consider it my task as the responsible faculty member to ensure that this scope is broadened and extends to those areas that are not so much the focus of academic research. These include in particular the illiquid asset classes, such as real estate, private equity, or even investments in art objects or the art market. In particular, our last publication on the topic of art and art investments in the context of total asset allocation has generated a lot of interest in the social networks. We were also able to contribute an excellent master’s thesis in which one of our students dealt with the question of whether and to what extent the principles of portfolio theory apply to investments in works of art. For family offices, in particular, such questions and especially the answers to them are of great value. Numerous wealthy families have invested at least part of their assets in works of art for generations. The performance measurement of such collections is a topic that has not yet been conclusively discussed academically. Dr. Maximilian A. Werkmüller, LL.M., Professor für Finance und Family Office Management, Allensbach Hochschule Hill: How do you distinguish the family office segment from the private wealth management segment? Werkmüller: We recently published a blog article on this question as well. The distinction lies in particular in the different perspectives that a family office and a private wealth manager take. While a family office, as a trusted advisor, exclusively represents the interests of its principals and does not pursue any asset interests of its own beyond its remuneration, a wealth manager, who is employed by a bank, for example, may also sell his house products to the client without any further problems. In this capacity, he does not necessarily have to act as a “trusted advisor”, but may and must also legitimately pursue the profit-oriented interests of his employer. At this point, I deliberately do not mean this in a derogatory way. It is just a completely different starting point. Clients who entrust themselves to the private wealth management of a bank are not looking for a family office, and vice versa. Hill: Are there any current trends in the family office sector that you are aware of? Werkmüller: To answer this question, we have to distinguish between single and multi-family offices. The topic of impact investing is clearly on the rise among single-family offices. Another trend, which was largely caused or reinforced by the Covid 19 pandemic, is the digitalization of services. While multi-family offices have traditionally been better positioned in this area due to the existing competition, and in some cases still are, single-family offices sometimes have a lot of catching up to do, depending on the stage of development the office is at. Concerning investment locations, it can be seen that the continent of Africa has now also become the focus of family offices. More and more, families are investing part of their assets in East African countries. They do this not only to generate an appropriate return but also to make an effective investment in improving the local infrastructure. Otherwise, private equity investments are still the focus of the offices, regardless of whether they are single or multi-family offices. The topic of “NextGen” is currently occupying numerous families who have set up their own office. The reason for this lies in the fact that many entrepreneurial families have completed the generational change and the younger generation naturally has different demands on the services of the office than the generation of the transferors and/or company founders. Numerous

  • Markus Hill spoke for FUNDBOUTIQUES.COM with Tommy Piemonte, Head of Sustainability Research, Bank für Kirche und Caritas eG (BKC), about his motivation for dealing with the topics of sustainability, ratings, CAT bonds, and the banks’ activities within the framework of the European investor initiative “Shareholders for Change” (SFC). In this context, the Institute’s current joint activities with the Brazilian Bishops’ Conference (CNBB) and the Global Catholic Climate Movement (GCCM) to protect the Amazon rainforest also represent a special commitment. Hill: Since when and why are you enthusiastic about sustainable investments? Piemonte: To explain, I have to go back to the very beginning, when I first learned about sustainable investments. After my training at a savings bank, I joined Deutsche Bank, where I worked in private banking, among other things. That was over 20 years ago now. Looking back then, I would say that I was the typical banker of the 90s – the focus was on maximizing profits for my clients, increasing my bonus, and developing my career. I gave no thought whatsoever to the positive and negative sustainability impacts of the securities and investment products I sold. Even worse – I had a complete blind spot as far as externalities of investments were concerned. At the same time, I regularly had doubts about the meaningfulness of my activity and had always been interested in environmental protection and social issues. In this mixed situation, perhaps by chance or instinctively, I came across one of the few sustainability funds at the time, of which perhaps, there was a handful in Germany. I began to inform myself about the concept and the background of applying sustainability aspects to funds. And so it happened, all of a sudden, the following quote applied to me “Even a small flash of enlightenment brings clarity to the darkness”. From now on, I was convinced that the full integration of sustainability aspects into the financial industry and the financial market is necessary so that they are part of the solution to our global challenges in the future and no longer part of the problem. That was the point where my socially responsible investing (SRI) career started. I quit my job at the bank and started studying economics at the Nürtingen University of Applied Sciences. After graduation, I started as a junior analyst at the sustainability rating agency imug Rating, which is still a research and distribution partner of the international sustainability rating agency Vigeo Eiris. I stayed at imug Rating for several years and went through all career stages, up to Head of imug Rating. And for five years now, I have been working at the Catholic church bank Bank für Kirche und Caritas (BKC) in Paderborn as Head of Sustainability Research. Tommy Piemonte, Head of Sustainability Research, Bank für Kirche und Caritas eG (BKC) Hill: What are your activities at the Bank for Church and Caritas (BKC) and why did you change there? Piemonte: Working at a sustainability rating agency is exciting and varied, and by asking specific questions and assessing the sustainability performance of companies, very often sustainability improvements were initiated at the companies. This latter aspect particularly appealed to me and I was therefore even more convinced of the effectiveness of so-called “engagement”, which is practiced by investors and asset owners. Engagement is generally understood to be the active exertion of influence on investment objects. The aim is, for example, to motivate companies to realize improvements in their respective sustainability management or to take existing controversial incidents as an opportunity to derive appropriate consequences and concrete preventive measures for the future. This is how I came to accept the offer of BKC to be responsible for the further development and monitoring of the ethical-sustainable investment strategy of the bank and its clients, as well as to professionalize the ethical-sustainable investment process and to accompany the coordination of the research process. And on the other hand, it was my wish to set up the topic of engagement holistically for the bank. Hill: What does BKC’s engagement approach look like and what is special about it? Piemonte: The so-called “engagement” is often referred to in German as active shareholders. However, we do not only conduct our engagement activities with equity companies, as the term “active shareholder” might suggest, but also with bond-issuing companies or other investment objects. In addition, we actively influence industry associations, politicians, and financial market players at a higher level to improve the integration of sustainability aspects in their fields of activity. We exert our influence as an investor by exercising voting rights on shares (“vote”) and constructive dialogue (“voice”) with the investment objects. Dialogue, which takes place through written or personal communication with company representatives, through speeches at general meetings, or through participation in public investor campaigns, is of particular importance in our engagement strategy, as we attribute a high degree of influence to it. We are convinced that through targeted engagement we can both reduce or even prevent negative sustainability impacts of investment objects and promote positive sustainability impacts. In addition, we believe that the risk-return profile of an investment can be positively influenced by engagement. A special feature of our engagement activities is that we do not limit them to our ethical-sustainable investment portfolio, as is common with the engagement concept often found in the financial market called “shareholder activism”. This means that we also enter into an active dialogue with companies to motivate them to change towards more sustainability if they violate our exclusion criteria or do not perform to our satisfaction in the positive and negative criteria we have established. The only motivation is that we actively want to see sustainability improvement. We call this engagement concept “shareholder criticism”. The difference in the concepts is that with shareholder activism, engagement activities are carried out with companies where either an investment has already been made or there is an intention to invest. In this case, the demands on the company can also have the motivation to achieve an

  • Foundations, asset management, fund primer & ESG, from portfolio manager to passive “portfolio controller” – Markus Hill spoke for FINANCIAL CENTRE FRANKFURT with Tobias Karow, STIFTUNGSMARKTPLATZ.EU, about the current challenges for foundation managers in managing foundation assets. The importance of the founder’s will, the foundation’s purpose, and investment guidelines were discussed as well as mutual funds, crime fiction, Rollski and gin (EVENT NOTE: VIRTUAL DAY FOR FOUNDATIONS ASSETS – 12.5.2021). Hill: Why is the foundation’s assets a construction site? Karow: Many things come together. I always say: “We’ve always done it this way meets low-interest-rate” which explains everything. In Germany, we have a long tradition of investing foundation assets purely in bonds. Thanks to this love of bonds, about 90 % of the 100,000 or so foundations that existed in this country in 1914 disappeared after the Second World War. This is often forgotten, and in practically all countries where foundations existed, investments are made differently, namely broadly and globally diversified, with the focus on a decent return and not only on capital preservation. The fear of loss unites many foundation managers, but it is not a fear that is goal-oriented. I bought my first share when I was 13, and to date, there have been a few crashes and corrections, but each of these setbacks was temporary, one just had to work on the portfolio now and then. Ordinary income is the most important goal of managing foundation assets, and if it is, then the investment policy of a foundation at 0.0% interest rates in the next decade must look different than it did 10 or 15 years ago. But something is changing, that is already foreseeable. Hill: What options do foundations have in your eyes? Karow: Well, foundations can continue to do it themselves, but they, i.e. those responsible, must devote sufficient professional and time resources to make an appropriate decision on the investment of the foundation’s assets. It also includes having obtained all possible information to support this decision, just like a prudent businessman. If I’m unable to manage to do this, and as in the case of capital investment this is very likely, doing it myself is not the first option, in my eyes anyway. Foundations should therefore take the path of delegation, i.e. delegate the task of managing the foundation’s assets to professionals. This changes the role of foundation officers away from active portfolio manager to passive portfolio controller, and for me that fits the times much better than fiddling around with a few stocks here and a few bonds there. Before foundation boards do that, they should rather write proper and up-to-date investment guidelines, because if the framework fits, the room for manoeuvre is then at a maximum. Tobias Karow, STIFTUNGSMARKTPLATZ.EU Hill: You are a friend of fund investment for foundations, and you run the platform here. Why is that? Karow: If I delegate the management of the foundation’s assets, then fund investment or the compilation of a fund portfolio is advantageous in my eyes from many points of view. Foundations must comply with the diversification requirement, and they can do this wonderfully through funds by investing in different concepts, styles, and asset classes. But foundations must also follow the founder’s will, which means that above all the purpose must be realized. Accordingly, I look for funds that have a longer distribution history or where income is the focus. Since a lot of information on funds is also available transparently, it is easy to make an informed decision, and control based on this information can be institutionalized. In addition, five fund units and five distributions are easier to account for than countless individual stock and bond positions. For me, fund investment is the most suitable way for foundations for these reasons, but above all, the individual goals of the foundation can be mapped much more granularly with funds. This also includes sustainability, on which every foundation has its own opinion; this must then also be reflected in the portfolio, which can be done well with funds. The investment guideline can state that the foundation only buys Article 9 funds, which will make the foundation portfolio look different. I don’t think it’s feasible for most foundations to do ESG themselves. Hill: When you are not organizing virtual days for foundations, what drives you? Karow: As a young father, sport is quite important to me, simply as a balance, I like roller skiing, it’s a nice alternative to running when it doesn’t work out with real skiing at the moment. And then I have time for a crime novel again, do miss writing, but on the other hand, being an entrepreneur is also good yet challenging. Currently, we are blogging and working on a foundation marketplace gin, which already has the name. Hill: Thank you very much for the interview. 1. FRANKFURT & FOUNDATIONS (EVENT NOTICE – 12.5.2021 – PANEL / INFORMATION – SELECTION): Foundation assets 2030: A discussion with Hans-Dieter Meisberger (DZ Privatbank), Thomas Meissner (Stiftung Polytechnische Gesellschaft), Arndt Funken (Aquila Capital). Eco and green are not everything. Final impulses on the couch on the contemporary management of foundation assets by Harald Brockmann (Mission Central of the Franciscans), Immo Gatzweiler (AXA Investment Managers), Markus Hill ( ADDITIONAL INFORMATION / REGISTRATION – VIRTUAL DAY FOR THE FOUNDATION’S ASSETS: 2. FRANKFURT & FOUNDATIONS (INFORMATION – SELECTION): a) Frankfurt Foundation Database (quote): “There are over 600 foundations with their registered offices in Frankfurt am Main. Foundations are involved in many important social areas in our city: in education and training, in science and technology, in art and culture, in social issues through to assistance for the elderly, as well as in nature conservation and environmental protection.” – SUPPLEMENTARY INFORMATION: Foundation Database | City of Frankfurt am Main b) Initiative Frankfurter Stiftungen (citation): The Initiative Frankfurter Stiftung sees itself as a network of people who bear responsibility for shaping the foundation system in and around Frankfurt. It has existed since 1993, and finally as a registered

  • The topics of family offices, hedge funds (Archegos), and regulation are currently being discussed intensively in professional circles and the media. Markus Hill spoke for FONDSBOUTIQUEN.DE with Daniel Grieger, Plenum Investments AG, about the importance of risk management and the strengths of insurance companies compared to classic hedge funds in this context. The focus of the conversation was on topics such as subordinated bonds in the insurance sector and the special factor of know-how, investment process, and CAT bonds. Points such as portfolio management due diligence and a current event (21 & 22.4.2021) were also part of this exchange. Hill: You have been working intensively on the topics of CAT bonds (insurance-linked securities) and risk management for years. Currently, the scandal surrounding the US hedge fund Archegos is attracting a lot of attention in the media. Credit Suisse, family offices, regulation – the search for causes is on. What can insurers do better than hedge funds? Grieger: For two decades I have been dealing with the intersection between the world of insurance and the world of asset management. Our Plenum Insurance Capital Fund, which will soon have a one-year track record, ideally embodies what is possible if you are open to ideas of providing capital to insurers. In my view, insurance companies are completely underestimated in terms of their ability to analyze risks. Many methods of analyzing risks originated in insurance companies and were only later adopted by other sectors, such as banks. Here, there is even the profession of an actuary, which shows that people have been dealing with risks for a very long time. The current case of the collapse of a “family office” (Archegos), which operated like a hedge fund, shows impressively what can happen if risks are not kept under control. And when I compare banks with insurance companies, some differences are obvious. Insurance companies can often draw on a huge catalogue of historical data. For earthquake models, for example, you go back several hundred years to estimate the damage intensity of a possible earthquake. Moreover, insurance claims are not paid out immediately. Unlike the sinking of a hedge fund, the money is not immediately gone. Insured losses are paid out over longer periods. The liquidity for a claim, therefore, does not have to be held permanently. In the case of larger losses, one also has the time to raise further funds on the capital market. This also means that a bank run like Northern Rock in 2007 is not possible with insurers. Daniel Grieger, Partner and Fund Manager, Plenum Investments AG Hill: Your special expertise is attracting increased interest due to the low-interest phase, and investment alternatives are being sought. What is special about investing in CAT bonds (insurance-linked securities)? Grieger: With CAT bonds we take the position of a reinsurer. We cover catastrophe risks – mostly storms or earthquakes in North America or Japan. These are geographically local events that can be diversified into portfolios. The funds we manage assume these risks and receive the coupon payments of the CAT bonds in return. A catastrophe event can trigger a partial default or even a total default of a CAT bond. In the past decades, CAT Bonds have proven that they hardly react to financial market events. CAT bonds thus represent an important source of alternative fixed-income returns. At this point I need to emphasize that I also include the area of insurance subordinated bonds in this investment segment. Whether CAT bond or subordinated bond – the type of capital injection seems less relevant to me, in the end, the insurer can write more business. Hill: Thank you for the keyword. You have just launched a fund in the subordinated insurance debt segment. Many investors are familiar with this asset class in the banking sector. How did the idea come about? Where are the differences in the way banks and insurance companies look at subordinated debt? Grieger: Subordinated insurance debt is a highly attractive niche – which hardly anyone seems to understand. More and more banks withdraw their credit research coverage of the insurance sector. I just heard today that at another large London investment bank transferred the insurance coverage to their bank analyst. But you can’t expect much quality from this analyst anymore. We can show that with the MIFID-induced reduction of analysts – because nobody pays for research anymore – the mispricing on the market is increasing. And we also want to exploit this with the new Plenum European Insurance Bond Fund. Moreover, subordinated insurance bonds have been paying an additional premium over traditional corporate bonds for years. Hill: What is the investment process for the fund? Grieger: First, we perform a fundamental analysis on the issuer itself. Our Coverage Universe comprises around 60 issuers and we have clearly defined which issuers have a place in our portfolio. The second step is the prospectus analysis, where we compare the attractiveness of the individual bonds and capital types. An important factor here is estimating the expected call date of the bond. This has to be done individually, as the bonds are structured very differently. Only based on the expected call date can we define the expected yield of a bond and compare the attractiveness of the individual bonds of an issuer. Hill: This structured approach seems very labour-intensive. Who covers which areas of analysis and portfolio management in your team, and with what expertise? Grieger: The portfolio management team consists of three members. Each has its focus – but the coordination among them is extremely close. Rotger Franz has been doing credit analysis of insurance companies in Europe for 20 years, he was ranked as the best insurance analyst by Euromoney ten times in a row. He is the Lead PM of the Plenum European Insurance Bond Fund. I have been managing portfolios of subordinated insurance bonds for eight years and act as his deputy. Dirk Schmelzer is the most experienced CAT bond portfolio manager in the whole market – for him, insurance

  • In addition to ESG and low-interest rates, topics such as value investing and commodities are once again attracting increased interest among private and institutional investors. Markus Hill spoke for FUNDBOUTIQUES.COM with Urs Marti, SIA Funds AG, about the connections between sustainability, oil, geopolitics, and the significance of nuclear energy in connection with the topic of climate change. The reflections are rounded off by an interesting literature reference on the topic of commodities – keywords: “Bible”, General Patton, Jackpot & Dividends. Hill: Value investing and commodities seem to be experiencing a certain revival. How do you see this? Marti: Actually, there is a lot that points to a trend reversal. If you look at the chart, there is still a long way to go. At SIA, we have been pointing out for some time the coming shortages due to the huge misallocations of capital and the resulting underinvestment. Robert Friedland has aptly described the decade that has begun as “The decade of the revenge of the miners” (see chart: “Ratio Growth / Value” Source: SIA Funds AG). Hill: The topics of raw materials and supply security are followed with interest in the press. Did the recent Suez Canal incident have an additional impact on already strained supply chains? Marti: It may sound a bit paradoxical, but Covid probably has parallels with the occupation of the Rhineland in 1919. In retaliation, workers stayed at home. This led to lower production, shortages, rising prices, and the inflationary spiral got going. In the commodities sector, there are always production shortfalls, for a variety of reasons. On average, about 5% of production capacity fails. If the market is sufficiently supplied, the stocks are full, this has hardly any lasting effects. However, when stocks are low and the supply is tight, it leads to significant price volatility. What is worrying about the current situation is that it affects practically all parts of the value chain: raw materials, electricity, transport, containers, equipment, etc. The situation is not as bad as it seems. Looking at the whole value chain, there is simply not enough investment (examples: mines, oil fields, power supply, shipyards, etc.). Chips are also needed not only in iPhones but also in ships, combine harvesters, etc. Take a look at the fields of study that are offered: Who is training to be a geologist, mining/petroleum engineer? Then there is politics. Demand is stimulated by printing money, but the supply side is made more expensive by countless measures, taxes, restrictions, regulations, and levies. Hill: How do you see the connection between raw materials, China, India, and consumption? Marti: China’s policy is undergoing a paradigm shift. They want lower trade surpluses, more domestic consumption, and a higher standard of living for the population. Outsourcing is taking its toll. There will be many changes, also concerning currencies. To put it bluntly, the so-called West has less raw materials at its disposal if China itself wants to consume more. China’s per capita consumption is currently one-third of that of the West. The coast in China is well developed, but the rest of the country is not. Pushing this development is, after all, one of Beijing’s main priorities. But it is not only about China. India will soon have more inhabitants than China. The standard of living and per capita consumption of these countries – raw materials and goods – is only a fraction of that in the West. Among the ten largest countries, the only representative of the so-called West is the USA. Next comes Indonesia, Pakistan, Brazil, Nigeria, Bangladesh, Russia, and Mexico. Urs Marti, SIA Funds AG Hill: ESG, climate change, and commodities are often discussed in the same breath. What connection do you see in this area, what particularly strikes you? What role does oil play in this context? Marti: Human life is based on the use of the resources that exist on the planet. The basis of everything comes from mining, agriculture, hunting, fishing, etc. You can also stop the production of agricultural goods, then, brutally speaking, the population (number) also “decreases”; without support, CO2 emissions are then also reduced in a ratio of 1:1. Today’s division of labor and productivity is only possible thanks to industrialization. Without carbon, we would probably be at the level of 1860. The productivity of agriculture would probably be a tenth. 80% of the world’s electricity is generated by steam (90% fossil, 10% nuclear fission, the rest effectively by hydroelectric power). Inexpensive transport in large capacities is only possible with oil. Likewise, all products that are not naturally grown or made of metal are made of carbon. How to produce is another question, just like in any other industry. When I was a child, photos could be developed in Basel with Rhine water (at least that’s what they told me). Just as a VW no longer looks the same as it did in the seventies, the same is true of mining. It is arguably the most regulated industry in the world. It’s not like you can just start mining oil sands in Fort McMurray. There are the strictest environmental regulations in the world, billions are spent, there is renaturation, etc. By the way, many of the companies also have very good ESG ratings. For example, the biggest oil producers in the world are also the biggest companies in CO2 capture/storage. And just because many countries in the world no longer allow themselves to be patronized by the West does not mean that things have to be worse there. Why should a Western NGO, investment bank, or consultant have any say in the territory of China, Brazil, or Russia? Of course, there are always accidents, black sheep. In Switzerland, criminal proceedings have been opened against a transport company that is alleged to have illegally disposed of hundreds of tonnes of contaminated material. This is said to have led to the death of fish in the Blausee. It is easier to point the finger at other countries and other continents. Hill: When

  • “Knowledge speaks, but wisdom listens.” (Jimi Hendrix) A few years ago, I was able to experience the forests of Norway with colleagues in a kind of “survival” mode – including campfire romance, building river bridges together, setting up camp for the night without a tent, as well as unaccompanied marches in the lonely wilderness. As a former community service worker in my early 30s, I was able to learn how to read a compass. Also exciting were seminars of overstrained trainers who underestimated the psychodynamics of their group and could not prevent participants from leaving the seminar in tears because so-called “colleagues” continued to unabashedly shoot their bullying arrows. Many of you will have experienced similar, so-called “team-building” seminars in the course of your career. Often the aim is to strengthen the “we” feeling and to ensure more trust among each other. A wide variety of approaches can be found here, from “hard” to “warm”. All the wishes and intentions on the part of managers have their justification. How much of it is transported into everyday professional life is something everyone has to judge for themselves. If a “team” is well-positioned within a company or department, this is reflected in corresponding results and low fluctuation. Holger Leppin, Senior Relationship Manager bei Plenum Investments AG Team, Jazz and the Art of Listening However, I experienced my strongest personal imprint on “team playing” in a completely different context. Namely in my time as a jazz musician, especially during my years as a student. From my point of view, many characteristics of jazz musicians can be transferred very well into the “normal” everyday working life. What is meant by this and what is required for this? Jazz musicians are characterized above all by the fact that they can form “teams” within a very short time. An example of this is so-called jam sessions, i.e. a spontaneous meeting of musicians who do not know each other beforehand – almost a kind of “blind date”.   What does a musician have to bring to the table? First of all, a fairly good knowledge of their instrument and the respective form. A well-known example is the blues form. In a jam session, team-building usually begins with a very short “preliminary discussion”, i.e. a brief agreement on which form the perhaps 3-4 musicians (e.g. drums, piano, bass, saxophone) want to play. If, for example, a blues is agreed upon, the key is briefly determined, i.e. to play a blues in F or C. In this formation, the saxophone can play the blues. In this formation, the saxophone can play a well-known blues melody. The communication of 4 musicians meeting spontaneously for the first time at a session could go something like this: Saxophone: “Okay, are we playing a blues? Key in Bb? Bass: “Works for me. Shall I play a run-through with drums in mid-tempo and then you come in with the piano? Saxophone: “All right” Piano: Gives the thumbs up Open communication is necessary here. You start together in this phase and begin to play. And in these first “rounds” (12-bar blues scheme) you listen to each other, notice what your “colleagues” can do, what their abilities or limits are, etc. You probably guessed it already: Listening is one of the most important skills a jazz musician should possess. Only by doing so can he adequately adjust to the situation, be inspired, or give spontaneous feedback to the others by looking at them and spur them on to play another solo, for example. In short: very often people treat each other very benevolently from the outset. As a rule, everyone gets a turn, can and should be allowed to play a solo. People take each other along with them. No one is left out. Asset Management – Tolerance, Team & “Leadership In a fixed formation, which is closer to a team within a company, this “we” feeling is of course much more pronounced than in a spontaneous jam session. Regular rehearsals and performances strengthen the bonds among each other, you can discuss arrangements in more detail and take in feedback from all the fellow musicians in the process of rehearsing and incorporate new ideas. Jazz formations also often have a “leader”, but he or she is not a “boss” in the classical sense, but rather a “primus inter pares”. This mindset of jazz musicians also means that they can adapt to new situations and fellow musicians, i.e. “teams”, at short notice. This high level of tolerance also leads to the fact that it is natural for jazz musicians to contribute their ideas without restraint since the “mindset” of jazz musicians is inherently open. This is a virtue that also brings many advantages to everyday professional life. For oneself, one’s colleagues, and one’s general well-being. Examples – “Attunement & Flow Finally, a video recommendation of a jazz formation in which the “Jazz Code” is well reproduced: “The JazzCode documentary – how jazz musicians work”.(NOTE: “Copy title, paste on YouTube”). In this context, a live example of a jam session with Wynton Marsalis, one of the greatest jazz trumpeters and jazz ambassadors (Jazz at Lincoln Center), is also interesting. Pay attention to the formation and different vintages starting from the bass player to the guitarist: “Cherokee… Jam session at BOZAR Victor Cafe in Brussels, Belgium”(NOTE: “Copy title, paste on YouTube”). Holger Leppin (Plenum Investments AG) studied musicology and psychology at the University of Hamburg. During this time he was a member of the Landesjugendjazz Orchester Hamburg and the Universität Bigband Hamburg, among others, and was active in permanent jazz formations for many years. Source: LinkedIn Related articles: ESG, Climate Change, SDGs – CAT Bonds, Ratings & Volcanoes (Interview – Roland Kölsch, Qualitätssicherungsgesellschaft Nachhaltiger Geldanlagen)ESG, Cat Bonds, Industry & Cooperation, “Tail-Risks” and Asset Management (Interview – Nico Rischmann, Plenum Investments AG)CAT Bonds, Climate Change, Risk Management & “Palms of Steel” (Interview – Daniel Grieger, Plenum Investments AG)Behavioural Finance & Cat Bonds (Martin Friedrich, Lansdowne Partners Austria GmbH)Family

  • Sustainable investments, ESG criteria, climate change, and ratings – many private and institutional investors focus on these topics. Markus Hill spoke with Roland Kölsch, Qualitätssicherungsgesellschaft Nachhaltiger Geldanlagen (QNG), about this range of topics and the special features and challenges of the rating process for CAT bonds (insurance-linked securities). The conversation will focus on the special features of the asset class catastrophe bonds, the connection to topics such as sustainability criteria (SDGs), “impact investing” and also the advantages and disadvantages of this special market segment. The recent issuance of CAT Bonds (“Red Cross & Volcanoes”) and the current search of investors for alternative investment opportunities in the low-interest phase underlines the topicality of the subject. Hill: Mr. Kölsch, you are now in your fifth year as the person responsible for the quality standard for sustainable investments, the FNG seal. Could you explain what this is all about? Kölsch: Motivated by the need to steer the growing proliferation of sustainable investments in a certain direction, various stakeholders got together in 2012 to work out criteria for classifying the quality of sustainable financial products in a three-year development project. With the participation of financial advisors, asset owners, rating agencies, academia, the church, asset managers, and NGOs, the quality mark was launched in 2015.The result is a multi-layered methodology that attempts to evaluate the different building blocks used in the various investment paths to (more) sustainability and express them in a multi-level label. The holistic methodology is based on a minimum standard. These include transparency criteria and consideration of labor & human rights, environmental protection, and anti-corruption as summarized in the globally recognized UN Global Compact. All companies in the respective fund must also be analyzed in full for sustainability criteria. Investments in nuclear power, coal mining, significant coal-fired power generation, fracking, oil sands as well as weapons and armaments are taboo. High-quality sustainability funds that excel in the areas of “institutional credibility,” “product standards,” and “portfolio focus” (security selection, commitment, and KPIs) receive up to three stars. Roland Kölsch, Qualitätssicherungsgesellschaft Nachhaltiger Geldanlagen (QNG) The FNG seal goes far beyond a pure portfolio assessment and includes quantitative and qualitative elements. With over 80 questions, for example, the sustainability investment style, the associated investment process, the associated ESG research capacities, and any accompanying engagement process are analyzed and evaluated. Besides, elements such as reporting, controversy monitoring, an external sustainability advisory board, and the fund company as such play an important role.The more multi-layered and intensive a fund’s activities are at the various levels, the higher its sustainability quality and the potential to ultimately achieve indirect and direct impact. Hill: Now it sounds as if only the usual equity, bond, or mixed funds are evaluated here. Kölsch: Since the majority of the products on the market come from these asset classes, the majority of the financial products that apply are from these classic investment forms. However, among the investment funds we award, you will find more and more investment concepts that are not quite so common, such as convertible bonds, high yield, emerging markets, capital preservation, and subordination concepts. Microfinance is currently on the horizon and in real estate, the transparency foundation is being laid. Things got exotic in 2018 when, after more than a year of preliminary work, we tested the first Cat Bonds fund for its sustainability quality. Hill: Why exotic? Kölsch: What sounds very simple is anything but trivial. Because a cat bond is ultimately about a bond, but this is in turn divided into a multi-part structure. A cat bond is a construct with various components and players.It is not the insurance company that issues the cat bonds, but a special purpose vehicle set up for this purpose that stands between the investor and the insurance company. Unlike ABS, the purpose of the latter is to conclude a reinsurance contract with the insurance company as the so-called sponsor/cedent. The potential obligations arising from this contract are financed by the issue of a bond in which the investor: then invests.Another component is the insurance premium. It is firmly negotiated at the time of issue and must adequately compensate for the risks assumed via the reinsurance contract. The premium is paid by the sponsor, i.e. the insurer, and then paid out to the investor together with the money market component in the form of a coupon. In summary, the investor receives a variable part from the money market component and fixed compensation for the insurance risk. Hill: What makes such an exotic asset class as cat bonds so attractive in principle? Kölsch: Cat bonds are bonds used to cover insurance losses from rare natural catastrophes. Catastrophe bonds usually relate to hurricanes, floods, earthquakes, and pandemics and are therefore well suited to diversifying larger portfolios, since natural catastrophes have nothing to do with the stock market and different catastrophes are in turn hardly correlated with each other. The value of a cat bond hardly fluctuates as long as the defined loss event does not occur, because the money is parked in safe, short-dated bonds. Counterparty and interest rate risk are low, and a fixed interest rate above money market levels is paid. The bonds are issued at nominal value and repaid at 100% at maturity. In a pre-defined event of a “catastrophe”, so-called trigger events (usually during a fixed period of three to five years), the entire amount or at least part of the paid-in capital is transferred to the issuer of the bond. The risk is therefore that investors will lose money when such catastrophes occur. The probability of loss is compensated with higher interest rates. Especially in times of zero and even minus interest rates, cat bonds thus offer a not uninteresting yield pickup and allow (qualified) investors to improve their risk-return profile.Securitizing catastrophe risks on the financial market creates an additional insurance opportunity, which often makes it possible to insure (peak) risks in the first place that no individual insurer would otherwise take on the books.For example, the Danish Red Cross

  • Caduff: Mr. Hill, you are a first-class expert on the family office landscape in Germany. It’s not for nothing that you’re called “Mr. Family Office. Are you coming through the crisis well in business terms? Hill: Family offices, like the classic Mittelstand and fund boutiques, are known to be “long-term thinkers”. I know many of the service providers in this segment. My feedback and also from various other service providers: Things are moving forward, sometimes at a slightly slower pace. However, it is interesting that there are also new providers with interesting services, for example, Peter Brock and Christian Stadermann (BEEWYZER) – I am perhaps somewhat selective and biased here due to joint panel discussions which had, I admit. In short, on the contrary, things have turned out much better than I would have expected, despite the “crisis”. Perhaps it also has something to do with the fact that we were already very well positioned digitally a long time before. Caduff: You are extremely active on LinkedIn with always a lot of responses. Why are so many people interested in the topic of family offices? Hill: You shouldn’t overestimate LinkedIn, but you shouldn’t underestimate it either – XING seems to have gone a bit on the defensive. I see social media primarily as a channel for staying in casual contact with a large number of market participants over a long period, or I use it more actively (MH transparency) when I want to make certain topics more visible, so to speak. I’m happy when people suggest topics to my attention. The attraction for me is the exchange of thoughts, interesting invitations, or simply input on topics like finance and also culture. Family offices and interest – you can perhaps distinguish between different groups in the market. Press, investors, providers, entrepreneurs, etc. I have been working on my account since 2005, but I also know the employment relationship from my time as a banker and asset manager. I admire hidden champions, people who do things they love and get better at over time. You find these personalities in the entrepreneurial space, and you find many of these entrepreneurs back in the role of principal at certain single-family offices. The exchange on the product level with these addresses is fun, now and then interesting networking with providers arises, which one gladly recommends or is recommended to others. And then there is the other group in the market, which is perhaps less motivated by content to get in touch with the respective family office. Primarily, the family office is seen here as “prey” to be hunted down. Please excuse my figurative language, to put it more precisely: the counterpart is simply seen here by the product provider in its function as a buyer. There is nothing wrong with this, it just becomes a problem when one of the predominantly interchangeable products (example: funds) is to be “imposed” on the family office. This purely functional interest is probably a very, very strong driver in this market. But it is probably also simply called the legitimate pursuit of business interests. Caduff: If you read the trade press, you get the impression that such offices are springing up like mushrooms and that existing ones are getting bigger and bigger. Do you share this impression? Markus Hill, independent asset management consultant Hill: I admit that the term is still fuzzy. Of course, it is often used by banks or asset managers as a marketing label out of sales interest; this development is already preordained, so to speak, in the “free market economy & competition” system. Names are after certain time sound and smoke, the achievement counts then, I do not feel this as too deplorable. My feeling is even that many “real” family offices don’t care about that, because they usually deal with much more essential things than with topics like branding and positioning – especially in the single-family office segment. To give a practical example: I had the opportunity to have a brief professional exchange with Prof. Dr. Dietrich Grönemeyer and with his son Till Grönemeyer (Grönemeyer Health GmbH). Both have deep expertise in healthcare. Last year, the family, in combination with external service providers (Christian Exner & Team), also launched a liquid mutual fund on this topic. During the exchange of ideas, it spontaneously crossed my mind that this family constellation with this strong professional orientation in combination with the investment property is, in my opinion, rather close to a single-family office structure, compared to the structure of various other single-family offices. A concrete counter-example in another market segment, the topic of real estate developers: In extreme cases, one has the feeling here that some of these addresses would still like to adopt or would like to adopt the designation Single Family Office – to be fair, this only applies to those addresses that perhaps see themselves more in the role of “marketer”. Sometimes, to the outside world, these structures are not recognizable to third parties at first glance: Am I talking to a family office or to the real estate developer who adorns himself with the reputation of his “core seeder”? Again, that’s nothing to worry about, but it doesn’t necessarily promote transparency in the market. Caduff: You can tell us for sure: in which German city is there the most and largest family offices? Hill: Well, seriously speaking: Of course, I don’t know, as to where the boundaries are drawn and either the boundaries are often too blurred between single-family office, multi-family office, and pure asset managers. And I would be cautious if someone would claim to have transparent information about everything – addresses, investments, investment amount, and AuM (assets under management). But I would be pleased to be convinced otherwise by knowledgeable third parties. Caduff: Is it correct to say that this business has very strong local roots? Hill: Starting from the local middle class, I would agree with the statement. But on the other hand, many of these companies are

  • Each fund location has its special strengths, diversity invigorates the business. Markus Hill spoke for FUNDBOUTIQUES.COM with David Gamper, Managing Director of the LAFV Liechtenstein Investment Fund Association, about topics such as fund launch, real estate, blockchain, AIFM, family offices, and innovation clubs. Besides, the special, cooperation-oriented constellation of the financial centers of Switzerland and Liechtenstein were discussed, as well as the importance of the topics of ESG and sustainability for the fund domicile (Link / Recording – 25.3.2021: “ESG Webinar – Liechtenstein Fund Center and Sustainability – What Fund Promoters and Asset Managers Need to Know” – LAFV & PwC Liechtenstein / Switzerland). Hill: What role does real estate play for Liechtenstein as a fund center? Gamper: The real estate was underrepresented until a few years ago, but is gradually catching up. This is probably since fund initiators used to come mainly from Switzerland, and they hardly ever launched real estate funds abroad. The internationalization of fund initiators has also been accompanied by an increase in real estate funds, as Liechtenstein can boast very advantageous regulatory conditions. Liechtenstein is a member of the EEA and adopts the EU’s AIFM Directive. Thus, the fund center offers almost identical possibilities as other fund domiciles in Europe, e.g. the SICAV or the special fund. If you are interested in this regard, you can find a fund brochure including an overview of the legal forms and structuring options in Liechtenstein on the LAFV website. One of the most important features of the Liechtenstein fund center is the Financial Market Authority (FMA). Not only the very short approval time of three to four days for new products sets Liechtenstein apart from other fund domiciles, but especially the cooperative and solution-oriented approach of the FMA. This has a very positive effect on all parties involved in terms of planning and time. The good cooperation is also reflected in the fact that there are model documents agreed between the FMA and LAFV for the relaunch of funds. The quality requirement for the regulatory necessary constituent documents was deliberately standardized to focus on the real implementation of the processes, which are the basis of asset growth and thus the basis of qualitative investor protection. One example is the new regulation on asset valuation. Not least, for this reason, a German AIFM with a focus on real estate recently expanded to Liechtenstein with its AIFM. Hill: Would you describe the Liechtenstein financial and fund center as innovative? Gamper: On the one hand, Liechtenstein is very traditional and thinks in generations. This also manifests itself in its political and economic stability. On the other hand, it is also very innovative from my point of view. Let’s just think about the first comprehensive “blockchain law” in Europe or maybe even in the world. The first crypto asset fund under European law, which is now making a name for itself with enormous returns, was also licensed in Liechtenstein, as was the first fund that can be traded on a token basis. In Liechtenstein, several institutions promote innovation in the financial sector. From the government side, there is the Financial Center Innovation Staff Office, which supports the innovation processes of financial service providers and financial market-related companies. To improve the governmental framework, there are also the so-called innovation clubs. Anyone can easily communicate their needs to the government. It is also possible to exchange ideas with like-minded people in an innovation club. This enables an efficient process for improving the framework conditions or other areas of government activity. The fund industry has also already contributed ideas here and there is a very quick response to find solutions. The establishment of the regulatory laboratory at the Financial Market Authority (FMA) is also interesting. Innovative business models such as fintech often do not fit into the classic regulatory categories. A competence team for precisely these innovative business models has therefore been set up at the Financial Market Authority Liechtenstein. This gives interested companies direct access to specially qualified contacts for an approval process that is as free of obstacles and as speedy as possible. David Gamper, Managing Director of the LAFV Liechtenstein Investment Fund Association Hill: What is the relationship between Liechtenstein and Switzerland like, is it more of a competitive relationship or cooperation in the fund industry? Gamper: I think there is healthy competition between all fund domiciles in Europe. I cannot speak of a special competitive relationship between Switzerland and Liechtenstein, the starting point is too different for that. Swiss funds cannot benefit from the EU passport, as Switzerland is not a member of the EEA. This means that distribution in Europe is only possible to a very limited extent. On the other hand, investors from Switzerland have the advantage that they do not have to pay stamp duty on domestic funds when they are issued. Thus, I would say that the origin of the investors tends to determine the choice between the two fund domiciles. If they are only in Switzerland, then you set up a fund under Swiss law. If they are in Europe, then one takes a fund domiciled in an EEA state. Liechtenstein is particularly advantageous if the investors come from both Switzerland and the EEA. It is the only fund domicile with EU passport and stamp duty privilege for investors in Switzerland. Thus, there is not any competition, I rather see the advantages of cooperation here. Very many services of the Liechtenstein fund providers are delegated to Switzerland and thus provided there. In some cases, the owners of the Liechtenstein fund companies also come from Switzerland or there are parent companies, sister companies, or subsidiaries there. Last but not least, a very large proportion of the fund initiators come from Switzerland. So it is a cooperation with Switzerland, a very good one. Hill: Family offices were looking at Liechtenstein as a location for fund launches in 2020. Do you continue to see strong interest here in 2021? Gamper: We have already talked about this. Family offices

  • In December last year, a panel discussion on ESG and Insurance-Linked Securities (CAT Bonds) took place on the industry platform ARTEMIS. Markus Hill spoke for FUNDBOUTIQUES.COM with Nico Rischmann, Plenum Investments AG, about the challenges in this market segment, investor education, and the need for cooperation in the industry (sponsors & asset management). In terms of content, topics such as regulation, entrepreneurship, the importance of tail risks, and product management were addressed. Besides, topics such as ratings, risk management, natural disasters, and optimal entry points in the CAT Bonds segment for investors in 2021 were discussed. Hill: ESG is currently attracting a lot of interest as a topic. You and your colleague Dirk Schmelzer had initiated a panel discussion on sustainability and insurance-linked securities (ILS) on the industry platform ARTEMIS back in December. The big players in the industry were also involved. How did this idea come about? Rischmann: We invited to the discussion because we had gained the impression that the ILS industry had not made any progress in the last three years on the topic of “transparency of insurance books”. As a first step, we are trying to demonstrate to violators and insurance brokers that non-ESG compliant behavior will lead to a significant decrease in CAT bond demand because about 45% of ILS/CAT bond demand comes from Europe. We would like to explicitly alert our industry to the risk of potentially losing investors in the future. Our roundtable was the beginning of a series of issues that we still need to work through to establish a generally accepted best practice standard in an asset class that does not conform to traditional ESG analysis methodology. At this point, I would like to appeal to members of the CAT Bond value chain as well as our peers to work together to set this standard. Hill: What did you see as the main findings of the discussion at that time? Rischmann: It was gratifying to see that our industry is taking the issue seriously. That’s not so easy, since we ensure a majority of U.S. risks or cover U.S. violators that are not listed on the stock exchange. We were also very pleased to see that Swiss Re is actively trying to implement sustainability in the risk transfer market. Insurance brokers also seem to be moving. We are in the “butter on the fish” phase. Nico Rischmann, Plenum Investments AG Hill: To what extent is there a concrete need for action for the various providers of ILS (CAT bonds, etc.) and for fund managers who use these products? Rischmann: There is a great need for concrete action. Not only because the relevant laws are now being implemented, but much more because it is a question of interpretation or how to meet the requirements of the legislator. We also see the possibility of a clash between “Forms over Substance” and “Explain or Comply” in the market. What’s my point? We see investors analyzing CAT Bonds by putting the issuer or sponsor at the center of the ESG analysis – as if one were invested in an insurer’s stock or bond here. Since ESG analysis agencies have little information about the insurance book, they focus on analyzing the asset side of the insurance balance sheet. Formally, this approach is consistent with the traditional ESG view. Applied to the holding of pure reinsurance contracts, it seems to us that the use of this method is not appropriate. One would urgently need a generally accepted best practice standard for CAT Bonds. This is currently the big construction site, as the Disclosure Regulation with its categorization in Article 8 or 9 will fuel this discussion. Either the so-called “general amnesty” for CAT bonds will come or the application of the RTS will have to be accepted in a figurative sense to do justice to the special character of CAT bonds. After all, no one denies the high social contribution of this asset class, which can be achieved by an investment to hedge against natural catastrophe events. I don’t anticipate that the legislature will develop its RTS specifically for the ILS industry. As you know, three years ago we began to cast the issue of sustainability and CAT Bonds into a mold with the seriousness it deserves. We decided at that time to go the FNG seal route. It was a very important process for us to learn what language the sustainability industry was speaking. We kept hearing the arguments from our industry that CAT Bonds are sustainable per se. In principle, that statement is correct. But it doesn’t help our industry, because investors need answers to their questions as part of their “check-the-box” due diligence. CAT bonds are still not mainstream. To move in that direction, more education needs to take place. This is because we believe that a thorough understanding of capital market-based insurance risk transfer will generate the understanding necessary to recognize that CAT Bonds are sustainable investments. This includes the discussion about the impact of CAT Bonds. Swiss Re has taken a first and important step with its discussion on the iSDG (Integrated Sustainable Development Goals). Furthermore, we are convinced that it is now time for the ILS-/CAT Bond industry to organize itself worldwide in the sense of an association. After all, the ILS/CAT bond market has meanwhile developed into a major pillar of the reinsurance industry in the field of natural catastrophe risks. Hill: When and how did you personally become interested in CAT bonds? Rischmann: At the beginning of 2000, Plenum Investments AG was the fund management arm of the then Plenum Group that was outsourced to alternative investments. Our core business at that time was the fund of hedge funds business and we were also invested in so-called “event-linked” strategies. During the financial crisis, we were surprised that this asset class was hardly affected. After that, it was clear to me that asset management had to be more than just dealing with volatility. We were made aware that the

  • Topics such as ESG, climate change, and the current investment needs of institutional investors are intensively discussed. Markus Hill spoke for FUNDBOUTIQUES.COM with Daniel Grieger, Plenum Investments AG, about the challenges for portfolio management in the fixed income segment, the topic CAT Bonds (Insurance-Linked Securities), and about his enthusiasm for this special segment. Additionally, the importance of subordinated bonds in banks and insurance companies was discussed as well as the importance of empathy (keyword: diversity of interests & perspectives – “palms of steel”). Hill: How long have you been involved with the topic of insurance-linked securities (CAT bonds)? Grieger: I originally come from Mannheim, my studies in St. Gallen were the reason for my emigration. At the St. Gallen Symposium, I heard the then CEO of Swiss Re, Walter Kielholz, speak about climate change and was thrilled that a profit-oriented company was taking on the topic. I started working for the Institute of Insurance Economics, wrote my thesis in 1999 on CAT Bonds, and – had my first job at Swiss Re. At the time, there was no money to be made in CAT Bonds, and the regulatory arbitrage between bank regulation and the then almost non-existent regulation of reinsurers brought quite different opportunities. I became an underwriter and did mostly structured credit and credit derivatives. It was an exciting time but it wasn’t until I moved to Horizon21 and the aftermath of Hurricane Katrina in 2007 that I started looking at CAT Bonds again, and then immediately as an investor. The interface between the insurance industry and asset management has stuck with me ever since. Both worlds have their peculiarities and I find bridging them very exciting. Besides, my job is about making a small contribution to keeping insurance premiums affordable in certain geographies and thereby mitigating the impact of climate change on private households. But my work result will also hopefully ultimately ensure that investors achieve a higher and more stable return than with usual investment instruments. Daniel Grieger, partner and fund manager, Plenum Investments AG Hill: What challenges are investors currently facing in the fixed income sector? Grieger: Investors with thetraditional 60/40 approach are facing the challenge that a large part of their allocation has has become non-yielding paper. Many corporate bond issuers have used the past few years to secure attractive conditions by placing bonds with the longest possible maturities. So the duration of corporate bonds has tended to rise – while interest rates have remained at record lows. So anyone who wants to continue investing in corporate bonds would have to take on more credit risk. Or they could turn to niches such as insurance subordinated debt. Here, strong regulation of insurers ensures that issuers meet high solvency requirements. The investment universe is pre-filtered, so to speak, by the local regulators in the individual European countries. Nevertheless, these bonds still pay attractive yields. Hill: How can insurance-linked securities offer solutions here? Grieger: I would like to define the term insurance-linked securities more broadly here and also include the debt capital that insurers issue. In my opinion, it doesn’t matter in which format I provide capital to an insurer. Whether it’s a CAT bond or a subordinated bond, the insurer will ultimately be able to write more business. CAT bonds are characterized by the fact that they cover the pure natural hazard risk and generate a market-independent return, provided the earth doesn’t shake or the wind doesn’t blow. There is no credit or duration risk here. Subordinated bonds embody both interest rate and issuer default risk. Both instruments are suitable for investors in 2021. Interest rates are likely to rise in the medium term due to synchronized economic stimulus programs around the world. Government bonds will then no longer be attractive. If investors are now looking for a substitute in the fixed-income area, CAT bonds, and subordinated insurance bonds are suitable in both cases. The CAT bonds are floaters. The spreads are relatively attractive due to the healthy market environment for reinsurers. The insurance subordinates also pay surprisingly high yields, but they also come with interest rate risk. Hill: What are you dealing with more intensively from a technical point of view at the moment? Grieger: We have just completed preparations for the launch of a pure fund for insurance subordinates. As mentioned above, investors are looking for alternatives on the fixed income side. Often, subordinated bank debt is already used, but there is a lack of expertise for subordinated insurance debt. This can be bought in through our fund – with daily liquidity. I’m also looking at secondary risks – by which I mean forest fires and floods. Both risks are increasing due to climate change, and the question is to what extent one wants to expose one’s portfolio here. I am rather cautious about these risks. But I’m not the only one, and there are quite high returns that are tempting here. For example, the National Flood Insurance Program in the U.S. has just placed a CAT bond that covers flooding due to hurricanes in the U.S. – the less risky tranche, for example, already pays 13%. Hill: The world does not just finance. What are you currently reading? Grieger: I’m currently reading Dominik Bloh’s book (Unter Palmen aus Stahl – Geschichte eines Straßenjungen), which describes his time as a homeless man in Hamburg. It is a biography that shows the circumstances under which a person can end up homeless in Germany and how difficult it is to escape this situation again. It is a vicious circle, i.e. “no fixed residence, no job”, “no job, no bank account”, “no bank account, no phone” and so again to the status “no phone, no job”. At the same time, it is hard to believe that someone without any material possessions is enthusiastically helping Syrian refugees. The indifference of government agencies is shocking and dispels the prejudice that homeless people are helped without further ado in a rich country like Germany. Hill: Thank you very much for

  • “One, two, three, at a whizzing pace time runs; we run with it.” (Wilhelm Busch). Frankfurt, innovation, resilience, and entrepreneurship – Markus Hill spoke with author Ortrud Toker for FINANZPLATZ-FRANKFURT-MAIN.DE about entrepreneurial personalities, inventiveness, and the historical significance of slowness, speed, and communication. Topics such as technology, inventiveness, and Prussia are addressed as well as data transmission, banking, and Frankfurt’s Paulskirche. Hill: The Frankfurter Rundschau called your book “Vom Ende der Langsamkeit” a public favourite, HR2 Kultur and Thalia recommend your book as a “Buchtipp”. Before Lockdown, you had many readings, including at the DenkBar, the Weltenleser bookshop and the Kulturfabrik in Sachsenhausen.  What is your book about? Toker: “The End of Slowness” is about three extraordinary personalities of the 19th century. Werner von Siemens, Philipp Reis, and the couple Bertha and Carl Benz. They were all instrumental in groundbreaking inventions, namely telegraphy, the telephone, and the automobile. These inventions changed the world and still shape it today. Hill: I see, it’s about entrepreneurial personalities. What do they have in common and how do they differ? Because I know two names, but I’m not familiar with Philipp Reis. Toker: We are dealing with three completely different entrepreneurial characters. Werner von Siemens is probably the most popular and most influential. What distinguishes him is that he never lost sight of his goal, always remained curious, open, and above all flexible. He never allowed himself to be permanently discouraged by setbacks and defeats, but rather they spurred him on to achieve great things. In 1842, already as a young artillery officer, he used his imprisonment in Magdeburg prison, for example, for experiments that led to a significant discovery and his first patent. The beginning of a lifelong career, full of ups and downs. The Friedrichsdorf teacher Philipp Reis, on the other hand, was hapless and found no investors throughout his life. He died before the further development of his telephone began a worldwide triumphal procession. And what would have become of Carl Benz’s “Kutsch’ ohne Gäul'” if his wife Bertha had not tirelessly encouraged and supported him over the decades is written in the stars? Ortrud Toker, AuthorPhoto: Hartmuth Schröder Hill: So your book is also about the fact that inventiveness alone is not enough to be successful in the long run. Toker: Absolutely. It’s commonplace that the gods put sweat before success. But what exactly that looks like and what it means in detail can be seen very clearly in these three CVs. Not only diligence and perseverance are an advantage, but also perseverance in achieving goals and a special resilience. Resilience refers to the ability to keep going after setbacks, to look forward like skipjack, and to learn productively from mistakes. The examples in my book show how this can be done. Every era needs clever, unconventional solutions, innovators, and visionaries. Entrepreneurs who burn for their goals, take calculated risks and assume responsibility. Only when innovative ideas are accompanied by the courage to implement them, openness, a sense of proportion, and staying power can they lead to long-term success. There are plenty of examples where perseverance has paid off. Today’s superstars are Steve Jobs, Elon Musk, and Jeff Bezos. But of course, people who have a smaller sphere of influence also know this. Hill: Everyone talks about speed, but why do you talk about the end of slowness in your book? Toker: In the inventions of the main characters in my book, Siemens, Reis, and the Benz couple, the acceleration of the transport of people and news plays a central role. But what exactly speed is and what significance it has in our society is constantly being redefined. In 1888, Bertha Benz needed a whole day to cover the 100 kilometers from Mannheim to Pforzheim in the first automobile. Her husband Carl Benz wanted to stop producing cars at a speed of 50 kilometers per hour. Today, the new mobile radio standard G5 is about transmitting data speeds of up to 10 gigabits per second, which means communication in real-time and enables completely new applications. 100 billion devices would be addressable at the same time. Hill: Fast data transmission was also politically and militarily relevant and still is today. Is that why Frankfurt’s Paulskirche also plays a role in your book? Toker: Wired telegraphy was a brand-new technology in 1848/49 during the revolution. The Prussian king in Berlin wanted to be informed as quickly as possible about what was happening during the National Assembly in Frankfurt. Werner von Siemens was therefore commissioned to build the first European trunk line from Berlin to Frankfurt. When the National Assembly decided on 28 March 1849 to offer the imperial dignity to the king, the news travelled from Frankfurt to Berlin at the sensational speed of just one hour. If you think about it, we’re talking about a single wire, a cable connection on poles. That’s how it started back then. Today, Frankfurt is the location of Europe’s largest Internet node. Hill: The financial world is also dependent on precise and fast data transmission – does Frankfurt have location advantages here historically? Toker: Certainly, that is the point. My book is about the beginnings of accelerated communication, the first hot wire between Berlin and Frankfurt. There are famous precursors before telegraphy. At the beginning of the 19th century, the Rothschild banking family maintained their lofts for carrier pigeons on the roofs of their banking houses and used them to transport stock prices. In this way, they outflanked the competition. Hill: That sounds like the motto “knowledge is power”. Toker: Quite right. Nathan Mayer Rothschild knew before the British prime minister that Napoleon had been defeated at Waterloo and used this knowledge profitably for share trading. Carrier pigeons were also used by Julius Reuter in the mid-19th century for bridging purposes as long as the telegraph network was not yet fully established, even before he founded his news agency. Hill: Thank you very much for the interview. Ortrud Toker, born in 1957, studied art

  • According to the Duden dictionary, the term boutique translates as “small store” – some asset managers, which are classified in the category of fund boutiques, would generally not be happy with this title, others would welcome and appreciate it with enthusiasm. In the asset management sector, these agile houses may even represent the “salt in the soup” in an increasingly regulated and synchronized investment world. For more than 20 years, I have been navigating the landscape of so-called specialty providers in asset management, as fund boutiques (boutiques) might also be called. They are usually characterized by the following: 1. focus on one or a few, usually special asset classes such as private equity, hedge funds, “closed-end funds” / AIF, micro-finance, insurance-linked securities (ILS), or even completely new developments such as crypto assets.2. Highly specialized portfolio managers and analysts for the respective segments with appropriate market access and know-how.3. generally increased knowledge requirements for employees in product management, sales, marketing, and IT.4. especially in the early years, high self-motivation, a special “team spirit” – combined with the knowledge of being able to offer added value to its investors and to work very closely with them.5. very high continuity in management and employees. Holger Leppin, Senior Relationship Manager, Plenum Investments AG In my view, investors look for and appreciate precisely these special features – even today, despite significantly higher requirements than 20 years ago. Fund boutiques deliver more than plain vanilla and should not be closet indexers: specialization and active (!) fund managers are in demand. Only those who build up and maintain their track record, service, and innovative strength over many years will gain a corresponding reputation in the market. Challenges – size, costs, and regulation To what numbers is the term fund boutique tied? There seems to be no fixed limit here – as a benchmark in the AuM area, up to approx. EUR 10 billion can be heard as a boutique area. However: Is one above this mark no longer a boutique, although not much has changed from the above list and claim? I think no. There are examples in the market that manage very large volumes (greater than EUR 20 billion) and are still described in the market as “familiar”, “responsive” and “highly competent”. A practical example: I know chief economists of meanwhile very large asset managers who still spend the whole day every year at the stand at the Fondskongress in Mannheim and patiently answer questions from every financial advisor, no matter how small. This attitude also explains the difference why other houses have never managed to climb to the next level, some also like to talk about “Champions League”. And that brings us to the dangers or challenges that boutiques face. In an increasingly demanding market, where you not only have to compete against “cheaper” passive fund vehicles, costs in general, especially due to regulation, but are also becoming an ever more decisive factor, or you simply cannot map certain scales compared to the “big” addresses due to a lack of size – that’s where the air becomes thin. Visibility, digitization, ESG, and personal dialog And how can fund boutiques become more visible in the market when the Pimcos and BlackRock’s of this world have multi-million dollar marketing budgets with their social media departments that small providers can only dream? In the wake of the Corona pandemic, many asset managers will have to reposition themselves. Old structures from traditional trade shows, conventions, roadshows, or face-to-face meetings with portfolio managers, relationship managers, and investors will become increasingly “digital”. How much of the “old” days will return after the pandemic is difficult to estimate. It will not return completely. After all, if almost all asset managers are currently integrating ESG criteria into their strategies and business models, and “green” investing is “state of the art,” how can it be justified that thousands of company used car trips or short-haul flights to arrange meetings? Sometimes the impression can arise here that this form of travel activity might be motivated more by thoughts of status or concern for the Senator mileage account. At this point, the usefulness and importance of face-to-face meetings between asset managers and investors should not be completely denied, but they can and probably will be limited to a few and more efficient forms. It not only reduces the carbon footprint but is also cost-effective. Fund boutiques often have the advantage here that they have structures that have grown over many years and have established a good network that can be managed well “digitally”. The in-person visits, which will be possible again in the future, but reduced, will then be appreciated again. Outlook Despite the issues and challenges that smaller asset managers face, I am convinced that they will have a future with the right business model. And it is to be hoped that there will continue to be investors/product selectors who are open to precisely these houses with their approaches. They should continue to be given the opportunities to make decisions outside the mainstream – only in this interplay do we prevent a kind of monoculture in the fund landscape. What is one of the reasons why you enjoy working at a fund boutique? It is the lively exchange with people – the personal contact, the personal decisions that take place “face to face” – fortunately not yet replaced by algorithms! Holger Leppin has been active in sales in the financial sector since 1994, focusing on asset managers with special themes. From 2000, he helped MPC Capital AG become the market leader in closed-end funds from Switzerland, worked from 2012 for Fisch Asset Management AG in Zurich, which specializes in convertible and corporate bonds, and moved to Plenum Investments AG (insurance-linked securities) in 2020. LINK to Plenum Investments AG: Related articles: Behavioural Finance & Cat Bonds (Martin Friedrich, Lansdowne Partners Austria GmbH)CAT Bonds, Climate Change, Risk Management & “Palms of Steel” (Interview – Daniel Grieger, Plenum Investments AG)

  • Financial market forecasts, “speculative bubbles” and geopolitics – Markus Hill spoke for FUNDBOUTIQUES.COM with Martin Friedrich, Lansdowne Partners Austria GmbH, about the current challenges as a fund of funds manager in the area of capital market analysis and the importance of currency developments and commodity prices in the assessment of asset classes. Hill: The markets are currently interesting. Can one now speak of a speculative bubble? Friedrich: The first thing I would like to say about this is that the word “bubble” is used far too lightly in public discourse. In fact, not every sector that has risen sharply is necessarily in a bubble. Otherwise, market participants who make their money from short-selling wouldn’t be struggling as well. Some studies show that even a rise of 100% within two years only leads to a correction of at least 40% in half of all cases. However, there are segments in the U.S. market in particular that cause me concern. Interestingly, it is often the accompanying signs of the price increase that make it easier to diagnose a bubble. Unfortunately, there are several warning signs here. Hill: What do you mean specifically? Friedrich: First, the fact that some sectors are in an accelerating uptrend. In the process, volatility is rising, which is unusual – normally, the tendency to fluctuate is higher in downward phases and calms down on the way up. Second, we often see retail investors pushing particularly hard into the stock market toward the end of a bull market. It is also particularly evident right now, as was dramatically evident in light of the Gamestop episode. Third, we have high activity in new issues. Here, speculation is facilitated and additionally fueled by the oversupply of liquidity. We see a certain parallel here with the turn of the year 1999 to 2000 – the central bank played a role then, too. However, the reason was not a pandemic, but the fear that many computer systems would grind to a halt in connection with the date change. As a result, an index of leading Internet companies doubled in the last three months before the millennium change, having already returned 130% in the first nine months of 1999. In Germany, too, the Neuer Markt Index rose by 56% in 1999 as a whole and then made a further gain of almost 90% between the beginning of 2000 and mid-March. By comparison, however, 2020 compares favorably: an equally weighted index of Facebook, Amazon, Apple, Netflix, and Google rose 59% after rising 43% the year before. In cases like Tesla, the numbers are even higher by quite a bit. Martin Friedrich, Lansdowne Partners Austria GmbH Hill: To what extent do you base your market assessments on financial forecasts from other institutions? Friedrich: Within the framework of our investment policy, we distinguish between medium- and long-term models. Here, the medium-term projections are aimed at a time horizon of 6 -18 months, whereas in the case of the long-term, we are concerned with the outlook for the next seven years. The distinction is important: while we exclusively use our models for the assessment of short- to medium-term events, for our long-term projections we observe an always constant cross-section of well-known asset managers and research houses, which have in common that they publish just such forecasts. The median of this “expert panel” is one of several input variables for our asset allocation planning. Paradoxically, in financial markets, long-term developments are often more predictable than short-term ones – for the simple reason that short-term upheavals often fade away as quickly as they can occur – the year 2020 was a good example of this. Hill: Especially after the current election results – how do you view the current role of the U.S.? Friedrich: We expect – as probably most do – that the new administration will isolate itself less internationally and seek a stronger relationship with traditional partners again. The conflict with China will nevertheless remain but probably conducted by other means. Economically, we expect very strong growth, brought about by the combination of high fiscal stimulus and recovery from the end of the pandemic. Besides, the dollar is likely to be weak, boosted by parallel budget and current account deficits and by a central bank which, after ten years of too-low inflation, now finally wants to see higher figures and is therefore deliberately keeping the economy “running hot”. This is an explosive set of macroeconomic conditions that we are facing here. That’s why it’s not possible to be confident that the “air will soon come out of the bubble,” if you’ll allow me a colloquial image. Hill: In your fund of funds, your capital market analysis forms the basis for specific investment decisions. Is there a particular asset class and particular asset managers that you are looking at more closely at the moment? Friedrich: We always have to keep an eye on all asset classes and managers, that’s our daily bread. But of course, some areas could potentially be favored by the macroeconomic big weather. For example, let’s stay with the likely weaker dollar that I just talked about: a weaker dollar increases liquidity in less developed countries and at the same time favors rising commodity prices. We could thus see a renaissance in emerging market assets, as well as value-oriented investments – parts of the capital market that are still heavily underrepresented in most investors’ portfolios after a prolonged bear market. Hill: Thank you very much for talking to us. Martin Friedrich is portfolio manager of the Lansdowne Endowment Fund and Head of Research. He joined Lansdowne Partners Austria in January 2019 from HQ Trust, one of the largest independent multi-family offices in Germany. Mr. Friedrich had been employed there since 2009, most recently as Head of Capital Markets Research and Co-Chief Investment Officer. Additionally, he managed client portfolios and was responsible for the investment process of LIQID, a fintech company in Berlin. Link to Lansdowne Partners Austria GmbH: Related Articles: Behavioural Finance & Cat

  • “Jewish life in Frankfurt” – This is also the title of the brochure that has just been published by the City of Frankfurt, Department of Finance, Participations and Churches in cooperation with the Jewish Community of Frankfurt and which is about common history, discovering, experiencing and also remembering. The mayor as well as the head of the church, Uwe Becker, and the chairman of the board of the Jewish community have written committed words of greeting. Jewish life in Frankfurt has a great tradition going back almost 900 years. The historical traces of Jewish life can also be traced in Frankfurt’s wonderfully restored old town. The horrific expulsion and murder of Frankfurt Jews in the Holocaust left terrible scars on our urban society. After 1945, there were only a few Frankfurt Jews who also returned to their destroyed hometown; before 1933, the Jewish community consisted of 30,000 members and embodied the most significant era of Jewish activity up to that time. Eva-Maria Klatt, Frankfurt am Main It was not until 1864 that Jewish Frankfurt residents gained full equality and the community grew; in 1882 the synagogue on Börneplatz (destroyed by the Nazis, who then built a high-rise bunker over it) was consecrated, and in 1910 the Westend Synagogue. Today the Jewish community has about 7,000 members and is the second largest in Germany. In 1986, the Jewish Community Center was opened, which is now called the Ignatz Bubis Center. This center, like other buildings here, makes Jewish life in the city “alive” again. The Jewish kindergarten, the Lichtigfeld School, the Jewish sports club TUS Makkabi in the heart of Frankfurt, and the Jewish Museum, which was reopened in October with its impressive bright new architecture, are also very noticeable and visible. CORONA, LOCKDOWN, AND MUSEUM “Closedbutopen” was the motto for the Jewish Museum during the second lockdown until its radical closure. It is the oldest Jewish Museum in Germany and focuses on 800 years of Jewish history in Frankfurt. It was rebuilt for five years until it opened on Oct. 21, 2021, with a rather ascetic ceremony in the Alte Oper, allowed with hygiene measures due to the pandemic. The Jewish Museum has its own YouTube channel with many informative and worth seeing films, it is present on Twitter, Facebook, Instagram with daily posts, all of which are stimulating and make curious to visit – at present and later. CULTURE, EVENTS, AND CURIOSITY Frankfurt, as a small but decidedly powerful metropolis, now also features Jewish Film Days in May and Jewish Culture Weeks in September. Jewish life in its diversity is not limited to the aforementioned buildings but takes place everywhere in Frankfurt because there is an impressive range of Jewish institutions and activities here. One example is the Frankfurt Schönstädt Lodge, B’nai B’rith, which was founded in 1888 as the 20th B’nai B’rith Lodge in Germany and whose members were highly active and volunteered for the common good. Banned during the Third Reich, it was re-founded in Frankfurt in 1961 – with changed tasks but always remaining true to its ideals and values. In the beautiful old rooms of the lodge, cultural events of various kinds take place at regular intervals, which are very popular in the city society. Jewish life in Frankfurt is also embodied by the brothers James and David Ardinast. They enrich the gastronomic and nightlife culture of our city with many restaurants such as the “Stanley Diamond” or the “Bar Shuka” in Niddastraße. Another example of this diversity is the Jewish Community Center for the Elderly, nursing home with a residential facility for the elderly, and the Henry and Emma Budge Foundation Care Center, which is open to Jews and Christians alike. Both facilities also offer numerous cultural events, which many Frankfurt residents enjoy attending. Representative of many activities within Jewish life in Frankfurt is the Interfaith Choir, which is jointly organized by two choirmasters, the Protestant cantor Bettina Strübel and the Jewish Chasan Daniel Kempin, which signifies another facet. Perhaps the readers of this article have become curious about many more Jewish traditions and stories of our city Frankfurt am Main, freely according to the motto: “A new kind of thinking is necessary if mankind wants to live on” (Albert Einstein). Eva-Maria Klatt, retired senior lecturer, Deputy Chairwoman of the DiG Frankfurt (German-Israeli Society) JEWISH MUSEUM FRANKFURT: Source:

  • “A formulated problem is already half-solved” (Charles Kettering). Markus Hill* spoke for with Harald Schnorrenberg, GET Capital, about the interrelationships of asset management, artificial intelligence, and the importance of risk and return estimators in the investment process. Additional topics of conversation included the use of mutual funds by institutional investors as well as Robo-advisory and field hockey. Hill: Since when have you been more intensively involved with the topic of artificial intelligence and asset management? Schnorrenberg: We have been involved with AI since 2009/10. At that time, many investors had to realize that classic portfolio management and risk approaches do not always work well in extreme situations and the subsequent recovery phases. We were looking for better solutions. Working with universities, we became aware of pattern recognition as a subfield of artificial intelligence. It was a long process. We have completely converted the investment process to AI and automated it since 2012. Harald Schnorrenberg, GET Capital Hill: Do you have the impression that investors have developed a strong interest in this area and have sufficient know-how here? Schnorrenberg: We see growing interest as the topic becomes mainstream and various applications have arrived in real life. You see interest especially among the generation that is not yet in decision-making roles. AI is effective, but it is still very complex. However, if you understand the principles, you are already further along as an investor than most. Hill: You have particular expertise in serving traditional institutional investors. You launched your mutual fund years ago. How did this idea come about? Schnorrenberg: As with most quant approaches, AI is complex to understand and investors find it easier if they can test an investment live with small amounts. Mutual funds are a good format to do that. They offer more confidence than, say, model calculations. Hill: What is the investment approach of your fund? Schnorrenberg: Basically, our investment process is not very different from the usual approaches. The main difference is the way it is implemented. Intelligent algorithms, not portfolio managers, provide the trading signals, and they do so throughout. This process is completely automated. This means there is no manual intervention, only checks at points critical to success. This is Industry 4.0 in asset management. Asset management, in particular, is predestined for AI, because large volumes of data have to be analyzed, forecasts made and optimization carried out. Today, technology can do this much better than humans in many areas. It is very hard to be better than the benchmark inefficient markets anyway, especially by cost. As practice shows, only a few managers manage to do this consistently over several years. We do not rely on classic analyses, but therefore use synergies from Big Data, the Internet, and artificial intelligence algorithms to generate added value from the daily flood of data. The investment strategy is determined by three main input factors: 1. risk estimators of the relevant markets 2. return estimators of the relevant markets and 3. optimization constraints (such as a risk budget of x%). The risk and return estimators are influenced by market changes and adjust themselves. With this adjustment, the allocation of the portfolio can also be changed depending on the market change. Likewise, the risk constraint can trigger a change in the allocation, depending on the utilization. The investment decision is derived in three steps: 1. market analysis: via regressors and classifiers (AI methods of machine learning), about 8,000 securities of the relevant markets are checked daily to see if they are unlocked for investment and if so, which are the most interesting markets in terms of an absolute return estimator. 2. portfolio construction: In this process step, individual restrictions (for example, the risk budget) and the defined overall universe are introduced into the process. 3. portfolio optimization: Here, the relevant markets from the defined overall universe flow together with the return/risk estimators and the portfolio restrictions. An optimal portfolio allocation with all constraints and transaction costs is determined. Our return estimator logic forms the basis for market estimates. The regime-based return estimators are calculated using a pattern recognition process and their intelligent evaluation based on historical data. Hill: How do you estimate the importance of mutual funds for institutional investors, which are launched by fund boutiques? Schnorrenberg: You have to ask the investors that. As described, these offer a good opportunity for a “test drive,” that is, to test strategies under real conditions. Investors reflect on us that the ability to invest in mutual funds quickly, transparently, and cost-effectively is helpful. Hill: Where can your approach be found in addition to the traditional institutional business? Schnorrenberg: Institutional investors are our core clientele. However, due to the flexibility and scalability of the platform, it also acts as an engine for Sparkasse Bremen’s Robo-advisor: Smavesto. Incidentally, Smavesto won the Handelsblatt comparison of 25 Robo-advisors in November 2020 with a 10.2% return over 1 year by a clear margin. Hill: What trends are you currently observing in your customer segment? Schnorrenberg: Zero interest rates are a major problem. Here, people are desperately looking for alternatives in all conceivable formats and forms. This requires a considerable build-up of know-how because simple solutions no longer exist. Thus, capital management is becoming more strenuous. We are seeing strong demand for long/short products underpinned by our technology. Hill: What topics do you deal with when you want to get a “fresh head”? Schnorrenberg: As you know, the world is not just about asset management. Sports are a good balance for me. I enjoy playing field hockey and tennis. Hill: Thank you very much for the interview. GET Capital AG: *) Markus Hill is an independent asset management consultant in Frankfurt am Main. Related Interviews: Real Assets, Asset Management Consultants, Mutual Funds, Borussia Dortmund & “A Brief History of Humanity” (Interview – Martin Dürr, FAROS Fiduciary Management AG)Quantity & ESG – singularity theory, fund selection, seed money & “mirror of light” (Dr. Oliver Klehn, interview & literature reference)Value Investing, Aristoteles, Fund Selection & Ownership

  • The banknote pictured, with a nominal value of 100 trillion, comes from a trip to Africa. It was printed in late 2008 and had a value of only $30 at the time. It is a vivid reminder of how hyperinflation can destroy an economy. Currently, investors and the public community, are concerned about a return of inflation in developed countries. They are unsettled by the rapid pace of money printing by central banks. The scientific basis of such inflation fears is known as the “quantity theory of money.” It is a fairly old paradigm, but one that assumes that neither the general level of output in an economy nor the velocity of money changes much (1). In today’s reality, however, this assumption is invalidated by the fact that the velocity of money is very much changing, and changing significantly. Since its peak in 2007, for example, the velocity of M1 money has declined by more than 60%, while the velocity of MZM has halved, ensuring that prices have risen less than the Federal Reserve intended. Martin Friedrich, Portfoliomanager of the Lansdowne Endowment Fund and Head of Research The sharp increase in the money supply has to do with quantitative easing programs: When a central bank buys bonds, the sellers receive cash. This cash, unlike bonds, is included in the money supply calculation, so the increase in the money supply is a logical consequence. However: the velocity of money in circulation will decrease by the same amount as long as this money remains buried in bank accounts. To create inflation, it must find its way into actual purchasing decisions. And therein lies the disconnect between quantity theory and practice: as central banks found out back in the years after the great financial crisis of 2008-2009, quantitative easing programs are effective in providing liquidity to capital markets, but they cannot stimulate demand in the real economy. As a result, central banks quickly felt helpless in their attempt to create inflation2 as the velocity of money simply shrank in response to the increased money supply, neutralizing most of the desired effect. What causes inflation? There are several competing and, of course, interconnected theories to explain and possibly predict inflation. Broadly, these explanations fall into three camps: 1) Monetarism – inflation is caused by too much growth in the money supply. 2) Supply-side access – it is caused by rising prices for inputs in the economic cycle, such as commodities or wages 3) Demand-side access – high growth leads to capacity constraints and resource scarcity, which then subsequently causes rising prices Beyond examining these mechanisms, central banks also closely monitor inflation expectations. After all, once the expectation of rising prices is embedded in the thinking and behavior of economic agents, it easily becomes the proverbial self-fulfilling prophecy. No sustainable increase in the immediate future When the world enters a broadly synchronized recovery from this year’s deep recession in 2021, we will very likely see a temporary rise in inflation metrics. Beyond that, however, none of the ways we have described allow us to forecast a sustained rise in inflation over the next 2-3 years. Let us consider the three theories in turn. Approach 1, monetarism: We have already shown that the link between money supply and inflation has been effectively short-circuited by the banking sector. Figure 1: No wage-price spiral!Sources: Bloomberg, OECD, Lansdowne Partners Austria Approach 2, the supply-side argument, is often cited as the driving force behind the inflation of the 1970s. At that time, unions had considerable bargaining power and pushed through large annual wage increases, perhaps leading people to anticipate inflation. Economists identified a “wage-price spiral.” In contrast, in today’s environment, wages are unlikely to rise significantly until unemployment returns to pre-recession levels. Figure 1 shows that hourly wages have in any case not signaled inflationary pressures so far. Following the third approach, it is difficult to diagnose inflation-relevant capacity constraints as long as economic growth is very far below its longer-term trend. Charts 2 and 3 show that in the past, whenever the output gap4 has been negative, inflation has generally trended downward rather than upward: Figure 2: U.S.-estimated output gap versus 12-month change in inflationSource: Bloomberg, OECD, Lansdowne Partners Austria Figure 3: Europe – Output Gap Estimate versus 12-Month Change in InflationSource: Bloomberg, OECD, Lansdowne Partners Austria Finally, both market-based and survey-based inflation expectations currently remain at a stable low level. Notwithstanding this outlook, which in itself is not a cause for concern, there is one short-term effect worth mentioning: From spring 2021, we expect base effects from volatile energy prices. The average price of crude oil (WTI) was around $17 in April 2020; today we are around 170% higher. This means that if prices continue to rise, and even if such price increases are only marginally passed through to consumers, we could see headline price increases of 3% or above in the US in April 2021. You can be sure that some journalists will pick up on this, and it will be interesting to see how the bond market reacts then. Nonetheless, we expect this rise in inflation to be temporary. The role of fiscal policy Unfortunately, there are still longer-term drivers of inflation that could change the dynamics so far. In fact, we see an inflation storm on the horizon. To explain, let’s briefly discuss the role of fiscal policy in the current economic situation. The economic crisis of 2020 is fundamentally different from all previous crises in one aspect: This time, the recession is the result of a conscious decision by governments. It was decided that it is better for society as a whole to accept a recession now than to deal with the consequences of mass death due to an exponential increase in infections later. In this situation, many people are now relying on “helicopter money” to continue paying their bills. Without the many fiscal programs, the world would probably look different today. Remember, as we have said before, central banks cannot create demand.

  • There is still no uniform definition for the term “fund boutique”, but from our point of view, all fund boutiques have one thing in common, i.e. a kind of trademark: they are owner-managed and their strategies are unique in contrast to the “big players” in the fund industry. Usually, the change of a (well-known) fund manager into self-employment is the birth of such a fund boutique. In Germany, there are very successful houses and these independent asset managers are also coming more and more into focus in the media. Names that have been strong in this country for years, both in the private client business and with institutional and semi-institutional investors, and continue to grow, include Acatis, DJE, Flossbach von Storch, and Lupus alpha, to name just a few. What makes a fund boutique, how does it differ from the big fund houses? First of all, it is a fact that the large providers often launch funds on a scattergun principle to cover as many themes as possible and to reach the largest possible number of investors. Fund boutiques, on the other hand, take a completely different approach, because there are “actively managed strategies away from the mainstream” and not infrequently certain niches are occupied. While fund managers in large houses must adhere to certain guidelines within their strategy, fund boutiques and their managers have a great deal of leeway and can ultimately give free rein to their creativity. One of the other strategies of a fund boutique would not even exist without the customers, because besides, the fulfillment of individual investor wishes also plays a certain role. This in turn means that successful or special investment solutions are often not showered with money, which is an advantage in the case of one strategy or another. Michael Bohn is Managing Director of Greiff Research Institut GmbH and also heads the editorial team of the publication “Der Fonds Analyst” The “high-conviction approach” (concentrated portfolios) is widespread among fund boutiques: The managers do not follow any index, structure correspondingly concentrated portfolios with comparatively few securities and, as a result, the funds very often have only a low correlation to mainstream funds, which benefits the investor portfolio. No less important for the success of a fund boutique and therefore not to be underestimated are, in our view, the following arguments in addition to this described flexibility and existing niche occupation: The personal connection and the proximity to the investors are in each case a valuable commodity, which the large market participants can hardly or not at all offer. This, in combination with a certain continuity of personnel, builds trust with investors that can tip the scales in favor of a boutique approach. We all know that in the end, it is mostly performance that counts, but boutiques can score points here as well: As a study by London’s Cass Business School in collaboration with the Group of Boutique Asset Managers showed, fund boutiques managed to outperform large asset managers (various equity funds, period January 2000 to July 2019). In some areas, the outperformance was particularly striking (for example, large caps, mid and small caps Europe). But of course, there are stumbling blocks that small boutiques often encounter. The path to the first ten million euros can sometimes be very long, which can of course be due to the skill of the manager or the lack of contacts with investors who are open to funding boutiques. Arguments such as “fund volume too small” or “insufficient history” does not make life any easier for aspiring fund boutiques. Longer phases of standstill can be the result before the breakthrough is eventually achieved. But also in the future, there will always be boutiques that leave the market again. Conclusion: In our view, fund boutiques can score with their independence, maximum commitment, personal ties, and specialization with investors. And studies have already proven that this can go hand in hand with outperformance compared to the big managers. Michael Bohn is Managing Director of Greiff Research Institut GmbH, heads the “Fund Analysis Research” division, and has over 20 years of investment experience, including in the evaluation of investment funds. He also heads the editorial team of the publication “Der Fonds Analyst”. Website: Source: HANSAWELT 3/2020 by HANSAINVEST

  • Psychology in Action, And an Interesting Asset Class One of the most fascinating and promising parts of finance research is a discipline called “behavioural finance”. It represents an important step forward in our understanding of how capital markets function, how risk is priced, and why certain inefficiencies persist and enable those who are disciplined to capture excess returns. One such inefficiency evolves around how most people – and investors are also people – deal with probabilities. Research has repeatedly shown that humans tend to over-estimate small probabilities and under-estimate large probabilities (Exhibit 1). The reliability of this fallacy has given rise to two entire industries – gambling and insurance! To be fair, the case is clearer in the case of gambling. The price of a lottery ticket is about twice what you’d expect to receive, on average, if you could play an infinite number of times. In the stock market, there is gambling too: it has been proven that stocks which carry the promise of very high returns with a small probability (so called “lottery stocks”) are systematically overpriced relative to their fair value1. AUTHOR: Martin Friedrich, Lansdowne Partners Austria GmbH Exhibit 1: Probability vs. Decision WeightsSource: D. Kahnemann, Fast and Slow Thinking Insurance-Linked Securities (Cat Bonds) In insurance, prices are much closer to their associated probability-weighted loss than is the case for lotteries, thanks to competition, and because buyers are probably more financially sophisticated than those who buy lottery tickets. Insurance serves a useful function in society by enabling economic subjects – companies as well as individuals – to relieve themselves of risks that are too big to bear. However, the insurance industry has a problem with natural catastrophes. If a large number of policy holders in a certain area suddenly have a claim based on the same event, insurers can quickly be overwhelmed. The first such insured event occurred in 1842, when the city of Hamburg burned to the ground. In its wake, that single fire bankrupted what was then the entire German insurance industry, which subsequently led to the foundation of Cologne Re. The episode gave birth to a whole new industry, called reinsurance, which is tasked with protecting primary insurance companies from the existential risk of being wiped out by very large natural catastrophes. A reinsurance contract essentially specifies that in return for upfront premium payments, the buyer (cedent) of the policy will not bear losses in excess of a certain threshold from a predefined event (e.g. an earthquake). Reinsurers will then engage in several strategies to avoid being bankrupted themselves by these events: 1) Firstly, Reinsurers need to have deep pockets. Market-leading reinsurance companies like Munich Re, Swiss Re, Berkshire Hathaway or Lloyds are recognized as some of the best capitalized players on the planet. 2) Secondly, they diversify. By insuring different types of catastrophes in different parts of the world, they ensure that no single event – like a fire in Hamburg – can wipe them out. 3) Third, they operate on a global scale. This is a necessity because it enables point two above, diversification. 4) Fourth and last, as the value of insured sums has risen dramatically, reinsurers have engaged with public capital markets. As Michael Lewis described so well in his 2007 article “In Nature’s Casino”2, the high demand for insurance naturally leads to ever higher losses in the event of a single hurricane or earthquake. And the best way to transfer that risk is by engaging capital markets. After all, even the largest loss ever caused by a natural event – Hurricanes Katrina (2005) is estimated to have caused an economic loss of $125 billion, $80 billion of which was insured – represents an amount equal to just 0.10%3 of the global stock market capitalisation. And that is why, in the last 15 years, participating in reinsurance markets has become a source of investment returns. The corresponding asset class is called insurance-linked securities, or more simply “Catastrophe Bonds”. According to industry sources, the total outstanding volume amounts to $42 billion as of September 2020. The Returns At this point, dear investors, you may still ask yourself “what’s in it for me?”. So let’s check that there is sufficient money to be made, and then go back and examine the nature of the risk in some detail. On the question of returns, there is good news in that at least historically, cat bonds have delivered returns in excess of global equities AND global bonds. Exhibit 2 compares the result of a hypothetical investment of the de facto asset class benchmark, the Swiss Re Global Cat Bond Index4, with both global equities as measured by the MSCI World and global bonds (Barclays Global Aggregate, Euro-Hedged). As you can see, the results were pleasing, as cat bonds have delivered superior returns, comparable to those of high yield bonds. Exhibit 2: Returns since 12/2001Sources: Bloomberg, Lansdowne Partners Austria Three caveats apply, however: First, you cannot buy an index. There are no ETFs available, and as with high yield bonds, the average manager trails the benchmark even before cost and fees are taken into consideration. Second, in the early days of cat bond investing, only a few specialised hedge funds were providing capital, so we have to ask whether it is reasonable to expect the same returns going forward that these pioneers were able to capture. Third, the index has plateaued between 2017 and 2020, and only recently broken out to new highs. We need to understand why this has happened, and what might be in store during the coming years. To begin, in the context of current EU regulations, only the most liquid sub-segment of the insurance-linked market is investable by UCITS-funds. The securities under consideration are legally structured as bonds. They pay a coupon, which is fixed at the time of issuance and which fluctuates depending on the nature of the risks underlying each specific transaction. Historically, we have observed coupons between 5% and 10% above LIBOR (cat bonds are frequently structured

  • CoVid 19 is one of yet multiple indicators showing the global economy – like society as a whole – needs a powerful digital infrastructure if it wants to provide growth and prosperity in the long run. However, the current pandemic crisis represents a catalyst increasing the speed of change and, in particular in Germany, has brought up the topic of digital infrastructure and data centers, and made it a subject of public discussion. The topic´s ambivalence is obvious: While many German companies are struggling with digitization, German fiber network access for households (FTTH)remains at a low 12 percent. Yet, at the same time, Germany beyond its borders is known for an excellent fiber optic network, state-of-the-art data center space and, referring to De-CIX Frankfurt, hosts the world’s largest internet node in terms of data throughput. Peak traffic at De-CIX reached 9.1 Tbit / s in March 2020 and 10 Tbit / s in November last year – both rates representing world records. AUTHOR: Michael Jakobi, LL.M. is a consultant and project manager in the field of digital innovation & infrastructure at contagi Digital Impact Group – Frankfurt´s and thus Germany´s transformation into an international digital hub has historical, but above all geographical and geopolitical reasons. Typical for real estate, Frankfurt´s location also is decisive for data centers. Nodes where submarine cables land or, as in Frankfurt, where the world’s fiber optic backbones cross, are predestined as an exchange platform if they also offer a business ecosystem. That eco system needs to include international companies as well as SMEs, and an end customer base possessing economic strength, as well as qualified employees and specialized service providers. Metropolitan region Rhine-Main represents such an ecosystem.  The international banking and digital infrastructure heavyweight counts almost six million inhabitants, including three million employees in a widely diversified economic landscape. In addition, the location as such is geographically well positioned: The region represents the middle of Europe, where data streams meet originating from across the Atlantic (via England / London and the Netherlands / Amsterdam) as well as data streams originating from Scandinavia and Southern Europe. Those are linked with Mediterranean submarine cable hubs, which in turn connect Germany with Asia and Africa. All of that explains why regarding Frankfurt business premises international players in the data center industry are willing to pay 2000 € / m², ten times the local standard for commercial property on the outskirts of Frankfurt. Taking into consideration the horrendous investment costs of a data center itself, which (without the cost of the property) can quickly run into three-digit million figures, and considering high level sales and distribution requirements, it becomes obvious why the data center asset class –  despite massive, sustainable growth and downright fantastic returns – in large parts remains in the hands of specialized REITS such as Digital Realty, KeppelDC REIT as well as telecommunications groups such as NTT and 1 & 1. Those vehicles in turn own or rent to colocation providers such as Interxion, Equinix or Maincubes, which again in turn provide server space for companies and hyperscalers, i.e. cloud providers such as Amazon AWS. Given that background of specialists and global players, the question arises whether the entry barriers for capital, market penetration and know-how for SMEs, project developers and non-institutional investors are not already too high to jump on the bandwagon. Today, large cloud providers like Microsoft (Azure), Google and Amazon AWS, are securing their oligopoly position in metropolitan areas. With the establishment of availability zones growth of colocation providers in Frankfurt is leveraged, same as in the Rhine-Ruhr and the greater Berlin area, in Hamburg and in Munich. The cloud hype in addition is reinforced by efforts of the EU and its Gaia-X program. Yet, many technologies that are currently evolving, like 5G, autonomous driving and IoT, are exemplary, and require a high density network of data processing and storage levels, small data centers within a distance of less than one kilometer (Edge), regional sub-hubs (Fog) and international (cloud) hubs, a structure resembling a distribution network in logistics. Apart from a few European metropolitan regions, the Rhine Main area is currently anything but comprehensive and thus offers considerable potential for regional players – like energy suppliers, project developers and property / real estate owners as well as SMEs. Regardless of investment costs being considerably even when it comes to smaller data centers, in areas outside of Frankfurt, it is possible to keep investments low due to lower property costs and modular construction methods – without at the same time having to forfeit latest, environmentally friendly technology and scalability. Sustainability or ESG is a topic already playing a central role when it comes to data centers in Germany. The issue is driven by corporate responsibility, legal requirements, or simply out of economic reasons. Germany with its ultra high energy prices even on a global level does not exempt data centers from the EEG surcharge, an additional cost factor punishing high energy consumption. In addition, power grid expansion in some metropolitan areas is not keeping up with demand, representing a significant challenge in particular for Frankfurt. Precisely that creates opportunities for regions where energy supply is a given, or, like in Northern Germany, where a surplus of alternative energy is found. Integrating data centers into local structures – waste heat utilization, smart energy storage, charging infrastructures, etc. – will transform data centers into ESG supporters, and stop them from being marked part of a problem. This integration, however, requires the involvement of local and regional actors – and offers them the opportunity to participate in data centers and the profits they produce. It can thus be stated that data centers can be highly interesting not only as the basis of digitization for society in general. Also, they represent an asset class for open minded, modern companies and investors. All of that works even on a small scale – given the right approach to the market and technology level are provided. And what´s more,

  • “More than the past, I am interested in the future, for in it I intend to live” (Albert Einstein). Markus Hill* spoke for FUNDBOUTIQUES.COM with Martin Friedrich, Lansdowne Partners Austria GmbH, about inflation, fiscal policy, asset allocation,  “SPACs & New Market” REITs, and infrastructure investments. The question “Are we heading for Zimbabwe?” from his latest research publication further deepens this view. Hill: In your last capital markets commentary, you focused more on inflation. How do you assess the current danger in this field? Friedrich: Inflation is not only crucial for consumers, but it is also a very significant influencing factor for all economies, and thus automatically becomes a driving force for capital markets. That’s why we follow price developments very closely. However, I can reassure your question about a “threat” at least in the short term. We see strong deflationary forces at work due to the recession, and it will take quite a while for these to lose effectiveness. In this context, the central bank’s often demonized quantitative measures should be seen primarily as a bulwark in the fight against a deflationary collapse. It is not to say, that the macroeconomic management mechanisms of 2020 – some of which are new – do not harbor medium-term risks. That’s what we’ve been writing about it. Hill: Where do you see – in the near or distant future – drivers for rising inflation? Friedrich: Before I answer that, let me define what inflation we are talking about it. I am referring to the consumer price index calculated by the official site – Eurostat or Bureau of Labor Statistics and more. Besides that, of course, there are many other methods to measure the rate of price increase, for example, asset inflation or the subjective perception of consumers, which is disproportionately influenced by everyday goods, in which frequent transactions are made. Forbes even calculates a “cost-of-living-extremely-well” luxury goods index. This basket-of-goods-of-the-high-net-worth has been particularly inflationary since 1982. This is all interesting, and sometimes good for a headline, but mostly of secondary economic relevance. We expect traditional inflation indicators to pick up noticeably in the coming year, provided that our expectation of a progressive economic recovery materializes. This is only right and proper, as we are currently recording values below zero in the eurozone. From the 2nd quarter of 2021, it will then become apparent that many commodity prices are likely to be significantly higher than in the 2nd quarter of this year, and these base effects will lead to a temporary increase. This is just the flip side of 2020. If the development of 2016 to 2017 is repeated, we could be back in the ECB’s target corridor of “close to 2.0%” in just one year. However, this is not a threat in itself, although it will be interesting to see how the bond market behaves in this context. It will be more interesting from 2022 to 2023 because several long-term developments suggest a resurgence of inflationary tendencies from the middle of the decade. These include the possibility of a supply-side shortage of critical raw materials after a decade of below-average investment in production capacities, the restriction of world trade as a result of protectionist trends, but also a relative decline in the cohort of the working population as a result of a completely foreseeable demographic trend. Ultimately, one must also ask whether the relatively new steering element of fiscal policy is implemented in a sufficiently countercyclical manner in practice. Hence, it is still too early to pass judgment. On the one hand, it was right and important to decouple the economy as far as possible from the public health crisis. Without the “helicopter money,” this would have been difficult to achieve. On the other hand, these very fiscal stimuli would also have to be withdrawn in time. Whether that will be possible amid our heated political discourse remains to be seen. Hill: Are the players behaving “optimally” in fiscal policy – where are the opportunities and risks for investors here? Friedrich: As I said earlier, the bailouts have saved not all, but certainly many companies from what would otherwise have been certain bankruptcy. The downside is that many a “zombie” will survive in the process. Our economic system needs a healthy amount of creative destruction, and that is being prevented right now. On the other hand, government bridge support can preserve capacity in many critical sectors of the economy. It’s sort of like an injured athlete trying to keep muscle atrophy to a minimum in the course of an enforced break. In other words, the less structural damage to the economy, the more robust the recovery will be when we will have inoculated our population! And it is precisely this upswing that gives us optimism that there will be opportunities for the capital markets in 2021. Of course, the risks are never far away in my line of work either. Here I would like to refer to the speculative exuberance in some capital market segments. The development of the Tesla share or the hysteria surrounding the IPOs of some SPACs reminds me strongly of the time around the turn of the millennium. Some people will still get their fingers burned there. Hill: You work intensively in the field of capital market strategy. As a fund manager and fund selector, you have additional “glasses” on – what are your expectations going into 2021? Friedrich: We expect that equities will again generate positive real returns. G7 government bonds side, on the other hand, we think that even a nominal zero would be a success. Indeed, our fund is accordingly. However, the most exciting development will probably be at the sector level. We would not be surprised to see several losers in 2020 become winners in 2021. For this reason, we have remained true to our value-oriented managers in the selection process – even though it has hurt at times – and have even increased our exposure to this sector. Similarly, we see interesting opportunities

  • “International politics is never about democracy or human rights. It’s about the interests of states. Remember that, no matter what they tell you in history class.” (Egon Bahr). Geopolitics, China, Silk Road, commodities, value investing – Markus Hill* spoke for FONDSBOUTIQUEN.DE with Urs Marti, SIA Funds AG, about the connections and the importance of these topics for private and institutional investors in the coming years. This “economic prose” by him is rounded off by interesting remarks on the subject of history, Europe, diversity, and South Tyrol. Hill: The topic of geopolitics is currently being discussed more intensively again in specialist circles. Where are the chances, dangers of the development? Which actors, interests, reactions and participants are there? Marti: The BRICS countries, led by China, have long been trying to secure their need for raw materials by various means. Ultimately, there will be less available for the West. Thus, the overconsumption of the West will hardly be satisfied. The result will be inflation, devaluation of currencies and thus of savings, and a relative equalization of living standards. Likewise, the various currencies will have to be properly valued with each other to normalize the drastic imbalances in trade. For the West, this will result in a massive increase in the cost of imports, consumption, and thus living standards. The flip side will be an increased return of productive jobs. Increasingly, people will only be able to consume what they produce themselves, be it agricultural or industrial goods. This changeover will hardly be easy. Urs Marti, SIA Funds AG Hill: China and the “New Silk Road” project – what is that and what is it all about? Marti: The name refers to the ancient trade routes that connected Asia, Persia, Arabia, East Africa, and Southern Europe by land. Likewise, the name goes back to the lucrative silk trade that originated in the Han Dynasty in 200 BC. Historically, the Silk Road was the basis for most of the world’s trade for the longest time in history. It was only a few hundred years ago that trade began to migrate to the sea routes. Technological changes, most notably black powder, and nautical technology led to the age of colonialism. Various naval powers dominated world trade and, by extension, world politics for pretty much a hundred years at a time. Since the fall of communism, China has opened up, industrialized, and replaced the West as the new emerging world power. Favored by the West’s reserve policy, the industry shifted in an initial phase. The so-called emerging countries, China first and foremost, have accumulated huge foreign exchange reserves due to their trade surpluses, meanwhile, central bank balance sheets and debts have been growing immensely since the financial crisis. The majority of the trade surpluses have been parked in U.S. government bonds. But due to escalating developments, they are no longer willing to continue doing so. The West can’t cover these debts with a real counterpart. For this, one would have to devalue the currencies in a drastic style. The official gold stock of the USA (there are doubts about its plausibility…) would just cover the trade deficit of one year of the USA against China. Politically, it is difficult for China to convert this “paper money” into real values. One would have to, in effect, colonize the U.S. by buying technology, infrastructure, utilities, and real estate. However, this is impossible. Probably also a reason for the current political situation with and in the USA. Accordingly, China is left with the option of investing much of its trade surplus in its infrastructure as well as in the Silk Road. Hill: What are the implications of this for the commodity sector? Marti: An expansion of transportation, traffic, and communication routes always brings with it a surge in trade and prosperity. Along these trade routes, more than half of the world’s population lives – much of it at a level of prosperity that is only a fraction of that in the West. Prosperity, which can mean infrastructure, goods, and energy, among other things, is always linked to the consumption of raw materials. It is striking that although China is now highly developed along the coast, many people still live very modestly in the interior. Besides, a large part of the raw materials officially consumed in China is in fact as industrial goods in the West. If you look at the 10 largest nations and their development as examples – China, India, USA, Indonesia, Pakistan, Brazil, Nigeria, Bangladesh, Russia, and Mexico – it is obvious what the potential demand for raw materials is. Unfortunately, this will hardly be satisfied, if only because of natural limits. And on top of that, there has been hardly any investment for the last 10 years. Thus, structurally, the production of ores, energy, uranium, and much more will hardly increase. The effects can be imagined. Hill: What are the implications of China’s next 5-year plan? What is the significance of the so-called RCEP (Regional Comprehensive Economic Partnership) in this context? Marti: It’s all connected. The new 5-year plan is a paradigm shift. China wants less trade surplus, more domestic consumption, more domestic investment. Consequently, the currencies have to be aligned to achieve balanced trade. This means inflation for the West, less consumption, and less prosperity (material prosperity is not necessarily equal to the quality of life!). For the Silkroad, it means the opposite: as a result, the major global blocs are likely to increasingly seal themselves off. Europe could actively ensnare Russia with its resource wealth instead of driving it into the hands of China. The U.S. has an overvalued currency but, along with Canada, is potentially self-sufficient, unlike Europe. Hill: What interesting developments are you seeing in the commodities sector in general? Marti: Due to years of underinvestment, production is starting to decline. The Corona crisis has accelerated this. Prices are starting to rise and there will be shortages. This, combined with the developments I described in Asia and the immeasurable money printing,

  • Caduff: Mr. Hill, you have earned the nickname “Mr. Family Office” in Germany over many years. It could probably be more difficult today because there are so many institutions, advisors, and formats in this segment that are very good. Hill: Right, there are many interesting personalities and institutions in this field, especially universities and other educational institutions, by the way, also in the rest of the DACH region. The field of family offices has an interesting form of “ramification”. Areas such as entrepreneurship, investments – direct, indirect, liquid and non-liquid, company succession, governance, shareholdings, M&A – all these facets and more are touched upon in this field. Additionally, there is still proximity and bridge to areas such as fund boutiques and foundations, charity, philanthropy, art, and politics. Individual sectors, seen through my lens as an economist, promote the diffusion of knowledge and transparency in this field through their activities. One could say that this form of “ecosystem” has a welfare-enhancing effect on everyone, so to tell. Caduff: And you know all the major players in this field? Hill: No, of course not all.  Through many panels, interviews, investor events, and at “internal forums” and direct contacts in this segment, I may know an above-average number of addresses – on the family office side as well as on the side of the providers of services in this segment. The exchange of ideas and connections is a pleasure. The diversity also on the provider side (multipliers, research, service providers, etc.). The sheer number of single-family offices in a wide variety of forms guarantees that you will always get to know great addresses in this segment. One interesting phenomenon is that many addresses, commonly defined as a single-family office do not perceive this at all. Just this week, I had a telephone call with a representative from this segment, who pursue their asset management approach and are rather considering, although a designated investor in other asset classes, whether one should say “call a spade a spade”. With all the advantages and disadvantages: Either blocking oneself off from knowledge or permanent sales calls from product providers – expressing in the extreme, so to say. Markus Hill, independent asset management consultant Caduff: But you also deal intensively with small and medium-sized investment companies. Does this still give you pleasure? The big names cover everything. Hill: Class rather than mass counts. Of course,  large asset managers cover a broad field. For sure there are excellent fund managers in big names too. To your question, if I get pleasure, definitely yes I get a lot of satisfaction from it. I find the people in this particular field interesting. Usually, the ones in this field have a special talent (“gift”) in their part following a deep passion for what they do. Ideally, you have a manager that you are so convinced of – regardless of temporary performance – that you enjoy connecting them with other interesting market participants. This can be done in various stages – press (“distance marketing”), then indirect and direct contacts. It is gratifying when in the end people have found each other who appreciate one another. This is completely independent of whether the respective services (e.g. funds, advisory, etc.) fit when first getting to know each other. Often, it is more a matter of thinking in terms of the long term, as is the case in the special fund’s sector. To be honest, it has to be said that in the end, the manager’s approach and performance have to be right. Caduff: Will there still be so many very small fund providers in the future? What do you think? Hill: I strongly believe in creativity and adaptability in the field of independent asset managers. There will always be a demand for non-corporate experts with a high degree of specialization and a “skin-in-the-game appearance” who pursue their interests with “immense passion”. Entrepreneurial personalities have staying power, are resourceful and flexible. Of course, there is an ongoing shakeout in this segment as well. Many small houses hold their own for years with small volumes (AuM), just at the limit of what is economically justifiable. Some still manage to break through, for example, they have staying power and capital. In this market, too, there is a constant coming and going. A book author once said to me on the subject of independent asset managers, “I’ve talked to 100 different addresses and seen 100 different business concepts.” Niche providers are flexible, at least when it takes place in a market that doesn’t run like traditional institutional asset management: slide rules, performance measurement, committee decision as to the main factors in manager selection. Caduff: If someone wants to set up a fund, what are your three most important pieces of advice? Hill: Without claiming to be exhaustive, my piece of advice is: 1. some form of “USP”, for example, special performance history, technical expertise, reputation, network, etc.2. patience, consistency, and pleasure in exchanging ideas with other people or in engaging other people to support one’s fund project (multipliers, network, externals, etc.)3. financial “buffer”, you have to survive the phase of a seed money search and the time after that as well. It can be – practical challenging experience – just as hard to get zero to three million fund volume as to get from three to ten million afterward. In my opinion, these phases are often neglected. One has a central advantage if one has a stable core seeder. Otherwise, many projects “crumble” or become “chewing gum projects”: endless, grueling, often failing in the end. I am deliberately talking about very small addresses here. With institutions (for example family offices, foundations, etc.), which are often core-seeders themselves at the beginning, there are again quite different pitfalls in the next stages, which admittedly can be avoided with a little strategic planning. Caduff: What are you currently working on more intensively? Hill: Regular consulting mandates (search, “investor dialog”), as usual. Interestingly, they currently touch strongly on the areas of real assets in

  • “The worst path one can choose is to choose none.” (Frederick II) Unfortunately, raising funds from a startup, i.e. from mostly super-motivated people with sufficient skills, often turns out to be more difficult than one might imagine. By all means, the key to success is staying persistent even if there are often setbacks and you have to make a fist in your pocket. But that’s just the way it is: the road to the top is rocky. Stumbling block 1: BaFin “Throw a spanner in the works”…… The first stumbling block is encountered right at the beginning. As soon as the first external communication begins, you almost have one foot in jail. Why? Topic BaFin! One has not thought about it at all in the overconfidence. But one should. You need, as we have done, a liability umbrella under which you can slip. Which gives you the necessary legal backing and also supports in all matters relating to the fund launch. Stumbling block 2: The right KVG (German regulated capital management company) – Pay attention to the fees! The next stumbling block is the selection of the capital management company. Here, too, there are enormous differences. Especially in the beginning, you should make sure that the fees do not crush you and then you cannot deliver the necessary performance of the fund. We have had to gain experience in this area, and it has not always been the best, but that is part of the game. Stumbling block 3: “You should not look at one another, but look together in one direction”. In another, the very important stumbling block of the seed money search, I wish everyone a competent and fair partner. It is certainly helpful to offer the seed money provider a shareholding, as the willingness will then increase significantly. It is important to note that you should not accept every partner because you have a company together with him. Everything should already fit, otherwise, the whole project is programmed to fail. One should not look at one another but look together in one direction. Some seed money lenders don’t see it that way, and many also lack the necessary seriousness. It is atrocious when you give 150% and the seed money provider only 10%. The bottom line is that it costs time when you find out that you have the wrong partner. And you don’t part that quickly because you hope it gets better. The best thing is to structure everything, set deadlines, and then act accordingly. Which means: to part with him immediately. And then the game starts all over again… Conclusion: Without the right partner, it’s extremely difficult. This concerns on the one hand the administrative level and on the other hand the interpersonal exchange – be it the contact to the seed capital provider as well as the contact to the own partners within the company. Therefore, I can only encourage every clever person to take certainly a rocky path. In the end, this path is not only instructive but also very rewarding. After all, “The worst path you can choose is to choose none.” Link to Barbarossa asset management GmbH: Related Articles: Seed money, Theodor Fontane and the resilience factor… (Interview – Norbert Wolk)Family Offices and Fund Boutiques – Seed Money, Incubators, and Goethe (Comment – Markus Hill)

  • Family offices and independent asset managers in the DACH region have been showing an increased interest in launching private-label funds for years. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with David Gamper, Managing Director of LAFV (Liechtenstein Investment Fund Association), about current developments in these client segments and about current developments in the cryptocurrency sector. Additionally, topics such as sustainability, ESG, and taxonomy were discussed. Regulation, current interests in association activities, and “Animal Farm” were also addressed. Hill: What role does the area of fund distribution in family offices play for Liechtenstein as a location? Gamper: Liechtenstein is a fund domicile whose market participants are primarily specialized in the launch and administration of private label funds. Asset managers from Switzerland and Liechtenstein have always been among the most important fund initiators in our location. In the last three to four years, we have noticed an increase in demand from two segments, asset managers from Germany and family offices, who are discovering Liechtenstein as a fund location for themselves. LAFV, too, has recently received interesting inquiries from family offices regarding the establishment of funds and the relocation of the registered offices of existing funds to Liechtenstein. This positive development for the fund center is due on the one hand to the excellent legal and tax framework. There are, for example, separate fund categories for asset structuring which do not have to go through an approval process at the Financial Market Authority but only have to be registered. Nevertheless, and we see this as a great advantage, these funds are directly supervised. On the other hand, the increasing demand in the area of family offices is related to the fact that many investment companies are focusing on the area of asset structuring. So to answer your question: family office funds are one of our growth segments and are playing an increasingly important role. David Gamper, Managing Director of LAFV (Liechtenstein Investment Fund Association) Hill: What is the current development of your site in the crypto-currency sector? Gamper: The first crypto asset fund under European law was approved in Liechtenstein in March 2018, followed by several others shortly after. That was in the middle of the phase when the price of Bitcoin collapsed. This situation was of course not very advantageous for the development of the funds, neither for performance nor for the fund volume. Currently, however, these funds have recovered very well and can now offer a much more positive return. Nevertheless, the total volume of these funds is still at a manageable level. Besides, there is another interesting development from the blockchain. On January 1, 2020, the Token and VT Service Provider Act (TVTG), often referred to as the Blockchain Act, came into force in Liechtenstein. With this law, Liechtenstein is the pioneer in Europe and offers legal security for companies operating in the blockchain. The new law also brought something new for the fund industry, because the TVTG provides the legally secure basis for tokenizing fund shares and then trading these tokens. This new possibility has already been used. Hill: Sustainability, ESG, and taxonomy are currently the subject of intense debate throughout Europe in the field of asset management. How do you deal with this topic in Liechtenstein? Gamper: Asset management in Liechtenstein is primarily a topic for banks, but also asset managers. The banks in particular are very well positioned in an international comparison concerning sustainability. For example, the Private Banking Magazine wrote on November 16 this year: “When it comes to sustainable investment, investors are best advised to bring their assets to Liechtenstein. As this year’s asset manager test conducted by the FUCHS | RICHTER testing authority shows, the small financial center stands out in terms of sustainability”. It is precisely the two best-rated banks from Liechtenstein, which occupy first and fourth places in the ranking for the entire German-speaking region, that also manage the majority of fund portfolios. Besides, a study of Liechtenstein equity funds as early as 2016 concluded that they invest exceptionally well in terms of ESG criteria. The fund industry itself, which is responsible for the administration of the funds, is primarily concerned with the implementation of the comprehensive regulation. This implementation takes place under enormous time pressure and therefore ties up considerable resources. Hill: Which current topics are you currently dealing with more intensively? Gamper: You got to the heart of the previous question about sustainability, which is a topic that is currently occupying us in all its facets. First and foremost, however, regulation takes up a great deal of time. In this respect, we at LAFV have set up our working group and the members are very interested in participating. A current project at the national level, in which all financial associations in the country are involved, is the further improvement of the prevention of terrorist financing and money laundering. The Global Forum on Transparency and Exchange of Information for Tax Purposes (OECD) has already given Liechtenstein good marks in the country evaluations in 2015 and assessed Liechtenstein as a “Largely Compliant”. Since then, Liechtenstein has been rated the same as, for example, Germany and Great Britain, and of course, we would like to maintain this good rating. A perennial fixture at our company has long been the Taxation Working Group, which, in addition to BEPS and DAC6, deals with issues that serve to prevent unnecessary taxation, such as double taxation through withholding taxes, for our fund investors. Current topics also include digitization and data security, the further optimization of framework conditions, and cross-border fund distribution. Hill: Besides your work in the association, what do you do in your hours of leisure? Gamper: I have just read two books. One was a classic, George Orwell’s “Animal Farm”. My other reading is a reference book on how blockchain technology works. What I’m going to read next I’ll know after the holidays. Let’s see what’s under the Christmas tree. Until then, I probably won’t have much time for reading – except for my

  • Family offices and classic institutional investors have been intensively involved in the field of alternative investments for years. Markus Hill* spoke on behalf of FUNDBOUTIQUES.COM with Martin Dürr, FAROS Fiduciary Management AG, about the challenges for asset management consultants in the selection of liquid and non-liquid investments in the area of real assets. Topics like,  the use of mutual funds in this segment, investment process, capital market analysis, and manager selection will be discussed. Additionally, areas such as fiduciary management, consulting, and fund management (“implemented consulting”) as well as current challenges in asset management too. The importance of Borussia Dortmund and “A Brief History of Humanity” will complement the technical explanations. Hill: What does FAROS do? Dürr: FAROS deals with the entire process of capital investment by institutional investors. From the strategic allocation considering the liability side, over the tactical orientation to the concrete implementation of the investments – i.e. the selection of managers and funds. Also accompanying processes such as risk management, regulatory reporting, ESG strategy are part of the process. Hill: What topics do you personally deal with in the company? How did you get into the consulting area? Dürr: In my career, I have always switched between the investor and the consultant side, so I know both perspectives well. This has given me a very broad base and a good overview of the various facets of capital investment. During my time with one of the leading German family offices, I became involved with alternative investments quite early on. Even today my field of activity is still very broad. From capital market research in general to the special focus on alternatives, in particular the topic of infrastructure in the selection of managers and products. I started at dit, the investment company of the former Dresdner Bank, as an equity portfolio manager at the turn of the millennium. Then I switched to the consultant FERI Institutional Management to get to know not just one but many, especially international investment managers and their processes. At FERI, I was responsible for the further development of the manager selection department. Finally, I changed to the investor side, Munich Re and Harald Quandt Holding – for more than 10 years now working on the consultant side with FAROS. Martin Dürr, FAROS Fiduciary Management AG Hill: You said that you also know the portfolio management area from practical experience. You have launched a mutual fund at FAROS. Why did you decide to do this? Dürr: The mutual fund has developed from the cooperation with customers of fiduciary management. The liquid portfolio of this fund consisted of listed real assets, which we created as part of a “Best Ideas” portfolio. In terms of performance, the fund was convincing across the board – and the use case was also convincing thanks to the flexible and simple “exposure” to an attractive asset class. We, therefore, assumed that many investors must be interested in our allocation and selection service, especially as it was being offered at a reasonable price. Hill: What is the investment process of your fund? Dürr: First of all, the investment process is a top-down process: Based on our market assessment, our insights into existing investments in private market funds, and discussions with their managers, we decide on the allocation by region and sector. The cells of the resulting matrix are then filled by bottom-up selection. This means that the entire universe of potential investments is first qualitatively examined to determine the extent to which it meets our ESG and profitability criteria. The profitability criteria focus on the actual ownership of assets. Besides, the companies should have moderate leverage and not too aggressive capital growth. Concerning our ESG criteria, we generally exclude companies that are conspicuous, for example, by child labor, production of outlawed weapons, or corruption. The remaining companies are rated with an MSCI ESG score and must achieve a minimum score to be eligible for investment. Besides, the companies are then selected quantitatively according to the criteria of the highest stability in terms of dividends and generation of free cash flows. Hill: What are the challenges in the area of liquid versus non-liquid investments? How important are risk management and volatility? Dürr: In the case of non-liquids, for example, direct investments or private market funds, the challenge is the enormous inflexibility. It takes a long time – namely several years – before the desired exposure can be built up. It takes just as long to change the orientation of an existing exposure. Moreover, because of the blind pool risk, such a control is often imprecise. Last but not least, the required minimum investment of five million euros or more is also a considerable obstacle. It is very challenging to be able to construct a well-diversified portfolio by sectors and regions at this limit. These problems can be addressed and solved very well with liquid investments. There again the challenge lies in the higher volatility. Since I have the freedom to buy or sell the investment at any time, I also have a price at any time. In the case of private market funds, I only get it once a quarter – firstly, usually with a considerable delay of six weeks or more, and secondly, it is only an estimate. Whether I could sell my investment at this price is up in the stars. In the long term, liquid and illiquid investments are on par in terms of performance, but the short-term volatility of liquid assets is of course a challenge for some investors. We counter this with a so-called equity tail risk hedge. This means that we acquire put options on stock indices for part of our earnings. These options are relatively far out of the money, around 10 to 15 percent. This means that these puts normally expire worthlessly. If, however, the market falls sharply by 10 percent or more, the options go into the money and the portfolio is partially hedged. We always invest a constant amount, namely 10 basis

  • In the search for alternative sources of income, fund selectors at family offices, independent asset managers, and classic institutional investors have been increasingly dealing with alternative investments for years. Markus Hill spoke to Martin Friedrich, Lansdowne Partners Austria GmbH, about cat bonds as an asset class, risk versus return, correlation properties as well as the respective advantages and disadvantages for investors. Besides, in this niche market, they talked of challenges and opportunities for manager selection. Likewise, sources of information on this topic, and current topics of the in-house publication (capital market strategy) were discussed too. Hill: As a capital market expert and fund of funds manager, you closely observe markets and available investment options. In one of your last publications, you discussed the topic of behavioural finance and then specifically addressed the asset class of cat bonds. Why are cat bonds of particular interest to you and other institutional investors? Friedrich: As a multi-asset investor, our fund can potentially invest in anything that is tradable at least weekly and complies with the UCITS regulations. In addition, we adhere to the principle to only invest in capital market segments that we understand sufficiently. The criterion for ‘understanding’ is our ability to formulate our own return and risk models. That is the case in the cat bond segment, an asset class which I have been following for a number of years now. To be more precise in answering your question, our interest in an asset class can be measured primarily by two factors: First, what potential returns do we expect from an investment? Second, how strong is the correlation of these returns with the rest of the portfolio? Theoretically, it is sufficient for an investment if an asset class stands out positively in only one of the two dimensions. In extreme cases, according to portfolio theory, even an investment with negative return expectations could still be appropriate if that class of assets exhibits sufficiently stable and negative correlations. Insurance-linked securities, or cat bonds for short, are even better than that. They actually offer the best of all possible worlds in a multi-asset context. In the context of today’s market outlook, they offer attractive yields AND low correlation coefficients. Hill: How do you assess the risk/return ratio? Friedrich: On the basis of a pure Sharpe ratio analysis – expected return divided by volatility – cat bonds beat practically all other asset classes. However, we need to question whether that ultimately leads to a correct assessment of the true risk, because cat bonds have the unpleasant characteristic of producing really large losses from time to time, and these losses are unfortunately not predictable, as they are triggered by natural disasters. Worst of all are hurricanes – typically those that form over the Atlantic and then hit the coast of the United States. In this way, losses in the double-digit percentage range can occur practically overnight. As an investor in catastrophe bonds, you must be able to live with this risk. In purely mathematical terms, it means that you should not rely solely on volatility as a measure of risk in sizing your position. Hill: What are the advantages, what are the disadvantages? Friedrich: I have already touched on the advantages: cat bonds are a high-yielding investment with simultaneously low correlation to traditional asset classes. At the same time, many investors have withdrawn from the asset class after two disappointing years in 2017 and 2018, at an inopportune time as we think. Today, more than ever before, the insurance industry has a need to lay off risks in the capital market. The pandemic is hitting this industry hard and will tear a big hole into balance sheets. Cat bond investors, on the other hand, have escaped with practically no losses, but are indirectly profiting from the losses – many of which are not exactly quantifiable yet – of large insurance groups. To elaborate, just a week ago we received an example of how this is actually playing out: Google is currently issuing a $237 million cat bond to protect its buildings and server farms in California against earthquake risks.  The fact that THIS COMPANY is directly accessing the capital market is an indication for us that their traditional insurers do not have sufficient capacity on their balance sheets to offer this certainly attractive customer satisfactory conditions. It is a signal that the insurance market is in a “hard phase”. This is a good time for investors, as they can influence the conditions of catastrophe bonds in their favour! As a drawback, I would mention that even today’s spreads of 6-9%, which are attractive from a historical perspective, cannot protect against sudden, unforeseeable catastrophes. Against this background, an investment in catastrophe bonds always remains partly a poker game, even if you have a relatively good hand in today’s market environment. Whenever such losses occur, the newspapers will be full of reports on them; which can quickly create a difficult situation for a fund selector who then has to see his boss and take responsibility for a big hole in the portfolio. Hill: How do you identify suitable asset managers in this segment? Friedrich: Basically, we proceed as we do with all such decisions. We observe the market and compile lists of all available providers. In the case of catastrophe bonds, this is relatively simple. It is a genuine niche market, with a manageable number of providers. In fact, I think we are in contact with all the funds we could invest with today. Thereafter, it depends on how much each respective approach convinces us. As always, the quality of the team is in focus, and experience in the insurance industry is really a key issue in this case. In addition, we make sure that the balance between avoidance of risk and ability to meet return targets is tailored to our needs as a multi-asset investor. After all, it makes a big difference whether a specific risk affects you by 100%, or whether you can diversify

  • “As soon as the mind is directed toward a goal, much comes to meet it” (Goethe). Innovation, medium-sized companies, and sustainability are interesting topics for investors in the usual value-versus-growth discussion. Markus Hill spoke for FONDSBOUTIQUEN.DE with Marc Siebel, Managing Director of Peacock Capital GmbH, about “tried-and-tested” professors, DCF models, and the enthusiasm for value investing. In connection with this investment style, topics such as ESG & taxonomy in small caps, investments in technology, and the art of archery were also addressed. Hill: Where does your enthusiasm for small and medium-sized companies and value investing come from it? Siebel: I spent part of my business studies in the USA. I was fortunate to find Prof. Dr. Bey, a renowned professor of finance, who, in a student investment fund course, “drove” me to set up my DCF models, conduct SWOT analyses of the business models, and then present these to an assembled team. The standard works of Benjamin Graham and Aswath Damodaran were on my desk as a basis. Back then I was “thrown in at the deep end”, which has shaped me to this day and made me a disciple of “value investing”. The satisfying thing about the exercise at that time is, since then I have been able to understand DCF models and, above all, to calculate them myself. It’s not important when you talk about the “fair value” of stock and are sometimes presented with questionable DCF models. At the turn of the millennium, I started my career at the fund company of the former WestLB. There I directly experienced bursting bubbles on the stock markets and also lost money privately. Quite instructive. Since then, I no longer run after every “hype”. My time in London in the field of asset management and the cooperation with equity analysts on the sell-side have broadened my horizon, as the view of companies here is very different. I then concentrated on medium-sized companies, or “small & mid caps”. This meant extensive balance sheet analyses, studying extensive sector and stock publications by banks, and travelling to investment conferences in the various countries and the companies themselves (“site visits”). After a stopover at Bankhaus Lampe, where I set up and managed a small-cap mutual fund as well as WestLB, I founded Peacock Capital GmbH in 2013. It was good to be able to show a long-term and resilient track record for small caps. This is important to investors. To this day, my passion for second-line stocks has never left me. Our fund, the Peacock European Best Value Fund, is a European second-tier fund. It has the heart of a true “value investing” supporter. Marc Siebel, Managing Director of Peacock Capital GmbH Hill: Long-term thinking and sustainability also determine the thinking in medium-sized companies. What significance does the current discussion on ESG and taxonomy have for your investment approach? Siebel: Starting in 2022, the EU’s Taxonomy Regulation stipulates that companies and providers of financial products will be grouped into different categories concerning their ecologically sustainable activities and investments. This will finally create sufficient pressure on the industry to take ecological criteria seriously in its business activities. Given dramatic images from the Antarctic and periods of drought in Europe, too, it is time to finally step on the gas. We already reacted to this at the beginning of the year and screened our companies in the portfolio in terms of a declaration of compliance with various ESG criteria. We have always used analytical questionnaires on the business model and balance sheets at our meetings with the members of the Board of Management. We have supplemented these with ESG criteria. We also use our network of analysts. Various partners in Europe now offer ESG conferences at which listed companies present ESG reports. As critical investors, however, the focus on the “S” – Social and “G” – Governance should not be missing. As a critical “value” investor, it is not only the accuracy of the balance sheet that is important but  the quality of the management and supervisory board. As the Wirecard case shows, ignoring this quickly leads to serious financial losses. For us, the company has always been a red rag. The Management Board was too involved with the Supervisory Board, which always dismissed critical comments by renowned journalists as nonsense. As late as 2018, an investment bank proved that a large part of Wirecard’s e-commerce sales revenues could not exist. Two reasons that made all the alarm lamps light up. The fact that Wirecard also uses dubious practices to intimidate or monitor Wirecard critics, as reported by the Financial Times at the end of 2019, only makes an investment even more dubious. It is surprising how many companies do not fully comply with the German Corporate Governance Code, for example. Small caps are particularly attractive for ESG investors. I have been concentrating on European second-tier stocks for almost 20 years. The trend toward sustainability is particularly impressive here. Remember the introduction of the Renewable Energy Sources Act in 2000, where Germany pioneered the way for the renewable energy sector, and where “pure plays” have emerged in great numbers. Nordex and Vestas are well-known names, but things get more exciting in the second and third rows when it comes to hydrogen, solar, wind, raw materials, and electric mobility. This starts with Italian IT software companies, continues with our long-standing investment in Corticeira Amorim, the market leader for cork, and ends, for example, with the electric charging station manufacturer Compleo, which recently celebrated its stock market debut in Germany. Many companies here offer unique selling points and a strong “economic moat”, which are otherwise only attributed to companies like Google or Apple. Together with our partners and analysts in Europe, we have already created a “Green Deal” list that includes these “Pure Plays”. In the Best Value Fund, we follow these guidelines. Because of the large number of innovative “pure ESG plays” in small caps, we are also considering a “PURE ESG” fund, which can probably

  • Family offices, think tanks, and independent asset managers frequently have interesting economic “Maps” in the area of capital market strategy. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Martin Friedrich, Lansdowne Partners Austria GmbH, regarding connections between share prices, economic growth, and central bank policy. Additionally, the topics discussed were inflation and the importance of fiscal policy in coronavirus times. The interview was written as a follow-up to the lecture “Stock Puzzle of the Year 2020” (Organizer: CD Invest Consult GmbH, Vienna). Hill: It seems like a mystery to many investors – the economy is constantly delivering new negative records, but stocks are rising. Have the central banks severed any connection between the stock market and reality? Friedrich: We are not convinced by this argument. People are quick to blame, or credit, central banks with almost everything. In reality, we should first understand what is and what is not really different about the current situation. After all, before we can anticipate the future, we should first of all have an explanation for the present! So let us first understand what caused the stock market rally. The connection with between stocks and economic growth is often cited but frequently misunderstood. Yes, we can show that in the past, strong growth rates in economic activity have correlated with positive stock market returns; the opposite also holds. However, there is a catch to this “analysis”: it only works when looking backwards. In investing however, you have to plan ahead to make money – investment decisions are fundamentally about the future. So the question is, does the observed positive correlation hold up when compared with forward-looking returns? Unfortunately not! If you compare the GDP growth of the past year with the stock market returns of the next 12 months, the beautiful correlation just described is suddenly gone. Moreover, you cannot forecast equities based on an economic forecast, either, because there are simply too many surprises for that – see the special year 2020. So be careful with that. Instead, we see two other correlations:There is a certain correlation between the stock returns of the previous year and the economic growth of the following year. One can therefore very well derive an economic forecast from the shares. a) Secondly, there is an observation – it doesn’t happen often, but if global GDP has really plummeted, then in the last 30 years we’ve not had a single case of negative stock returns in the following 12 months. So, deep recessions are really the time when you can buy stocks with the least risk. This has also proved true this year.b) So what we conclude is the following: Central banks have helped to limit the duration of the recession to one quarter by providing liquidity and other measures. The fact that shares rise after a recession, on the other hand, is a completely normal thing. Hill: Your explanations sounds plausible. Can you prove your conclusions with concrete examples? Friedrich: Of course we can back our claim up. We looked at the Standard & Poors 500, before and during all the major recessions of the last 50 years. According to the research of the NBER (National Bureau of Economic Research), there have been exactly six recessions since 1970. We wanted to know, and asked ourselves two questions: a) How many months before the beginning of the recession do stock prices start to fall? b) When do they rise again? What we have seen is that the best time to buy has always been before the end of the recession – in fact always exactly when it seemed to be at its worst. Our analysis shows that while stocks begin to fall a good six months before the recession, when it comes to anticipating the new economic cycle, the market is much more short-sighted. On average, lows have been marked two to three months before the end of the recession. This, by the way, has been true well this year as well. So the stock rally is not really that surprising in principle, even though the current crisis is anything but normal. I think we can formulate the following hypothesis: If the economy started a new expansion cycle in the third quarter, then March 24th, 2020 was also the beginning of a new bull market in stocks! This is why I said in July already that we will not see the lows again. Hill: What role did the central banks then play in this scenario? Friedrich: The study of market panics – and we saw one in March on the world’s stock exchanges – leaves no doubt that in times of such emotional turmoil only the intervention of authorities is really able to stop the downward spiral. I recommend reading Charles Kindleberger’s classic “Manias, Panics, and Crashes”. This time, however, the authorities have really gone very far. The Fed has thus managed to dramatically reduce interest rates, up to very long maturities. For example, 10-year US yields fell from around 2.00% at the beginning of the year to 0.70%, and even 30-year yields came down from 2.40% to 1.20% in August. Hill: So, the result of the central bank’s intervention influences stock markets? Friedrich: Yes, and massively! As we have both talked about before, shares are financial instruments with a basically infinite term. And we can show that a drop in interest rates has a greater impact on their valuation than a temporary drop in profits due to the current recession. This is particularly the case with so-called growth stocks. It is therefore not surprising that technology and pharmaceutical companies have marked new highs in recent weeks, while on the other hand the cyclically exposed part of the market has been stuck in a sideways movement since April. Some use the term “K-shaped recovery” for this kind of dynamic. What is important to understand in this context is that the correlation between equities and bonds works both ways. Put simply, if interest rates rise again at some point, it

  • Asset allocation and fund selection also pose a particular challenge for decision-makers from family offices in Corona times. In the run-up to a joint Family Offices panel with Martin Friedrich, Lansdowne Partners Austria, Markus Hill spoke about selection criteria for fund boutiques and “traditional” asset managers as well as the current assessment of the topic “investment in illiquid asset classes”. Also discussed were the different views on the topic “Use of Emerging Managers” in contrast to portfolio management in the endowment fund concept for an organization that has positioned itself as an incubator in the asset management sector for quite some time. The differentiated view on the selection of managers is supplemented by thoughts on the topic of know-how expansion in their own company. (Event note: Vienna, 15.10.2020, “The Stock Puzzle in 2020”). Hill: What criteria do you use to select asset managers? Friedrich: We proceed just as systematically in our selection as we do with all other investment decisions. First, each search relates to a distinct area of the portfolio. We only consider managers if they represent the asset class we want to invest in a style that is true to our top-down guidelines. If there are many managers in one area, we first narrow the selection using quantitative filters. The filters are deliberately kept simple. Criteria such as investable within the scope of our strategy or low costs are given priority. This is followed by a qualitative assessment of the most promising candidates. For this purpose, we take the time to understand each strategy, first based on a study of written documents and then in personal interviews. Sometimes we also carry out cross-checks with external consultants. Finally, we ask ourselves, how well does the manager fit into the portfolio? We put together a team of managers for each of our investment segments in the fund. And in a good team, the members complement each other. The strengths and weaknesses of the various strategies should complement each other, ideally in such a way that in the end one plus one equals more than two. Hill: Which asset classes are of particular interest in Corona times? Has there been a change in investment behavior? Friedrich: The asset class structure has changed partially due to Corona. Our strategy is long-term oriented and does not live from changing positions in staccato. Nevertheless, due to the changed data situation in June, we increased the weighting in commodities, emerging markets, and inflation-linked bonds. Besides, we are currently overweight in absolute return strategies and catastrophe bonds. Hill: How do you see the importance of investments in illiquid asset classes? What type of asset manager is of particular interest to you? Friedrich: Illiquid asset classes are traditionally important for endowment strategies. In our case, however, only liquid positions come into question because we are subject to UCITS regulations. Fortunately, listed investments can also very well reflect the risk characteristics of real assets like private equity, real estate, or infrastructure, especially if you have a long investment horizon. The additional advantage we see here is that valuations are generally lower than in the private capital market. When selecting investments, we again place great emphasis on a high degree of specialization of the strategies invested in the respective universe. We also welcome managers who share our long-term philosophy. Hill: You work in a firm that is itself the “incubator” of new funds. How do you see the role of emerging managers in asset allocation in general? Friedrich: Indeed, the Vienna office of Lansdowne Partners in particular has always played a pioneering role in the development of new approaches in the fund sector. It is a very top-class and powerful team that I have around me. In addition to the flexibility of such an environment, I have the backing of a highly professional asset management organization. This combination naturally offers a huge advantage in the implementation of innovative ideas. The situation is somewhat different when we talk about the Endowment Fund that I manage. The investment process of this strategy usually requires a track record of 3 years. However, there are exceptions in justified cases: For example, when known strategies appear in a new form. This may be the case if teams change companies, or if a strategy has already existed for some time in a different regulatory environment and is then newly provided in the UCITS mantle. Here I can act relatively flexibly, but of course, I must also take responsibility for such decisions. Hill: How important are fund boutiques in your selection of asset managers? Friedrich: Boutiques have the advantage, as I just mentioned, that they can react unbureaucratically to changes in the market environment and we appreciate this ability to adapt. We are therefore in constant contact with several smaller providers and have already invested with some of them. But there are also areas of the capital market where a large house if it is well organized, enjoys clear advantages. If, for example, you need to keep an eye on the interest rate, currency, and credit risks in 80 countries at the same time to manage an asset class, the resources of a large, internationally positioned house are already significant advantage. In the end, it’s all about the mix. We like to be diversified, and that also applies to the selection of managers. Hill: Has Corona changed your information behavior in the selection of managers? Friedrich: Of course we – like probably all investors – now do more video conferences than 1-on-1 meetings. The frequency has rather increased as a result. Many of our managers were also very proactive and offered conference calls on their initiative in March and April. We gladly accepted this offer. As a result, I worked extremely long hours, which paid off – because I was able to get to know many of the managers even better. Hill: Which topics are currently being dealt with more intensively? Friedrich: Mostly with the enlargement of the team! We would like to enlarge the

  • Webinars and digital trade fairs are currently attracting increasing interest from investors in the fund sector. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Andreas Hausladen, HANSAINVEST, about success factors for fund boutiques, “full-service KVGen” and about the personal reasons for his fascination for this market segment, for the hidden champions of the fund industry. Additional topics of discussion were the challenges for the asset management industry in the field of digital communication, as well as the concept and content of the new event format FONDSTIQUE (event, 15.10.2020). Hill: You observe the industry intensively and attentively. How do you think the fund boutique market segment has developed over time? Hausladen: The market for fund boutiques has been developing in Germany for more than 30 years now in the third generation. Firm changes such as the ever-increasing density of regulation and the narrowing of distribution channels have not slowed down the market thus the industry has steadily and intelligently developed its solutions. Operational quality no longer has to hide behind large fund houses. On the contrary: At least with the bank-independent, neutral service CVGs with open architecture, an individually optimized set-up is possible. An ecosystem of its own has emerged from various providers, with solid concentration tendencies on the part of the service providers. But vice versa, due to the continually evolving depth of service, it has never been easier than today to launch an “own fund”. The organizational professionalism comes from the Service-KVG and its partners, an asset manager focuses on the quality of the concept so that the products are often “outstanding” in quality and flexibility. As a side note: Due to the manifold support of the fund initiators, these service providers should somewhat be called “full-service KVG” by now. Andreas Hausladen, HANSAINVEST Hill: Who will the future belong to here? Hausladen: The fund initiators have become remarkably professionalized and are increasingly asking the right questions: The success factors are a clear customer focus, innovative strength, an appropriate size that still allows flexibility and customer proximity, an open architecture, a state-of-the-art IT platform, and specialist know-how, also concerning ESG. Recently – not least driven by the systemic risks that continue to develop in a crisis-like manner – completely new aspects have also come to the fore. For example, the counterparty risk of a KVG, which many people seem to have been unaware of until now. For this reason, the more professional fund initiators, in particular, are increasingly subjecting aspects of substance and risk to meticulous scrutiny. Sustainability and credibility are also trumped on the material level. However, this new “critical thinking” has not yet arrived everywhere. In contrast to the private label fund market, we recently started to take a closer look at the exclusive fund’s sector with its landscape shaped by consultants. To the size of the business, the fund initiators see a clear advantage here for equity-strong institutions with low complexity risks and a stable, long-term ownership structure, such as HANSAINVEST with Signal Iduna as its strong reliable parent and partner. Hill: You have been active in the service KVG sector for about 20 years. How do you personally see your role in this area? Where does your enthusiasm exist for the “small houses”? Hausladen: Even before my time at Service-KVGen, I was able, as a pioneer in the banking sector for more than ten years, to give the first boutique funds on the market their well-deserved recognition in fund selection and by opening up conventional distribution channels. In this respect, I have had a great passion for independent thinkers and creative entrepreneurship for more than 30 years. And it doesn’t look as if it will get boring in the next few years: The private label fund market is in a founder’s time mood. In phases of financial and economic crises, as is the case again now, new innovative approaches are constantly emerging that do not fit into any conventional product range in the conventional fund world or simply do not meet the profitability expectations of the big houses as a niche strategy. We are happy to be obstetricians. Many special and successful concepts have meanwhile added up to an enormous and indispensable enrichment of the investment world. Hill: How did you get the idea for a digital trade fair? Aren’t the analog formats enough anymore to make the fund initiators visible in the market? Hausladen: My work of many years with banks and KVGen always stood under the sign to be a strong voice and platform for the independent ones as well as to unite and bundle the forces. KVGen such as HANSAINVEST can help small houses to reach a critical mass in terms of fund volume more quickly through support in sales and marketing. These advantages are also recognized on the investor side. Furthermore, a large field of self-decision-makers is growing up in a world in which professional information is available online virtually free of charge. So how do both sides come together in the digital parallel universe? The old world worked well, but will that also be possible in the digital world? The investor matrix is not only shifting horizontally as a result of the digital possibilities of new reach, but completely new opportunities are also opening up vertically in the B2C market. Covid-19 will probably posthumously write the history of turbo-digitization as a major achievement in the Wikipedia logbook. Of course, new digital formats do not replace personal contact. But they are a more than useful addition, so to speak the digital format as a “warm-up phase” for the direct contact of investor and fund initiator that may follow later. For existing contacts, these formats are a welcome change in communication. If there is no time for a personal reunion, then our digital fund fair offers a pleasant, uncomplicated opportunity to stay in contact and to deepen it. Hill: What is so special about your FONDSTIQUE? Hausladen: The FONDSTIQUE is another step to expand the field of possibilities excitingly, another experimental

  • The topic areas of family offices, fund boutiques, and incubators often appear to be linked interestingly. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Martin Friedrich, Head of Economic and Market Research & Portfolio Manager, Lansdowne Partners Austria GmbH, about this professional connection and liquid investment in the asset class of real estate (REITs). These remarks are supplemented by thoughts on valuation issues for investments in real estate (liquid and non-liquid investments). This interview is directly related to the participation in the panel discussion “RealX: Real Estate Investment Opportunities for Family Offices” on September 18, 2020 (link to the video, further events: Family Office Panel, FundForum International, 6.10.2020 & Vienna Lecture at CDInvest, 15.10.2020, see below). Hill: Lansdowne Partners is a well-known investment manager based in London. What was the reason for establishing the Vienna office? Friedrich: Lansdowne Partners was founded in London in 1998 and manages assets for clients around the world. As a group, Lansdowne manages assets of approximately $10 billion and offers equity funds of various types in European and global markets, energy, China, and India, through to multi-asset strategies. As far as Austria is concerned, we opened our Vienna office in 2009 because Lansdowne Partners’ co-founder, Steven Heinz, moved here. Mr. Heinz is Austrian and lives in Vienna. Lansdowne Partners Austria was therefore established as a platform for the investment of internal capital and seeding and incubating new Lansdowne fund strategies. Hill: What investment strategy do you pursue concerning real estate? Friedrich: As far as real estate is concerned, Lansdowne has traditionally not been a core investment class, as the company focuses primarily on equity investments. Therefore, our natural approach is to invest only in listed real estate companies and not in direct real estate. The structure we use to make these investments is the Lansdowne Endowment Fund, a global multi-asset strategy which I manage myself. Hill: How does invest in listed real estate stocks differ from investing in direct real estate? Friedrich: There are several differences: First, REITs are liquid, which makes them much more volatile. This also means that they are correlated with stocks, especially in the short term. Because they can be traded daily, they also react much faster to changes in fundamentals. So if you look at how REITs are traded today, you will get a very good idea of how your direct real estate could react several months later. This is no coincidence: as anyone familiar with the asset class knows, property valuation follows strict standards. These valuation principles are necessary and sensible for investors, but in practice means that the current valuation is partly based on the past. Changes in fundamental data are therefore reflected with a certain delay. Mathematically, we see this as a result of a high degree of serial autocorrelation in the time series analysis of direct real estate returns. Autocorrelation is a sign that the full risk of the asset class is not 100% reflected by the reported returns – unlike with REITs. The second important difference is that REITs are legally structured as companies and are endowed with free capital. This makes them more volatile compared with existing real estate, even after adjustment for the aforementioned smoothing induced by the different calculation methods. On the other hand, this also means that their yield is higher. Hill: What are the advantages and disadvantages of REITs? Friedrich: The main advantage is that if you as an investor look up and down through the “noise” of the daily ups and downs, you gain access to the real estate asset class with the convenience of daily liquidity and minimal transaction costs. We can demonstrate this by performing correlation analysis with delayed returns on direct real estate: for example, the correlation of U.S. real estate to U.S. real estate stocks increases from 15% to 80% when they delay returns by just one quarter. In Europe or Asia, the time lag may be different, but the principle is the same. The second advantage that I mentioned earlier is that the returns are attractive. Let’s take US real estate once again as an example: the total return of a REIT index since 1990 has been 10.2%, which is significantly higher than the 7.6% per year that direct real estate generated according to NCREIF. Thirdly, listed real estate enables us to represent a globally diversified commitment even with a small investment. This is not possible on the direct side. The final advantage is that REITs are generally managed in a highly professional manner and often own high-quality real estate. Such properties are not necessarily available to investors in the private market. Of particular interest is the “alternative investments” sector within the real estate sector, in which we are heavily overweighted: Logistics, healthcare, data centers, mobile phone masts, and the like. Hill: So far you have only talked about advantages; are there also disadvantages? Friedrich: Of course. The main disadvantage is that REITs have a high correlation with traditional stock indices. From the perspective of quantitative portfolio construction, investors cannot therefore expect the same level of diversification as they would from direct real estate. This also limits our options for property allocation, as the fund I manage is subject to a systematic, disciplined investment process. In concrete terms, this means that we currently have just under 7% of our total equity allocation in REITs. Hill: Looking at the direct market – what kind of opportunity/strategy would be attractive for family offices? Friedrich: As I have already explained, Lansdowne Partners Austria is not a typical family office. The fund I manage sees itself as a patient, very long-term oriented investor with a mandate to ride out short-term market disruptions. For this reason, the higher returns and liquidity of REITs outweigh the volatility and occasional interim losses. For other investors, this compromise will probably be different. Ultimately, every investment policy has an emotional core – and many family investors appreciate the control and sense of security that comes with owning a physical structure. Hill: Thank

  • 1. FondsmanagerRunde, Dusseldorf, October 28, 2020 (AMPEGA) 11:00 am Arrival at the Industrie-Club11:15 am Welcome and moderation by David Krahnenfeld Next Session: Cyrus Moriabadi, Chairman & Portfolio Manager, Martagon Family Office AG:”Share-oriented investment with defensive qualities – active discount strategies convince even in a crisis year!” Berndt Maisch, Senior Fund Manager, Tresides Asset Management GmbH:”With successful and reliable dividend payers through the crisis – Proven dividend strategy with additional growth focus!”                        Marc Siebel, Managing Director & Fund Manager, Peacock Capital GmbH:”How to beat the market in the long term with second-line stocks – Attractive companies off the usual indices in special situations!” 14:00: Farewell and summary by André Heidecke 2. FAMILY OFFICES-PANEL, FUND FORUM INTERNATIONAL (LIVE-STREAM – DIGITAL) Tuesday 6 October 2020 / Time: 08.30-08.55am (CET)Fund Buyer & Asset Owner Academy Breakfast Briefing – DACH FAMILY OFFICE SPECIAL Exploring the role of asset allocation and fund selection in Corona times – „traditional managers” versus fund boutiques and the challenges for fund distribution in digital times!  Moderator: Markus Hill, Managing Director, MH SERVICES Panelists: Marcel Müller, Managing Partner, Head of Portfolio Management,HQ TRUST (MFO – Frankfurt)Martin Friedrich, Head of Economic and Market Research & Portfolio Manager,LANSDOWNE PARTNERS (SFO – Vienna)Florian Schmitt, Managing Director, SLDV (SFO – Fulda) To view the latest agenda you can click on our website, and to view your fellow panelists’ CV please click it here. 3. “Think and invest like an entrepreneur – Value Investing, Fund Boutiques & Family Offices”. “The word crisis in Chinese is composed of two characters – one signifying danger and the other opportunity” (John F. Kennedy). For 18 years, former strategy professor Dr. J. Carlos Jarillo (former Ph.D. student of Michael Porter and Harvard Research Associate) and his team have been managing equity funds at Strategic Investment Advisors Group (SIA). His latest book, “Strategic Logic – The Sources of Long-term Corporate Profitability” is considered by many executives to be the practice-oriented successor to Michael Porter’s classic “Competitive Strategy”. “Strategic Investing” is thematically closely related to the way independent entrepreneurs think (ownership approach). Markus Hill will therefore speak about “Value Investing, Fund Boutiques and Independence” (USA formula) as well as initial feedback from the MH-Survey 2020 “Family Offices & Value Investing”. For years he has been observing and commenting on the development in the field of owner-managed, independent asset managers/family offices and the long-term horizon of investments. This year, the entire investment committee and the partners of SIA will be on site: Prof. J. Carlos Jarillo, Alex Rauchenstein (CEO), Marcos Hernandez (CIO), and Urs Marti, moderator: Markus Hill. “Think and invest like an entrepreneur” (topics) Think and act like an entrepreneurWhat is a good enterprise?How do we evaluate a company?Portfolio construction and lessons learned from 2008Commodity stocks, still an undervalued investment themeValue Investing with Values (“Sustainability”) Event date / venue: Thursday, 24 September 2020, from 11.30 to 14.00 h, Main Nizza (, Untermainkai 17, 60329 Frankfurt am Main Strategic Investment Advisors Group (SIA, is a value boutique from Switzerland that has been successfully serving investors in Europe for many years. SIA maintains an intensive dialogue with its investors and value investment-oriented investors. Since 2015, the professional exchange of ideas has already been conducted intensively in Frankfurt, Cologne, Munich, and Hamburg. An interesting aspect of these meetings in previous years was the discussion of the concepts of mutual funds and private equity funds in the value investing segment and the classification of commodities as part of asset allocation. These and other points will be taken up again this year (“investment horizon”, Warren Buffett, etc.). Another aspect: Family offices and independent asset managers seemed particularly interested in learning more about the range of independent addresses in the value investing segment during the exchange of ideas at the time (“Diversification with brains”, MH-Survey 2020). INQUIRIES ON THE TARGET GROUP OF EVENTS – Investor Event (“invitation only”), registration, presentation, and content: Markus Hill redaktion@fondsboutiquen.de0049 (0) 163 4616 179 Family offices, entrepreneurs, and high net worth individuals are currently dealing more intensively with the topic of commodities as an investment. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Urs Marti, Partner at SIA Funds AG, about the assessment of the market cycle in this real asset segment and about the investment behavior of various investor groups in the market. Additional topics in the discussion in the connections between value investing and investment in commodities as well as the current importance of sports and Hugo Stinnes (“Industrialist & Politician”). Commodities, Value Investing, Family Offices and Hugo Stinnes (Interview – Urs Marti, SIA Funds) 4. SAVE THE DATE – Martin Friedrich, Lansdowne Partners Austria GmbH, October 15, 2020, Vienna, additional information to follow Family offices and institutional investors think in long terms in the investment sector. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Martin Friedrich, Lansdowne Partners Austria GmbH, about topics such as strategic asset allocation and the selection of asset managers. The similarities and differences between the fields of activity of family offices and fund boutiques were also discussed, as well as previous experiences as a portfolio manager and last but not least the reference to an interesting book. FUND BOUTIQUES & PRIVATE LABEL FUNDS: Family Offices, Strategic Asset Allocation & Asset Manager Selection (Interview – Martin Friedrich, Lansdowne Partners Austria GmbH) 5. TAKING PLACE (NOVEMBER 2020, Frankfurt am Main) – FAMILY OFFICES & FUND SELECTION ( Independent asset managers (fund boutiques) enjoy great popularity among private and institutional investors. Regardless of the respective asset class (shares, bonds, real estate, etc.) and product packaging (mutual funds, special funds, AIF), the strongly entrepreneurial asset managers score points through independence (U), specialization (S) and authenticity (A). In most cases there is no corporate affiliation, they concentrate on one or a few asset classes, they have skin-in-the-game: authenticity here means that many of these owner-managed houses start the funds (private label funds) with their own money and that the entrepreneurs (fund initiators) “burn” for their cause. The independent site is happy to discuss the topics mentioned above and is grateful for input, ideas, and suggestions in this market segment. ( Related Interviews: Family offices and fund boutiques have many similarities (Interview – Thomas Caduff, Markus Hill)Stock Valuation, Corona & “Horror Movies” (Interview, Martin Friedrich, Lansdowne Partners Austria GmbH)Dividends, Value versus Growth, Foundations and “Asia 2030” (Interview – Bernd Maisch, TRESIDES)“It

  • Theater-Frankfurt

    “We should approach everything with both caution and confidence” (Epiket). Value investors in particular are currently experiencing challenging times. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Alex Rauchenstein, CEO of SIA Funds AG, about topics such as “Value versus Growth”, expectation management, the dialogue with family offices, and about investments in commodities. Topics in this context were also two “LIVE events” of this fund boutique (“Natural Resources Day”, Zurich, 17.9.2020, and “Strategic Investing – Thinking and investing like an entrepreneur”, Frankfurt, 24.9.2020). The discussion was rounded off by an anti-stress secret that certain people can also replace reaching for a cell phone or book. Hill: As in previous years, a lively value versus growth discussion is repeatedly taking place in expert circles. Value investing is investing with staying power – what are the reasons for this in the current market environment? Rauchenstein: Yes, you say it right. Value Investing is not a 100-meter sprint, but a marathon.  In the current situation, it feels like an ultra-marathon. After all, the underperformance of a value-based global strategy has been going on for several years, almost a decade. However, it is interesting to note that with the European share of our portfolio we have been able to outperform the Euro Stoxx 600 by 100% since 2011. In other words, it was almost impossible for a value-oriented, global investor to beat the global index. The situation was different for Europe. In other words – the valuation exaggeration has been taking place primarily in the USA for some time. Now that, in our view, interest rates are unlikely to fall any further and the debt financing of many growth companies has come to a standstill, things are getting exciting. But I and our company can’t predict that it will turn out exactly as it should. Such a forecast would appear to me to be dubious. On the other hand, I continue to invest my children’s money in our Value Fund and not in the NASDAQ. Hill: Many of your investors are family offices and independent asset managers. How do these investors see value investing, what do you notice during the interviews? Rauchenstein: Yes, many of our investors come from the family office segment and independent asset managers. Our contacts are often very professional investors with 20 to 30 years of investment experience. All with a clear long-term, entrepreneurial mindset. This fits very well with our investment approach and the view of an entrepreneur. We offer our clients an interesting opportunity to invest in listed stocks with the mindset of a private equity investor for the long term, with daily liquidity. Hill: A special feature of your firm is the combination of value investing and investment in commodities. How did this combination come about? What arguments speak for this combination? Rauchenstein: In principle, we are interested in all investment opportunities that present themselves. Because of the greater the selection, the greater the chance of finding something undervalued or “misunderstood”. Now, commodity companies are probably the most cyclical one can imagine – on the other hand, the cycle for most commodity companies lasts 7 to 10 years. If one is now able to correctly assess the cycle in the medium to long term, there are excellent investment opportunities. Many investors find it extremely difficult to correctly value these companies. This is where we close the gap on topics such as long-term thinking, cycles, and company valuation. Hill: How do you assess the current market situation? Rauchenstein: The current market situation reminds me and my colleagues very much of the year 2000. Similar to that time, we notice that hardly anyone seems interested in fundamental valuations. Something along the lines of “as long as a company’s sales increase, everything is okay”. However, hardly anyone is currently concerned that turnover does not equal profit. Let’s see how long this will continue. We are monitoring this situation intensively. Hill: What are you currently working on more intensively? How do you stay in touch with your investors? Rauchenstein: Covid19 has also somewhat limited our travel activities. Like many addresses in the market, we have reduced direct visits to a minimum. Phone, zoom, Skype – there are currently many ways to stay in dialogue. Just two weeks ago, we took part in the Wiesbaden Investors’ Day. We noticed that after this long communicative “announcement of distance”, many investors are once again enjoying a direct exchange of ideas, face to face. This is of course subject to the usual requirements, such as keeping their distance and wearing a face mask. This year, we will again be holding our event “Think and invest like an entrepreneur” (Strategic Investing) on September 24 in Frankfurt. First of all, thank you for your moderation and your short intro (“fund boutiques”) at the event. One week before, on September 17th, this year’s Natural Resources Day will take place in Zurich. Both events also serve to intensify the dialogue with investors and professionals on topics such as investment styles, asset allocation, and portfolio management in the current market environment. We are particularly looking forward to an unusual topic in Zurich, as the topic of emerging markets is also intensively discussed in Corona times: “Commodities and the development of India” by Chrys Kamber (Picard Angst), Head of Indian Investments. Hill: If the stock market is not the main focus – how do you clear your head? Rauchenstein: Investing is my passion and I would do the same if it were only my own money. Covid19 has certainly shown us all once again what the important things in life are. For me, the fastest way to clear my head in a short time is to do the activities with my three boys – a challenge and a joy for every father! By the way, without knowing it, they are 100% invested in our fund. Their investment horizon should be long enough to benefit from it. Hill: Many thanks for the interview. Related Interviews: Family offices and fund boutiques have

  • European-Central-Bank-Skyline

    “I have no special talent, I am only passionately curious” (Albert Einstein). This joy of discovery can be found in many personalities in the fund boutique segment. There you will find many independent minds with extensive know-how and (contradiction!) extraordinary talent. Many of the fund managers may not like to hear it – the proximity to “artistry” is obvious. If one generously assumes that fields such as economics and asset management, for example, are not “drawing board knowledge fields” but still have many undiscovered mechanisms of action, then one approaches this daring characterization. As long as not all the regularities have been discovered here, there are opportunities for independent talents who offer added value in the area of investor education in addition to performance. Where is the interface to Investor Relations? Which formats are often used? Think Tanks and “Citizen Education” Many of the so-called think tanks are often not primarily associated with the field of investment, they are often located in the general area of economics and politics. Examples: Institute of the German Economy Cologne e.V. (IW), Institute for World Economy at the University of Kiel (IfW), Friedrich Naumann Foundation, etc. Many of these institutes fulfill a valuable function, acting as catalysts in the area of “diffusion of knowledge”, for example in the named subject areas – of course, the framework is much broader concerning all think tanks. The interested absorption of this knowledge requires responsible citizens. Why? For each of these institutions, it is advisable to consider the respective “agenda” of the institutions. Who publishes what and with what interest? This seems to be natural and does not pose a problem. You just have to do your homework. Seen positively: This information is presented transparently and is also critically discussed in the media. Society benefits from the constructive discussion that these institutes make it possible for the interested public. As one of many sources of information, the added value is created. Fund boutiques and investor education Detached from the above-mentioned structures, many other forms of think tanks have emerged. Similar to the buzzwords family offices, fund boutiques or impact investing, it appears positive, creativity-promoting that all these terms are still in the debate at the stage of the discussion on the sovereignty of interpretation, see also the committed discourse on “sustainability”. Particularly in the area of more commercially oriented addresses in the asset management segment, there are interesting addresses that make a transparent effort to provide investor education. Addresses such as FERI Cognitive Finance Institute and Flossbach von Storch RESEARCH INSTITUTE, as well as “hybrid think tanks” such as Kiel Economics, should be mentioned here. In the shadow of these so to speak institutionalized houses, one could look at some other addresses that operate investor education without being able to advertise directly with an institute label. Addresses such as ACATIS, DJE, Lansdowne Partners Austria, Eyb & Wallwitz, and sentix, among many other addresses, strive for additional input for investors in investment decisions – where the focus is not on pure product advertising. Some houses act as portfolio managers (fund advisors) themselves, some wear several hats, so to speak (investor, portfolio manager, “incubator” etc.). Every address finds its fans, so to speak, and every pot also has its lid. Treasure Island – Newsletter, White Papers, and Webinars Many fund boutiques naturally pursue an interest in selling their products (funds). However, many of these addresses are aware that the constant publishing, posting, and sending of pure product information (Who reads all the mails with attached fact sheets on the investor’s side?) is meeting with increasingly sparse interest: Information overflow, besides, there should be databases and other sources of information that prepare this seemingly “hard” information about funds in an understandable, independent way and put it into context. Only a certain proportion of asset managers manage to create added value here. A lot of feedback from investors results in an interesting picture, for example, webinars: Often used by fund selectors, information is often given in private: “I organize product information myself anyway, the macro view of the manager is interesting, then I disengage”. This type of feedback corresponds with the great interest in added value information on the investor side: asset allocation – justification, alternative assessment of market scenarios, interesting specialist conferences or webinars with “information-above-the-plate”, views of fund managers, who, in addition to the current portfolio manager view, can discuss interesting additional aspects on these topics, as one might have had many other interesting “hats” on one’s head before the portfolio manager career (analyst, banker, publicist, family officer, etc.). A treasure island that may not have been discovered by many investors in the independent houses is certainly worth a deeper look: newsletters, webinars, and white papers on selected topics! Personality, know-how, and skin in the game Independent asset managers live in a different world compared to corporate experts. Nassim Nicholas Taleb already addressed this issue indirectly in the book “The Risk and its Price – Skin in the Game”. Ideally, decisions are made by people who can also experience the effects of the decisions via a direct feedback loop: There is a difference between analyzing things, describing them, and making them public without practical actions being linked to the results of my analysis. Independent asset managers usually appear under their name, building up a personal track record with their fund. By continuously communicating their world view to markets, asset classes, timing decisions, or via rule-based systems in fund management (Doesn’t every fund manager have their rule-based system – implicitly or explicitly described?) they make themselves “vulnerable”, transparent and measurable. He has Skin in the Game! No serious fan of fund boutiques claims that each of the independent managers beats the market and the “big guys” at all times. It is well known that the perfect manager, who has all the others with his “objective” portfolio management results, has fortunately not yet become reality. As long as this is still the case (solution: AI approaches in 2050?), there are a

  • Frankfurt-Main-Skyline

    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. Related Interviews: FUND BOUTIQUES & PRIVATE LABEL FUNDS: Family offices and fund boutiques have many similarities (Interview – Thomas Caduff, Markus Hill)FUND BOUTIQUES & PRIVATE LABEL FUNDS: Stock Valuation, Corona & “Horror Movies” (Interview, Martin Friedrich, Lansdowne Partners Austria GmbH)FUND BOUTIQUES & PRIVATE LABEL FUNDS: Family Offices, Strategic Asset Allocation & Asset Manager Selection (Interview – Martin Friedrich, Lansdowne Partners Austria GmbH) Source: www.institutional-investment.dePhoto:

  • Kurhaus Wiesbaden

    Asset Management Consultants often evaluate, select, monitor, and “advise” group-bound asset managers and fund boutiques. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Alexander Scholz, Managing Director of TELOS GmbH, about the breadth of the field of activity in his own company as well as the topics at the upcoming “Wiesbadener Investorentag” (20.8.2020) and the “Alternative Conference” (5.11.2020). Additional topics such as special studies and investment companies, ESG, investor education, and personal publication interests with “question marks” will also be discussed. Hill: What does TELOS do? What are the topics your company deals with within Wiesbaden? Scholz: The fields of activity of TELOS are manifold, but in the end, almost everything revolves around the analysis. Within the scope of TELOS Ratings, we analyse and evaluate asset management companies, master investment companies, custodians, investment processes as well as funds. Qualitative criteria are always in the foreground, although we always take quantitative factors into account, especially in the TELOS Fund Ratings. In our function as consultants, we support institutional investors of all kinds in the selection of suitable partners in the field of asset management and administration (master investment companies and custodians). Here our clients benefit from our more than 20 years of experience in the ratings outlined above. In contrast to rating processes, which tend to be standardized, our analyses in the context of our consulting activities are carried out individually according to the requirements and needs of the respective investor. Our third “mainstay” are various studies and publications. The TELOS Special Fund Market Study or the TELOS Master-investment companies Study are examples. Besides, we have been conducting an annual analysis of institutional investors’ satisfaction with their asset managers for almost two decades. We address current topics in our “TELOS Compendium” series and various short surveys and analyses. We are currently compiling a compendium on the topic of sustainability / ESG, in which various aspects and solutions are discussed and presented. The only thing that does not revolve around analyses is our events. This year, we are organizing the 11th TELOS Wiesbadener Investorentag on August 20. We are responding to the increased interest of institutional investors in alternative investments such as real estate, infrastructure, private debt, or private equity with our TELOS “Alternative Conference”. The conference will take place on November 5th, 2020. Ultimately, with all our services we would like to build the (information) bridge between investors and providers. Alexander Scholz, Managing Director of TELOS GmbH Hill: Which specialist areas do you personally supervise? Scholz: In principle, I cover the entire spectrum of our services. I also take care of our website and our information portal for investors “IMI”. As a shareholder and managing director, the further development of the company and the development of new services is of course also an important element of my work. Especially in the area of sustainability / ESG services, we at TELOS have made a lot of progress in the last few years, for example, the TELOS Sustainability Rating or the TELOS ESG Check. Currently, we are working on a quantitative rating, which is geared to the needs of institutional investors and which will go live in Q4 2020. All in all, I have a very varied and multi-dimensional field of activity here at TELOS, where I can contribute my experience from all my previous jobs. In any case, I will never get bored. Hill: What is the background of the event “Wiesbadener Investorentag”? Scholz: Our events are an essential element of our bridging function. Both the Wiesbaden Investors’ Day and the “Alternative Conference” offer institutional investors a platform to inform themselves about current capital market topics and to exchange information with other market participants in a familiar atmosphere. Asset managers and administration providers address various investment topics in presentations lasting around half an hour each. The event is rounded off by an investor lecture or, as this year, a specialist panel. We always make sure that there is a good mix of both the topics and the lecturing companies. Thus, each topic should not be dealt with more than once. Domestic and foreign suppliers, full-range stores and specialized boutiques, long-standing and newcomers to the German market will have their say. The overall result is an entertaining and varied program. Hill: What is special this time, what topics are discussed there? Scholz: In addition to the specialist presentations by the suppliers, this year’s program of the Wiesbaden Investors’ Day will include a panel of top-class experts on the topic of sustainability / ESG. Participants of the panel are Dr. Kuper from BVI, who will present the current developments from the association’s point of view, Mr. Helfberend from ERK Darmstadt, who will contribute his practical experience as an investor, and Professor Dr. Schäfer, who will cover both the scientific and the advisory side. In this respect, the topic of sustainability will be examined from all angles. We also have various fund boutiques with specialist presentations on-site, such as Carmignac, Fisch Asset Management, MAINFIRST, Rothschild Asset Management, and SIA Strategic Investment Advisors Group. Worth mentioning this year is a special situation due to COVID-19. The Wiesbaden Investors’ Day is one of the first presence events after the shutdown. From discussions with vendors and investors we have learned that despite the active use of webinars and other online formats, there is still a great interest in “real” meetings and personal exchange. In close cooperation with Nassauer Hof, we have taken all necessary measures to ensure that the event is a success and a safe one. Hill: If it’s not about asset management – what other topics are you concerned with? Scholz: I admit that I am not exactly a bookworm. Now I could argue that I have to read vast amounts of specialist literature and documents while I’m working, but that would only be a lazy excuse. When I read a book, the light fare is usually like regional or business crime novels. But, I don’t want to give too much away yet – there

  • Caduff: Mr. Hill, in Germany you have the nickname “Mr. Family Office”. How did you earn this prominence and what is behind it? Hill: As is well known, external and internal perceptions can often diverge. First of all, it should be said that I actually come from the product management area “Capital Markets & Asset Management” and later also worked in fund sales and PR. I have been living in Frankfurt for almost 25 years and work in the financial industry. For the last 16 years I have been intensively involved in fund selection and fund boutiques, 15 years of which as an independent consultant. Fund boutiques are bank-independent asset managers, owner-managed, specialized, and love what they do: Managing funds according to their ideas without any corporate guidelines. As with “normal” entrepreneurs, you will find many top talents here, often with closeness to artists. This is where one finds the middle class, so to speak, the hidden champions of the financial industry. Many family offices like this category of fund managers, and interesting minds are often developed in family offices – as a “boutique in the family office” so to speak. These addresses, who also like to engage in professional dialogue with other family offices, appreciate the fact that they get to know the minds from this segment in-depth, that they also see many interesting managers as a result of fund search projects, and that they are happy to share this information, which is generally not a one-way street. If you are technically deep in a topic, see a lot on the market and receive a lot of information, you will also recognize that there is a real interest in the topic and that the focus is not on a commercial agenda. To cut a long story short: If both sides have a technical topic on which they like to discuss in-depth, then sooner or later they will find more together. My connection to the topic of family offices and fund boutiques has therefore been organic and has developed. I wrote my diploma thesis on “Competition as a discovery process”. I simply did for many years what many fund boutiques and classic medium-sized companies do: Dealing with the topics that interest me personally, of which I like to publish and like to exchange ideas with experts as a moderator or panelist. Markus Hill, independent asset management consultant Caduff: As is well known, the term “family office” is not protected. Does everyone work for families, or is it – as we often hear – good for marketing and you run a normal asset management business? Hill: You will find mountains of literature on the standard forms and the variety of tasks performed by single-family offices and multi-family offices, so I don’t want to lecture presumptuously here. To use your words, there is a real “Mrs. Family Office” in Germany, Prof. Dr. Nadine Kammerlander from WHU Otto Beisheim School of Management. She has a lot of interesting information on the subject, and of course, there are other exceptional, interesting people in the segment with professional depth. To come back to your question: You’re right, of course, the term is often “misused”, although one shouldn’t be more papal than the Pope. Of course, there are classic Single Family Offices (SFOs) that are never perceived as SFOs from the outside, often with good reason. Discretion, trust, understatement are certainly part of the drivers for this deliberately chosen “invisibility”. My explanation for this phenomenon includes another aspect: visibility can be of great benefit to professional work. Especially if you want to discover interesting fund managers or be made aware of interesting investment projects. The communication concept “Aggressive Non-Visibility” (ANV approach) protects the work process in the SFO on the one hand, and of course also for product decision-makers in Multi-Family Offices. Why is it so? No product decision-maker can afford to be in constant dialogue with the salespeople of product providers or to hold discussions with people looking for investors. The view (quote from an SFO representative) that a conversation with Sales is often associated with the term “whole-body herpes” is often expressed at face value. Many salespeople I have spoken to are aware of this fact. Their job in Sales is to turn the square into the triangle for the potential buyer. The most radical strategy here is, of course, foreclosure. This situation – “competition as a discovery process” – often leads to the fact that one only perceives a small section of the market for investment opportunities and is cut off from know-how. I often receive invitations from the family office sector, where people talk about specialist topics in a protected area. There is a need for exchange, for “looking beyond one’s nose”. And this is where the magic happens: over the years, this need has led to an increase in the number of providers of family office events. As a rule, these events have to be financed by sponsoring, a completely normal situation, economically comprehensible. Sometimes, of course, there is the danger of getting into formats where one hairdresser wants to sell a haircut to another hairdresser. If this is known to the participants at the beginning, this is no problem for me, some sponsors might think differently. Especially here you often find the “pseudo-family offices” you described. But here one does wrong to the organizers. They provide a platform for the exchange of ideas. The increasing number of product suppliers for certain formats can lead to decision-makers withdrawing from the “right” family office side and increasingly resorting to small network meetings again. I have often networked people from these segments with each other when I had the feeling that one side could talk to the other side in a technically stimulating way, so to speak, without a commercial agenda – because I look at products myself, I am often introduced to interesting experts who I certainly cannot “hold a candle to”. I have no problem with family offices transparently offering

  • “Time dwells long enough for those who wish to use it” (Leonardo da Vinci). Markus Hill speaks for FONDSBOUTIQUEN.DE with Martin Friedrich, Lansdowne Partners Austria GmbH, about the valuation of stock investments in the current economic situation, risk management, stock market psychology and about supposed monsters on the capital market in corona times. Hill: What is going on with the stock market? Prices are shooting up into the sky, the DAX is already back at 13,000, aren’t we facing the worst economic slump since the World War? Friedrich: Yes, this topic has been on our minds for a while now. There are two ways to explain the share price development we have seen. Firstly, it is not unusual that a recession provides a buying opportunity – recessionary periods have always been the best time to buy stocks. This is because shares are anticipatory instruments. What matters most for the price trend is whether the economy will improve or deteriorate in the future. The status quo is generally already discounted.We have, for example, examined all US recessions since 1970 and analyzed how many months before the end of the GDP contraction equities have formed a bottom. Generally between two and five months before the end of a recession, share prices are starting to pick up again. The only thing that is required is SOME light at the end of the tunnel. To be clear: anyone who waits until the newspapers write about good news has usually already missed the rally. Martin Friedrich, Lansdowne Partners Austria GmbH Hill: What would be the second way to check plausibility? Friedrich: : So far, we have only talked about the direction, but we also have to think about the level. A small digression into company valuation helps here: Just as with an individual share, an entire share index, too, can be understood as the net present value of all future cash flows. This value is determined by two factors: how high will the payments be? And at what rate do we discount? So you can build a dividend discount model for an entire stock market, and that’s exactly what we have done. What we learned from this exercise is that 86 – 87% of the total value of shares are cash flows that are more than five years in the future. This is because, unlike bonds, shares do not have an expiry date. The assumption is that listed companies live forever. Logically, this means that even the theoretical elimination of all (!) corporate profits for the next five years should lead to a stock market slump of no more than 13 – 14 %. Hill: That is surprisingly little compared to the 36 % that the DAX lost from the beginning of the year until mid-March. Why do you think the shares have fallen so much? Friedrich: Well, I was talking about two factors. In addition to corporate profits, interest rates play a major role in determining share valuations. The discounting of future cash flows is always more of an art than a science. It is common practice to divide the interest rate used into a risk-free component and a risk premium. And in a panic like the one we experienced in March, it is mainly the risk premium that is involved. It has just reached very high levels in the short term. With the bold intervention of the central banks and the truly broad-based fiscal policy initiatives, the risk premium then normalized from the third week of March onwards. In addition, the risk-free rate also dropped. In the USA, for example, 10-year treasuries are a full 1.3% lower than at the end of December, while 30-year treasuries are still 0.8% lower. Moreover, there are reasons to believe that the fall in interest rates could be semi-permanent. Hill: Interesting, but if the risk premium can change so suddenly, don’t we have to assume that it will rise again? Given the rising number of cases, isn’t the next stock market crash inevitable? Friedrich: Not necessarily. Of course, it would be crazy to rule out a correction. You can never do that. Nevertheless, I believe that we will not see the lows of March again. A correction of 5 – 10 % would probably even be an opportunity to buy shares. Why? It has a bit to do with psychology and, of course, with our understanding of the capital markets.First of all, psychology: we humans get used to new situations, and the more we learn about the virus, the more it loses its terror. Surely, everyone has seen a horror movie: the monster is always the most frightening one second before it appears for the first time! With that in mind, even if case numbers rise and hospitals fill up again, we need to differentiate between the economic influence of the virus itself and fear of the virus. And it is fear that has by far the greater leverage – on consumer behaviour as a direct fundamental factor, but also on the risk premium as it relates to stock price valuation!The second reason why a renewed bear market is likely to be less severe is the positioning of market participants. At the beginning of this year, most investors were overinvested in risk assets. And then they all had to sell at the same time. Today, the situation is different. Many investors have missed the rally and are under pressure to get invested again. There are hard figures for that. The Merrill Lynch survey of fund managers, for example, shows that professionals are heavily overweight in time deposits and underweight in equities. The survey of the American Association of Individual Investors (AAII) also continues to show a strong overhang in bears versus bulls. This means that the technical starting position today is actually equity-friendly. Hill: What could disturb this positive picture? Friedrich: Well, a lot. If we stay with the film analogy, a new monster could appear on the stock market horizon at any time! After all,

  • Every crisis in recent decades has brought us new insights and has shaken up the fund industry accordingly. But in today’s situation, where exogenous factors without historical patterns prevail, it makes it difficult to plan sales and marketing in asset management. Although the fund industry is in the fortunate position of being able to generate continuous income despite the crisis, albeit possibly at a reduced AuM level, it is difficult to plan on the professional and content-related orientation of sales, support, and marketing. Thorsten Schrieber, DJE Kapital AG Since customer events, trade fairs, and meetings have been reduced to a minimum or are generally cancelled, it became necessary to develop digitization strategies. However, these make it more difficult to differentiate oneself from the market, because the technical possibilities and requirements, whether small or large investment companies, are identical everywhere. The creativity to offer something special to the public is limited and soon a saturation will arise due to the interchangeability of digital formats. Besides, the question also arises as to whether it will be possible to successfully pitch for large tickets on the digitalization path. This will lead to consultants being even more involved in the decision-making processes on the customer side. Appropriate personnel capacities for RfPs and questionnaires must be maintained. To cope with the required flood of data in the 60-70 page questionnaires, many companies require professional data management in the form of a data warehouse to bring together a wide variety of data sources, including risk management, DPG data/GIPS® data, ESG data suppliers, rating agencies, benchmark providers, etc. It remains to be seen to what extent a physical meeting is not relevant at the end of the selection process on the part of the consultants and the client. In the area of sales and sales support, it must be emphasized that the expansion of pure sales staff for expansion strategies may come to a standstill and that in-house sales staff from the support department will actively process the numerous contacts from video and telephone conferences. Of these contacts, 70-90% may be digitally supplied and only 10-30% will have a physical sales contact. But this also means that a completely new type of employee will be needed, who a) is hungry; b) is sociable; c) is eloquent and convincing on the phone; d) and has a higher level of basic technical training. These could be young savings bank or banking business economists with a few years of practical consulting experience who do not want to drive a BMW 5 Series right across Germany – as is the case with classic sales – but who wants to break out of the institutional shackles of the Volksbanks and savings banks. Whether this transmission will be the effective will, of course, depend decisively on the course of the pandemic and whether a “back to normal” as possible. Thorsten Schrieber has many years of sales experience in asset management. He was responsible for sales at Credit Suisse Asset Management (Deutschland) GmbH, Zürich Investmentgesellschaft mbH, and Fidelity Brokerage Services. Between 2001 and 2007, he worked for DJE Kapital AG as well as DJE Investment S.A. as a board member for sales and marketing. After other activities in the field of real estate development in Italy and Austria, he was reappointed as a member of the management board in 2017 and in October 2018 as a member of the board of DJE Kapital AG. Thorsten Schrieber is responsible for sales (institutional, wholesale, retail), sales support as well as marketing and PR.

  • Family offices and institutional investors think in long terms in the investment sector. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Martin Friedrich, Lansdowne Partners Austria GmbH, about topics such as strategic asset allocation and the selection of asset managers. The similarities and differences between the fields of activity of family offices and fund boutiques were also discussed, as well as previous experience as a portfolio manager and last but not least the reference to an interesting book. Hill: You have many years of experience in the field of asset allocation and have worked for a long time in the family office sector. What is your new role with an asset manager? Friedrich: Two years ago I decided to apply the experience I had gained over the past decades in a very special fund. The fund can be seen as a synthesis of everything I have learned in my professional life in the financial sector, which has now spanned more than a quarter of a century. Hill: Your “parent company” is located in England, you work in Austria. What are the current activities of your company in Germany? Friedrich: Lansdowne Partners is a provider of alternative investment funds founded in 1998. This makes it one of the longest established investment houses in the Anglo-Saxon world. In 2009, the Vienna office was added. The logical next step is to consider expanding the investor base in line with the geographical expansion of the operating business. After all, Lansdowne Partners Austria is a 100% Austrian asset manager, fully licensed, and under the strict supervision of the FMA. And with the Endowment Fund, we now have a strategy that we hope will meet with a long-term response in German-speaking countries. According to the BVI, the majority of the net inflows of mutual funds have been going to multi-asset strategies for years, including the Lansdowne Endowment Fund. Martin Friedrich, Lansdowne Partners Austria GmbH Hill: What is special about your concept? Friedrich: The fund differs from most of what is otherwise offered, primarily in its focus on asset allocation. Secondly, we have to talk about very broad diversification. I have rarely seen this in the fund shell. The importance of asset allocation is nothing new in itself. Gary Brinson set the “big bang” with his 1986 study, in which he asserts that 94% of performance is not generated by stock selection but by asset allocation. In contrast, many investors are more focused on “tips”. They want to find the one security that will make them rich quickly, and in this way, they often slide into risks that are too much for them to bear. Hill: This is often the case when investing with private wealthy people. What does this process look like for institutional investors and you? Friedrich: As investment professionals, many pension funds or family offices, for example, have a clear advantage here. They monitor and manage risks primarily at the level of the asset classes they invest in. The first step is to determine a long-term, strategic asset allocation, which serves as a central guideline for the entire asset management process. In Anglo-Saxon, I have also heard the term “central risk portfolio” used for this. In the second step, consideration is then given to the extent to which one deviates from this long-term weighting in the short term. The difference between the strategic and actual weighting of individual portfolio segments is then called “tactical allocation”.Ultimately, each of these segments must of course also be invested. It is only at this point that stock selection comes into play. Large investors such as university foundations, insurance companies, or pension funds often outsource this decision to specialised external asset managers. They decide, to give an example, what percentage of the assets should be placed in high-yield bonds. But they leave it up to a specialist to decide which high-yield bonds to buy because analysing credit risks requires a great deal of effort and a form of expertise that differs greatly from that of the asset allocator.So I have already outlined what my concept is. We want to make available in single security precisely those processes that have proven themselves over decades with such professionals. The most important difference is that institutional investors invest significant parts of their asset structure in illiquid investments such as real estate, private equity, or private debt. The Lansdowne Endowment Fund, on the other hand, is subject to UCITS regulations and is therefore limited to investments that are also UCITS-compliant and can therefore generally be traded daily. Hill: What is the process for selecting individual asset managers? Friedrich: As already mentioned, we first determine the proportion that a certain type of investment should take up in the portfolio and then look for managers in a precisely defined niche that can implement this in the best possible way. So we know exactly what we want right from the start. Then we filter the universe using a database to focus our search. Low fees are very important in this process. Secondly, a strategy should already have a certain history so that we can estimate how it will behave in the portfolio. Only then do we look for the most promising candidates. Those funds that are shortlisted are then checked for their risk and correlation characteristics using our models. Besides, the behaviour that our target funds reveal on a quantitative level must also be qualitatively comprehensible. Hill: How important are fund boutiques in this selection? Friedrich: We have no explicit focus on large or small fund houses. What is important is the expertise in the respective asset class. Boutiques often have highly interesting strategies, which is why we regularly exchange information with many independent managers. In addition to a consistent investment process and a comprehensible strategy, the corporate culture is also important. You always buy into that culture to some extent. Hill: You have held interesting professional positions. As mentioned at the beginning, you worked for a German family office before you became a portfolio

  • Liechtenstein is one of many attractive locations for the launch of funds in Europe. On behalf of FONDSBOUTIQUEN.DE, Markus Hill spoke to David Gamper, Managing Director of LAFV (Liechtenstein Investment Fund Association), about topics such as regulation, general conditions, special advantages of Liechtenstein as a location, as well as the role and importance of associations such as EFAMA (European Fund and Asset Management Association), IIFA (International Investment Fund Association) or BVI (BVI Bundesverband Investment und Asset Management e. V.) for the professional exchange of ideas. The associations in Germany, Luxembourg, Ireland, and Liechtenstein represent many common interests and maintain an intensive dialogue. In this context, the local cooperation of LAFV with local organizations such as the “Liechtenstein Finance” association and with the “Liechtenstein Marketing” agency also appears interesting, for example in the area of event activities in Germany for 2020 (events, webinars). Hill: What topics does your association deal with? Gamper: The design of the legal framework is an essential part of the association’s work. This is very extensive because, in addition to fund legislation, many other laws have a direct and indirect impact on the fund industry. On the one hand, the LAFV (Liechtenstein Investment Fund Association) intends to actively develop these laws further to continuously improve the attractiveness of the fund location, and on the other hand, it must deal with the European requirements. This includes monitoring at the European level concerning EU directives and regulations as well as the guidelines of the European Securities and Markets Authority ESMA. This keeps us up to date on what innovations are coming to the industry, what will have to be transposed into national law in the foreseeable future, and what is directly applicable. Our members are informed about all regulatory developments and those relevant to supervisory practice and, if desired, LAFV also organizes assistance in the form of workshops, training courses, working groups, model documents, etc. The flow of information between the industry and the legislator is also very important. The latter is confronted with so many different topics and needs additional technical expertise in various areas. For example, it consults specialists from the Financial Market Authority, who in turn consult with the fund industry, which is represented by LAFV in this respect. Also, there are regular discussions between the Liechtenstein Financial Market Authority and LAFV to continuously improve the framework conditions of the fund location. In addition to legal topics, the association also deals with tax issues, for example how funds can avoid double taxation based on tax treaties or EU law by reclaiming withholding taxes withheld for the fund investors. David Gamper, Managing Director of LAFV (Liechtenstein Investment Fund Association) Hill: Is there a special feature in the positioning of LAFV in contrast to associations of other fund locations? Gamper: Unique in Europe is that the national association is the official publication organ for the fund industry. On the LAFV website, you will find the necessary information on all Liechtenstein funds that are subject to publication requirements. In the last four years, location marketing has also been developed, because just like Luxembourg and Ireland, Liechtenstein is a fund location from which cross-border business is conducted throughout Europe. However, the advantages of the fund domicile are still far too little known to potential fund initiators. Hill: How does cooperation with other associations look like? Gamper: LAFV regularly cooperates on a national level with other financial associations such as the Banking Association, the Association of Independent Asset Managers, or the Insurance Association. They coordinate their activities and advocate common interests in the regulatory area or the area of location marketing. At the international level, LAFV works primarily with other fund associations. The association is a member of EFAMA (European Fund and Asset Management Association), the European representation of interests of the fund industry, and IIFA (International Investment Fund Association). Almost all fund associations in the EEA and some third countries belong to EFAMA. The German fund association BVI, which I particularly appreciate, is also part of this pan-European organisation. This cooperation is in my view particularly important, especially for a small association like LAFV. Hill: Your core task is the association work for the fund industry. How does cooperation with other “location marketing agencies” in Liechtenstein look like? How do you do networking, do you pass the ball? Gamper: Correct, as already mentioned, marketing is only one of several sub-areas, and it has only gained in importance in the last 4 years.But to get back to your question, to promote the financial center, the financial associations as well as other professional associations that express interest in the financial sector have founded the joint association Liechtenstein Finance. Although it has existed for some time, the association has only had its staff since the beginning of 2020. Of course, I am in active contact with Liechtenstein Finance. We exchange experiences, coordinate our appointments, and provide each other with professional input. Sometimes we also make use of the resources and expertise of Liechtenstein Marketing, which is responsible for tourism and business. Hill: Concerning the fund industry – why can the Liechtenstein location be of particular interest to fund providers in contrast to competitors in the DACH region? Gamper: Legally, the fund center offers a great deal of flexibility within the framework of the European requirements which Liechtenstein complies with due to its EEA membership. This can already be seen in the many different legal forms for funds, but it is expressed above all in many small points that often bring decisive advantages. A very important aspect is the open discussion of the Financial Market Authority. The most important tasks of financial market supervision are the supervisory and protective function, but it is also open to the needs of the market and always ready to talk to market participants and their concerns. This has a positive effect on the processes involved in setting up funds, but also in ongoing fund administration. For example, the processing of a license or a distribution notification usually

  • Independence, an ownership approach, and a high degree of specialisation are key features of fund boutiques. Markus Hill spoke for FONDSBOUTIQUEN.DE with Berndt Maisch, Partner at Tresides Asset Management GmbH, about dividend funds & history, value versus growth, and investor interests. Besides, personal experiences with the topic “Group versus Boutique”, the role of sports and the expansion of personal horizons (“Asia 2030”) were discussed. Hill: How long have you been dealing with the topic of dividend funds? What are your experiences in this area? Maisch: With more than 20 years of experience in the field of dividend-based investment strategies, I can certainly count myself among the pioneers in Germany in this originally Anglo-Saxon terrain. As early as 1999 I was involved in the launch of a mutual fund with a dividend focus at my former employer LBBW. Large asset managers such as DWS, AGI, or fund boutiques such as DJE, which are currently on everyone’s lips with their dividend funds, were far from focusing on this topic at the time and mostly played growth stories from the short-lived TMT boom. With the LBBW fund, which I was solely responsible for managing for 14 years, I not only achieved numerous awards for the performance achieved and a fund volume of over EUR 2 billion but above all gained important insights into the topic of “dividend investing”, from which our TRESIDES Dividend & Growth fund now benefits. The years 1999 to 2006 marked a phase of clear outperformance for dividend funds. They were less affected by the bursting technology bubble and from 2003 onwards they even benefited to a greater extent than average from the recovery on the equity market. By contrast, the ensuing financial crisis had a considerable negative impact on many dividend funds and especially on dividend ETFs. This was particularly due to the far too high proportion of financial stocks in the then still young dividend funds and dividend indices. The years 2009 to 2013 then showed a mixed picture. In this phase of economic recovery, classic defensive dividend sectors such as telecommunications and utilities did not perform well, partly because of the often high debt levels of companies. Dividend fund managers with too high a weighting in these sectors therefore only participated below average in the very positive stock market development. The experiences from this long-term learning curve are incorporated into TRESIDES Dividend & Growth. We focus on European equities with reliable dividends, very solid balance sheet quality, and promising growth opportunities, and always keep an eye on a balanced sector mix in our portfolio. Berndt Maisch, Partner at Tresides Asset Management GmbH Hill: From a press point of view, dividend funds have been very much in the foreground in recent years, there are a large number of funds in this area. You have just described the long history of the somewhat “boring” dividend funds. What do you do differently in portfolio management? Maisch: The basis for our stock selection is our research know-how, which has been recognised for years at the renowned Extel Awards as the quality leader in Germany. The stocks we select are then added to the portfolio, not in the form of overweights or underweights, but weighted according to our degree of conviction and the market liquidity of the individual stock. This leads to an above-average active share in the fund compared with our competitors. We are constantly actively looking for new investment ideas and implement them in the portfolio so that the portfolio turnover is also higher compared to other dividend funds. However, the long-term focus of many dividend funds on highly capitalized defensive standard stocks such as Nestle, Novartis, Unilever & Co. Private investors can make such investments as classic buy & hold stocks in their portfolios without the need for active fund management. On the other hand, our additional “Growth Aspect” also allows interesting structural growth themes to be considered. As a thoroughbred European equity fund, the motto “100% shares without hedging” applies, i.e. the investor must be able to live with market fluctuations. Hill: Which investment style do you pursue – value or growth? Maisch: That always depends on the respective “value” definition. According to the Morningstar classification, we have a lower value bias than our competitors among dividend funds. If the definition of “value” is aimed at low P/E and CFB industries, then we are underrepresented here, as sectors such as banks, energy stocks, or airlines play a smaller role in our portfolio. In contrast, our focus is more on so-called “quality industries”. By this, we mean sectors that are certainly sensitive to economic cycles, but which have good structural growth prospects. Their representatives must also have first-class balance sheets, generate high free cash flows, and be fundamentally well-positioned. We are also interested in stocks from defensive sectors with growth characteristics within the industry environment, such as Deutsche Telekom with its growth driver T-Mobile US. Hill: Which investors are most interested in your approach? Maisch: The focus at TRESIDES is mainly on institutional investors. The high current income from our dividend funds is particularly interesting for foundations, which can use it to finance their foundation projects. But we also see strong interest from pension funds and insurance companies. We have been serving some addresses from these segments as investors for years. Hill: You originally worked in the banking sector. Why did you choose a fund boutique as your employer? What was your previous experience here? Maisch: When discussing the topic “group versus boutique” many points naturally come to my mind. The elimination of rigid hierarchies and a large number of internal organizational meetings makes flexible and efficient work in fund management much easier. I also find short paths for exchanging information with colleagues from the fixed income and commodities areas very efficiently. Also, owner-managed asset managers such as TRESIDES require entrepreneurial spirit. The fund managers can actively participate in the strategic positioning of the company. Our financial participation in the company’s capital and direct investment in our fund

  • Family offices, entrepreneurs and high net worth individuals are currently looking more closely at commodities as an investment. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Urs Marti, Partner at SIA Funds AG, about the assessment of the market cycle in this real asset segment and about the investment behaviour of various investor groups in the market. Additional topics in the discussion were the connections between value investing and investment in commodities as well as the current importance of sports and Hugo Stinnes (“Industrialist & Politician”). Hill: How long have you been dealing with the topic of raw materials? What fascinates you about this topic? Marti: I still come from a time when the future career aspiration was a crane operator. We still played with railways, remote-controlled planes and the village king was the one with the best-cut-up moped. A certain fascination for technology, big ships, trucks, buildings was probably always with me. In general, one seems to have hardly any idea what it all needs until we have a kilo of gold, a filled tank or enough electricity “real” and can use it. In the financial world, I was taught that one should act as anti-cyclically as possible and buy undervalued assets to be able to earn something on the stock market. During the Internet bubble, the commodity industry was the antipode. As a portfolio manager, I later started to invest in hydroelectric power plants, mines, and oil producers. Hill: Which commodities do you pursue more intensively? How do you form an opinion about the market? Marti: We follow the sectors of capital investments.  Commodities have about 10-year cycles. They are supply cycles, which means long pig cycles. In the last ten years, there has been far too little investment in many sectors due to low prices. The availability of many commodities will decline. Urs Marti, Partner at SIA Funds AG Hill: You are a portfolio manager and have many conversations with fund selectors and institutional investors. Do you have the impression of these discussions that the importance of commodities in asset allocation is correctly assessed by your discussion partners? Marti: I have this impression from many of my contacts. There are some specialists with whom I exchange views. Besides, there is often interesting feedback at investor presentations, in one-on-one meetings, or at events. It is probably the most neglected sector. This is always the case when something is at its lowest point, similar to the situation twenty years ago. One thing that struck me in this context: Family offices, entrepreneurs, and many wealthy private investors appear to be more open-minded and interested in commodities. There can be various explanations for this. One hypothesis could be that this group of investors is more interested in real assets (“real economy versus financial economy”) when building up their assets. Moreover, there is a completely different, important aspect of investment behaviour in this segment. Entrepreneurs, private investors, and also family offices generally have very short decision-making paths. Personal responsibility, “skin-in-the-game” and the ownership approach are the most prominent features when selecting investments. Among institutional investors, we still perceive a certain reticence towards commodities. One reason for this could simply be the structures; decisions are often made in committees, and due diligence processes seem more time-consuming. Both approaches have their justification, you simply have to be prepared for them. Hill: Value investing and investing in commodities, is there a connection between these topics? Marti: A good question. Surprisingly, the periods correlate because value outperforms with rising commodity prices. At first glance, there doesn’t seem to be a connection between these two themes. In times of sharply falling interest rates, growth versus value is often outperforming. This is because the discount rates for cash flows decrease. The further into the future the cash flows are, the more their net present value increases. (Often the positive cash flows are infinitely far in the future). Commodities are probably the antipode. One has depletion, the industry loses about three percent of production annually without investment. If you don’t invest, after 20 to 30 years there is hardly anything left to produce. You can’t extrapolate an infinite growth or scale an existing platform. It is “real life”. You have to invest huge amounts of money – it’s difficult, Mother Earth is capricious. But that’s why prices go up and there are very good cash flows, dividends, and low valuations. The commodity sector has never been valued so low in its history. Hill: Commodities and portfolio management are your professions, your passion. What other topics are you currently working on? Which book are you currently reading? Marti: In my free time I like to ski and cycle. I am quite shocked by the rest of society and politics. It seems that you successfully turn everybody against everybody. Right versus left, old versus young, black versus white, east versus west, poor versus rich, south versus north, city versus country, and so on. This is unlikely to improve as the distribution struggles intensify. Politicians often see the citizens and the economy as nothing more than a “cash cow”, admittedly in somewhat polemical terms. The whole thing has long since ceased to be financially viable and now functions only through the money press. Currently, I am reading the biography of the German industrialist Hugo Stinnes (1870 – 1924). Why do I find his life story interesting? Looking back, it is always interesting to see how topics such as central bank policy, inflation, and real assets have developed an interesting economic dynamic in the past. Of course, the comparison with the current situation of the markets limps in partial aspects, but fundamental similarities can be discovered if you look a little closer. Hill: Thank you very much for the interview. FONDSBOUTIQUEN, VALUE INVESTING & ROHSTOFFE (SIA Funds AG) Photo:

  • Many funds of funds use fund boutiques for the allocation. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Lars Kolbe, Managing Director of Aqualutum GmbH, about the advantages and disadvantages of using independent asset managers in portfolio management. They discussed the stability of approaches to boutiques, due diligence, and seed money as well as crash prophets, athletics, and Arnold Schwarzenegger. Hill: How long has the topic of fund boutiques accompanied you?Kolbe: I started building up a fund database as a working student in 1991 at a family office. At that time there were about 800 funds in Germany, mainly from the asset managers of the big banks. The only foreign funds at that time were Templeton and Pioneer. Boutique funds were de facto not available. It was not until the second half of the 1990s that this changed with the founding of Ennismore (Ex-Barings Manager) and Thames River, which offered these fund managers an independent platform. The era of German boutiques only began at the end of the 1990s. A pioneering role was played by Dr. Jens Ehrhardt, who launched his FMM Fund back in 1987 via the then BHF Bank. Hill: How do you use fund boutiques for the allocation in the fund of funds?Kolbe: Fund boutiques play a central role in our m4-masters select. The fact that the managers are usually also the founders of the company ensures the stability that is rarely found in the funds of the big houses. There, manager or team changes dominate almost like in the Bundesliga. (German League) Frequent „strategy changes“ – such as recently at a German market leader – also show what these companies prefer to deal with, namely themselves. On the other hand, we appreciate it when we can engage specialists for different markets or segments who only deal with their particular topic from morning to night. On the other hand, if a company is known for value investing in established markets suddenly launches India or biotech funds, we sell immediately. These companies have entered the monetization phase through this unusual „shift“. This is legitimate but without us. It is also important to remember that investment strategy and fund volume should match in fund boutiques. It is precisely here that we have recently seen some glaring cases of mismatch. The performance of funds has been correspondingly weak for some time. Lars Kolbe, Managing Director of Aqualutum GmbH Hill: What lessons have you learned for due diligence of boutique strategies against the background of the Corona crisis? What was different this time, remarkable, possibly „weird“?Kolbe: There wasn’t a lot new adjustment. It was again interesting to observe how isolated crash prophets exert an irresistible attraction in the crisis. Sadly, always an ex-post. And unfortunately, they can never tie in with their „out-performance“. Apart from that, it should be noted that it has become much more difficult to collect seed money as new starters. But that was the case before Corona. But now it hasn’t become easier. Hill: What occupies you intensively at the moment, if you are not dealing with independent asset managers?Kolbe: I prefer to read biographies of successful personalities. This ranges from Arnold Schwarzenegger, whom I hold in high esteem (who was often underestimated by many) to NIKE founder Phil Knight. For a decade and a half, he had to fight against great resistance. Today the company is the world market leader in sport’s shoes and sportswear. Here I can also make the connection to my great passion, the sport. After my own competitive sports career in athletics, I have remained true to sport. Today I train a group of talented young sprinters in my home club. And this is where the circle closes: small against big! Boutiques against corporations. I have always loved this fight. Not without success. Hill: Thank you very much for the interview. *) Markus Hill is an independent asset management consultant in Frankfurt am Main. Photo:

  • Fund boutiques have been attracting increased interest from family offices and traditional institutional investors for years. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Oliver Klehn, Managing Director of Paladin Quant GmbH, on topics such as singularity theory, quantitative asset management, and ESG. In addition to these technical aspects, topics such as “permanent employment versus entrepreneurship”, seed money and experiences with fund selectors were discussed. The portfolio manager’s professional impressions are complemented by personal reading thoughts on the topicality of Thomas Chromwell, Brexit, and Corona (“Mirror and Light”, Hillary Mantel). Hill: You have taken an interesting professional path, what exactly did you study? Klehn: I still remember the evening walks with my father. I looked up at the sky with fascination and had many questions. My father explained the world to me, he talked about the finiteness of the universe and about astronauts for whom time in space would pass much more slowly if they moved in space at approximately the speed of light. That the astronaut would only have aged a little, while the people on earth would have been old people long ago. And that all of this would come out of Einstein’s theory of relativity. These answers sparked my interest in science, I wanted to understand things. After the German Army, I began to study mathematics and physics. Since I had to commit myself to a core subject, I decided to study mathematics with physics as a subsidiary subject. What fascinated me about mathematics was the clarity of the methods and the fact that everything has to be proven, but then once and for all it is irrefutable. During my studies, I chose as my main subject a field that is considered to be one of the most difficult and abstract within mathematics, the so-called singularity theory. It is a branch of geometry and deals with places in geometric spaces, the so-called singularities, which conventional mathematics fails to investigate. For example, the Big Bang of our universe is a singularity in physical space-time geometry. The equations of general relativity collapse here because the curvature of spacetime becomes infinite. To investigate singularities, completely new mathematical methods are needed, and singularity theory develops them. What I found particularly appealing about this was the drilling of thick planks and the forging into completely unknown territory. I have a passion for solving difficult puzzles. Consequently, I thought to myself: if you have to do mathematics, then do it right. The most challenging topics were always the most interesting ones for me. It had little to do with finance. But today, as a fund manager, I benefit from the fact that I had to learn in my studies to tackle even very complicated issues with courage and perseverance. However, I had a certain affinity for the financial markets even as a youngster. Even then, I was concerned with the fact that Germans have little to do with financial markets and often regard the stock markets as the devil’s work. I never understood why the Germans did not want to participate in their economy. But at that time, and also during my studies, I had not yet planned to go into the financial sector later on. Directly after my studies, I received an offer from my then-doctoral supervisor to do a doctorate with him at the institute. What appealed to me above all was the fact that I was able to research a comprehensive topic for three years completely independently. However, it was clear to me that I did not want to spend my whole life at the university, but that I would go into business after completing my doctorate. I eventually joined the Market Risk Controlling department of a bank. Oliver Klehn, Managing Director of Paladin Quant GmbH Hill: What made you choose the path of self-employment in the asset management sector after this “secure” employment relationship? Klehn: In the later years of my professional life I went through several stages in risk and asset management. The last one before becoming self-employed was with a medium-sized asset management company. I was asked to develop a product range of purely rule-based funds and to set up a dedicated team to manage them. The focus was on institutional clients. That worked well: the interest of institutional investors was great and we were able to build up the volume very quickly. From then on, however, more and more people wanted to have a say, and it was clear to me that the full potential of the methods we had developed could only be brought to the street under our responsibility. I, therefore, decided to become independent but needed a partner to compliment me. This partner should preferably have a mutual fund with a track record of several years, as well as expertise and infrastructure in sales. In Hanover, distances are short, so I came into contact with the Paladin Asset Management Group. The group emerged in 2011 from the family office of the Maschmeyer family of entrepreneurs. Their equity fund Paladin ONE is a “handmade deep value fund”. After a period of trial and error, we decided to establish Paladin Quant GmbH in autumn 2018, thereby expanding the Group’s offering to include purely rule-based strategies for institutional investors, family offices, foundations, and asset managers. The clasp between what at first glance appears to be very different approaches is that all strategies aim to efficiently manage risk and reduce draw-downs. In autumn 2019, we launched the first mutual fund of Paladin Quant GmbH and were also able to acquire a special mandate from an insurance company. We are in the same boat as our investors: All employees and management are invested in our mutual funds with significant amounts. For example, I have invested all the reserves that I do not need in the short term in Paladin Quant Aktien Global Nachhaltig. Hill: What are the best features of your approach? Klehn: The special feature of our approach is that we efficiently bring together the issues

  • Independent asset managers (fund boutiques) have been the focus of institutional investors in the area of fund selection for years. Markus Hill* spoke on behalf of FONDSBOUTIQUEN.DE with Daniel Knoerr, Head of Product Management & Unit Linked Business at Ampega Investment GmbH, about key issues that are addressed in the design, process, and launch of private label funds. Topics such as the evaluation of derivative strategies, current fund projects, the importance of marketing and sales support for capital management companies, and the significance of ESG in asset management were also addressed. The experience gained in the area of “lived agility” in projects and processes in the Group division also appears interesting. Hill: What exactly is your area of responsibility at Ampega? Knoerr: In my new function I am responsible, among other things, for the acquisition of administrative mandates and for looking after label funds and clients. My other responsibilities include product development and product management. This also includes, for example, the preparation of mandatory publications such as sales prospectuses or (semi-) annual reports. Besides, my team is responsible for the product development of the unit-linked life insurance tariffs of the various life insurers of the Talanx Group. Hill: What do you consider to be the main steps in the PLF concept review? Have you been able to identify some factors for successful concepts? Knoerr: In terms of methodology, when evaluating new projects in the private label funds sector, we orient ourselves very strongly towards the “business model canvas” from a lean startup. This means that the value proposition of the product must be worked out and it must be examined based on various criteria to see whether the realization of the product will deliver long-term value contributions for all parties involved – the investment company, the initiator, or advisor and the custodian. We ask ourselves the following questions, for example, without claiming to be exhaustive: Which investment idea or investment case will be implemented and does the initiator have the expertise and track records?What benefits do our sales partners and distribution channels derive from the product launch?Do we possibly have a competitive advantage? (Example: First Mover-Advantage)What could be the drivers of success? Who supports us? Who benefits from the implementation? (This could be a large anchor investor providing seed capital, for example).What obstacles and expenses could arise on the way to fund launch? For example, can all instruments be mapped and valued or does a new custodian need to be connected?What internal and external resources do we need for the implementation? (External resources could for example be a portfolio / or order management system, which the partner uses and has to communicate with the internal investment company systems. We are very thorough in dealing with these and other more detailed questions. What is important for us here is the interaction between the sales and product management departments and coordination with other important internal and external interfaces. Daniel Knoerr, Head of Product Management & Unit Linked Business at Ampega Investment GmbH Hill: You have a long experience in fund selection, at the beginning of this year you were also on Citywire’s TOP 100 fund manager list in Germany. You were able to view many fund approaches in this function through the “investor’s lens”, an experience that is helpful in due diligence. What is your attitude towards the use of derivatives in fund concepts in the private label fund segment? Knoerr: My previous experience as a fund selector is very helpful in assessing fund concepts in fund boutiques. The use of derivatives is often a component of concepts and must, therefore, be mapped, managed, and monitored. Hedging instruments are used in most cases. If derivative strategies are used, for example, to collect risk premiums, it often becomes more complex. In my view, it should always be considered whether the strategy can be implemented sensibly in the UCITS framework and above all under the current set of requirements (keyword: risk controlling) of the investment company to fully develop its benefits. This year we have already seen some negative examples during the turbulent market phase in March. We try to identify such pitfalls in advance of the launch and would reject the mandate if in doubt.    Hill: What was your area of responsibility before you changed? Knoerr: Before my change, I had various responsibilities within the Group. As you briefly described above, I was a portfolio manager of several mutual funds of funds and portfolio manager of unit-linked life insurance policies. Also, I was responsible for fund selection for the various carrier companies in the Talanx Group and was a project manager and product owner in the ESG project “Capital Investment” in the Talanx Group. Hill: Which concepts are currently being launched in your company? Knoerr: We have now realized the “FAROS Listed Real Assets AMI” in cooperation with the consultant FAROS and launched it a month ago. REITs, which are largely unknown in Germany, offer many advantages for investors who want to invest in real estate. They are often more stable than shares, pay high dividends, and are also very liquid. In the fund, we also offer investors broad access to other real estate investment themes from the bond sector, such as corporates or property-secured bonds. Currently, there are other exciting projects about to be launched, both public and special fund mandates. I am very excited about one fund project: a biotechnology fund which we will implement with the provider LUNIS. Hill: Are you also involved in the examination of fund concepts in the non-liquid sector? Knoerr: We are a full-range provider and offer asset management services for real estate, private equity, and infrastructure investments in addition to liquid asset classes. As a specialist, Ampega Real Estate bundles the entire value chain from acquisition through project development and portfolio optimization to disinvestment in a separate company. One of the biggest growth drivers is the Infrastructure Investments segment. Here the Group has systematically built up expertise and since the beginning of 2014 has

  • “We are very patient” (Jean Marie Eveillard) is a mindset that many fund boutiques follow in the field of value investing. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Stefan Rehder, Managing Director and CIO of the asset manager Value Intelligence Advisors, about the importance of factors such as patience, slowness, risk management, eagerness to learn and the classification of investment styles – interesting minds in this area: Jean-Marie Eveillard, Warren Buffett, Bruce Greenwald, Benjamin Graham. Mr. Rehder also spoke about the importance of “antennas” (macroeconomics, politics etc.) in portfolio management and the role of family offices as value investors. Hill: How would you describe your investment approach? Rehder: I am convinced that avoiding losses is the key to attractive long-term returns on the equity market.  I was influenced in this respect by Jean-Marie Eveillard, one of the most successful global value investors. The implementation of his value-oriented “Slow & Steady” investment philosophy is comparatively challenging, as it demands a great deal of patience from both the fund manager and the fund investor. Moving forward cautiously and at a turtle, speed is not for everyone, especially in bull markets. In the current environment, on the other hand, the sense of what makes sense becomes clearer more quickly. Hill: Where do you see the difference in other value approaches? Rehder: Stylistically, we are at the Buffett end of the value spectrum. We like to invest in quality companies with pricing power and have little fear of growth, as long as it is protected by market entry barriers. Our company analysis is based on the teachings of our mentor Prof. Bruce Greenwald, who taught Buffett’s style of company valuation at Columbia University for more than two decades. Another important difference to other value approaches is the scope of risk management. Organizational theory has shown that companies are particularly resilient when they have numerous antennae in the environment. I interpret the construction of a resilient portfolio in a similar way. For me, macro, sustainability, or political analyses are also potentially important antennas in the context of risk management. Stefan Rehder (Value Intelligence Advisors), Markus Hill – Auf.Den.Punkt, AMPEGA, Cologne, 2019 (Photo MH Services) Hill: In your opinion, has value investing changed? Rehder: Yes and no. Since Benjamin Graham, value investors have tried to strictly separate the value and price of a company. In determining value, they are guided by average future conditions. The challenge of the present is that the world is in a paradigm shift and mean reversion is in many cases no longer a certainty. As a result, the rules of the game are changing fundamentally in numerous industries. At the same time, I argue that the policy of cheap money has had a massive positive influence on supply and demand in various industries. The answer to the question of whether, for example, the profit margins of the last 10 years are representative has become more complex. Hill: Value Investing and Family Offices – what role does this fund selector group play for you and your funds? Rehder: Family offices are our largest investor group, accounting for approximately 40% of assets under management. This is hardly surprising, as the focus on capital preservation is particularly strong here. The clients of family offices are often entrepreneurs who have worked hard for their money. They are less interested in maximum returns than in benefiting from the long-term yield advantages of shares with comparatively low risk. We have been very fortunate to find family offices that trust our approach and think long-term.                                                                                                                                         Hill: When you look back on the founding of your company – what conditions have you learned? Rehder: The nice thing about my profession is that you can learn something new every day. VIA was founded in 2009, the first fund was launched in May 2010. Having previously worked for various banks, I found it a gift to be able to implement a value investing completely independently of the requirements of others. Over the years I had to learn that an approach that makes a lot of sense in the long run, still does not necessarily suit every client. In the meantime I have understood that it takes time to establish our all-weather funds. In the end, not only the process but also the results must be convincing. Hill: What are you currently working on more intensively? Rehder: In my opinion, the current investment environment is very complex and demanding. In this respect, there is a lot of work and comparatively little time to let one’s thoughts wander at the moment. In April, we added another member to our team, which means that I personally have even more time to focus on what I like to do best: Looking for attractive companies worldwide and familiarizing myself with interesting business models. I also spend more time than usual on the top-down perspective. I think we are living in extraordinary times in which economies are undergoing serious adjustment processes that will also have a lasting impact on the corporate level. Hill: Thank you very much for the interview. FONDSBOUTIQUEN & MÜNCHEN: Photo:

  • Fund boutiques have been meeting with increased interest for years, not only in Germany. In the value investing segment, there are a number of service providers offering training courses, events and webinars. Markus Hill spoke for FONDSBOUTIQUEN.DE with Christian Freischütz from the Value School in Madrid, Spain. In addition to topics such as value investing, family office and investment culture in Spain, topics such as setting up a consulting firm in the pension fund segment, the selection of fund boutiques and skin-in-the-game factors were also addressed. Hill: What does the Spanish market for fund boutiques look like? What role do family offices play here? Freischütz: The Spanish market has been characterized for long time to be a bancarized (I include insurance companies for this purpose as most did bancassurance deals with banks to gain distribution size) asset management sector, with bank branches nearly everywhere (second largest bank branches density per thousand inhabitants of the world just before the GFC). It was very profitable for banks to have lowly paid asset managers which were basically index tracking. The GFC changed little, but as bank branches started disappearing and the banks were involved in quite a number of scandals, life got easier for independent asset managers. A few Family Offices started managing their money independently from the banks at the end of the ‘90s and beginning of the 2000s, between them the Entrecanales (a family with interest in the construction sector back then, nowadays owners of Acciona) Family Office called Bestinver. They hired Francisco García Paramés in 1989 and 2 years later he was running the Spanish equity fund with a Value Investing approach and achieved a very good track record (15.7% p.a. Jan 93-Sep 2014), he gained larger attention from Spanish media as during the Internet Bubble meltdown (Bubble during which he refused to purchase the trendy stocks, he made a strong performance vs a falling market). Other Family related managers (also around that time where Lierde Sicav and La Muza Sicav, related to Mr Alierta and to the Urquijo family) and a few other independent players like Metagestión were created back then. Between the Internet Bubble and the GFC more independent projects were born: Cartesio Inversiones, Belgravia Capital, Solventis Gestión, Abaco Capital… but the larger boom in terms of number of independent projects came after the GFC as performance of the banking asset managers was very poor. Since then we have seen quite a number of new projects like Trea AM, Valentum AM, Invexcel, Equam Capital, Buy&Hold, Lift Investment Advisors… One factor which has made the sector much more dynamic has been the departure of Mr. Paramés and a few other partners / managers from Bestinver in September 2014. Since then a number of projects started from “scratch“ and gave the ecosystem much more depth. End 2015 AZ Valor and Magallanes Value Investors were founded and  in 2016 Cobas AM (Paramés) entered the arena too.  Christian Freischütz,Director Business Development at Value School Hill: The family office segment and fund boutiques seem to be closely related in Spain. What is the relationship with Value School? What exactly do you do there, what is your mission? Freischütz: During his non-compete period, Mr. Paramés re-read the classic investor books, between them Peter Lynch, who got a 29% p.a. performance over 13 years in a row. In his book he stated that NONE of the investors in his fund made this performance as people traded the fund. This was a revelation, if Mr. Paramés was able to compound at 15% p.a. over the following two or three decades, his investors should be able to get the same returns. Thus, people in Spain needed to learn about financial education: that was the basic idea behind Value School. In 2017 Value School was founded and started offering mainly online information and education programmes, investing books were also translated into Spanish to give more options to people. In 2019 we have found a few potential partners to replicate the Value School model in Italy (Value School Italia) and perhaps in Germany with the founders of Value Campus. Other projects  I find interesting are Value Dach and Vadevalor which has also an event together with RankiaPro. Apart from starting quite a good number of online courses to educate people with little or no financial knowledge we (Value School together with me) have also been able to attract in September 2018 Mr George Athanassakos to teach his Value Investing Program in Madrid and have now partnered with the Gabelli School of Business to bring online to Spain a Behavioural Investment Course for end of May 2020! ( Hill: What would you like to see for the fund boutique segment in Spain? What is your experience with the conference segment in other European countries? Freischütz: One of my dreams is to see a much larger independent asset management sector in Spain. Currently around 7% of AuM are run by independent managers and another 4% would be foreign firms of which some will be independent and some not. The long term aim is that the fund offering in Spain ends up being as diverse as it is e.g. in the UK (70% of money is run by independent managers). In that sense this is how I ended up collaborating with Value School. Our aims are pretty complementary. Since 2015 my wife and me are running the Spanish value investing conference called Value Spain which follows the spirit of the Italian Value Investing Seminar. Other conferences we are supporting as friends are: the Nordic Value Conference in Copenhaguen, Smart Vienna,  the International Value Investing Conference in Luxembourg and the Prague Czech Value Conference. We have attended all European and some US conferences as the: London Value Investor Conference, Value X in Klosters and the Cyprus Value Investor Conference. In Germany we have also been at Mr Stefan Rehder´s VIA Conference and in North America we have attended twice the Berkshire Hathaway Annual Shareholder Meeting (the Cradle of Capitalism as Mr. Buffett puts it) plus the conferences which

  • Many fund boutiques have distinct expertise and passion in the field of value investing: “Pleasure in work makes the work come out right” (Aristotle). Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Dominikus Wagner, founder of the Bonn-based asset management firm Wagner & Florack, about the ownership approach, skin-in-the-game and also about the selection criteria of an asset manager when using boutiques in client portfolios. Topics such as balance sheet analysis, the “buffett moat” and the importance of Charlie Munger for value investments were also discussed. Hill: There are many interesting approaches by fund boutiques in the value investing segment. How would you describe your investment approach? Wagner: Concentration on the business essentials. That’s why we need to analyze and understand the business models and balance sheets of companies – both from an entrepreneurial perspective. We take an entrepreneurial and long-term view when investing in the cash flow of strong, steadily growing companies. These companies always earn very well in the long term, even in a recession. It is important to us that the companies have to use little capital, have high reliable economies of scale, and create an outstanding return on capital. And the companies must have robust and stable competitive advantages, i.e. the buffett moat. Dominikus Wagner (Wagner & Florack), Markus Hill – Auf.Den.Punkt., AMPEGA, Cologne, 2019 (Photo MH Services) Hill: Where do you see the difference in other value approaches? Wagner: We call our style “value investing according to Munger”. If a target we want to invest in is available at a price – including a safety margin – below the value of the company, we buy. By the way, low fair value less safety margin seldom means that we buy at supposed or actual lowest valuations, as Buffett’s teacher Graham once did, who was influenced by the Great Depression of the 1930s when many companies were valued well below their balance sheet book values. In his time without Munger, Buffett also often tried to find such (supposedly) cheap stocks. This was rarely successful, as Buffett admitted. Munger, on the other hand, learned from Fisher that supposedly lowest-priced companies are often rightly cheap. World-class companies with always low capital requirements and high economies of scale and therefore robustly high margins and high return on capital, with robust moats, strong brands, and pricing power will always be valued slightly higher or distinctly higher. Nevertheless, the price must be below the value. And sometimes the value of top companies is significantly higher than their price, e.g. in a bear market like the current one, or when analysts are “disappointed” by good business figures because they expected even more, and sell automatic trading systems, traders and anxious people. Munger has made it clear to Buffett that such companies are better investments in the long run than pure “Graham companies”. Value investing, according to Munger, is therefore not Graham investing, but rather focused, long-term investing in world-class quality companies that can be bought at a price below their value, and this price will usually be higher than for rightfully cheap stocks. Hill: Who do you consider to be your competitors or your direct rivals? Wagner: I only know competitive thinking from sport, otherwise it is foreign to me. We concentrate on ourselves. We must continue to do our homework consistently, then the rest will come naturally. Hill: What is “homework” and what do you mean by “rest”? What are your goals? Wagner: Reading annual reports, investor presentations, statements by good managers, then thinking competently about the business and the balance sheets of companies and their competitors.  And both of these things must be done with a critical, entrepreneurial mind. Understanding business models, thinking about the risks of the business, and the moats and understanding how they change. We need to look closely at how a business performs in a recession and what other serious problems may arise. Moats are also changing, so thinking about what the consequences might be is crucial. In quantitative analysis, we only identify and look at those key figures that are relevant from a business perspective. Ultimately, you have to take an overall view of the business model and the entire balance sheet to be able to assess and evaluate a company sensibly. If I do my homework consistently and thoroughly, then the “rest” results – you avoid unnecessary mistakes, create a high level of investment security by investing in companies that always earn good money, and are rewarded with high performance in the long term because the companies not only grow reliably but also strong. Hill: And what are the objectives for the fund in terms of volume? Wagner: We are and remain very down-to-earth. But I would like the grip we bring to the road in terms of investment process and performance to be reflected in the volume. We are currently at a good 75 million after about 30 million a year ago, but so far we have done very little in terms of sales or external perception, but we are in the process of carefully changing that. We have patience in this respect, even if it is sometimes difficult. Hill: The fund is intended to convince investors in the long term, especially in weak market phases; the current phase has been challenging for many value managers. Is it risk management, good timing, or what are the main reasons for success in this area? Wagner: It is not the timing, we were and are fully invested in the corporate funds. And yes, risk management? Our risk management is the constant and thorough completion of the homework mentioned above. And: robust cash flow and a healthy balance sheet is the best downside protection or, in our opinion, the best risk management. Our portfolio companies are also not threatened by insolvency, while a considerable number of listed companies are latently “at risk of bankruptcy” in a harsh to a very harsh environment. We are therefore living up to our own, overriding objective, namely not to lose money

  • “Courage is good. Endurance is better. Perseverance is the main thing” (Theodor Fontane). Whether with liquid or non-liquid fund products – in the search for seed money, it can sometimes take a lot of stamina to reach your goal. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Norbert Wolk from the start-up company Barbarossa asset management about the practical experience in approaching investors, challenges, and the special importance of the factor resilience in turbulent times on the stock exchange. Hill: Which fund project are you currently working on more exclusively? Wolk: We at Barbarossa asset management are planning to launch an endowment fund as initiator and advisor. This fund should be mixed, the returns will mainly come from equities and risk premium strategies, by which the entire investment process will be carried out using a systematic trading model. In contrast to many “new” fund initiators, this model is backed by a manager who already has a long track record and a certain degree of recognition in the industry – it is not a concept based solely on backtesting. During the current crisis, the system has once again proved its worth. As the name “endowment fund” suggests (nomen est omen), it is designed to meet the needs of a foundation. On the one hand, regular distributions are very important for a foundation (preferably quarterly) to be able to fulfill the purpose of the foundation. On the other hand, the focus must also be on risk management to avoid extreme drawdowns. After all, the capital stock should not be attacked. Of course, this applies not only to foundations but to everyone concerned about these issues. Norbert Wolk, CEO at Barbarossa asset management Hill: How would you describe your experience in the current search for capital? Wolk: We have only been in business for 8 weeks, but the approaches, how and in what the fund invests, have been in place for much longer. Rome wasn’t built in a day, so it takes a little longer. Especially the topic of seed money searches is proving to be difficult and time-consuming. It’s not that we don’t have a network, but I still have to say that investors are very cautious. I don’t think it’s because of the current Corona crisis, but it’s probably a general phenomenon. According to the motto: “What the farmer does not know, he does not eat”. Then there are always questions like: “Is there any backtesting?” And then I say: “Well if you want to cover the costs of backtesting, I’d be happy to do so”, for once the basic concept of our fund is based on the practical track record of our manager. We work with risk premiums and if you ask at the stock market what historical data costs, they’re left speechless. It’s not feasible. I would also like to see a little more empathy; by that I mean that as a “seeker” you are also taken seriously and not as an annoying blowfly. For me, this also includes something like replying to an e-mail. This answer can also be very short, but that’s just part of good manners. For example, I have currently written to 97 asset managers, only six of whom have sent me a reply. So there is still a lot of room for improvement. But the good thing about the current seed money search is getting to know new people. Since I am a Rhinelander, it is also in my nature that I enjoy it. But having success once in a while wouldn’t hurt either. Once the fund is up and running, you have of course already done a lot of preliminary work and you will have “warm” contacts. Hill: What do you think are the challenges of your project? Wolk: The challenge in the whole seed money-search process is certainly not to stop. We have such a great product, I am 100% sure that this will lead to success in the end. You just need, as Oliver Kahn said, “big balls”. You shouldn’t get frustrated when you hear the umpteenth reason why it doesn’t work. We also thought about what else might interest a potential seed money funder and so we decided to give up a company share to make the package more attractive. One should always look from the other person’s point of view to be successful in the end. Hill: What are your next steps and expectations in the further process? Wolk: I look forward to getting up every morning and starting the day with a lot of energy. Because every day is a gift from God, and that’s how we should see it. Always think positively. In the meantime, we have also offered a potential seed money funder the prospect of a stake in Barbarossa asset management. I am looking for a reliable partner who is as motivated as we are and recognizes the opportunities we have. Just like Antoine de Saint-Exupery: Don’t just look at each other, but look in the same direction. Hill: Many thanks for the interview. Barbarossa asset management: Input, ideas, suggestions on the subject of “Seed Money” and fund boutiques in the liquid and non-liquid fund sector are always welcome: More interesting articles: Fund Boutiques & Private Label Funds: Value Investing, “Value versus Price” and the Importance of Family Offices as InvestorsFUND BOUTIQUES, FAMILY OFFICES & VALUE INVESTING: Ownership Approach, Business Schools, Behavioural Finance & more Photo:

  • Issues such as ESG, SRI, impact investing and fund boutiques have a long-term character. Against the background of COVID-19, priorities in the current discussion seem to be shifting. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Anton Bonnländer, Advisor for the Bank für Sozialwirtschaft AG, about the current situation and impressions in product development, due diligence, and fundraising in the field of sustainable investments. Topics such as seed money, skin-in-the-game, kite surfing, rock bands, and social distancing complete the current mood. Hill: The current discussion revolves very much around COVID-19, its effects on the economy and society as well as on the world’s stock markets. No one can today grasp the effects of this pandemic. This implies a very monothematic view of our society and economy and also leads to a noticeable decrease in risk appetite in the investment sector. To what extent is the topic of ESG and impact investment still relevant? Above all, is the attractiveness that has just begun, which has also led to many reorientations among product providers, collapsing again? Bonnländer: It is interesting to see how the corona pandemic is currently seemingly effortlessly displacing all other problem issues in the public debate. I deliberately say „seemingly“, because the current emergency is sharpening the focus of many people on other trouble spots: underfunding/structural weaknesses in the healthcare system, inadequacies of the digital infrastructure, deficits in the resilience of supply and delivery chains, the need to rethink transport systems and mobility habits, inconsistencies in the social system – to name just a few of the issues. Interestingly, the „shutdown“ in the major economies leads to an improvement in „environmental quality“, to a different view of the „post-pandemic world“. This state of affairs is accompanied by the question „Can’t the financial resources that are now being used for crisis management be linked to a sustainable investment? I think that the view of the one catastrophe also opens up inventiveness and social motivation as to how other problem areas could be dealt with in one go, so to speak. A great deal of capital is being made available here worldwide, capital that was previously not planned by politicians, if at all, for meaningful investments. This is why ESG and impact investing is a highly topical issue. We will be able to deal with the pandemic; it will subside. The serious ecological, social, and economic issues covered by the UN’s 17 SDGs remain active and want to be resolved. The global impact of the pandemic is perhaps also building the necessary bridges to come together more strongly at the international level. So, first of all – capital will flow, and it will flow into new fields of investment with return prospects. Structural crises have always been opportunities. And secondly, concerning the capital markets, for me as an „investment man“, the crisis offers the opportunity to analyze the resilience of sustainable investment solutions to exogenous shocks compared with conventional, purely return-oriented – and often environmentally damaging – investment opportunities. Initial results show me that ESG investments are at least not falling more sharply than the market; many ESG portfolios lost significantly less. As soon as I have sufficiently verified this, I will make my results available. Anton Bonnländer, Advisor for the Bank für Sozialwirtschaft AG Hill: As a bank, „ESG boutique“, you offer mainly sustainable mutual funds. At the same time, you develop impact investments for the smaller circle, for professional and semi-professional investors. What experience have you gained in this? What advice and tips can you give during the product conception phase? Which mistakes should be avoided? Bonnländer: Stimulating question! Here too, Corona shows, as in a magnifying glass, the already existing necessity to tread new paths. We also see ourselves as a kind of ESG boutique; many fund boutiques in the segment will be presenting themselves in Cologne in the fund selection section. Cleaning the door, visiting large potential investors in the start-up phase of a new product idea to collect seed money, are simply not possible at the moment, and are even forbidden. At the Bank for Social Economy, I was also on the side of the „product decision-maker“ for a few years. There you are swamped with requests for appointments, annoying presentations sent and the roles are usually clearly assigned from the outset. These conversations are usually characterized by „sales pressure“ instead of „interest suction“. Rarely did the discussion partners succeed in reversing this. So digital communication is the order of the day at the moment! With it, I can create „suction“. Draw attention to your own house without immediately falling into annoying advertising drumming. Providing information with added value for the information recipient – that builds competence, USPs, and curiosity on the interlocutor. The more complex the products become, the more important the necessary preparatory work becomes. Pre-market sounding should also focus on the situation of a potential investor. What is my potential partner looking for? Which regulatory requirements does he have to comply with? Which investment vehicle is the easiest for him to invest in? How much administrative energy does my product idea cost the investor? How can I facilitate his new product process? What arguments can I provide for the in-house product discussion? Does he need the 17th bond fund investing in the euro area? Even the honest identification of product disadvantages in certain market phases shows transparency and creates trust. Other confidence-building measures include own „skin-in-the-game“ or national or supranational guarantors that reduce the investment risk. Also of interest is information that is not related to the product, which shows commonalities in the company’s philosophy, which underpins special competencies, track records with other products, the identification of positive changes in own processes. Information-on-demand and non-product-related calls-to-action also form proximity and thus the basis for successful personal discussions. At present, these take place more in webinar format or via video conferences. I am curious to see when we will finally be able to hold roundtables, face-to-face meetings, conferences, and customer events again. That’s

  • Fund boutiques have gained in popularity over the years. Markus Hill* spoke on behalf of FONDSBOUTIQUEN.DE with David Gamper, Managing Director of the LAVF Liechtenstein Investment Fund Association, about the launch of private label funds. The interview also covered the importance of German fund initiators for the financial center as well as topics such as AIFM, tax transparency, and strategy. Hill: What advantages does the Liechtenstein location offer for the launch of private label funds? Gamper: The biggest advantage is the fast processes. This is almost a matter of course for providers due to the high level of service orientation, but it is also a given for the Financial Market Authority. If necessary, fund management companies, AIFM and also fund initiators, can meet within lesser days, allowing many questions to be clarified in advance before implementation. This makes it easier to work both when launching funds and in the ongoing administration. In contrast to other locations, the Liechtenstein Financial Market Authority appreciates these clarifications, since it enhances less work to the written applications. Since the legislative reform on 1 February 2020, alternative investment funds (AIF) no longer have to be licensed; it is sufficient to notify the Financial Market Authority. Nevertheless, AIF is supervised and audited, and Liechtenstein does not wish to deviate from this quality standard. If an AIF is distributed, a distribution notification is required, which the Financial Market Authority generally confirms within 4 to 5 days. This ensures a very short time to market. It should certainly also be mentioned that funds in Liechtenstein are exempt from all taxes. The investor therefore only has to take into account the taxes in his home country. Hill: How attractive is the German market for Liechtenstein? Gamper: Germany is the most important and attractive market for the Liechtenstein fund industry after Switzerland, which uses Liechtenstein as access to the domestic market. The share of German initiators of private label funds has increased disproportionately, especially in the last 3 to 4 years. It is interesting to note that in the current COVID-19 crisis one or the other fund project has been postponed, but also many new inquiries are coming in, with some providers even more than before the crisis. Generally, these projects refer to material assets such as real estate. Photo: DAVID GAMPER, David Gamper, Managing Director of LAVF Liechtensteiner Anlagefondsverband Hill: Liechtenstein as a financial center – how has the picture changed over the years? Gamper: When it comes to taxes, Liechtenstein has changed completely. For more than 10 years the country has been pursuing a consistent tax compliance strategy, and that pays off. The Global Forum on Transparency and Exchange of Information for Tax Purposes (OECD) has already given Liechtenstein good marks in its country assessments in 2015 and assessed it as a „Largely Compliant“. In terms of tax transparency, Liechtenstein thus has the same classification as, for example, Germany and Great Britain. Liechtenstein has also been involved in the automatic exchange of information from the very beginning and has joined the Early Adopter Initiative of the G5 states (Germany, France, Great Britain, Italy, Spain) for the earlier introduction of the AIA. Liechtenstein’s financial companies have experienced a considerable upswing in recent years and today score points above all with outstanding services. Hill: Which book are you currently reading? Gamper: I have just read two books again after a long time. „Fish! An unusual motivation book“ by Stephen C. Lundin, Harry Paul, and John Christensen and „The Max-Strategy“ by Date Dauten. Hill: Thank you very much for the interview. —— Markus Hill is an independent asset management consultant based in Frankfurt am Main. Contact:; website: David Gamper is Managing Director of LAFV Liechtensteinischer Anlagefondsverband, (Liechtenstein Investment Fund Association) the official representation of interests of the Liechtenstein fund industry. LAFV’s mission is to promote the development of Liechtenstein as a fund center and therefore further improve its attractiveness for fund providers and investors. Association LAFV: Source: www.institutional-investment.dePhoto:

  • Frankfurt-Skyline-Sunset

    „Even today most of us find it impossible to really know more than 150 individuals, no matter how many Facebook friends we show off about“ (Yuval Noah Harari, 21 Lessons for the 21st Century).Xing, LinkedIn, Facebook and more – the economy of attention also applies to the asset management industry. Does digitalization represent the future communication in this area? Fund boutiques and mission Entrepreneurs in the asset management segment who are independent of the Group are often referred to as fund boutiques. Special characteristics of these asset managers are usually independence from group interests, a high degree of specialisation and „skin in the game“ as well as the characteristic of authenticity: These entrepreneurs are conviction-mongers, „burning for their cause“. They love what they do – a bold statement at this point: Many of them are by no means primarily motivated by pecuniary interests, monetary compensation is more a form of hygiene factor – in the sense of: „An excellent job is rightly exquisitely rewarded! Digitization and Information Overflow Social networks are a good way to stay in touch personally known and unknown market participants (fund managers, sales, investors). However, they do not replace personal contact interaction.This fact is perhaps sometimes emphasized a little too little. One can exchange contact data, stay more or less in „passive“ contact with a large number of people over a long period of time through postings and other activities. One can get the impression that in an additional complex services the term social selling can lead to a „imbalance“ in communication. Why? Content with specialist information is often seen as an offer, of course with the option of „disregarding“. However, if this type of selling is done via the „dumping of product promotion“ channel, expectations are often inevitably disappointed. As the platforms in this area grow, the providers of promotions often „scream” themselves down, as the channels with sales information cramping investors, who have neither the time nor the energy to cope with the information. „Back to the roots“ – opportunities for the analogue world In the area of roboadvisor providers, the initial euphoria seems fairly to have subsided. Meanwhile the desire for personal connection   in consulting is back. Apart from disappointment in the area of performance, the market appears too fragmented. This fragmentation also exists in the area of fund boutiques. One strength, the non-standardization, the heterogeneous range of personalities, investment approaches and asset classes offers a wealth of content of a professional nature, which is often perceived as enriching by investors: At investor events and manager meetings, the following still applies: people currently still prefer to communicate with people rather than clicking through menus. Perhaps this behaviour will change in the future. However: The alternative to digital neutralization in the area of social media as well as in the area of mailings is for many providers still personal contact with the investor, with the disadvantage in terms of scalability: Relationships cannot be established at the push of a button. Investment companies as „communication hubs Event formats of investment companies (Ampega, Axxion, Hansainvest, Universal Investment etc.) show that personal contact becomes increasingly important in times of digital saturation. Digital formats are helpful, but appear limited by the need for convenience and the capacity limits in the information intake by customers. Houses that creatively promote the dialogue between fund initiators and investors also create negotiating power for fund projects („added value“). Both worlds complement each other, but do not replace each other. In the sense of: There is still nothing like a cultivated personal exchange of ideas! Source: www.institutional-investment.deFoto:

  • In commodities, too, many fund boutiques are sought-after contacts for investors as active managers. Markus Hill* spoke for FONDSBOUTIQUEN.DE with Urs Marti, partner at SIA Funds AG, a value boutique from Switzerland. Urs Marti and Alex Rauchenstein will give a joint presentation on this topic on 29.1.2020 in Mannheim (Fund Selectors – INVITATION ONLY format). Hill: Mr. Marti, 3 years ago, after a long break, you decided to manage a commodity equity fund again. Are you satisfied with the results so far? Marti: Actually, I am. It’s very similar to the way it was 20 years ago. Analogous to the tech bubble, nobody is interested in the sector, although most commodity prices have already passed the low point since the end of 2015 and are showing a positive development. The companies are healthy, debt has been reduced, nice cash flows are being generated, dividends, share buybacks, etc.  Well-known countercyclical value/distressed/macro/long-term investors are also entering these sectors. More and more investors are contacting us. Our events are again well attended, and the topic is increasingly meeting with a positive response. Our fund is well-positioned and now ready for the next phase. Hill: What distinguishes the Long Term Investment Fund Natural Resources from competitor concepts or a passive product? Marti: Our focus is clearly on medium-sized companies in the industrial metals and oil sector, agricultural companies, and other sectors. We are no friends of the big energy companies who see their future in the energy turnaround rather than in the oil business. We like companies that benefit from rising prices, that do not have defensive cash flows – and we do not like exploration companies. We also do not own gold mines. This is because gold mines are always more expensive than base metal mines. Besides, there are already some good gold mine funds on the market. I would even strongly recommend investing in these funds. To put it more bluntly, we invest in the type of companies that have benefited the most from 2001 to 2007. Almost all our companies have one thing in common. They have completed the peak of their investments and will reap the rewards in the coming years. For many commodities, we expected a decreasing availability due to underinvestment since 2011, and thus deficits that will persist in the coming years. From this point of view, our companies are in what we call the „value bracket“, i.e. we are in a position to acquire these companies at very favorable terms. For example, our larger companies trade on an EV / EBITDA of 4-6x and the smaller ones between EV / EBITDA of 2-3x. Valued based on current spot prices. Hill: That all sounds very plausible. What do you think could happen that your expectations for the fund are not met? Marti: For one thing, the timing of a physical shortage is difficult in the short term due to unknown commodity inventories. But in the longer term, supply correlates with investment, as you have to replace 3 to 5% of production each year due to „depletion“. Probably the greatest risk is that central banks will be too restrictive and cause the global economy to collapse. But that is not our scenario. On the contrary, we expect increasing fiscal measures and a continued very expansionary monetary policy. The commodities sector anticipates that the global economy will stagnate forever and that from today’s point of view the consumption of commodities will only stagnate or decline. Virtually all other asset classes discount very strong economic growth. Either there is one or the other as a perspective. One can imagine the consequences of an eternally stagnating global economy for the real estate market, the tea sector, government revenues, venture capital, private equity, high-yield bonds, and so on. In summary, we find our commodity equity fund interesting, as the expected return for us is 21% for the next few years. Hill: Thank you very much for the interview and wishing you and Mr. Rauchenstein successful discussions in Mannheim. I am looking forward to the moderation („MH bias“) and I am curious about your presentation! *Markus Hill has been accompanying events of SIA Funds AG (sponsor) for many years. He is an independent asset management consultant in Frankfurt am Main. (Transparency: See also the imprint of the independent site FONDSBOUTIQUEN.DE). FONDSBOUTIQUEN.DE will be dealing more intensively with the topic of fund boutiques and commodities in succeeding articles. In this area there are many interesting fund boutiques (Stabilitas, Tresides, Commodity Capital, etc.): Input is always welcome here). FONDSBOUTIQUEN.DE does not give any investment recommendations, of course, the active managers compete here with passive concepts Source: www.institutional-investment.dePhoto:

  • Frankfurt-Skyline-Night

    The “Private Wealth Germany Forum” conference will take place in Munich on 16th October. The independent industry expert Markus Hill will moderate a panel there. He will talk to decision-makers from family offices, private banking and the fund industry about trends and tendencies in the due diligence of products in liquid and non-liquid asset classes. The selection of alternative investments will be the focus of the discussion. One of these topics is also closely related to the topics of the MH Roundtable “Cologne & Sustainability” on November 6. As at the LRI Investment Summit and FundForum events in Copenhagen in the first half of the year, topics such as product selection, product management and critical aspects in areas such as ESG and impact investing will be discussed intensively. IPE D.A.CH editor-in-chief Frank Schnattinger spoke with him about the panel, further conference content and current topics in the fund boutique and service investment company sector. IPE D.A.CH: Which topics will be addressed at the conference “Private Wealth Germany”? Hill: I’ve had the opportunity to host a family office Panel in 2017. The focus is on private wealth management, asset management, “dependent” and independent. It also offers roundtables with product providers, where individual topics are further deepened. Few topics which are also interesting for family offices and HNWIs. Current topics this year will again be developments in the family office segment, asset allocation for liquid and non-liquid assets, due diligence criteria and the outlook in the respective market segments. IPE D.A.CH: Which points will be taken up and discussed with your panel? Hill: Regarding the content in particular, I will not pressure my panelist. The title of the panel is “Emerging and Opportunistic Alternative Investing”. Participants will be Marcel Müller of HQ Trust, Antje Biber of FERI, Daniel Kerbach of Merck Finck, Jürgen Blumberg of Goldman Sachs and Martin Heimes of responsAbility. How will HNWI consultants view expected returns in areas such as currency, private equity, real estate, hedge funds and credit? How are new investments in alternative investments assessed and how could their significance be in the future? Keywords: Cryptocurrency, agricultural investments, water and more sustainability themes and products in ESG, SRI and impact investing. How should we look at ETFs in this context? What opportunities and risks exist here in the area of asset allocation and product selection? The time is limited but I hope for an intensive dialogue with investors and product providers in the audience. The conference provides itself a forum for constructive exchange of ideas. Family offices, private bankers and HNWIs also like to discuss topics such as asset allocation, product selection, fund boutiques and sustainability. IPE D.A.CH: What other topics and product fields will be addressed at the event in Munich? Hill: Two years ago, I moderated a panel on family offices and governance, trends in the field. That will take place again this year. One of my former panelists, J. Christian Stadermann, will be moderating it. I’m looking forward to the discussion on this topic, personally speaking a bit biased. Of course, topics such as global investment outlook, strategic and tactical asset allocation, portfolio construction, artificial intelligence (AI), value investing, fixed income, equities and the role of ESG, ETFs and Smart Beta will also be intensified and discussed at various panels and roundtables. For one are the topics at such conferences fascinating along with an additional joy to discuss with speakers, investment companies and investors. Last year I attended as a guest and was impressed to have had an engaging conversation. IPE D.A.CH: Which topics are you currently intensely occupied with? Hill: At the moment I’m intensely looking at fund managers for two different search mandates. One concerns fund managers in the ESG, SRI and impact investing theme segments. Due to the current “press hype” it is already more difficult to separate the wheat from the chaff. On single family office (SFO) segment it is the selection of interesting fund boutiques in the field of value investing. On the one hand, I closely monitor well known addresses, and on the other hand, I find the range of boutiques from the second row quite interesting. There are a variety of managers, for example, who have interesting, impressive track records, but are hardly known, so I also speak with many selectors, as an exchange of ideas often bestowing me interesting hints. I am frequently approached by providers in the segment, not only the DACH region, which corridors to beneficial communication. To my surprise that many good addresses are barely visible, therefore I am grateful for any hint from investor as well as provider side. Constantly I am monitoring a lot but to 97% feeling is “technical not convincing”. Keeping on mind that I have to pass the shortlist to my client, which means I have a personal reputation risk for my recommendation of asset managers (“skin in the game”). Honestly speaking on this point, I personally know many of the boutiques and would like to advertise to stay in focus on the selection process for the shortlist where factual argument plays a vital role. Another topic, which is indirectly related to the first search topic – I will be organising and moderating a MH Roundtable in Cologne on November 6, 2019.Last year, Warburg-Invest kindly supported me in an event with Reiner Konrad from FOCAM and Manfred Gridl from Gridl Asset Management. This year, I am supported by Anton Bonnländer from the Bank für Sozialwirtschaft (BfS). An interview with him at IPE D.A.CH with me is also there. I had him as speaker this year at LRI Investment Summit on topic of impact investing and the social economy. At the FundForum in Copenhagen and at the LRI Group event, my family office panels were about same topics mentioned above. On the upcoming event “Cologne & Sustainability” I’ll briefly explain the results of product search in this segment and the current discussions. Anton Bonnländer will talk about topics such as due diligence of funds in the ESG & SRI segment (liquid products), as well as current