German managers are urged to pick their partners, carefully
It is a good idea to be choosy when selecting a partner, but this might be difficult for German managers.
Regulatory pressure leads public bank distributors to accept ever more products; private banks and family offices seek new funds to differentiate themselves; and self-directed retail investors are open-minded, too.
Ben Phillips, partner at management consultant Casey Quirk, notes that all Continental Europe is “shifting from a dynamic concentrated on retail banks, to one where multiple channels fuel growth”.
Jens Baumgarten (pictured), head of the asset management unit of strategy consultants Simon-Kucher & Partners, says of Germany: “In the past, securing a key distribution channel was a great strength for an asset manager. In the future, it will not be, not least because of a more open mind-set investors have. They are looking actively for other managers, not only the three or four main ones in Germany.”
DekaBank and Union used to be the gateways to about one-third of Germany’s retail market.
Researcher Mackay Williams estimates that Europe’s banks hold a similar share of pan-European retail assets.
At the same time, foreign managers such as Franklin Templeton and Carmignac have been taking market share.
Across Europe, 75% of net distribution of mutual funds since 2005 was by foreign managers.
Europeans, including Germans, seem under-equipped to fight back. The crisis highlighted “glaring underinvestment [by European asset managers] in third-party sales and marketing talent required to tap increasingly influential non-bank distribution channels,” according to Casey Quirk’s study of asset managers within European banks and insurers.
Phillips recommends heavy investment in sales professionals, “particularly more technical personnel, such as consultant relations officers and portfolio specialists, both of whom can appeal to professional buyers.”
Phillips adds that data shows firms with significant distribution investments grow “much faster than their less-leveraged peers”.