Marketeer Max.xs Secures Deals with Rothschild & Kleinwort Benson Investors
The independent distributor offers smaller managers a route into Germany – Europe’s most fragmented and expensive market – and there are other reasons third-party marketers are effective for new funds.
Financial services and distribution company max.xs has secured new assignments from money managers Rothschild & Cie Gestion of Paris and Kleinwort Benson Investors Dublin Ltd.
(KBI) to distribute their asset management products and services to institutional and retail investors in Germany.
The Frankfurt-based firm, set up last year to build a range of products to distribute in Europe’s German-speaking markets, has grown rapidly as new asset managers struggle to shoulder the increasing burden of marketing and distribution costs, plus regulatory and compliance requirements.
CEO Frank de Boer, once a senior executive at Union Investment, ING Bank, ING Investment Management and Robeco Group in Germany, says there is strong demand for independent distribution capabilities in difficult and fragmented markets, but he is careful only to take on products that complements the existing range.
“In Germany especially, the cost of distribution is extremely high,” he comments. “The German market is also very conservative. Fixed income still makes up about 90% of most portfolios when it should be nearer 75%. But that is having to change.”
German authorities are looking carefully at how the financial advice market in the UK is developing, and want to steer the industry towards a client-focused solution rather than a product-centric culture.
That means more effort and communication, education and advice, and less selling.
“Manufacturers can’t price that into the product, so they will have to manage their distribution more effectively,” says de Boer.
Pressures on selection procedures and the risk of transgressing transparency rules also suggests processes have to become more standardised.
That means existing, well-known products will probably get more attention than new ones.
“Track record and volume becomes very important, but size does not guarantee performance – all it suggests is that the product has reached critical mass,” says de Boer.
A lot of interest is focused on alpha-generating capabilities, which come mostly from boutiques or smaller more dynamic firms often without the infrastructure to support adviser networks.
Max.xs will aim to bridge that gap, taking over support, training and marketing functions for smaller asset managers.
Rothschild & Cie Gestion and KBI are max.xs’ first, non-domestic asset management partners.
Rothschild & Cie Gestion focuses on European bonds and equities.
The portfolio includes strategies such as balanced, bond, equity and convertible, as well as traditional and alternative multi-management strategies.
KBI, with $4.3bn under management, specialises in global dividend equity strategies and thematic environmental strategies.
With a track record of more than a decade, it offers water, clean tech, climate change, agriculture, alternative energy and environmental solutions.
De Boer is now looking for asset managers of North American asset classes and bonds to meet investor demand.
Environmental themes, emerging market equities and high dividend-related products also generate strong interest.
In Italy, Max.xs is working with Gamax Management AG, part of the Mediolanum Group, on an ETF range for financial advisers.
Along with reshaped product and distribution strategies will come a review of fees. De Boer says max.xs’s own fees are being structured to help build trust between the product provider and the agent.
The firm asks managers for at least a two- or three-year commitment (although de Boer would prefer five years) with an initial three-year fixed “co-investment” to build the brand in the market.
After that, there is a “co-option”, but not co-investment, for the next two years as the process of aligning interests is worked out.
“We want to get to the point where we and the manager are comfortable with how it works, and where they can skip the J curve of steep initial investment in infrastructure they would otherwise have to sustain.”