Germany’s winds of change

We hear changes are afoot in Germany. Colleagues at CAMRADATA report a notable rise over the last 18 months in product searches by German institutions for non-domestic firms and strategies. Intrigued, the Lens went to Frankfurt.

First impressions: a city of 700,000 people compared to 7 million in London makes for some pleasant walking. Streets easy-to-navigate. People friendly. So far, so gut.

Now for some fact-finding.

Unlike in the UK market, only 30-40% of manager searches go through consultants. The UK figure is 90%.

Why? Local sources tell us that lighter regulation of the German asset management industry means institutional investors have less of a requirement for advisers. More importantly, this softer regulatory touch is tempered by stricter internal guidelines than you might find elsewhere – so strict in some cases that virtually “anyone in the office” of a German insurer could make allocation decisions.

Manager and strategy searches originating from Germany have been across emerging markets, multi-asset, European equity/corporate bonds, Japanese equities, US small-cap, and Asia Pacific, to name some. That’s far more diverse than seen in the UK recently.

CLOs were even in there, along with private markets, which CAMRADATA recently launched a search facility for. (The Lens promised to mention this, else no return fare, you see).

The Lens asked our friends in Germany how a foreign manager might get a toehold there. The answer: a German presence is necessary in most cases, but the barest minimum requirement is to have a relationship manager that can speak German.

Perfectly reasonable, if you ask us.

Finally, a quick word on etiquette, especially if you are coming from the UK.  Never refer to the European region’s assets as “Europe ex-UK”. No danke. In Germany, Europe means Europe.

Thanks for the advice, Frankfurt, and bis bald…