What is the scale and opportunity of the German market?

Authors: Marcus Kuntz, Universal Investment

Date:

13. December 2023

With more than 3.4 trillion in assets, the German institutional market far surpasses that of many of its European counterparts, and is increasingly garnering strong investor interest. Since 2013, the German market has seen annual growth of 8.4 percent, exceeding that of Italy (6.5 percent), France (3.8 percent) and the Netherlands (3.8 percent).

Meanwhile, the German retail market represents the largest in Europe, with total assets under management of nearly EUR 1 trillion. For context, Germany holds more funds held by private investors than the United Kingdom, France, and Belgium together, accounting for nearly 27 percent of the fund holdings of all private households in the UK and EU.

Beyond the significant scale of the German market, its appeal for international asset managers lies in its margins. For asset managers seeking to gain traction with a new investor base and generate alpha in a primary market with attractive margins, Germany is a critical opportunity.

Namely, it provides advantageous opportunities for fundraising. The market boasts a sophisticated investor base, such as pension funds and insurance companies, which seek well-managed investment opportunities. Through the flexible UCITS vehicle, asset managers can access capital from several investor categories, including retail and wholesale, life insurance, and institutional investors via a separate share class.

Are there challenges with entering this market?

Though the German market presents important opportunities, there are complex challenges to entering this specific market, largely due to its unique fragmentation and regulatory environment. As such, international asset managers benefit immensely from an experienced partner to traverse this market on their behalf.

The German institutional market is particularly decentralized, with a diverse set of investor categories, government and corporate entities, and governance systems, all requiring expert navigation. Asset managers also face the barriers of intricate regulatory frameworks, necessitating a comprehensive understanding of financial laws.

By partnering with the boots-on-the-ground expertise of an established partner, namely a Super ManCo model, fund managers can overcome the market’s fragmented nature and complex regulatory frameworks, tapping into existing distribution channels and ultimately capturing opportunity to maximise alpha with unparalleled reach to investors.

With Germany's position as a prominent market in Europe, asset managers stand to benefit from partnership with a German ManCo with German roots and presence.

Marcus Kuntz, Area Head Sales & Fund Distribution, Universal Investment

What are the strategic benefits to Super ManCo and Fund Distribution partnership as compared to dedicated salespeople on the ground?

International asset managers seeking to enter new markets face a significant decision to progress their goals: undergo cost-prohibitive investment in a dedicated internal presence on the ground, or work in unison with a Super ManCo or fund distribution partner that has longstanding domestic expertise and extensive investor networks.

There are many advantages to Super ManCo and fund distribution partnership, such as deep understanding of the local market, fund structuring guidance, and active distribution support. Super ManCos also offer enhanced efficiency and compliance, ensuring transparency and robust reporting to clients of all categories, including pension funds, corporations, and foundations. Simultaneously, they help reduce costs and increase operational efficiency by consolidating functions and quickly adopting evolving regulation, such as the Sustainable Finance Disclosure Regulation.

In fact, the Super ManCo model has gained popularity in recent years as it relieves asset managers of administrative and organisational pain points, thereby allowing them the bandwidth to focus solely on the core expertise and investment strategies that set them apart.

Does choosing a German ManCo or Distribution partner present similar advantages?

With Germany's position as a prominent market in Europe, asset managers stand to benefit from partnership with a German ManCo with German roots and presence.

German ManCo partnership offers a method to access the market’s unrivalled dominance and decentralized investment landscape, guided by experienced professionals who can help you navigate fragmented distribution channels and regulatory complexities. Domestic partnership also offers invaluable insights, helping asset managers tailor their investment strategies to align with the preferences and needs of German investors and thrive in the multi-trillion EUR space.

In collaboration with the right partner, asset managers can successfully bring their investment strategy to one of the largest markets in Europe and effectively grow their AUM.