Bridge-builder for institutional investors

universal spotlight: Mr Fischer, are active investment strategies making a comeback?

Oliver Fischer: Passive investments have their place. However, after years of gravitating towards them, we are now observing a shift back to active management in certain asset classes, especially in niche markets with market inefficiencies. Yet, even in well-established market segments, we repeatedly find managers who succeed in generating long-term added value for investors. Those seeking sustainable outperformance in all asset classes cannot overlook active fund management. Additionally, with the current interest rates, flows mainly go into government and corporate bonds with solid ratings. As interest rates shift, the search for alternatives becomes more important, making fund selection even more crucial. Choosing passive strategies involves considering costs, tracking error, and replication methods. In contrast, selecting active strategies is much more complex, as is accessing top asset managers.

How can your fund distribution team support investors with these challenges?

My team can significantly enhance the efficiency of fund selection. Institutional investors can consult with dozens of asset managers individually to find suitable funds for their needs. However, this requires a lot of time and effort. In contrast, we provide investors with a pre-selection of outstanding fund strategies across various asset classes, all from a single source. Our selection is based on numerous quantitative and qualitative criteria, backed by our extensive expertise and full conviction. Additionally, investors benefit from the proficiency of Universal Investment as a management company, for instance in meeting the often regulation-driven extensive reporting requirements of institutional investors.

Aren't investors themselves keen to be “pearl divers”?

Many institutional investors have strong capabilities in fund selection, yet some successful strategies are not accessible to European investors. Here, we can bridge the gap. We search for international asset managers who haven’t yet launched funds for local investors. In this process, we often discover specialised asset managers who were previously off the radar. For instance, we recently figured out that some of the most appealing US small-cap strategies with long-term high performance were not available in Europe.

An asset manager might not consider entering the European market solely for a single German institutional fund segment and the initial onboarding of only one such fund would also pose operational challenges for the investor. However, we can offer them the opportunity to tap into new markets. This benefits institutional investors, asset managers, and, of course, us as well. In essence, we act as an outsourced sales office for the asset manager, replacing or establishing direct contact when required.

What criteria does your team use to select funds for their fund distribution?

We exclusively distribute highly specialised providers known for their expertise in a particular asset class or strategy. This is not limited to niche segments; currently, our most successful product comes from the Global Equities sector. These are mostly foreign asset managers not yet present in the European market. Often, they have already scaled to a significant size in their domestic market and now seek to expand into Europe with Universal Investment. For this, they need market access, our operational expertise, and distribution capabilities.

Initially, we analyse the marketability of the asset class in question, considering the specific market environment and drawing on our evaluations and investor feedback. This is followed by a quantitative comparison of the product with similar funds in its peer group. Equally important is the qualitative selection process. We delve deeply into the subject matter and engage in in-depth discussions with providers, focusing not only on product quality but also on the operational structure of the asset manager, the quality of the investment process, team stability, and other qualitative factors. We address questions that investors ask us, to ensure compatibility with the requirements of institutional investors.

Our Fund Distribution team continuously optimises our sales portfolio to align it with customer interests, such as a specific asset class or strategy. We then approach what we consider the best asset manager in this area and porpose launching a fund vehicle for European distribution with them. This strategy effectively connects asset managers with institutional investors. Currently, for example, we are partnering with asset managers from Scandinavia and North America.

Which institutional investors are your target group?

The primary target audience comprises institutional investors, such as pension schemes, insurance companies, pension funds, corporations, and church investors, along with family offices, funds of funds, foundations, or consultants. Additionally, we cater to the wholesale sector, including banks, independent wealth managers, broker pools, and fund platforms.

One final question: How do you approach potential investors?

Our experienced sales team has a deep understanding of the individual needs of decision-makers in investment management, gained through extensive discussions. We serve as sparring partners for institutional investors in their quest for the most promising strategies. By ensuring the “onboarding” of these strategies, we expand the range of investable asset managers for our clients. Without our support, many institutional investors would find it challenging to connect specialised investment boutiques from abroad to institutional fund segments. Additionally, we handle regulatory requirements, such as reporting. Not all asset managers easily recognize its importance.

We also offer a wealth of information, for example, through a platform for webinars, various event formats, and our newly created “Universe” section on our website, where institutional investors can learn about the investment strategies of our fund partners connected through Fund Distribution. All content produced in cooperation with Universal Investment, such as press releases, videos, articles, or webinars, is compiled in the Universe.

We also join asset managers at roadshows and conferences, offering institutional investors opportunities for direct interaction with fund managers. Our joint visits with fund managers to investors on-site are highly valued by our clients.