Time of the as­set man­age­ment spe­cial­ists

Financial Mirror (Cyprus) - - FRONT PAGE - By Dr. Rainer Zitel­mann

Open-ended and closed-end in­vest­ment funds are emerg­ing from their most se­vere cri­sis in decades. Large seg­ments of the mar­ket have col­lapsed. The sheer num­ber of for­merly prom­i­nent in­vest­ment com­pa­nies that pulled out of the mar­ket is a clear mes­sage.

The sur­vivors are the ones with pro­nounced man­age­ment com­pe­tency and a spe-cialised skill set.

To back my ob­ser­va­tion I will tell you about some of the suc­cess­ful play­ers, many of which have been our clients – giv­ing me ev­ery op­por­tu­nity to mon­i­tor their per­for­mance:

- Things are go­ing very well in­deed for spe­cial­ists like Jamestown – both in the re­tail client busi­ness and in the in­sti­tu­tional client busi­ness. Go­ing com­pletely against the mar­ket trend, this spe­cial­ist in US real es­tate col­lected $700 mln in eq­uity, some $384 mln of which from pri­vate in­vestors. It was the third best re­sult in the an­nals of the com­pany – and this in a year that was slower than any other for closed-end funds as a group.

- In the in­sti­tu­tional fund sec­tor, spe­cial­ists like Beos (cor­po­rate real es­tate) or Re­dos (large-scale re­tail real es­tate) ef­fort­lessly raised nine-fig­ure sums among in­sti­tu­tional in­vestors.

- Sim­i­larly, spe­cial­ists in as­set man­age­ment of res­i­den­tial real es­tate – such as Wert­grund or d.i.i. – have had no trou­ble ri­as­ing mas­sive amounts for their in­vest­ment fund so­lu­tions or their sep­a­rate ac­counts.

For­merly vastly suc­cess­ful fundrais­ing ma­chines – such as MPC or Ideen-kap­i­tal – have more or less van­ished from the mar­ket. They pur­ported to be com­pe­tent at ev­ery­thing – ships and pri­vate eq­uity, Euro­pean and US real es­tate, film funds and sec­ond-hand life in­sur­ance poli­cies, air­craft, you name it – but ul­ti­mately failed to de­liver truly im­pres­sive re­turns in any of these seg­ments.

These days, it is no longer good enough to be a bril­liant fundraiser, even if fundrais­ing has lost none of its sig­nif­i­cance. Both pri­vate and in­sti­tu­tional in­vestors have

as­set be­come more crit­i­cal. They tend to have more faith in spe­cial­ists than in gen­er­al­ists. This is why those providers that used to of­fer a plethora of as­set classes and fund types have lately trimmed their fo­cus down to one or two as­set classes – gain­ing im­mensely in cred­i­bil­ity.

In­sti­tu­tional fund providers, too, man­i­fest a trend to­ward spe­cial­i­sa­tion. Re­mem­ber the time when “oik” dom­i­nated the mar­ket with a share of more than 50%? At the time, spe­cialised funds were vir­tu­ally un­known. Most funds used to in­vest – just like the pub­lic funds did – across as­set classes (by­pass­ing only res­i­den­tial prop­erty, which was a mis­take). Then came LB Im­moIn­vest with its “build­ing block” funds (“Bauste­in­fonds”), of­fer­ing in­vest­ment funds for spe­cific use types. To­day, spe­cialised funds that fo­cus on spe­cific themes are vir­tu­ally the only ones left. And more and more of­ten, they are run by spe­cialised as­set man­agers.

Gone are the days when it suf­ficed to com­pile a pretty prospec­tus with “easy” prop­er­ties (ide­ally let on a 15-year lease to Deutsche Telekom) and to pre­pare a fan­tas­tic story for the sales team (about a Fer­ris wheel in Sin­ga­pore per­haps or a gi­ant oil rig, etc.). Over many years, some ini­tia­tors made a lot of money this way. They are no longer in the mar­ket, though.

The mar­ket play­ers who re­main are the ones with a demon­stra­ble track record in as­set man­age­ment. They need not nec­es­sar­ily be spe­cial­ists with a nar­row fo­cus, but they hap­pen to be that, too, as of­ten as not.

The fund in­dus­try would do well to learn from Ap­ple and Steve Jobs. Dur­ing the 1990s, Ap­ple made the same mis­take many com­pa­nies make when it steadily ex­panded its prod­uct range. But in 1998, Steve Jobs slashed the num­ber of prod­ucts from 350 down to ten. A decade later he told For­tune Magazine in an in­ter­view:

“Cer­tainly the great con­sumer elec­tron­ics com­pa­nies of the past had thou­sands of prod­ucts. We tend to fo­cus much more. Peo­ple think fo­cus means say­ing ‘yes’ to the thing you’ve got to fo­cus on. But that’s not what it means at all. It means say­ing ‘no’ to the hun­dred other good ideas that there are.”

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