Germany’s decentralised structure with its different financial centres, access to distribution partners, fund-related regulation and Working from Home (WfH) as well as specific requirements from clients are the biggest challenges for foreign fund companies in the German market. Compared to the respective home markets of the asset managers, regulation in Germany causes considerably more work. These are the main findings of the survey “What hurdles do foreign fund houses have to overcome in the German market?” – the second after 2020 – which was conducted by the specialised communications consultancy Gerle Financial Communications (GFC).
Representatives of 18 companies that work for or provide services to foreign fund houses, mainly in Sales, took part in the online survey in February and March of this year. Participating firms came from Europe (twelve firms), North and South America (five) and Asia (one firm). Eight of the participants (44%) have been present on the German market for more than five years, three (17%) between three and five and four (22%) between one and three years. Three companies (17%) have only become active on the German market in the past twelve months.
Decentralised structure, access to distribution partners and WfH as challenges
Asked what challenged them most personally when they first started working in Germany, 44 per cent of participants (2020: 47%) named Germany’s decentralised structure with its various financial centres. Hiring qualified staff followed with 20 per cent (2020: 16%), with German language (2020: 13%) and Working from Home (asked for the first time) each accounting for twelve per cent of the mentions.
The biggest challenges from a Sales perspective seem to be getting access to the right sales partners at 25 per cent of the answers (2020: 22%), fund-specific regulation at 22 per cent (22%) and being ready for the special requirements of German fund clients – for example with regards to reporting for separate share classes, individual target groups and mandatory key figures – at 19 per cent (2020: 26%). Likewise, 19 per cent of the participants stated that WfH without direct personal contact was a major difficulty (surveyed for the first time).
Regulation causes more work in Germany than in home markets
Compared to their home markets, regulation in Germany obviously causes more work for fund companies: 13 participants or 72 per cent (2020: 56%) confirmed this; four participants responded that they had just as much work with regulation, only one had less. Sifting through and selecting sustainable and socially responsible investments (ESG/SRI) is more work in Germany than at home for eight foreign fund companies or 47 per cent (2020: 56%). According to the survey, asset managers in Germany have just as much work as in their home countries with “Digitalisation” (conversion from analogue to digital and the internal optimisation of processes) at 83 per cent (2020: 56%) and with “New Work/Working from Home” at 94 per cent (2020: 53%).
Sales focuses on institutional clients and Third Party Marketers
The main target groups of the investment companies surveyed in the German market are, unchanged from the previous year, fund-of-funds managers and asset managers (14 mentions compared to 16 in 2020), institutional clients such as pension funds, insurance companies and occupational pension schemes (14 / 14) and private banks (10 / 12). Independent financial advisors named four participants this time (2020: 0), Family Offices two (2020: three) participants as important sales groups.
In terms of Assets under Management for clients in Germany, most of the participants represent investment boutiques or fund companies that have not been active in Germany for very long. Five of the investment companies (38%) manage assets of less than 100 million Euro, four (31%) between 100 and 500 million, one (8%) between half a billion and one billion and two (15%) between one and five billion Euro. Only one fund company claimed to have AuM in Germany of more than five billion Euro.
As far as their presence in Germany is concerned, half of all participants (nine) are doing business with an external sales representative or Third Party Marketer. Five of the companies use a “flying salesperson”, i.e. an own employee who travels from the headquarters to customer appointments in Germany. Two companies each stated that they operate their own branch office or a subsidiary in Germany.
With 18 responses from asset managers, Third Party Marketers and service providers, the survey is, of course, not representative of the entire fund industry, comments Hagen Gerle, Director at Gerle Financial Communications, on the results. “But given the diverse profile of the companies – from investment boutiques to a global full-service provider – this is quite an interesting insight into the challenges foreign fund companies have to overcome in the German market.“