Tapping into the German Market

Germany, as Europe's largest fund market for distribution, offers vast financial potential for international asset managers, but accessing it requires understanding its distinct regulations and leveraging specialised entities like Super ManCo's for efficient distribution and compliance. Keith Milne from Universal-Investment Ireland gives an overview of the German market and how to tap into it.

Germany currently stands as the largest retail fund market in Europe. With investment approaching EUR 1 trillion as of March 2023, it holds a commanding presence in the retail fund market (accounting for a staggering 27% of the fund holdings of all private households in the European Union and the United Kingdom). To put this in perspective, with EUR 991 billion invested, Germany has more funds held by private investors than in the UK, France and Belgium combined. This market therefore provides crucial opportunities for those seeking a foothold in Europe's financial landscape.

The German institutional and retail fund landscape exceeds all its EU counterparts, with total assets distributed into Germany exceeding EUR 4 trillion. Since 2013, the German market has seen annual growth of 8.4%, surpassing Italy (6.5%), France (3.8%) and the Netherlands (3.8%).

However, entry into the German market is challenging, in part due to its unique local rules and environment. This means that institutions looking to tap into this market must make informed decisions on how best to utilise their resources for the greatest success.

Navigating diverse distribution channels

In Germany, distribution channels encompass a broad spectrum, including the three banking pillars, insurance companies, financial advisers, and institutional organisations. It is via these institutional organisations that international fund managers can gain access if they have the right provider with a strong footprint in Germany. Fund distribution in Germany is also focussed throughout the entire country and not primarily concentrated in the capital city and main financial market like in many other European countries.

Through Super ManCo’s and Fund Distributor partnerships, international asset managers can benefit from the on-the-ground expert knowledge needed to tap into these key distribution channels, offering their alpha-generating strategies with unparalleled reach to investors across various sectors.

The Super ManCo Advantage

The concept of the Super ManCo model has continued to gain prominence in the European investment landscape in recent years. By leveraging third-party Super ManCo’s, asset managers are granted the freedom to focus on their core expertise in executing successful investment strategies. As a strategic partner, some German ManCo’s not only offer tailored fund vehicles and regulatory proficiency but also streamlined fund accounting and distinctive active fund distribution opportunities in the German market and beyond. International asset managers, therefore, must decide whether they wish to invest in having dedicated salespeople on the ground or to partner with a German Super ManCo who has this local distribution capability.

Enhancing operational efficiency and compliance

In practice, when asset managers choose to consolidate functions under a single entity, Super ManCo’s can enhance operational efficiency, reduce costs, and provide expertise across various fund structures – saving both time and money. Super ManCo’s can also play a pivotal role in addressing the evolving regulatory landscape, ensuring clients remain in compliance with complex regulation. As new regulations, such as the Sustainable Finance Disclosure Regulation, come into effect, a Super ManCo’s extensive resources and expertise enable them to tailor compliance solutions for clients, ensuring a competitive edge in a regulatory environment.

Maintaining a competitive sector

Choosing a German Super ManCo and Fund Distributor with expert local market knowledge is a strategic decision in targeting Germany's position as a prominent fund market in Europe. With unrivalled local market recognition, and diverse distribution channels, ManCo partnerships offer a pathway to success in the German fund market. It is an opportunity to tap into a four-trillion-euro market guided by experienced professionals who can help you navigate and thrive in this lucrative space, while simultaneously gaining international exposure.

Furthermore, contrary to concerns that close integration between distributors and fund companies might limit investor choices, a recent survey by the German Investment Funds Association (BVI) reveals a different story. Less than half of all retail fund sales are made by affiliated companies. Two-thirds of the survey participants distribute at least 80 per cent of their funds through external distributors1. This fosters strong competition between fund distributors to maximise alpha and remain appealing to potential clients.

References

1 BVI: Germany is Europe’s largest fund market for private investors, [last accessed on: 25/09/2023].