Towers Perrin in Frankfurt says clients are taking a more quantitative approach to asset management. Headquarters of multinationals are requesting asset liability studies and in Germany, even traditionally conservative institutions are sponsoring them. “The kind of investors we’re dealing with are more aware of the need to invest in equities, there’s a greater degree of sophistication,” says Towers Perrin consultant Jochen Menssen. “It’s more or less accepted that equities should be included in every portfolio, it’s just a question of the extent.”
Foreign consultants have come in for criticism over the past year but local consultants are holding their own and winning praise. Menssen says the role of consultants is greater than ever but admits the locals have the edge in some areas. “In terms of manager searches and selection, the locals are winning at the moment,” he says.
Many managers single out Wiesbaden-based consultant Heissman as a local firm holding its own. Heissman has concentrated on asset liability modelling, which leads on to investment and manager selection, reporting and reviewing managers. According to Heissman, ALM has taken off over the last couple of years due to contractual trust arrangements a fund similar to a fifth German financing vehicle but without PK equity limits. These arrangements are very interesting for multinationals that want to fund their liabilities but lacked the appropriate vehicle in Germany. Heissman has set up a number of contractual trusts for clients.
According to one consultant, clients are now better informed about fee structures and have demanded the option of a clean fee, an upfront one-off charge. Two years ago local managers would have been unlikely to offer a clean fee, instead opting for fixed price plus trading commissions. Heissman now often advises clients to appoint managers offering all-in packages thereby making it easier to gauge overall costs. Whereas international managers tend to offer a one-off fee, local managers are moving towards giving asset managers the choice.
Feri-Heubeck Pension Asset Consulting, a joint venture between Feri and Heubeck, is another firm often mentioned as winning business. Feri comes from an investment background, while Heubeck is a leading actuarial firm.
Another consultant, RMC, now offers more than standard ALMs and has 10 clients for which it advises on the complete investment process. According to Hans-Juergen Reinhart, its managing director, they concentrate on asset liability studies and the development of strategic asset allocation as well as portfolio analysis manager searches, selection and risk management. He says local consultants are flourishing but that they have seen little from foreign consultants. “This doesn’t mean German consultants are better than international consultants, just that German ones know the language, the legal system and, most importantly, the risk mentality. It’s also very important that the investor gets the feeling the consultant is present…you have to be in Germany. German clients don’t want to get their service out of London,” says Reinhart, referring to foreign consultants trying to run German operations at arm’s length. It also requires experience and some international consultants have failed to make serious inroads into the German market.
Friedrich Schmitz, head of asset management at Commerzbank believes the role of consultants has increased but will not reach the level of the UK and America. Schmitz compares the German market to France’s. “There’s a tendency for big institutional investors to select asset managers on their own and therefore it’ll be very difficult for international consultants to penetrate the market,” he says. Barbara Diaz, head of client services at Credit Suisse Asset Management, agrees. “You still have this typical German focus on absolute return and it’s not so easy for them to sell clearly defined products. Often the Anglo-Saxon is not the best approach for the German market and that’s why the domestic consultants are doing so well,” she says.
Also German pension managers don’t like paying consultants. “That’s the reason there are so many balanced accounts. They think asset managers can do the same job as the consultant,” says Diaz.
Much of the sniping between asset managers and foreign consultants though is perhaps local managers getting their own revenge, since international consultants are forever criticising local managers over opaque fee structures. “I wonder whether it’s not them getting their own back a bit,” says one local consultant.

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