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German gatekeepers focus on fund performance

German gatekeepers concentrate on performance rather than the investment philosophy of a fund to determine whether it is eligible for their white list, according to research by investment consultancy NMG.


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German gatekeepers overwhelmingly cite long-term performance as their most important fund selection criterion. It was mentioned as the prime selection factor by the approximately 90 interviewees about three times more frequently than the runner-up; alignment to risk appetite, which is also a quantitative criterion. The top-3 was completed by short-term performance (see chart below).

NMG also asked US-based gatekeepers the same question. They appear to take a more balanced approach to fund selection, attaching much more importance to the investment process and philosophy as well as long-term performance.

Taking it easy

“It shocks me that German gatekeepers put a very strong emphasis on long and short-term performance, which are precisely the criteria that are easiest to check,” says Thomas Romig, who is in charge of the multi-asset business at Assenagon Asset Management in Frankfurt. Romig, who was head of multi-asset management at Union Investment before switching to Assenagon earlier this year, believes his quant-focused peers are perhaps not taking enough time to properly vet funds. “Much more effort is indeed required to evaluate qualitative criteria such as the investment philosophy and the management team,” he says.

And that’s exactly what Romig himself is doing. “I’m more like the Americans,” he says. “The most important selection criteria for me are the investment philosophy and the portfolio managers on the funds, alongside the long-term performance.”

Short-term bias

In its research, NMG also zoomed in on the investment drivers of institutional investors in Germany, which is a large segment of the country’s overall market. While institutional investors usually have a relatively long investment horizon, since their liabilities tend to be long-term as well, this is not the case in Germany. Moreover, German institutional investors attach greater importance to the short-term performance of a fund than to its long-term track record (see chart below).

Institutional investors – most important factor




“German investors attach a lot of importance to calendar year performance, and they usually have one-year return targets,” explains Romig, who doesn’t approve of this approach. “It eventually leads to a lower long-term performance, as they invest too conservatively and are primarily focused on reaching their annual target.”

In the retail space, there is a similar problem, says Romig. “Client advisors there also tend to have one-year return targets for their clients, and act accordingly. At Assenagon [which caters retail as well as institutional clients], we try to take a longer horizon, in close consultation with our clients. We focus more on the qualitative aspects of a fund.”