In Europe, as elsewhere in the world, institutions like when possible either to deal with specialist boutique operations or with operations the same size (or at least with the same standing in their particular industry) as themselves. Thus a middle-sized fund group with, say US$ 10m or US$ 25m under management is going to find itself with a very hard sell indeed. In these circumstances it is important, from a marketing standpoint, to quote all the capital/corporate size available. Thus if the middle-sized fund group is a subsidiary of a larger brokerage or banking operation, the capital worth of the parent should be brought into play.

If no parent company exists, attention should be focused on the specialist characteristics of the fund group and its investment programmes (words like flexibility and innovative are useful here) in an attempt to portray the fund group as a niche business. (This technique is often used by consultancy groups seeking to act for investment management groups.)

Technical Expertise

As above, anything which can distinguish a fund and its programmes is desirable. This applies to high academic standing among the personnel (the ‘rocket scientists’) as much as it does to the claims of rigorous testing of a technical system. Sellers of funds based upon technical systems should remember that the institution is still, to a great extent, buying the people representing the system rather than, straightforwardly, access to the ‘black box’. Equally sellers of funds based on fundamental trading systems should remember and have an answer to institutional concerns about the star trader being run over by a bus, for example.

In both cases, substantiated claims of testing the investment programme in every conceivable market condition are valuable.

Performance Aspirations

The expected returns on a fund, as quoted, are, of course, largely a function of the quoted track record. In that context it is worth restating that European institutions are made nervous by apparently exorbitant potential performance. A number of institutions have been quoted in the press as saying that they are disappointed that the performance expectations are always a number of percentage points higher than the real figures (often because of the imposition of a more substantial fee structure than originally envisaged).

Furthermore, potential performance need not simply be quoted as straightforward capital growth. Increasingly, successful fund groups are quoted figures in terms of percentages above a particular benchmark or index. More specifically, certain managed derivatives programmes are sold on the basis of improving overall portfolio performance by a few percentage points. Nor need performance always be considered simply from a growth standpoint. Certain new funds, particularly those partially aimed at tax exempt institutions (such as pension funds in certain countries), offer a combination of income and performance, perhaps even guaranteeing the income levels.

If the fund being offered already has an established track record then it may prove useful to quote figures or provide graphs showing the fit between real performance and programme expectations.

So-called Guaranteed Futures Funds also have their place in this equation although these are usually much more enthusiastically received at the retail end of the market.

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