Asset managers would love to manage the trillions of euros Germans have sitting in their accounts – for the benefit of both sides, as they stress. To that end, the world's largest asset manager, BlackRock, has now entered in a joint venture in the German market with fintech Youvestor. The goal is to bring money that becomes available from life insurance policies, for example, into BlackRock funds through financial intermediaries.
Handelsblatt has learned that the tie-up, which launches today, has already brought in an insurance company and some brokerages as partners.
The unique aspect of the deal is that the world's largest fund provider does not wish to recruit new customers directly. Instead, insurance and financial brokers give their customers an option of investing in a strategy involving BlackRock funds.
To join, an investor downloads the fintech software My Depot and opens an account with a fund platform. Then he selects an investment strategy from five options based on appetite for risk, ranging from conservative to dynamic with a high percentage of equities.
We want to acquire customers who have had no exposure to investments so far. Christian Machts, head of retail, BlackRock Germany
In each strategy, the investor is offered 10 BlackRock funds. The funds are reviewed twice a year, and investments that are doing poorly are replaced. Loss thresholds for each strategy are designed to limit risk. If these thresholds are exceeded, BlackRock shifts the assets into money market funds, and the back into equities again when the markets rise. "We want to acquire customers who have had no exposure to investments so far," said Christian Machts, head of retail for BlackRock Germany, who argues that active funds make sense for long-term wealth building. Managers of the individual funds have the latitude to act in ways intended to extract more yield for the customer, with a lower risk of loss than with investments that simplify model indices. This is BlackRock's first joint venture for active funds with a fintech in the German market.
Youvestor Chief Executive Officer Andreas Feiden said there are advantages for everyone involved. "The broker keeps his customers but doesn’t even need a license as an investment adviser, and he receives payment as long as the investor uses My Depot," he said. In the joint venture, BlackRock uses special fund classes without sales costs. The customer pays a total of 1.75 percent of invested capital per year, which includes a 0.5 percent management fee to BlackRock, plus €37.50 ($39.80) in account costs. There are no front-end loads for buying into a fund. Mr. Feiden said the venture gave customers a cost-effective way of setting up a diversified active strategy with risk control.
Jan Altmann, head of fund adviser 4Assetmanagement said the model has its appeal, especially in light of plans to create stricter rules for investment advice and liability.
He said the BlackRock product could work well for for customers who want active funds and are therefore not as sensitive to costs,
In the medium term, however, copycats will likely enter the market and create price pressure. Banks, fund providers and insurance companies are also developing automated investment advice systems, both for customers and brokers, to offer similar products.
Anke Rezmer covers the investment fund industry for Handelsblatt out of Franfurt, Germany's finance capital. To contact: [email protected]