The Future of the KG-Market
David Landgrebe
Hamburg, 13th June 2015
Agenda
1
2
3
4
5
6
7
• HCI who we are
• Size of the German Capital Market
• Facts about German investment culture
• Potential for new Business in Germany
• New Financial Regulation under MIFD and AIFM (New World)
• Basic features of future KG funds
• Summary
2
HCI Capital AG – Who we are
Foundation in 1985
30 years
Investors
110,290
Number of Employees
Investment Volume
Raised Equity
Funds
130
15.4 bn EUR
8.4 bn EUR
total
today
6.1 bn EUR
3.4 bn EUR
total
today
526
246
total
today
3
Size of the German Capital Market
Total Fund Volume of the Germans 1,6 trillion EUR (or 1.600 billion)
4
Mutual funds volume against
the KG Market
Currently the closed-end fund market has 200 billion EUR Assets under
Management
This is just a fraction (12,5%) from the Mutual Fund Market
Shipping has 45 billion or 23% of all assets under management within the
closed-end funds.
5
Facts about
German investment culture
Priorities: Cash, Life Insurance , Pension entitlements
Germans love cash and hate risk
Germans held 128 billion in bills and coins at home
Financial Assets in billion EUR
Currency and
deposits
344
Debt securities
739
1997
Equity and
investment fund
shares
Life insurance
879
951
162
Pension
entitlements
Other
6
Potential for new Business
in Germany
Today more than 1,997 billion EUR are held in cash or cash equivalents
Annual savings rate: 9.4%. of available income / around 165 billion EUR.
83 billion EUR of that going into cash accounts
Potential for shipping:
 In the past: Ship KG placing = 2.5% of annual savings (but overdone during
boom)
 Applying same ratio today would mean 4 billion EUR
 However, quarter of the ratio more realistic in future
 German retail investor market then good for at least 1 billion EUR of shipping
equity per year
7
New Financial Regulation
under MIFD and AIFM
New World
Legal framework
 New Investments only in line with AIFM and Capital Investment Act (KAGB)
Product design
 Higher equity ratios
 Transparent Factsheet with all costs, i.e. one-off costs, carrying-costs, provisions, performance
fees
 Stricter Standards for sales an distribution by MIFD II
Domestic Shipping Management Companies (or rather Asset-Manager)
 Comprehensive reporting standards towards several official “check points”




Domestic Management Companies (Kapitalverwaltungsgesellschaft KVG)
Depositary (Verwahrstelle)
Federal Financial Supervisory Authority (BaFin)
German Central Bank (Bundesbank)
8
Basic features of future KG funds
Layout and Preconditions
Product design:
 Minimum equity volume of 100 Mio. EUR / Minimum 3 ships/assets per KG/AIF
 Debt-to-Equity: 50% maximum
 Investment ratio: 95 %
 Combination of long-term charter and spot employment
 in Blind pool-funds with strict investment rules
Preconditions for market revival
 End to insolvencies / Clearing-out of distressed tonnage
 24-36 months time to forget and recover for private retail investors
 18 months of uninterrupted stable charter markets and positive results of leading global
container lines
9
Summary:
• KG equity placing stalled, but potential for comeback
• Huge cash reserves among German retail investors
• Mindset (“something tangible!”) works in favour of ship as an asset class
• As an investment base Shipping can/should at least offer 4-5% returns, more
than fixed-income products
• New regulation (AIFM, MIFID II) allows a fresh start in this sector
• New ship KGs/AIF with higher equity ratio, multiple ships and mixed
employment concepts
10
We look towards the future and remain hopeful for the resurrection of
the German KG Market
The beer is only 5 meters away – Cheers
☺
KG 2.0
Legal Notice
This presentation (“Presentation”) was made only for the internal use of its recipient and is meant to be used for discussion
purposes only. The recipient of the Presentation is not entitled to give any information contained in the Presentation to third parties
and is obliged to ensure that the Presentation, wholly or in part, is not utilized for other than intern purposes of the recipient other
than expressly permitted in writing by HCI Capital AG and / or any company affiliated with HCI Capital AG. All information
contained in this Presentation is as of the date of its preparation and is subject to modifications and amendments. Information
being extracted from publicly available sources was not separately audited or verified; their accuracy and completeness is
assumed. The Presentation does not constitute an obligation of HCI Capital AG and / or any company affiliated with HCI Capital
AG to conceive, offer or invest in any product described in the Presentation. The HCI Capital AG and / or any company affiliated
with the HCI Capital AG undertake no duty of the viability of the presented structure or the accuracy or completeness of any data,
documents or any other information represented in the Presentation. We have to point out that we are not allowed to give any legal
or tax advice and therefore do not give any such advice.
11