Private Market Investors Need the Right Managers, German Column Warns

The Quick Take

• A prominent German markets column argues that private-market return dispersion is far wider than in public markets, making manager selection the critical variable for investors.
• ELTIF 2.0 (European Long-Term Investment Fund) regulation is opening private equity, private credit, and infrastructure to European retail investors for the first time at scale.
• German asset managers face competitive pressure on fee structures as retail private markets access grows and transparency requirements increase.

A prominent German financial markets column argues that investors entering private equity, private credit, and infrastructure via ELTIF 2.0 structures face their most consequential decision not in asset class selection but in manager quality. The column contends that dispersion between top and bottom-quartile managers in illiquid strategies is substantially wider than in public markets — where index funds have compressed the alpha opportunity — making due diligence on the fund manager more important than macroeconomic timing. The argument reflects a structural shift: German retail and institutional investors are allocating growing shares of portfolios to alternatives following years of near-zero government bond yields that made traditional fixed income unattractive as a diversifier.

The commentary has direct implications for Germany's asset management industry. Fee structures in private markets are substantially higher than in passive equity products — carried interest of 20% and management fees of 1.5-2% versus ETF fees below 0.2% — and any regulatory pressure on fee transparency under ELTIF 2.0 distribution rules could compress margins for managers that cannot demonstrate consistent top-quartile performance across full market cycles. German savings banks (Sparkassen) and cooperative banks (Volksbanken), which serve retail clients, face the operational challenge of conducting meaningful manager due diligence at scale — a capability that traditionally required institutional resources unavailable to retail distribution networks.

Forward signals point to continued growth in ELTIF distribution through Germany's private bank and savings institution network, with manager selection becoming a competitive battleground. Investors considering private markets exposure should seek managers with verifiable track records through at least one full cycle including a distressed period, transparent co-investment practices, and credible quarterly valuation methodologies. As secondary-market liquidity for ELTIF structures improves, the ability to exit under-performing fund positions between vintages may become a meaningful differentiator for sophisticated allocators reviewing their alternatives allocation.