Germany: Invesco PowerShares

Our Investment Trek has connected us with an amazing network of financial professionals, investment experts, and government officials across the globe.  In many cases, both John and I have participated in meetings on the trek that we knew the other would have absolutely loved to have been a part of.  Whether it was a certain personality type or a topic that was particularly interesting, we’ve both had those, “Oh man, he would really love this discussion…” type of moments.

Ryan Hessenthaler with Michael Huber

Thanks to the always supportive Invesco PowerShares team, there is one individual who holds the unique distinction of having met with both John and me during our Investment Trek… but the meetings occurred in different cities and were separated by over 6 weeks’ time.  That individual is Michael Huber.  John met with Michael in Berlin in early July and I had the pleasure of meeting with Michael in Munich.

Our meetings with Michael were facilitated by Kevin Connolly from the Invesco PowerShares home office near Chicago.  Thanks again to the entire PowerShares team for their continued support.  And a special thanks to Michael for his willingness to share his time and insights with both John and me on separate occasions.

I met with Michael at Invesco’s beautiful offices in the heart of Munich.  The reception area of the Invesco office includes a map of the world, with a marker for each of Invesco’s locations across the globe.  I snapped a picture and took a quick inventory of how the markers compare to where we’ve been on Investment Trek.  While we haven’t seen it all, we’ve had opportunities to visit some amazing countries and participate in some outstanding meetings.  Between the two of us, we will have hit almost all of the major players as well as many of the emerging markets in the global economy.  It has certainly been an unbelievable education.

Before we settled in too much at the Invesco office, Michael suggested we visit a local café with a “better view.”  That was an understatement.  Munich is a beautiful city… and it doesn’t get much better than a roof-top view of Marienplatz and Neues Rathaus (New Town Hall).  The plaza fills up a few times a day with visitors eager to witness the famous glockenspiel chiming.  We ordered a few local treats and jumped in to a wonderful conversation.

Like I said, Munich is a beautiful place… and people are clamoring for a piece of the pie.  There’s a real estate boom driving a great deal of wealth creation in Munich and southern Germany.  Apartments in the city center are currently valued at up to 15,000 EUR per square meter.  Michael showed me a few examples online of apartments valued above 10,000,000 EUR, and while nice apartments, it’s the location that’s driving the value.

In addition to a very strong real estate demand, Munich is also home to many of the largest companies in Germany, including Allianz, BMW, Infineon, Linde, Munich RE, and Siemens.  Employees are paid well, the standard of living is very high, and some of the best healthcare specialists in Europe call Munich home.  Michael noted that one of the challenges in Germany is that everything is spread out.  These pockets of industry and commerce lead to disparate incomes and household wealth.  Most of southern Germany is extremely wealthy compared to the north.  Using GDP per capita as one measure, the data shows the difference between north and south Germany.

Sources: http://www.zeit.de/wirtschaft/2014-10/bundeslaender-bip
http://www.statista.com

Michael covers Germany and Austria, so I asked him a little bit more about Austria.  It’s often overshadowed by the larger players in Europe, but that’s appropriate given its size.  One of the advantages Austria has, when compared to Germany, is the concentration of industries, commerce, and wealth – all of which is centered around Vienna.

We talked about banking in Germany, as it is the major conduit for asset and wealth management.  There are three different types of banking institutions in Germany: 1) private banks, 2) savings banks, and 3) cooperative banks.  In terms of numbers, there are 300 private banks (but only a handful of dominant, national players such as Deutsche Bank, Commerzbank, Unicredit, and Postbank), 420 savings banks, and 1,050 cooperative banks.  The banking system is loosely connected in some ways, but for the most part, all of these banks operate independently.  This illustrates the “fractured” nature of the market in Germany.

Invesco Offices in Munich

Before I knew it, the chocolate cake had disappeared and our time was over.  Michael was running to another client meeting and I had a call scheduled with a Credit Suisse VP in Mumbai.  Michael pointed out a few additional spots he recommended visiting in Munich and then we parted ways.  I lingered in Marienplatz for a bit longer… just to soak it in… before finding a quiet corner for a phone call.

Sincere thanks again go out to Michael Huber for meeting with both John and me on our trek.  Michal’s efforts show that the Invesco PowerShares standard of outstanding support that we’ve experienced for many years is alive and well in Germany as well.  Danke sehr! 


Special thanks to Brennan Staheli, Joseph Hirschi, and the Lunt Capital team for their contributions to this report.