Leading questions

Q1 What do you see as the three most important challenges facing the asset management industry in the current market circumstances?

Q2 What do you see as the three most important challenges facing you as an asset management group in current conditions
a) Over the short-term (1-2 year horizon)?
b) Longer-term (3-5 year horizon)?

Q3What will be the growth products/ investment classes for your business in 2003?

Q4 Which countries/regions will be the growth areas for your business in 2003?

Q5 What would you describe as the key focus for your asset management business in 2003/4?

ADAM
Joachim Faber: CEO
1. Equity market deterioration/ Loss of client confidence in actively managed products/ Industry consolidation (cross-
border).
2. a) Cost management. Implementation of our business model with two global lines of business (fixed income and equity) and geographic distribution.
b) Profitable organic growth. Build the pre-eminent global asset manager.
3.l Fixed income products l Global balanced
l Quant and alternative products (like guaranteed products) to meet customer requirements.
4. l US Retail l Germany l Consultant-driven European markets
5. l Deliver on our goal to achieve premium product quality through focused distribution l Prove to market place that our business model of combining the strengths of a portfolio of specialists with the strengths of a generalist pays off for customers
l Establish ADAM as a key profit contributor for Allianz Group.

AXA
Nicolas Moreau: CEO
1. Asset management companies are confronted with particularly difficult conditions: persistently volatile markets, especially on the equities side; and increased competition from both global players widening their offer and distribution network, and niche new entrants focusing aggressively on specific market segments.
2. More than ever, it is essential to build on our strengths and capitalise fully on our already existing areas of excellence : this is what our ‘Focus and Growth’ strategy is about. In the coming years, we will be under increased competitive pressure to cut costs and raise profits: this will be achieved by our ongoing commitment to improve efficiency throughout our organisation, combined with our commitment to our clients to keep on delivering a wide array of institutional and retail products that suit their specific needs.
We strongly believe that retaining and rewarding staff for their contribution to growth is a central issue : we will keep improving our work environment, thus ensuring that our employees are personally committed to deliver better value to our clients and stakeholders.
3. In 2003, we’ll concentrate our efforts on high value-added products such as euro fixed income, real estate, and structured and alternative investment vehicles.
4. We’ll be focusing our efforts on Europe- UK, France and Germany, Australia, Japan and the Middle-East.
5. Once again, our motto is ‘Focus and Growth’: delivering superior products and services in areas of expertise where we already have a sustainable competitive edge, and keep on scrutinising markets in order to seize interesting opportunities when they arise.


Bank of
Ireland Asset Management
Brian Goggin: CEO
1. These are very challenging times for the asset management industry, particularly with many customers facing funding difficulties – one of our biggest challenges is to generate the kind of returns that will return them to positive territory.
The asset management industry is a cyclical one and has been through difficult times before. The industry needs to demonstrate to customers that it is capable of delivering real long-term value – while at the same time maintaining its ability to invest for the future. Our industry is also embracing the need for more transparency in a range of areas including: corporate governance and cost disclosure - the challenge is to do this without significantly increasing costs.
2. a) With markets so volatile and unpredictable at present, we have to work all the harder to deliver real value - that is our number 1 priority. We are very focussed on staying close to customers – new and existing - ensuring they are fully briefed on events in markets and our investment strategy.
While managing costs carefully, we equally need to continue to invest in our future – developing our people, new products and new markets.
Positioning ourselves for the pan-European pensions market is another key priority for us in the next one to two years.
b) Continuing our strong growth record, while at the same time managing the business as efficiently as possible.
3. While we are well known for our value-based global equity capability, increasingly we are seeing a demand for our bond capability.
4. We are particularly excited about business prospects in the Asia/Pacific region, especially Japan. Our success to date is well ahead of expectation. With a strong pipeline of new business opportunities, we are very optimistic about the prospects for the future. Closer to home we are also seeing good opportunities for growth in Europe and particularly in the UK.
5. We will continue to focus on the same, long-term investment principles that have proven their value through time in all kinds of investment environments.

BBVA Gestión
Felix López Gamboa: Presidente BBVA
1. To maintain the confidence of the investors after three years of stock market decline. To generate new products not correlated with the market: absolute return.
To increase the transparency in different aspects: relationship with analysts, social responsibility, and corporate governance.
2. a) To offer innovative products for risk adverse investors (guaranteed funds, dynamic portfolios...).
Not to offer only products for a very risk averse environment: to have a diversified catalogue. To collaborate with the distributors in increasing the profile of the financial advice for the clients, focusing in on the risk-reward relationship
b) Increase the amount dedicated to I + D to develop a new approach to asset management. To enhanced continuously the relationship with distributors and final clients. Construct the capability to have different investment styles for different kinds of clients.
3. In 2003 the growth products will be absolute return products: on one side guaranteed funds for more risk averse clients, and, on the other side, hedge funds for the more sophisticated investor to diversify risk.
4. On the distribution side we are focused in Spain, Portugal and Latin America. On the investment side we invest principally on an OECD basis for equities and in an Euro + USD basis for fixed income.
5. Our key focus is to have responses to the challenges: be innovative, increase the number of products, enhance the financial dialogue with clients and increase transparency in the information for final clients.


Barclays Global Investors
Lindsay Tomlinson: CEO
1. A number of factors have combined during a period when investors have seen the value of their funds fall, and this has damaged the industry’s reputation. We must all work to repair this damage. We also face additional regulation across Europe as the regulatory bodies launch new initiatives. Maintaining profitability is another challenge. Many asset managers’ revenues have declined as a result of tough conditions and this has dented profits.
2. a) Helping our clients deal with tough market conditions and changes within the industry is a short-term priority. With our strong performance and defined investment process, Barclays Global Investors has created a great opportunity, which we need to convert into new business. Finally, maintaining our performance record is crucial.
b) Adapting to the changing structure of the industry will present significant challenges during the next three to five years. Again, maintaining our strong performance record and winning new business will be key.
3. Selling our active investment process, which covers bonds and equities and is enjoying growing success, is a big opportunity for BGI. Exchange traded funds (ETFs) are another growth product. In March 2003 our iShares business launched the iBoxx € Liquid Corporates fund in Germany, Europe’s first corporate bond ETF.
4. As an established global house, our main growth opportunities lie in the US and Europe. In both regions we already have significant scale and the opportunity to grow our market share.
5. In a word, ‘execution’. Converting the opportunity our reputation and performance have generated into new business wins.


Credit Suisse Asset Management Europe
Henry Wegmann: CEO
1. High risk aversion of almost all segments of investors due to loss of confidence; overcapacity; benchmarking paradigm being increasingly questioned.
2. a) l Protect level of profitability l Defend market share l Intensify customer focus.
b) l Further exploit opportunities of open architecture l Make productivity gains by pooled product modules l Strengthen brand Europe-wide.
3. Absolute return oriented products, fixed income with flexible duration policy, real estate and capital protected equity products.
4. CSAM Europe is covering all of Europe as with outstanding products there is sales potential in any European country.
5. Refocus towards client orientation and distribution while streamlining production capacity.

DekaBank
Peter Mathis: Board member responsible for asset management and treasury
1. Extensive restructuring in the industry is required to improve margins. This includes the scope of the research activities, product portfolio and staffing. For some the whole business model has to be under scrutiny (downsizing, rightsizing).
The question of distribution of power between production (producers) and distribution (distributors) on the split of fees will become important, especially with respect to the incentives given by current rules (front loads to distribution favouring high risk products in sales activities).
2. a) Successful use of new management tools (activity based costing, balanced scorecard) to enhance profitability of the asset management factory while at the same time increasing quality of products in defined core competencies.
b) Finding partners which are willing to complement own production in non core competencies by engaging in a mutually beneficial production cooperation.
3. Balanced portfolios who are designed according to clients risk profiles using asset liability considerations is one area. The other is our specialist (satellite) products (active quant, small caps, corporates, hedge fund) which complement a core portfolio.
4. Germany and selected countries in Europe.
5. To overachieve goals set out on mission statement, which was put in place after the successful merger of our production platforms DEKA (mutual funds), DEKA Investment Management (institutional money management) and FE&C (quant) to the new DEKA Investment in 2002.

Deutsche AM
Tom Hughes: CEO
1. The first and greatest challenge is to restore investor confidence. All other challenges flow from this. Because of the fluctuation and instability of international markets, I expect investors will increasingly want to consider alternative investment strategies to the balanced and benchmark-hugging mandates that delivered liability-beating returns in the late 1990s. I fully expect to see an enhanced role for hedge funds in the product mix being offered by the industry to clients in the coming years.
2. a) Over the short term, ensuring that investment performance continues to improve is one of our primary objectives. Gaining a strong foothold in the US retail marketplace and in relatively new European markets for DWS retail products, such as Britain and Italy, and solidifying and growing market share in Germany.
b) Over the longer term the challenges are to build on what I believe is our unrivalled global research platform and use this to further enhance our investment performance. Also we must continue to communicate with clients the range of products available to help meet their liabilities through fluctuating markets, and convince them of the benefits of using them.
3. Because of the current market conditions, I expect alternative investment products, hedge funds, real estate and private equity to be growth offerings for clients. However, I don’t expect there to be a flight from equities from those that are able to view the market in the medium and long-term.
4. All regions. Deutsche Asset Management is a truly global concern. There are opportunities to gain market share in the US for our retail and institutional businesses through Scudder, and by expanding our DWS business in Europe in the retail and pension funds sectors – consolidating our position where we already number one and growing where our coverage is thin. I also see real potential to expand in Southwest Asia and Japan.
5. We want to be the most trusted and client-centred investment management and advisory company in the world.

F&C
Alain Grisay: Joint head of institutional business
1. How to manage the volatility and the upside of equities. F&C’s faith in equities is long-term. Investors have to remain in equities or to rebalance them. The ability to react to changing sentiment. F&C has a diverse business base with 50% in fixed income, 40% in equities and the remainder in property.
2. a) Reducing and keeping costs under control whilst growing and developing F&C into a leading pan-European asset management business. Getting back on consultants’ list in the UK following the company’s transformation from a UK centric business to a European business and all that that has entailed over the last couple of years.
b) F&C is well on the way to achieve its mission of becoming a leading pan-European asset management business. It is already the largest third party manager of Dutch pension funds on an active basis, as well as being the UK’s 10th It is the leading retail and institutional asset manager in Portugal through its links with BCP. Building a strong presence in the Netherlands, Germany, Portugal, France and Greece. In five years’ time we aim to have achieved this. This will be defined by being an important and profitable force in the European asset management industry.
3. In the UK it will be composite bond mandates (mainly mixed sterling goverment/corporate mandates with some overseas). Emerging markets equity should feature in the UK and emerging debt.
In Europe, emerging debt and equity and European equity are the most likely drivers still. European bond mandates and European investment grade corporate mandates as well.
4. Netherlands, Germany, Greece and France.
5. To reduce costs further, strengthen our client servicing capabilities, build and maintain our relationships with our strategic partners in the business and win new business.

Fortis
Richard Wohanka, CEO
1. The asset management industry has to prove that active management adds value to portfolio performance, at the risk of seeing investors turn to indexed, capital market or insurance products. Asset managers need to adapt their product range to changing investor expectations in terms of risk and return, in order to preserve and grow assets under management. Reluctant to accept the low returns on government bonds, investors want to be exposed to a lower risk than on equities. The industry must concentrate on being profitable in the face of external and internal pressure. The external pressure is on lower margins with a trend towards variable fees. Internal pressure comes from increased fixed costs in areas such as risk control, client reporting and corporate governance issues.
2. a) Raising Fortis Investment Management’s profile and visibility as a specialised manager inside and outside the Benelux. Developing new products with an absolute return dimension while maintaining the service and quality on relative return products.
b) Consolidating and developing a firm-wide high performance corporate culture.
3. Absolute return and guaranteed products; corporate, convertible and emerging market bonds; CDOs and funds of hedge funds.
4. We expect substantial growth in Italy, Germany, the UK and Austria where we have recently opened sales offices, as well as China where we have a joint venture. As for our core countries, Belgium, France, and the Netherlands, we expect growth in assets albeit less spectacular.
5. Providing innovative high quality investment solutions to our retail and institutional clients.


Goldman
Sachs AM
Suzanne Donohoe: Co-head of GSAM Europe
1. l Maintaining price discipline
l People retention l Focusing on costs
2. a) l Pacing growth/investment in light of the environment. l Helping clients solve the difficult asset allocation decisions brought about by expected returns and underfunding. l Bringing multi-pronged solutions to clients l Keeping teams together
b) Same as above
3. Uncorrelated strategies - GTAA, HFS, Currency. Also, high return low imperfect correlation - HY, PE
4. UK, Holland, Scandinavia, Italy, Germany
5. Helping clients in difficult times


Henderson Global Investors
Roger Yates: Managing director
1. The biggest short-term challenge is equity market volatility which has had a dramatic impact over the past three years. Happily as a multi-asset, multi-geography business Henderson is weathering the storm better than most thanks to our fixed interest capability and alternative asset classes of property and private capital.
2. Other challenges include industry consolidation, increased pressure on margins given the new distribution channels developing through open
architecture. We will also need to focus on innovation and speed to market in order to provide a product mix which reflects investor requirements. A good example of this is the way in which we have launched a total of six absolute return funds over the last three years.
3. Given our configuration as a multi-asset investment manager, we would like to think we will see growth across all our investment classes including core and specialist equity, fixed interest and absolute return, property and private capital. In current markets, there is a growing demand for a well diversified portfolio and we believe we are well placed to provide the key elements of this.
4. We tripled the size of its European operations over the last three years and we anticipate that growth continuing, albeit at a more measured pace. We also anticipate steady growth in our core UK and Australian markets.
5. Providing consistent and repeatable investment performance across all asset classes, developing innovative new products and maintaining profitability and returns to all our stakeholders.


ING
Angelien Kemna, CIO Europe
1. This challenge can be divided in two sub-questions:-
Key challenge I: l How to streamline operational processes in order to reduce cost and ensure maximum scalability? l How to increase revenues?
Key challenge II: How to outperform benchmarks and peers in these difficult markets (credit defaults, war in Iraq, high volatility) in order to retain the performance track record?
Key challenge III: How to deal with the retail investment climate which is shifting towards non-risk asset classes with lower fees?
2. a) l To provide superior performance versus bench marks and peers l To ensure profitability via cost reduction and increasing revenues l Provide operational excellence regarding client servicing and operations
b) l To provide superior performance versus benchmarks and peers. l To build long lasting relationships with European fund distributors, consultants and institutional clients. l To realise an organisational structure that offers operational excellence and is truly scalable
3. l Value/high dividend equity products l Fixed income credits (global or European): Investment grade credits, high yield and asset backed securities l Emerging market debt l Sustainable equity fund
l Global sector equity fund l European equity
4. Benelux, southern and northern Europe, and the US.
5. Superior performance versus benchmarks and peers. Operational excellence leading to increased client satisfaction and an overall cost reduction.
Ensure successful institutional and retail sales with the help of our distribution channels.

Janus
Mark Whiston, CEO
1. The current challenges are restoring investors’ confidence in equity investing, finding long-term solutions to pension deficits and addressing declining revenues.
2. a) Over the short term, our challenge is to continue to broaden our product lineup so we can offer our clients a wider range of choices to complement our growth products. We’ll also remain focused on expanding our business internationally and improving the absolute short-term performance of some of our equity products.
b) Over the longer term, our goal is to deliver top-notch results to our clients and stockholders and to highlight our expanded product range to reduce our dependence on growth equities. We’ll also continue to build on our global distribution capabilities to make our wider range of products available to more investors around the world.
3. I expect continued solid growth from our more conservative offerings, such as fixed income, value, core and mathematical risk-managed equity products. Meanwhile, I’m optimistic that our growth funds will start generating stronger results as the US economy improves.
4. Outside America, we expect to see continued growth in Asia – our fastest growing region – as well as Germany and Italy, and the mature European pensions markets – including the UK, Netherlands, Switzerland, and Scandinavia.
5. My goal is to build a more competitive business model that delivers strong results for our clients and consistent profitable growth for our stockholders. To do that, we’re focused on four areas: diversifying our product range, leveraging Janus’ global presence, increasing operating efficiency and, above all, continuing to build on the improved short term performance of our growth equities.

JP Morgan
Mark White: Head of the institutional business in EMEA (Europe, Middle
East and Africa), Asia and Japan.
1. Strategic choices: global player versus niche player; distributor versus product provider.
The need for asset managers to differentiate themselves through their brands. More focus on absolute versus relative investment performance
2. a) Continue to manage excellence in difficult market conditions by: l Leveraging existing revenue opportunities, eg, expand product range l With higher diversification/risk mitigation effect l Use subadvisory opportunities as an alternative way of raising assets l Improve efficiency and effectiveness without compromising on long-term values and investment performance
b) Focus on long term, consistent outperformance
l Client focused solutions in an increasingly complex world l Manage the economics of a scale business
3. Core product: European + US Equities and Global Fixed Income-Credit. Satellite: Small Cap, Style Funds and Long Short Strategies/Total Return Strategies; Greater China
4. Europe: Retail/institutional (particularly in the Netherlands, Nordics, Germany and Switzerland) China (over the longer term).
5. To focus on our objective of delivering excellence and continuity in investment management, a comprehensive range of products, the highest quality of client service and global coverage with local delivery.

KBC
Edwin de Boeck: Managing director
1. Globalisation: As the importance of local markets reduces (EMU, European convergence) the clients’ needs are changing rapidly. Asset managers have to expand their operations to cope with this globalisation. The speed of these changes as opposed to the time needed to build up a reputation, hamper organic growth and often necessitate mergers and acquisitions. As demonstrated in numerous cases M&A are often very expensive but not always successful.
Increased market volatility: increased volatility requires new financial principles (dynamic risk profile, moving benchmark), techniques concentrating on downside risk (derivatives, CPPI) and adequate risk control systems.
New distribution, marketing and communication channels: e-marketing and e-reporting is partly taking over from traditional channels.
2. a) l Defensive: Keep existing clients satisfied after three very hard years l Downside protection of portfolios against an expected interest rate rise l Positioning pension funds within the framework of the new Vandenbroucke Law
b) l Pan-European pension funds l Competition in home-countries Belgium and Ireland with global asset managers l Niche product strategy within Europe and the US (EAFE)
3. l Downside risk protected products (capital/return guaranteed) l Passive management (bonds and equities) l Euro corporate bonds and related credit derivatives l Corporate cash products
l Ethical investments l EAFE Equity (product of KBC Asset Management – Ireland)
4. l EMU l Central Europe l USA
5. Growing First pillar pension business in Belgium.
The new Vandenbroucke Law on Additional Pensions.


Morgan Stanley Investment
Management
Robert Sargent: Head of EMEA
1. The current lack of a meaningful pan-European framework and the resulting fragmented regulatory and tax environment.
The need to move away from the short-termist approach currently prevalent in the industry towards a culture of creating solutions which genuinely meet clients’ long term investment needs.
Constructing business models that are able to deliver profitability in a more challenging low return environment.
2. a) Strengthening our brand recognition in the European asset management marketplace. Ensuring that we are able to grow our assets under management significantly without compromising either our performance or our ability to service clients. Ensuring that we are able to take full advantage of the asset gathering opportunities that will arise as the economic environment improves.
b) l To maintain our long term investment outperformance across all asset classes and investment styles l To grow our market share l Ensuring that we are able to grow our assets under management significantly without compromising either our performance or our ability to service clients
3. l Global equity – all styles l Liquidity/money market l Alternatives
4. UK intermediary and institutional, Germany intermediary and institutional and Nordic region.
5. Increase our ability to create bespoke solutions for our clients while maintaining superior investment performance.

Nordea
Henrik Priergaard: Head of Nordea Investment Management
1. The bearish equity markets have impacted sentiment and risk-taking capacity with both institutional clients and the retail market. Demand for traditional equity products is thus likely to remain subdued for some time. This means asset managers will have to find ways to reduce their high fixed costs while maintaining and even improving performance and accelerating product development. Setting out clear strategies to navigate these uncharted waters is not a straightforward exercise for most firms.
2. a) Securing and improving organisational flexibility and the ability to adapt rapidly to market developments and new client demands. Maintaining a competitive track record – keeping investment performance above the relevant benchmarks and ensuring that communication with clients meets the highest standards of quality and clarity. Controlling costs to free resources for product development and client service.
b) While it is not the most likely scenario, the possibility of a prolonged period of low equity returns and interest rates exists. Such an investment regime would challenge clients and asset managers alike, with close cooperation and innovation being required to find mutually beneficial solutions.
3. In terms of retail assets, the majority of inflows are expected from fixed income products. On the institutional side the picture is more balanced, as we continue to win significant international mandates for our proprietary Thematic Investment Process (TIP).
4. While clients in the Nordic countries are expected to be the main contributors to asset growth in 2003, we expect important inflows from both continental Europe and North America as well.
5. l Investment performance l Product development l IT-platform l Costs

Schroders
Michael Dobson: CEO
1) First, managing the impact on our industry of severe declines in equity markets. Such falls depress revenues and also contribute to client disenchantment with equities as an asset class.
Second, ensuring the excellence of personnel. Weak markets focus management and competitors alike on the need to identify, attract and incentivise top performers.
Third, ensuring at an operational level, efficiency is maximised. At Schroders, we have sought to reduce costs without damaging the long-term revenue generating capability of the business. Indeed we have continued to invest in the development of a highly efficient operating platform, the benefits of which will be apparent when funds under management start growing again.
2. a&b) Over the short and longer term, the overall challenge is to grow our business by consistently meeting client expectations in terms of fund management performance and service levels. This challenge is a continuous one regardless of current conditions. Our key asset is the talented people who work at Schroders and we are actively engaged in developing our resources and strengthening the investment process to enhance our competitive position.
3) Fixed income, key specialist equity products and alternative investments as both individuals and institutions alike pursue more diversified investment strategies.
4) Despite difficult market conditions, we expect to experience growth both in Europe and Asia. The general trend towards consumer choice and the growth of competing open architecture offerings has contributed to the gradual polarisation of industry participants between the manufacture of fund management products and their distribution. We believe producers such as ourselves who have leading brands and manufacture consistent, high quality products are well placed to develop business in these regions by continuing to build relationships with both local and global third party distributors.
5) Achieving positive returns for our clients.


SGAM
Philippe Collas: Chairman and chief executive
1. 2002 was another difficult year that saw a significant deterioration in the markets, with many asset managers making losses or experiencing significant falls in their profits. This is likely to lead to a concentration of fewer but larger players on the markets who will be the only ones capable of attaining the critical mass needed to continue to invest in the top-level professionals and the information technology required to anticipate the more demanding needs of clients and be capable of the innovation required to respond to them.
2. a) To continue to anticipate and innovate, in particular by growing our leadership in alternative investments (AUM in this area currently total E29bn), to strengthen asset gathering by exploiting our potential for the cross-selling of products between the group’s four specialist platforms worldwide and to be able to seize any opportunities that occur for concentrating our distribution (partnerships, acquisitions, joint-ventures).
b) To continue to build on our successful industrial model which has given us a strong presence in the world’s four major investment regions, to reinforce our capacity to develop external distribution, and to establish channels for growth in terms of regions (Asia, NAFTA, Eastern Europe) and products (alternative investments, cross-selling)
3. Alternative investments ie, capital guaranteed product, hedge funds, global bonds, corporate funds € and $, MBS strategy.
4. With our existing global presence we have no short-term geographic priorities but have ambitious plans for asset gathering through product distribution using our management centres worldwide. That being said, US and Asia should be the growth areas for this year.
5. To continue to strengthen our distribution capacity through cross-selling and external distribution, to maintain a balanced client/product mix and to continue to exploit and develop the SG AM Group industrial model worldwide.


T Rowe Price
R Todd Ruppert: President and CEO, T Rowe Price Global Investment Services
We, in the investment management industry, are entrusted with an extremely important responsibility – managing other people’s money. Our reason for being is to deliver superior risk-adjusted investment results for our clients; everything else we do, although extremely important, is subsidiary to that. I fear that some in our industry, in the mad rush for scale and asset growth through M&A activity and rapid expansion, lost sight of this important fiduciary responsibility.
The overriding challenge facing our industry, both short term and long term, is ensuring that we produce ongoing superior investment returns for our valued clients. We must remember that investment management is a profession with a business attached to it. If you do not constantly and diligently focus on those things that will enable the profession to perpetuate itself in the highest quality manner, you set in motion the eventual loss of