CDC Asset Management’s metamorphosis into CDC IXIS Asset Management at the start of this year heralded not only the legally required split under European regulation from the historical civil service activities of France’s Caisse des Depôts, but a conscious attempt to define the character of the investment manager on the global stage.
With last year’s $2.2bn (e2.4bn) CDC acquisition of Boston-based money manager Nvest beginning to be digested, Daniel Roy, chairman of the executive committee at CDC IXIS AM , says the new CDC story is one of consolidation through partnerships in Europe and Japan on the back of this added US expertise.
Significantly, he notes that the purchase of Nvest will aid the group more in its European rather than US ambitions.
“When you want to become a European player you must first become global, because it is difficult to convince the Germans, Italians or the Spanish that you are a good partner if you are not bringing with you a global product offer.”
The three markets Roy flags up are not named by chance, but represent the group’s targets for 2001.
“Germany is a big issue for us, but of course it is a very tightly regulated market and you do need a KAG vehicle and products with a German bias.” He is unequivocal though that CDC will seek partnerships as opposed to mergers or acquisitions in its drive forward.
“We are an asset management group, so do we need more expertise from other companies – No! What we do need is a good distributor of financial products, which likes having a global producer like us.”
While CDC has already been in discussion with Bayerische Landesbank, Roy adds that there are two other confidential discussions taking place – predicting action before the year end.
Ditto Italy, where Roy comments: “We are in discussion with a very large player in Italy and something may happen in the next few months. In Spain we will also be looking to have our own subsidiary.”
Roy also notes that CDC IXIS AM may be on the lookout for a Forex partner – possibly in the UK. “This is the remaining piece of the global offer we don’t yet have – currency overlay and things like that - and we may find an opportunity in the UK market.”
He also believes CDC’s expansion will enable it to brave the increasingly cut-throat demeanour of the French market. “I believe that there are only two or three players that are profitable in this business in France. The fight on fees is very hard and the normal conclusion is to say there are too many players. Over the next five to 10 years I predict only two or three large players with some niche satellites will remain.
“For this reason we are also very happy with the US acquisition because it gives us the global basis on which we will survive, whatever the state of the French market.”
The second strand to CDC IXIS AM’s plans, he says, is more pragmatic and based on the evolution of financial markets.
Roy believes the euro effect means the European fixed income market will become a proxy of the US bond market. “Nowadays, what we have to reinforce dramatically is our capability to manage bonds with financial analysis – a kind of bottom-up approach for issue selection and research etc.
“This is the beauty of the deal with Nvest, because we now have the US track record through Loomis, which is a famous name on the research side of the fixed income business.”
The third element, he says is to complement the US and European operations with a strong Japanese presence, building on the existing subsidiaries of CDC IXIS Japan and CDC Asset Management Asia in Singapore.
“Between Japan and Europe there are a lot of similarities; demographics and pension funds are big issues. Once again it is better discussing with potential Japanese clients and partners when we have a global image rather than a European or French one.”
And Roy is bullish about CDC’s prospects in its focus regions: “We have expectations for Europe and Japan of gaining $2bn for each area by the end of 2001 through a combination of synergies and new business.”
As for the US market, Roy
acknowledges the continuing domestic/global mandate bias and puts forward an expectation target of around $600m under management by the year end: “In the US we are a kind of holding company with subsidiaries and we will stick with the brands within Nvest such as Loomis and Harris.”
He adds: “We don’t perceive any greater specialisation in the US, bar very large funds like Calpers, which already have some European mandates, so the prospects of selling European products to the US market is limited.”
Globally though he believes CDC IXIS AM has the product range to compete in the bulge bracket asset management business, particularly with e321bn of assets under management.
Specifically, he points to the group’s Euro and US equity capabilities - both value and growth from small to large cap, as well as hedge fund and private equity offerings, with specific specialist products such as fund of funds hedge products sold through the Harris subsidiary in Chicago, which he says can be offered to European clients.
As a parting shot, he adds that just such a specialist capability within the broader asset management offering will define the industry’s future:
“It is always interesting when you manage a business like this to try to find the long momentum. We believe the days of unit brand are over. The success story for the next decade will be the fund of funds, multi-producer approach – open architecture, and that is exactly what we do have.”