Home is where the parent is
SEB Asset Management (SEB AM) threw a party for its staff earlier this year. The reason for the celebration was that the bi-annual Prospera survey had ranked SEB AM first among the 30 asset managers operating in Sweden.
This put them ahead of international titans such as Goldman Sachs JP Morgan Fleming AM, Credit Agricole AM and Merrill Lynch IM.
The poll was based on the opinions of 300 Swedish institutions and organisations, including insurance companies, county councils and pension funds that use asset management services.
SEB came out top in in terms of its quality of personal relationships, its level of service, and its understanding of clients’ needs.
The achievement marked the top of a steady climb up the ladder. In 2001, SEB AM was ranked sixth equal. In 2003 it reached second place.
It was also an endorsement of SEB’s decision in 2001 to redefine SEB AM’s core geographical markets and products.
SEB AM, the asset management arm of the SEB group, had expanded fast in the 1990s, building a presence in the US, Asia and the UK. In the process it spread itself too thinly. This was reflected in levels of client dissatisfaction and lost business.
Four years ago SEB AM made a strategic decision to re-focus activities on its home markets – that is, markets where the SEB bank had a presence.
Efforts were now to be focused on fewer markets. Offices in Asia, the US and UK were closed and SEB AM focused on Sweden, Denmark, Finland Germany.
SEB AM also decided to refine some of its core competencies within, for instance, European equities and fixed income. It would also use to a larger extent external suppliers and sub advisers for certain markets and asset classes.
Pontus Bergekrans, SEB’s global head of sales and products, was hired from Nordea AM in 2002 as part of this process of retrenchment. Three years later, he says the strategy has been an outstanding success.
“The focus that we decided to have - to become a lead player in what we call our home markets - has paid off significantly. We have really strengthened our position in the local
“That means we believe in local champions, and we want to have clearly defined strong local teams. But these teams are being supported by a global organisation when it comes to product development, product strategy, communications and systems, which can be scaled and leveraged.
“Another important step was that we upgraded the way we served our clients and listened more to their individual needs. The result was the introduction of absolute strategies, which better fulfilled the demands from the institutional client segment.”
Since then the aim has been to broaden the product offering, moving into credits on the fixed income side and into emerging markets, particularly new Europe, on the equities side. SEB AM has also expanded the range of products within alternative investments, including hedge funds.
Additionally, SEB AM has identified real estate as a core competency. SEB AM also wants to raise its profile in Germany, says Bergekrans ”Germany is a fantastic opportunity. It is also a different story in the sense that SEB AM is not well known. It’s a small player in the market. Our market share in asset management varies between 0.5% and 6 % in different segments of the markets, where real estate stands for the higher level.”
In a shrewd move, SEB AM has combined SEB Invest, the traditional equities and fixed income operation, with SEB ImmoInvest, the real estate management company to form a single new entity.
This will serve to raise the profile of SEB asset management, since ImmoInvest is a success story in Germany, says Bergekrans. “The ImmoInvest product is clearly at the top when it comes to quality and ranking. Combining SEB Invest with ImmoInvest means that we are bringing a star culture, good management capabilities and a much more credible story to our commitment in Germany.”
Germany is also showing greater interest in SEB AM’s institutional mutual funds, which account for half the total inflows of institutional money. “The German institutional market was traditionally based on Spezialfonds, but recently we’ve seen a change and a lot of institutional clients are putting their money into traditional mutual fund. That is a development we believe will continue,” he says.
As the footprint of the SEB banking group broadens, so will the asset management opportunities, says Bergekrans. “The bank as a whole is now defining 10 countries as home market countries. Not all of them are big asset management markets but some of them are.”
For instance, in the Nordic region, SEB has acquired Oslo-based Privatbanken. “That signals that SEB is expanding its strategy as a bank in Norway. We are following suit and looking to Norway as a core market for asset management,” he says.
SEB Group has also been expanding into eastern Europe and the Baltics. In Lithuania, SEB owns SEB Vilniaus Bank, the country’s largest commercial bank. Two years ago SEB decided that Vilniaus Bankas would spearhead its expansion plans in Ukraine.
In Poland it owns SEB TFI, a fund management company with around 5% of the Polish market.
“We are now building a very credible and strong investment management team in eastern Europe. We have more than 70 people working in eastern Europe in asset management already,” says Bergekrans.
Besides re-focusing its markets, SEB also changed the way it manages its money. “We moved away from the broad factory approach, into the small boutique approach with independent teams working with different asset classes in different ways.
“We now have five star products in European equities and strong momentum in global equities, and also a number of four and five star products within the fixed income area.”
One example is SEB’s index-linked bond fund, which invests in Swedish index-linked bonds. This has been rated one of the best performing funds in Europe.
The aim now is to market top qualityproducts outside SEB’s home markets, Bergekrans says. “We recognise that there is a demand from markets outside our home markets, in Europe for example.
“With the emergence of distribution platforms through Europe, we should ensure that our strong products are also available internationally as well as in our home markets.”
Products that SEB AM either cannot or does not want to manage itself are outsourced to sub-advisers. SEB AM operates a system of ‘managed architecture’ rather than open architecture in the management of its funds, says Bergekrans: “What we do is guide the supply in relation to our own capabilities. We decide what we can deliver, what we cannot deliver and what we want to deliver ourselves and what we want others to deliver.
“We decide what type of organisation we want to work with. There have been times when we have found a tremendously good product but decide that the organisation did not fit what we are doing, culture wise.”
To name a few, SEB currently works with Muzinich & Co to manage high yield fixed bonds, Barclays Global Investors to manage US indexed funds and DIAM to manage Japanese assets.
This approach enables SEB AM to meet the demand for multi-manager and fund of fund products. “The largest part of our inflows in Germany goes into these strategies. These products provide pure best choice.”
SEB AM has also moved to ensure that it meets the growing demand for derivatives and structured products. “This is something that makes SEB very attractive for the future, because we have a very strong merchant bank with strong capabilities in trading capital markets,” he says.
“We have created a joint development team to ensure that our thinking and schemes in the derivatives area combines with our thinking and schemes on the asset management area. If you combine the thinking of these two areas, something interesting will happen.”
The emphasis on quality products has enabled SEB AM to develop a dual strategy for home and international markets, Bergekrans says.
“At the local level, the strategy is to have a solid presence in the local markets, expanding this presence as the whole bank expands. The aim is to make available to our local clients and distributors a broad product range of our own products and those of external providers “On a much broader international level, the strategy is to focus on
marketing and distributing our quality niche products. Outside our home market, the task is to ensure that there is an awareness of the product quality that we can provide. If we have a good story to tell, we should tell it.”
To achieve this, SEB AM has increased its global marketing effort and recently created the role of global head of sales and products. “One reason for this was to strengthen our ability to look beyond our local markets,” says Bergekrans.
However, this time round SEB will position itself more cannily in the international market place. “We are not global titans, arriving on the international stage with a full product range. We are rather a niche player looking at some interesting areas.”
The world in which SEB AM operates has changed since the 1990s. It has become more uniform, less heterogeneous. The asset management world has become more international and less local.
“That has shaped the way that clients are looking at the business. Nordic pension funds have broadened their investment horizons,” says Bergekrans. “Our local markets have become much more international, and we are now much more international in the way we work with clients.”