Like many of his counterparts at large asset management firms, Sandro Pierri is mindful of how global trends are influencing his clients and the best ways for his firm to address them.
CEO of BNP Paribas Asset Management since July 2021, Pierri cut his teeth in Italy’s competitive Italian asset management business at ING in the 1990s and 2000s. Now he must grapple with changing client demographics in both the institutional and retail sectors, as well as retaining an edge in active management, private markets and ESG, where there is heightened competition for assets and people.
Pierri’s predecessor as CEO, Frédéric Janbon, centralised a previously somewhat unwieldy multi-affiliate asset management business and overhauled risk management.
All this, Pierri feels, has left the firm in a strong position, allowing the creation of a single emerging markets platform by bringing together capabilities from the former affiliates, for instance, as well as a centralised multi-asset and quantitative solutions unit (MAQS) in the same vein. This was created from two of the previous affiliates and an existing multi-asset team.
Recent activity has seen BNPP AM boosting its capabilities in private assets – fully integrating BNP Capital Partners onto the private markets platform and acquiring a specialist Dutch manager, Dynamic Credit.
With €9bn in AUM, Dynamic Credit specialises in Dutch mortgages and personal/SME credit in a Diversified Loan fund. It also offers valuation services, performance benchmarking and portfolio transactions.
The firm will remain a separate entity under CEO Tonko Gast, but will be a “part of the family”, as Pierri puts it, on the private markets platform.
Pierri says the private markets platform is “already pretty diversified from an offering perspective” but it will continue to “expand organically on the risk-return spectrum”, with areas like credit risk-sharing slated for launch, as well as an expansion to infrastructure junior debt, to sit alongside a senior-debt capability.
The CEO does not rule out bolt-on transactions akin to Dynamic Credit but cautions: “It will be very surgical to support and accelerate some of the strategic imperatives that we have in this area.”
Pension funds and insurers are seeking more complex multi-asset private markets strategies to meet cashflow requirements, and Pierri points to a recent win for a diversified private markets mandate. This strategy was created with input from the MAQS solutions group.
MAQS has also driven “quantamental” enhancements to fundamental active investment processes in recent years, adding enhanced data and analytics capabilities to bolster traditional security analysis and research. As a house, BNPP AM is largely active, despite a small passive business which accounts for less than 10% of overall AUM.
Pierri points to an increased focus on high-conviction active strategies as a strategic positioning in what he sees as a polarised active-passive world. “Active needs to be very active in good and bad times, meaning that when you’re wrong, you’re quite wrong, but when you’re right, you’re quite right.”
He highlights initial success in the fundamental equities space: “This has probably been the first asset class where we’re seeing that this new focus has worked. But we’re also very pleased with global fixed income, which, after a difficult start in 2017, is now showing very strong numbers also on a two-year basis, as of the end of last year.”
All this implies greater investment. Pierri says: “There’s no compromise on building a strong research platform internally, which is the journey we’ve been through. Clearly that comes with costs and pressures but that’s part of our business proposition and that’s what we need to do.”
Pierri has inherited a diversified client base, with external institutional money accounting for around 55% of total AUM. Captive client AUM, at around 18%, is lower than at many bank-owned peers, and Pierri sees potential to increase this somewhat.
Millennials are becoming an important retail client group, particularly as they inherit family wealth. BNPP AM was relatively early in the game as far back as 2017 with its acquisition of Gambit, a robo adviser.
The Millennial generation, aged roughly 25-40, is also becoming an increasingly important employee cohort now that its members are starting to occupy more senior positions. Millennials tend to have different values than their older and more conformist Generation X and Baby Boomer colleagues.
Pierri hopes his firm’s early and strong emphasis on sustainability, at group level as well as in asset management, will attract new talent, as well as drive future revenue growth.
At group level, BNP Paribas stepped up its coal exit programme in 2020. The bank joined the Katowice Agreement in 2018 to work on a common methodology with other lenders to align with the Paris Agreement, and committed to stop funding new thermal coal-fired power plants in 2017.
In asset management, a sustainability centre was also created in 2017 to bring together research and expertise with the aim of supporting investment processes and marketing. The centre is led by Jane Ambachtsheer, who was recruited in 2018 from Mercer, and Pierri himself chairs a sustainability committee.
Within the EU’s SFDR fund typology, BNPP AM manages about €191bn in article 8 strategies (which take ESG into account) and €39bn in article 9 funds (which promote ESG).
Getting integration right in ESG has been more of an organisational art than science until now. Too heavy-handed and centralised an approach could risk stifling teams. Too loose would risk incoherence.
But the dynamics are changing and integrating ESG in specialist areas like credit or sovereign fixed income are emerging but clear trends. Pierri hopes managers like BNPP AM, with a long track record in ESG, will be well positioned as regulators and policy-makers turn their attention to sustainability.
All this increasingly means ESG is now a language everyone has to be fully fluent in – everyone must be in a position to answer sustainability related questions directly, not pass them off to ESG specialists.
“Sustainability as a key ingredient in asset management is not only here to stay but it will be everywhere,” Pierri says. “We see that everyone – regulators, clients, asset managers – is busy trying to catch up and I think we’re just seeing the beginning of a major trend. My view would be that five years from now, ESG will be just mainstream. Everyone will have to do it, because it’s going to be the way we as an industry do business.”