Strategically Speaking: Amundi
Scale is so often said to be crucial in asset management that it barely warrants repeating. And large-scale mergers and acquisitions have been so frequent that they do not attract disproportionate surprise
A key driver of this M&A trend has been banks’ need of capital – which was certainly a factor in the case of Pioneer Investments’ former parent Unicredit. Yet the disposal of Pioneer, which had acquired the Boston-based mutual fund doyen in 2000, was many years in the making. Amundi’s acquisition was the final act in a saga that included an anticipated deal with Spain’s Santander until that was abandoned in 2016. The deal finally closed in July 2017.
Dominique Carrel-Billiard joined Amundi from the French boutique equity house LFDE at the end of 2016 to lead the Pioneer integration. “Overall, I’d say the integration is very well advanced, is advancing pretty fast,” Carrel-Billiard summarises. “From the get-go, everyone [knew] where they were going, who they report to, their scope of responsibilities, and what the business goals are per organisational unit. So we [could] start to act as one very quickly.”
Most European IT migration will be completed by June; otherwise, work to merge fund structures and legal entities is ongoing.
Given that Amundi was already a ‘waterfront’ asset manager with few gaps in asset classes or strategies, the benefits of the merger derive mostly from the lack of substantial geographic overlap between the two firms.
Following Unicredit’s 2005 acquisition of HypoVereinsbank, Pioneer obtained a Munich base from which to expand its German business. Amundi now has local access to a German insurance and pensions market in need of yield and also on the threshold of potential growth in workplace DC-type pensions.
Amundi now has an effective base in the US, where it has been under-represented, and where it will do business as Amundi Pioneer. The US fixed-income specialist Smith Breeden has already been moved onto the Pioneer platform, pending full integration.
What benefits will accrue to institutional investors from all this? “I expect a stronger offering and a better service from the combined entity than what I would have had from either separately,” says Carrel-Billiard. “Because in merging Pioneer and Amundi, we have built what I think is a truly global platform able to service an institutional client and all its needs. Effectively, the value, from my point of view, for institutional clients…. is to have a much more global platform.”
He also mentions expanding multi-asset credit – or credit continuum – strategies, for instance by leveraging Pioneer’s range of US fund strategies in a pan-European UCITS format.
Can Carrel-Billiard understand the natural scepticism of some about whether a sizeable asset manager such as Amundi can really replicate the culture of talent retention and level of client service that boutiques are commonly thought to offer?
“That’s an interesting question, because it talks about the culture. And whether you have the culture of a big animal, almost of an administration, or whether you have the culture of being closer to clients, more focused and more entrepreneurial.”
There is an urban myth, Carrel-Billiard says, that boutiques are better at retaining talent; large firms such as Amundi should be able offer better career prospects for the right people, or lift out teams in a way that allows talented managers to operate in a more structured and better-resourced environment.
In terms of culture, he stresses the commonalities between very small and very large asset managers, and seeks to shed a positive light on Amundi’s huge size – with 4,100 staff and 100m clients. “I am not sure that there’s that big of difference between boutiques and listed entities in terms of making sure that the business serves the clients and the shareholders well,” he says.
“As I entered Amundi a bit more than a year ago I was expecting something very big, very monolithic. And in fact it’s a very entrepreneurial group. So the culture in terms of management style, in terms of processes, is much closer to what I experienced in the boutique world than in the huge corporate world.”
Here, he contrasts robustness in processes and controls with what he sees as a nimble and entrepreneurial spirit, with “business units that are completely focused on their clients, growing their business, being responsive to the market place, to effectively move forward, improve the quality of the service, improve the quality of the investment experience, and to develop.
“There is, I think, a good virtuous cycle in place in this company, which probably explains that the momentum, in terms of pace, is as dynamic as it is, even though we are very big and in the midst of a huge global integration exercise.”
Pioneer ran on BlackRock’s Aladdin integrated portfolio management, trading and risk management platform, but will move to Amundi’s proprietary equivalent as part of the integration. Currently enjoying the less-than-glamorous name of Amundi Services, it could be expanded in future as a branded, standalone commercial offering.
Carrel-Billiard comments: “We want to retain the independence and the autonomy of having our own proprietary tools. Then we can offer them to other parties, who would be interested.” A recent multi-services fund-hosting deal in Luxembourg with Goldman Sachs Fund Solutions is proof of the momentum in this part of the business, he says. The deal encompasses front office investment management as well as control and oversight services.
Clearly, asset volume in itself does not deliver a stronger offering or better client service. As the effects of this merger play out in coming years, it will be for Amundi to prove whether benefits will accrue to clients. For Carrel-Billiard, the fact that net new client inflows totalled €70.6bn in 2017 proves that Amundi was not distracted by the merger and that it is dealing with clients in the right way.
His unit is tasked with delivering €45bn in net new inflows over the next three years, but there is a longer-term objective to become a top-three European institutional manager. Perhaps wisely, Carrel-Billiard remains quiet about when this milestone might be reached.