The name ‘AXA’ was chosen in the early 1980s, so the story goes, because it can be easily and uniformly pronounced in any language, and, as far as anyone knows, it also doesn’t mean anything rude anywhere around the world. But slick branding can’t make you good at everything, of course.
For AXA Investment Managers (AXA IM), the story has been an evolution from internal cost centre to externally facing profit centre. In common with other asset managers with an insurance parent, AXA IM was originally created as a spin-off from group insurance asset management functions.
Unlike its (former) French competitors Crédit Agricole Asset Management or SocGen Asset Management, AXA IM has not experienced any potentially disruptive merger process in recent years. “We haven’t gone through a transformational merger but we have transformed ourselves into what I think is a real operational multi-expert model,” says Carrel-Billiard.
“We had a vision that this company needed to be positioned as a multi-expert company, meaning that we needed to be both integrated as a group, yet diversified and focused by asset class with autonomous teams, totally independent in terms of investment process, to develop product excellence that could be recognised by the market and brought to the market by a shared distribution platform,” he continues.
“We have tried to combine a formula that best serves the needs of clients,” says Carrel-Billiard. “They want an easy interface with which to do business because it is easier than having multiple people knocking on your door.”
As an independent entity, AXA IM has grown both through internal build-out of areas like private equity and structured finance, as well as through acquisitions. New brands have been successively added, including AXA Private Equity and AXA Real Estate, alongside the acquisitions of Rosenberg and Framlington.
But while the 2005 purchase and subsequent integration of the UK retail and wholesale-focused equity manager Framlington was a relatively straightforward process, the affairs of the US West Coast quant shop Rosenberg have been anything but.
Notwithstanding the travails that quant managers experienced in 2007 as the convergence of their processes became painfully evident, AXA Rosenberg went into full-blown crisis mode in November 2009 after a coding error was discovered to have been affecting client portfolios for nearly two years. Worse, the error had come to light in the previous June but had not been disclosed. The debacle cost AXA Rosenberg half its AUM, as well as compensation and a regulatory fine to the order of hundreds of millions of dollars.
AXA Rosenberg remains a legally separate entity but the firm is integrating it as it did with Framlington. “We have had our own crisis to address with the AXA Rosenberg issue,” Carrel-Billiard says. “That has further forced us to restructure and re-focus.
“We are looking to redeploy AXA Rosenberg with a refocused and more transparent investment process which, hopefully, will deliver more reliable, less volatile investment results,” the CEO adds. “It’s going to be a slow rebuild because there has been a shock in the market but this is behind us. I think what we did was right in terms of confronting the issue and dealing with it honestly and transparently. Now I think the company is totally in order in terms of organisation, structure and strategic focus. We just need to implement and move forward,” concludes Carrel-Billiard.
After several years of being less active, the firm is also looking closely at the UK. Tim Gardener was appointed in autumn 2010 from Mercer to run the global consultant relations team, with Lisa O’Connor, formerly of Russell, as European head. She joined in summer 2011 at the same time as Irshaad Ahmad, head of the UK and Nordic region, who also came from Russell.
“In the UK, we found ourselves in 2009-10 in a situation where our consultant relations team was waning and we didn’t have an institutional sales force to speak of, the LDI focus had gone and we were a bit out of tune and out of touch, except for Framlington.” In fact, AXA IM started to promote its capabilities in LDI from about 2004, leveraging experience honed in the area of insurance assets, but this soon petered out. Carrel-Billiard attributes this to “people departing and loss of focus, as simple as that”, adding “we may not have placed all the chips in the right areas at times but the body of knowledge is very strong and we are in a good position for growth”.
There has also been activity in continental Europe. In February 2011, it was reported that AXA IM won a €2.1bn fiduciary management mandate for the Dutch Ahold pension fund, which was a major win. It leverages the firm’s structuring and solutions engineering capabilities, as well as its LDI and derivatives expertise, and provides a signature client in the important Dutch pension fund market. Most recently, the firm has poached Laurent Seyer, formerly CEO of Lyxor, to become head of investment solutions. He replaces Thibaud Vitry.
What implications does the on-going economic crisis have for the CEO of the fifteenth-largest asset manager globally? The answer is to keep going and not to “winterise”, he says. “The first objective is really to be close to clients and to make sure we can help them answer the questions they are faced with.
“When the environment is agitated, that is when you want more than ever to be close to your customers, because they need somebody to advise them. The second focus is to be able to effectively address their needs and have a type of offering that is accommodating of the environment.”
The third emphasis, he continues, is the implication for the economics of the firm. Here, Carrel-Billiard points to the cost-cutting measures that have been already been undertaken, with costs reduced by 20% between 2007 and 2010.
“Now we feel our offering is suited to the current environment and we have a strong track record across all areas of expertise so we therefore feel we can be ambitious and not winterise or withdraw like most of our competitors are doing.”
Carrel-Billiard, a former McKinsey partner, is also well aware of the need to align his firm’s objectives with those of his clients, and says he aims to position the firm as a trusted adviser. “One of the things that was very loudly proclaimed at McKinsey is that if you do well by your clients and your people, your economic formula should do well, which intuitively makes sense,” he says.
“We not only look at the eventual outcome but we also look at the journey, especially in an environment where mark to market and short-term valuation is the name of the game and where many players cannot afford a poor-looking snapshot taken at any one point in time.”
The CEO concludes: “We are in this game for the long run and we are patient builders of what I hope will become a global leader in
This story first appeared in the March issue of IPE magazine.