CDC IXIS AM Opts for strategic retrenchment

Forced by the prolonged bear market to scale back ambitious expansion plans, CDC Ixis AM looks to strengthen some wobbly internal bridges. Yuri Bender writes. With the acquisition of the Nvest group of companies from North America in 2000, CDC Ixis Asset Management finally took its place at the top table of Europe’s largest institutional asset managers. The glory years were short-lived. Huge costs relating to the Nvest acquisition helped deplete CDC Ixis group profits last year. And recent changes of management and ownership for the French giant, now running over E310bn, mean the period since then has proved no picnic for chief executive Daniel Roy. Realising two years ago that an almost wholly institutional and heavily bond-biased client base did not bode well for income diversification, he concluded that investment in distribution through banks to high net worth individuals would enhance profitability. An ambitious strategy for European expansion was devised by Hervé Guinamant, the board member responsible for new business opportunities. At the end of last year, Mr Guinamant appointed Sébastien Masson from Société Générale as head of European sales. The energetic 34-year-old Mr Masson had worked as head of product development at SGAM and then as head of institutional equity sales at the investment banking arm. “SGAM has had success in launching products with Frank Russell,” Mr Masson said, speaking shortly after his appointment. “It is not easy for CDC Ixis to replace SGAM in just six months as a producer of products. Our goal is to be pragmatic.” The figures demonstrate the need for coherent distribution. CDC Ixis AM manages over E190bn in Europe, yet to date, there has been little wholehearted mutual fund marketing. Unfortunately, the original plan for cross-border sales was scaled down almost as soon as it had been drawn up, due to the prolonged bear market. Even before French savings bank Caisse d’Epargne, previously an influential cross-shareholder, took operational control of certain activities at the end of July, the main initial focus was to be on selling guaranteed products to the French market. Expansion of distribution next year in Belgium, Switzerland and Spain was also on the cards. Hedge funds stay One product push yet to be affected is the imminent launch of a suite of Luxembourg-based hedge funds, manufactured by the group’s alternative and structured asset management arm under Isabelle Reux-Brown. These higher-risk products are backed by capital guarantees. The long term distribution strategy, however, appears to be under review, with a number of sensitive issues to be thrashed out. CDC Ixis funds are already available through Allfunds Bank in Spain, a subsidiary of Italy’s SanPaolo IMI, which held 3 per cent of CDC Ixis. But the bank’s relationship with shareholders closer to home has often been a more problematic one. Isabelle Bouillot and Gerard Barbot, the top two executives of CDC Ixis, stepped down in protest over the planned merger with Caisse d’Epargne in July. Thorny issues And even before the merger was announced, internal distribution had been a thorny issue in the corridors of CDC Ixis headquarters, near the huge Montparnasse station complex in Paris. Over E6bn worth of funds have been sold through the Caisse, for which CDC Ixis AM is official sub-provider for actively managed products. Insiders believe this is a drop in the ocean and expect a closer relationship. Some have criticised the bank for demanding excessive commission rebates on certain products. Fund performance is unlikely to be a problem. The fixed income product, CDC Convergence C, has been well ahead of the Citi European WGBI Eur0 index, gaining 8.7, 23.46 and 34.35 per cent over one, three and five years respectively. Earlier this year, Mr Masson’s team contacted brokers, telling them to move clients out of the flagship emerging markets bond fund because performance had peaked. CDC Planete Performance returned 43 per cent, against 6.19 per cent for the index, over three years. “We told them final clients should not be in emerging bonds at this time,” said Mr Masson in June. “And final clients can always be confident of our advice.”