COLLAS DEVISES CUNNING PLAN FOR SOCGEN

Funds managed by Société Générale’s global investment management and services division (GIMS) are up to E315bn, under the stewardship of Philippe Collas, a legendary operator in French finance, known as “The Fox” by former close collaborators.

Observers of Mr Collas are aware that it is not the high-profile successes, such as the funds house SGAM, which he will boast about most; but those areas such as private banking and securities services, which demonstrate the greatest potential for growth and profitability.

Currently, SGAM’s internally manufactured funds account for E267bn of the total, and SG Private Banking for the E48bn balance. While SGAM is well ahead in terms of asset management, SG’s private clients assets are currently dwarfed by BNP Paribas’ E95bn in fee-paying assets. But crucially, SG Private Banking assets are growing faster than those of its deadly French rival, due to a “sustained sales drive”. This will clearly be a key battle-ground for Société Générale.

“I would love it if the Paris bank could compete in Europe,” says Mr Collas, looking out from the window of his private dining room in one of the high towers of La Défense, across the Seine and down towards the Champs Elysées restaurants where many of his CEO counterparts do their bidding.

“Private banking in Switzerland is the bulk of the business for Credit Suisse and UBS. In SocGen, it is just one part of our global business. My objective is not to be UBS or Credit Suisse in five years’ time, but to be at least as good as these people, and to be able to compete in some markets.”

Open architecture is a phrase that was on the lips and in the mind of Mr Collas much earlier than most of his competitors. Whether he truly believes in the concept is another matter. But he realises it is a necessity for SG’s private banking division, and an inevitability for the retail branch network, for which he also has functional responsibility in relation to E70bn of assets managed for mass affluent customers.

DEDICATED SERVICES

Although Mr Collas wants to maintain full control of all products sold through both networks, he prefers to offer different approaches for the separate client sets. “Unlike Deutsche Bank, we think we need two separate organisations, one for private banking and one for mass affluent customers,” says Mr Collas. “The private banking business is ahead of the retail business for open architecture, as clients are more demanding and well informed. Although mass affluent clients need to be serviced by the retail branch network, they need dedicated people, not just your normal bank clerk.”

One of the key lines that attracts wealthy private clients is alternatives and structured products, says Mr Collas. “If somebody has sold a big stake – often just one share in a company, we can set up a product to cover the risk. Few banks know how to do that. It means we have a competitive edge for ultra high net worth individuals.”

He says some of the “big guys” in the investment banking world, such as Merrill Lynch, are looking to take advantage of their own good franchise in structured products. “But we are manufacturing the product for Merrill Lynch,” he adds. “When we bought Compagnie Bancaire de Geneve in 2003, one of the reasons was that we could offer this kind of ‘one share’ product to our clients.”

COMPETING TO SELL

Mr Collas really made his name in SocGen as head of capital markets in London between 1987 to 1991, steering through the aftermath of the Crash. But the latest trend in product development means that investment banking style products and hedge funds are increasingly being sold by SGAM, his asset management division.

“Asset management will compete more and more with capital markets in terms of structured products,” believes Mr Collas, who now sees the old capital market staples being developed and managed from his funds factory.

An alternative investments department was launched within SGAM in 1998. “We had a feeling at the time that the market would not go through the roof, and that it would become very difficult to sell equity products,” says Mr Collas, who has seen assets managed by SGAM Alternative Investments rise to E34bn. “Therefore we employed 250 people over two years to set up products for alternative investments. When the market collapsed in 2002, we were very well placed to sell products, and were one of the few asset managers to carry on making profits as before.”

THIRD PARTY DEAL

The innovative multi-manager product offered through a joint venture with Frank Russell has raised E5bn since 1997, when the deal was signed by Mr Collas together with his friend and like-minded flamboyant French funds luminary Frederic Jolly.

“When we set up the deal with Fred Jolly, open architecture was not in place in Europe at that time, but I had the feeling that the move would come in one day or another,” reminisces Mr Collas. “And I felt that it would be better to make this move before anybody else, to be well-placed.”

He felt that pressure for third-party funds from SocGen retail network customers would eventually bring to bear some big changes in product provision. So to start with the product was sold through the bank’s Credit du Nord subsidiary and also shipped out in Italy through the Arca multi-manager platform. Rather than sell the product through its own retail branches, SG preferred to make the funds available through its funds of funds, to be then sold off the shelf.

“We felt that as an asset manager, we could be the entry point for fund selection for our branch network,” admits Mr Collas. “We wanted to be in a position to control everything, including pricing.”

Although Mr Collas jokes that he is never happy with distribution outlets – “they are always insufficient and we have to pay them” – he has set up efficient outlets for his production factories in Asia where there is access to 100m clients of the China Construction Bank, and in Eastern Europe, where SG has done deals with Romania’s largest bank, BRD, plus others in Bulgaria and Slovenia.

The one channel which he must urgently address is the internal one. Despite his desire to control all products sold through SG bank branches, there is a belief that the internal channel has gone to seed and that the out-of-date suite of predominantly money market funds needs to be revamped for mass consumption. Only 7 per cent of net sales are currently accounted for by SG bank branch sales.

However, Mr Collas is playing his cards close to his chest. “To re-organise that market is more important than everything else. We will talk with our good friends in the network, and design a new type of product for them.”

Collas: knew all about open architecture before the concept took off