Funds must fight to win back buyers

A growing appetite for alternative assets, structured solutions and ETFs is leaving traditional asset gatherers under threat. But they are not going down without a fight. France and Germany are two of the territories where the investment banks are picking up substantial assets from the retail and private banking markets. Natixis, the investment banking entity formed through the merger of French groups Natexis Banques Populaires and Ixis, is already moving deep into asset management territory. From the bank’s new headquarters on Paris’s quai d’Austerlitz, a structured solutions team is building products around hedge funds and other active vehicles. Private banks will be a strong target for distribution. According to those involved, the business is purely about building profits, not assets under management. Several miles to the north at SocGen, a huge rivalry has developed between the funds house, SGAM, and Lyxor the synthetic producer of the SG corporate and investment banking arm, which has also styled itself as an asset manager. Leaders of the two groups claim they work together in a coherent strategy. But tell that to the sales teams, who are both talking to the same private banking clients and using every trick in the book to boost their bonuses. One operator who has worked for both divisions says there is a state of “war” between them. In neighbouring Belgium, where leading bank KBC will struggle to hold up its annual profits in the current crisis, some stability is being added by the asset management arm, which continues to develop concepts in structured products to boost revenues. Ideas such as Bric investments and currency plays have already been sold in Western and Central Europe, plus new markets in Asia. But is the tide about to turn? Governments are increasingly looking to impose capital gains tax on returns from structured products while regulators want to put them on level playing fields with mutual funds. Fund houses active in Germany’s industry, who feel most aggrieved at what they feel to be unfair competition from investment banks, are launching balanced and fund of funds products to tie in with new tax rules. There are also specific initiatives from groups such as DWS, whose GO platform embraces certificates, and Cominvest, which has launched funds that can buy certificates as well as other assets. According to these groups, structured products present more of an opportunity than a threat. It is the forward march of cheap beta producing products – the ETFs – which they really fear.

Yuri Bender