The fine art of delegation according to BNP parabis
It would be easy to assume that the delegation of specialist asset management to specialist houses creates a three-link chain: provider-distributor-client.
This is sometimes true. St James’s Place, for example, deals directly with wealthy individuals. But elsewhere the picture is more complicated. The delegating house may distribute through financial advisers, as with Skandia Investment Management, or it may sell via other distributors and institutions.
BNP Paribas is a case in point. Its Luxembourg flagship, Parvest, is sold to distributors and institutions (almost 1000 of them) in 24 countries. It does not deal direct with individual customers at all.
The French big name, which has promoted open architecture since 1993, launched a single entity, CFM, devoted to open architecture, in September 2004. Eight of Parvest’s 64 funds are externally managed: the high alpha products for which it lacks in-house expertise.
In June this year, BNP Paribas acquired FundQuest, a leader in so-called ‘turnkey’ asset management in the US, with a 130-manager roster globally, including Axa, Fidelity, Fortis and JPMorgan. As of 1 September, the two open architecture units have been amalgamated under the FundQuest brand.
So the firm can be expected to have delegation down to a fine art. According to chief operating officer Vincent Lecomte, it selects managers on the standard “performance, risk, style, consistency” criterion, but also looks in detail at the teams themselves.
“You need team stability. You need to make sure that all the managers are committed to developing the
business.”
This is particularly important when it comes to
boutiques, which account for five out of the top 20 FundQuest providers.
According to Mr Lecomte, there is “more and more” demand for the specialist services that these small, focused houses can provide.
CFM/FundQuest is in the process of launching two new funds: a US mid-cap value fund, which will be run by “a small US-based boutique”, and a Japanese mid-cap equity fund to be managed by a Japanese boutique.
Parvest external managers
- Neuberger Berman (US small cap)
- Sumitomo Mitsui (Japanese small cap)
- Pzena (US value)
- Lincoln (US high yield)
- Itam (technology)
- Hyperion (Australian equities)
- ACM (Europe value)
- MFS (Europe opportunities)
