La Française prepares to harvest a foreign vintage

Having left his position as business development boss of Invesco’s European business in 2008, Patrick Rivière took on a new challenge at UFG, the asset management subsidiary of French bank Crèdit Mutuel du Nord.

As well as being plunged into a new venture at the height of the financial crisis, Mr Rivière got more than he bargained for in the new role, where he expected to be criss-crossing Europe’s market of distributors and pension funds in the same old way every month.

Flung into the throes of a merger between asset management boutique LFP, created in 2001, with France’s largest real estate manager UFG, the fast-thinking Frenchman has been instrumental in shaping the product range and distribution footprint for a €35bn fund house with a growing reputation. He has already managed to reverse the €1bn outflow which the group suffered in 2008, with a €3.5bn boost of net new money in 2009 and €1.5bn last year.

The retail market focus of UFG has provided a strange mix with the more institutionally-minded fixed income mindset of LFP. Mr Rivière insists that putting the two together has been “appealing to the client base” due to the lack of overlap between the two groups. His plan is to focus on cross-fertilisation, particularly by selling real estate products to the newly acquired institutional client-base, previously fed a diet of fixed income and balanced strategies. The merged group has been renamed “La Française AM” to proudly proclaim its French roots.

“We are looking for growth in funds, not new clients,” says the pragmatic Mr Rivière, always known for his day-to-day, in-depth operational knowledge at Invesco, where he reported to the more strategically minded and high profile Jean-Baptiste de Franssu, one of the European fund industry’s most cultured frontmen. The two made a formidable partnership in their heyday. Mr de Franssu schmoozed key clients, government contacts and industry gatherings with his brand of charm and vision for the fund industry. The brusquer Mr Rivière was stronger on product detail, operational backup and practical support for distributors.

“We already have the clients. This is all about selling more and different products to the same people,” he admits.

But there is more to the business model then this and in particular a bid to internationalise the client base and diversify away from Crèdit Mutuel’s du Nord’s French heartlands. After two years of concentrating on the merger, Mr Rivière is now eyeing up expansion opportunities in foreign markets. “We are putting together the capacity and strength to develop a stronger international platform,” he says, while taking some time off from a distributor roadshow in Milan. This followed a similar meet-and-greet in Madrid. Swiss and Benelux-based buyers will also be targeted.

The operations centre, which Mr Rivière has built at the hub of the company in Luxembourg, employing 30 people there, now services the company’s sales staff, working for group subsidiaries in the outlying markets where products are sold. “Today we are using Luxembourg and French funds, passporting our products throughout Europe. It is not complicated anymore to deal with French funds.”

However, these are still early days, with Mr Rivière admitting that 99 per cent of his group’s business is currently domestically focused in France. “Over a three year perspective, I would like to have 5 per cent international business at a conservative estimate. But I know what it costs to develop business in Europe. On a longer term view, we can aim for one third of our business coming from outside France.”

He is keen to define his group as an independently-minded operation, despite its ownership by a French bank. “Only one third of our business comes from the group and two thirds from the market outside Crèdit Mutuel. That is the big difference to the other French banks.”

This argument is not however, wholly convincing, as several of the largest French high-street institutions claim similar internal-external client ratios. “We have a very strong shareholder, but it is a very retail bank,” says Mr Rivière, describing Crèdit Mutuel’s strong relationship-based business in both urban and rural networks north of Paris. “They don’t need our level of sophistication and product range. We have developed more outside the perimeters of the group.”

Despite being 80 per cent owned by the bank, the asset management subsidiary is very independent of its parent company’s retail bank branch network, he says. “Of our 10 person executive committee, not one has ever worked in the bank. We are very different from a bank-owned asset management company, where people are appointed by the bank to create products for the bank, in the name of the bank.”

He also describes big differences between the organisational culture in Invesco, one of the leading independent asset management brands, where he and Mr de Franssu built up a respectable European franchise from a standing start for the US company, either side of the turn of the millennium.

“We do not have the daily pressure for results of Invesco,” says Mr Rivière. “It is not easy to build a long-term brand where a listed company has such an emphasis on the bottom line. We are as independent as we were at Invesco, but the timeframe is very different. Here is it three years, there it was three months.”

Clients for La Française are often secured by independent financial advisers (IFAs), which govern an 8 per cent and growing slice of the French retail funds market. “In France, we are quite successful with both institutional clients and IFAs,” adds Mr Rivière. “Where we can improve is in the fund buyer segment with private banks. LFP was not active there. This is the only area of the French market where we can sell to significant numbers of new clients.”

The idea is to woo converts with a philosophy of active management. “We are not selling benchmark products,” he says. “Our funds are all very active. We try to take a view on the market and then communicate this. We have a conviction and then apply this to our portfolio.”

Despite its ownership structure, the group’s asset managers have not owned any bank stocks for the last four years, preferring to avoid financial institutions in the current climate. Their preference is for European companies exposed to emerging markets and positioned to benefit from their growth. “We have developed special products to exploit this trend,” says Mr Rivière, referring to the Impact Europe fund launched in 2005. “Most European investors are obliged to invest in Europe by regulations. We try to find a way for our clients to be exposed to growth taking place outside their region.”

Another new concept is a fund investing in vineyards, believed to be the first of its kind for an institutional and family office clientele. This will leverage on an existing €300m product La Française manages for retail clients, which invests across 15 French vineyards. The new product will be differentiated in that it will invest not just in the land used to farm grapes, but also in the wine production process.

In terms of active management, La Française can take inspiration from Carmignac, which started off as a boutique, but moved into mid-scale territory with distribution success of actively managed products across Europe. “The French look at the Carmignac story as a reason for hope,” says Mr Rivière. “Someone has been able to develop outside France, achieving just as much success in Italy. This is something very positive for the French finance industry.”

La Française is such a believer in the emergence of boutique fund houses, that it has taken stakes in 13 different small managers over a four-year period. “We enter at the starting-point, when a boutique is created and provide infrastructure to launch IT systems, space if needed, money and help in finding investors.”

This new business line is minor compared to the mainstay of managing assets, but it is just beginning to gain importance and get noticed. “It is a good way for us to get involved in a dynamic market,” says Mr Rivière.