Alternatives and acquisitions high on Natixis agenda

The driving force behind the growth of Natixis Global Asset Management (AM), the $719bn (€527bn) multi-boutique firm headquartered in Paris and Boston, is its powerful distribution machine, Natixis Global Associates.

The current structure of Natixis Global AM, part of Natixis bank, started to take shape more than a decade ago, when the French asset management company, then named CDC Gestion, acquired Nvest, a US holding company, comprised of 11 asset management firms. Loomis Sayles, the largest asset manager, was the main objective of the acquisition.

Today, Natixis Global AM can rely on the expertise of more than 20 independent investment managers, or affiliates, mainly based in the US. “We thought at the time, and we still do, that the best practices in our industry come from the United States – you learn a lot from US portfolio managers, and how they run their business” says Hervé Guinamant, president and chief executive officer of Natixis Global Associates International, at the time a member of the committee responsible for the acquisition.

The main objective of the international platform, which services and distributes $38bn in total assets and counts on 50 sales staff, is to help affiliates to grow around the world. This excludes the US market, which is served by a dedicated sister platform, and the French market, where Natixis Asset Management, the largest company of the multi-boutique firm, channels the group’s products through the two proprietary bank’s networks, Banques Populaires and Caisses d’Epargne, as well as third-parties.

Specific needs

“At Natixis Global Associates, we simply facilitate our clients to navigate through this vast product offering, helping them select the best solution for their specific investment needs, and the model has proved to be winning in challenging market conditions of the past couple of years,” says Mr Guinamant.

Twice a year, and on an ongoing basis, the sales team together with the affiliates and the centralised product management team in London, select a range of 20 strategies out of the 200 plus solutions available in the group, as best suits the environment. The idea is to avoid the “catalogue type” of approach, but focus on client needs.

“We spend a lot of time and have an open discussion with the different asset management companies. We listen to them, and advise them on what it makes sense to promote in this part of the world. We provide market data, feedback from the ground and a clear view of what we think it makes sense for today, and more importantly, for tomorrow.

“We have been very successful with this approach, thanks to our long-term relationships with key clients and an on-going dialogue on an international basis,” he says.

But it is not all plain sailing. There are frustrations to manage from time to time, as all boutiques think “their products are the best in the world,” says Mr Guinamant.

There is not much overlap of products within the group, but the affiliates do compete with each other. In the US equity space it has happened that Natixis Global Associates puts forward different proposals on behalf of different affiliates. “We don’t do this systematically, we try to understand the demand, the risk appetite and the volatility that the client is ready to accept and look at what fits best.”

Appropriate strategies

It is important to do your homework, emphasises Mr Guinamant, to identify the stories that are appropriate to the different client segments, listen to their needs and come up with a shortlist of best strategies. The idea is to sell one product today, to be able to propose another one tomorrow.

“It is not a very aggressive sale, it is really trying to be a partner with a client,” he says. “In this type of model, the main challenges are communication and management, to make sure that all the guys on the ground are doing what we decided all together, with the affiliates, the sales force and the centralised team in London.”

Trust, professionalism, and transparency are the necessary ingredients that ensure harmony in a multi-boutique model. Road-shows are organised for portfolio managers that want to see for themselves whether their products might work or not. The CEO summit, headed by Pierre Servant, CEO of Natixis Global AM, gathers all the affiliate CEOs once a year, to discuss future strategies. Introduced four years ago, this initiative is helping to create a good climate in the group.

With 11 different locations around the world and 20 different affiliates, it is key to plan a very clear strategy, he says. “We are much more proactive and reactive that the others.” This flexibility also applies to potential acquisitions, which can happen very quickly.

In October Natixis Global AM acquired a majority stake in specialty ETF start-up Ossiam, based in Paris, and added a new boutique, by founding a global macro alternative manager, H2O, in London, with a team of people previously running the value at risk (Var) range of products for Amundi.

“The JV with H2O is a very good example of the efficiency of this model, as it is bringing exactly the type of products that we need for the market today, such as total return. Today our main focus is to grow on the alternative side, in a very broad sense: alternatives to long only products.”

Boutiques such as private equity firm Caspian Capital Management, and AlphaSimplex, specialising in multi-strategy absolute return vehicles and beta replication strategies, also provide the kind of solutions Mr Guinamant hopes to leverage in his push into intermediaries, private banks and retail banks, collectively referred to as the “hybrid” segment. Although this segment accounts for only 20 per cent of the total $38bn assets sold by Natixis Global Associates International, with institutional clients representing 80 per cent, there has already been a very visible shift recently towards that ideal diversification of client base that Mr Guinamant aims at in the future. Three years ago, the very large majority of assets were distributed to institutional clients, with the retail distribution only accounting for five per cent of total sales.

“I like the hybrid segment, it is very demanding, although the money is less sticky. What private banks are expecting all the time is a new story, performance and transparency,” he says. Thematic products, such as the climate change fund proposed by Natixis AM, are also appealing.

It is challenging for a relatively newcomer such as Natixis, to try and compete with the likes of Fidelity and BlackRock, who are already established brands in clients’ portfolios. “You need to be known first; if we come up with a new story and we deliver in terms of performance and service, that is the first step.” Once the client is familiar with the brand, there will be the opportunity to add a more core, building block type of product, he says.

What is clear is that the private banking business, like the institutional world, has its rules. All the funds need to be on the buy list and then the preferred list of the bank, if they are to raise any assets. “Before Lehman and Madoff, private bankers had some freedom on the ground and private banking was much more a local business. Now it has become much more global, even if each client is different. It is tough to be global, you have cultural gaps, language gaps, time difference and so on. But now, those guys are waiting from their headquarters, be it Zurich, London or New York, to see what they can sell.”

Open architecture, which reduced greatly in the crisis, is taking off again. From Italy, flows are coming from the fund of funds of private banks. Affiliates like Loomis, a strong manager on credit or Harris Associates with their global value funds, are well positioned to benefit from this growth, although at the moment they have been more successful on the institutional side, he says.

“In the hybrid segment, we have a lot of clients to which we sell a few products, and my aim is to have a lot of clients, with a lot of our products.”

Bespoke, sub-advised mandates, such as the one won on behalf of Alpha Simplex for a leading Swiss bank, are what Mr Guinamant is looking for more in the future. “Sub-advisory is the best business because it means a long term partnership. This is where we give added value and where we can be seen as a solution provider.”

During the crisis, the firm opened a few offices in the Nordics and the Netherlands. “This makes us new on the market, and sometimes it is better to be new, rather than being known for something bad.”

Looking ahead, Mr Guinamant reveals plans to reinforce sales presence in Europe and in Asia, possibly in Korea and Hong Kong. In the pipelines, there are also acquisitions of new firms, in India, and in a couple of years, maybe Brazil.

Hervé Guinamant, Natixis Global Associates