La Banque Postale out to deliver broader fund menu

It’s a sweltering summer’s day in the suave sixth arrondissement of Paris, as Daniel Roy, chief executive of La Banque Postale Asset Management, gives a brief rooftop-based tour of the immediate environs.

“We are the first major financial institution in the sixth,” he declares proudly, pointing down from his glass-fronted corporate headquarters to the narrow streets flanked by regal-style grand apartments above rows of boutiques, artisan food stores and opticians retailing fashionable frames.

His headquarters is only minutes, but seemingly a world away from bustling modern-day Montparnasse, where Mr Roy once plied his trade as boss of €350bn funds franchise CDC Ixis Asset Management, followed by a similar stint at Natexis. Now in the relative financial backwater of the French post office, some say he is trying to re-create former glories.

“Daniel Roy was never going to sit there quietly choosing a few products for private clients,” albeit as the éminence grise of Gallic fund management, says a business rival, referring to Mr Roy’s recent role as head of the French franchise of HSBC Private Bank. “He was always going to bounce back and run hundreds of billions.”

A usually calm professorial individual, who regularly lectures students on the vagaries of portfolio theory, Mr Roy dismisses talk of reliving former fund highs. Yet despite many years of experience in the financial world, he has a glint in his eye of further adventures to come.

His denial of re-treading old roads is not altogether convincing. Mr Roy admits that at LBP, just like he did at Natexis, he can take advantage of a “very strong and powerful retail network”. His latest employer, whom he joined in June 2011, boasts 26m customers, 11m of whom have an “active relationship” with the bank.

“La Poste is in every village and local area in France and is part of the fabric and history of ‘La France’,” he says. “We have a broad footprint and a very strong story, which is what I saw on day one.”

Yet as part of France’s fast-changing financial landscape, the funds house is a relatively new one, created in 2006, with five asset management affiliates, plus several smaller units, running a huge total of €160bn.

While the still energetic boss plays down the notion of substantial future growth, it is still clearly on the cards. “As a retail bank, our first question is ‘what are the needs of our customers?’” While the answers echo his interviews when working for former employers, some of the economic forces he faces will be slightly different:  “The big issue in the coming years is can we cope with the environment in which interest rates are very low?”

The age of old-style “classical” one-trick products is now no longer suitable for this backdrop, he believes, with the time ripe to develop a new suite of strategies to enlarge the fund house’s menu.

Together with his LBP colleagues, Mr Roy looked at several options to re-energise the offer, including selling the asset management factory and buying in products from rival houses. But they decided such a course would be too drastic. “We have a specific brand and are structured as a state-owned company,” he says. “This means we have something to say to the market about how to manage assets; so we decided to keep our factory.”

No stranger to acquisitions, famed for successfully buying up and integrating Nvest and its subsidiaries Loomis Sayles and Harris Associates into CDC Ixis back in 2000, he also looked at this option for LBP, but calculated there would be too much impact on the bank’s tier 1 capital, disrupting core day-to-day activities, including granting credit to customers.

The best way to expand the product range, concluded Mr Roy after a strategic review, would be partnership with a non-French player, giving clients access to a more international range of savings and investment products. 

After running the rule over several firms, the group chosen to partner LBP was the funds unit of Dutch insurer Aegon. “We came to the conclusion that the best way to achieve our goals was to enlarge our expertise through a partnership, including international expertise, which we do not have…yet,” says Mr Roy, hinting that he still has big ambitions for improving his firm’s manufacturing capabilities.

Most asset managers, particularly in France, face the same challenges, he admits. “You are very large and generally recognised in areas such as fixed income and debt management. As soon as you realise you want to do more and look at areas such as emerging market equities, in the global world we work in, you are always obliged to look abroad.”

The multi-asset solutions he is starting to develop with Aegon look remarkably similar to the diversified funds he sold for Paribas in the 1980s and 1990s, before the merger with BNP, although “the risk envelope has changed, to take account of multiple alpha sources”. 

The latest packages will include European, US and emerging market equities, together with fixed income, put together in conjunction with his new Dutch partners. “We can do this for the man in the street, but also for institutions,” says Mr Roy.

His group will maintain a very hands-on role, despite the changing structure of the company, now 25 per cent owned by Aegon Asset Management. “This doesn’t give them control,” insists the occasionally combative Mr Roy. “We were telling them that we don’t want to give up, we are not selling the company, but at the same time asking them: how can we mix our products together?”

The decision-making centre will remain in Paris for the group’s French funds, “but it gives us the ability to share their expertise in the US, the UK and the Netherlands,” plus the experience of Aegon’s joint venture in China

“When it comes to debt, we have the ability to compete in London, Hong Kong and New York,” he says. “Our portfolio managers can compete with the best in the world, but we have no distribution,” even though 70 per cent of new assets entering the LBP fold are generated outside of the group.

Adding new products was also essential for survival, believes Mr Roy, who is planning to release the first tranche of multi-asset products, designed in conjunction with Aegon, ready for the shelves in 2016. “Asset management in Europe is facing huge challenges for profitability, growth and regulatory reasons,” he says. “Everyone believed doing something themselves was the best answer, but now they are all looking for partnerships.”

Mr Roy’s competitors are “fighting against us with very cheap products, released at low marginal cost,” he says, driving many players to compromise on their ideals. “Clearly, a partnership is a compromise.”  

Village life

On the wealth management side, Mr Roy is responsible for improving the quality of investment products available to LBP customers. “Among these customers are 500 to 600,000 wealthy clients, whom we need to serve better,” he says.

“These wealthy clients are not always well equipped on the product side and not enough of our capabilities are in the insurance field,” says Mr Roy. “We are not always perceived as a private bank, but we have the ability to make a huge push in wealth management.”

Once the product factory has been enhanced and defined, he feels customer needs and service in wealth management can then be addressed, before competing with networks such as Crédit Agricole and other savings banks, which enjoy a strong rural presence.

It is outside the main cities where Mr Roy feels the battle for clients’ hearts and minds will really be fought. “Paris is important for us too, but this is where competition is the strongest,” he says. “In France, there is a much healthier balance of clients in the villages. It is not like the UK, where you have London and then the rest of the country; France is very different to this model.”