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Know your clients, know your market : a perspective on France

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Know your clients, know your market : a perspective on France

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  1. Know your clients, know your market :a perspective on France AIMSE Annual ConferenceFebruary the 2nd, 2006

  2. Table of Contents 1. The French Asset Management industry 2. The Institutional market 3. Market players and winning strategies

  3. 1. The French Asset Management industry

  4. The 4th largest asset management industry in the world A strong appetite for money market UCITS Guaranteed Balanced 9% • Money market funds historically dominate as interest-bearing current accounts only appeared in 2005. 10% Money market 47% Equities 24% Bonds Source: EuroPerformance 10% A growing market… … highly invested in mutual funds In Billion Euros French UCITS Market shares of the European fund industry Mandates 1830 Germany 2000 12% CAGR Others 16% Spain 13% United 1412 4% 1080 Kingdom 9% 1000 813 750 Italy Luxemb. 7% 21% 1997 2001 2004 France Ireland 22% Source: AMF/AFG Source: EFAMA 8%

  5. Mutual funds distribution in Europe is dominated by banks. However, open architecture expected to increase dramatically € 6 000 Bn Assets Under Management in Europe (mutual funds only) • Push strategy shifts to pull strategy • Selection and advice become the new paradigm 30% € 3 700 Bn 8% Third Party Funds 92% 70% In-house Funds Source: FEFSI 2004 2014E No major change expected in channel market share France • Banks 76% • Insurance 19% • IFAs 3% • Direct 2% Source: Cerulli Associates, BNP PAM. Figures estimated as of 2005. Source: Cerrulli Associates

  6. 2. The Institutional market

  7. The institutional market is dominated by insurance companies. • Insurance companies hold € 1130 Bn of a total € 1386 Bn held by institutional investors Assets by institution type (2004 estimates) • Life insurance = € 992 Bn • Non life = € 138 Bn Source: BIPE/Af2i

  8. Institutional investors’ importance in the economy is growing. Share of the institutional investors in the households financial wealth % H. financial assets • Unit-linked insurance contracts are developing, but major flows go to guaranteed insurance contracts. 50% Life insurance (guaranteed contracts) 38% 34% Life insurance (unit-linked contracts) 25% 25% Retirement plans 26% Employees’ savings 21% 19% Others 1995 2000 2004 Source: BIPE, Ministry of Finance… Assets of the institutional investors in % of GDP % of GDP 100% 91% Life insurance 89% • Life insurance companies account for almost the whole trend. Non-life insurance Mutual benefits & social protection 55% 50% Employees’ savings 61% Others 61% 35% 1995 2000 2004 Source: Af2i, Ministry of Finance…

  9. How are they invested ? Balanced 10% Others 6% Money market 6% Bonds Equities 3% 4% Asset management delegation • Total delegated assets are estimated at € 130 Bn in different forms : AuM (Bn €) Total Delegation Insurance companies 217 19 (9%) 2003 2004 Social protection inst. 92 53 (58%) • Mandates 8% 8% • Dedicated funds 47% 59% • Dedicated f. of funds 14% 7% • Open mutual funds 31% 26% Banks 20 4 (20%) Miscellaneous 12 7 (58%) Total 341 81 (24%) Source: Image et Finance (panel on competitive market, excluding. delegation within the same Group) Asset allocation and UCITS • One third of the mutual funds in asset allocation (global balanced) } Source: Bank of France (securities survey of insurance companies and retirement institutions)

  10. Market trends in 2005 Use of Investment Consultants Increasing use of RFPs in France 2004 2005 % of the panel 2003 2004 Insurance companies 38% 41% Social protection inst. 84% 32% 29% 26% 28% 19% Banks 13% Miscellaneous 39% France Germany Continental Europe Average 43% 46% Source: Greenwich Associates Source: Image et Finance 35% of institutional assets are managed externally in Continental Europe Via pooled or commingled funds • France, Germany, Nordics and the Netherlands are the major markets for externally managed assets in Continental Europe. Via dedicated institutional asset management 9% 2% 6% 37% 33% 29% France Germany Continental Europe Source: Greenwich Associates

  11. 3. Market players and winning strategies

  12. Looking to the future : opportunities in France • Upcoming development of corporate pension plans (PERCO…) • Increasing demand for sophisticated products : absolute return strategies, portable alpha, credit derivatives, hedge funds… • Cash rich institutions will continue to demand money market funds, including innovative dynamic funds • Development of open architecture by domestic players…

  13. The asset management industry recognizes four macro-clusters of players. • Challengers face the issue of profitability and critical size issues • Niche players leverage on one or two core competencies to defend their franchise • Opportunistic players step into the market on high margin products Mapping of Asset Management players Market leaders Local banks & Insurance Comp. Challengers Euro banks … Client and product coverage Niche players Equities, ccy overlay … Opportunistic players Hedge funds… Assets under Management

  14. The French asset management market is still mainly local. • International global players are entering the market, but their market share is still quite low : • French companies 80% • Europe (excl. France) 19% • International (excl. EU) 1% Source: AMF • Most established asset managers in France : • IXIS Asset Management • AXA Investment Management • Crédit Agricole Asset Management • SG Asset Management • BNP Paribas Asset Management • Fortis Investment Management • Dexia Asset Management • Natexis Asset Management • Groupama Asset Management • Sogeposte • MMA Finance • Sinopia Asset Management • Edmond de Rothschild Asset Management… Source: IPE

  15. Key success factors Products are not bought anymore, they are sold • Demonstrate long-term commitment to the market (human resources, brand, long-term credibility…) • Maintain leading edge technology, structuring capabilities and clients service : create differentiation through permanent product innovation • Develop your ability to understand your clients’ needs and be a solution-provider (IFRS, ALM, Liability Driven Investments, absolute return strategies…) • Create a superior risk management discipline and apply a clear and consistent investment philosophy • Performance is not the main criteria for hiring an asset manager, but it is the most frequently cited criteria for terminating managers…