September 2015

EXECUTIVE INTERVIEW: ‘A billion a month since September’

Naïm Abou JaoudéNaïm Abou-Jaoudé has headed Candriam since 2007. The firm cut its link with troubled bank Dexia and the CEO now tells Nick Fitzpatrick about how growth under its new US owner has led to a record year. Candriam, the firm once known as Dexia Asset Management and sold after Dexia (the bank that owned it) needed state assistance, plans to increase its employees by 10% in the next 18 months, mainly in Europe, as it pushes deeper into distribution and institutional markets.  Among his plans, Naïm Abou-Jaoudé, chief executive officer, highlights the intention to increase distribution headcount in Italy and to create a consultant team in the UK. In doing this, and helped by record flows of new investments, the fund management firm could be cutting any lingering memories of its ownership by the troubled Franco-Belgian bank. The CEO wants to increase sales and marketing reach while keeping manufacturing centralised. Candriam has three investment management centres: Paris, Brussels and Luxembourg. This approach is what Abou-Jaoudé has called “glocalisation”.  At a 2012 Funds Europe roundtable featuring chief executives of major French fund management firms, the Candriam (then Dexia Asset Management) boss said: “[An] impact of globalisation is that you have to be global while at the same time you have to act local because of the importance of trust and direct contact. I call it ‘glocalisation’ – being global while acting local. That means a lot of investments in our business are needed.” Certainly the money should be there to build a wider-flung network of sales and marketing, a function that accounts for 10% of costs. Investment might include the US in the near term, and Asia in the longer term.  The firm saw €8 billion of net new cash in the first half of the year, which compares to €7 billion for the whole of 2014.  In January 2014, Candriam had €66.5 billion of assets under management (AUM). This was less than 2010’s figure of €86.4 billion. By June 30 this year, however, AUM had reached €91 billion. Some €9 billion of the increase was market impact, implying about 23% of net new cash.  “I’m happy with the organic growth that we have. We’ve raised a billion euros a month since September,” Abou-Jaoudé says. “2014 was a record year and we are doing much better already in 2015 with net new cash. Much better than expected.” For the next five years, Candriam will focus on third-party distribution and institutional segregated mandates. The focus includes the defined contribution pensions markets, which Abou-Jaoudé says the firm is already well positioned for in Belgium and Italy. “In Italy we are the second-biggest foreign pension fund manager,” he says. The increase in staff there is needed because Candriam’s operations in Italy since 2004 have focused on wholesale and platforms, but the firm is now building business in the independent financial advice market. Italy has the highest rate of net new cash for fund investment in Europe, which he says is due to a shift from savings accounts. The creation of a consultant team in the UK mirrors an existing team in Paris, and the firm is considering opening an institutional office in New York. Facilitating any push in the US is Candriam’s new owner, New York Life, which bought the firm at a time when Dexia was selling assets in a restructuring exercise. The deal was completed in early 2014. “The acquisition by New York Life has been extremely important and successful for us. We do not have product overlap with our parent. They have US business and we have European. However, we are considering opening an office in New York for more institutional business,” says Abou-Jaoudé. New York Life is a major distribution partner for the Paris-based Candriam. MainStay Investments, the mutual fund distribution arm of New York Life in the US, selected Candriam in the past year to sub-advise and Candriam runs part of a $215 million (€187.8 million) emerging markets equities portfolio. MainStay has also invested in two Candriam Paris-based absolute performance strategies for a multi-strategy portfolio. The relationship also sees Candriam select two New York Life US strategies – high yield and equity – for Candriam’s Ucits platform that is under construction in Luxembourg.   Candriam’s first-half (H1) flows went mainly into asset allocation funds. €3 billion went into these strategies, which Candriam, like other managers, is prioritising as a solution for investors facing a rise in interest rates. €1 billion went into absolute returns, including long-short and merger arbitrage.  A further €2 billion was invested in fixed income; an additional €1 billion was invested in high-yield credit; the rest went into mainly thematic strategies. Candriam’s AUM splits half-and-half between retail and private distribution on one side, and institutional on the other, while first-half flows split 60% into distribution and 40% into institutional. Candriam has a lot to thank its new owner for with regard to its now materialising success. Dexia Asset Management went from bad bank to good insurer with the sale to New York Life Investments, part of America’s largest mutual life insurer, New York Life Insurance Company. The sale bought New York Life Investment’s AUM to $511 billion, an increase in dollar terms of $100 billion. As a part of New York Life, Candriam has found a lot of stability, Abou-Jaoudé says. But he says the success is also down to the popularity of the multi-boutique model of asset management used by Candriam, which extends to smart beta, quant and socially responsible investment. The firm expects to add a boutique to its Luxembourg platform each year, on average. “Smart beta is partly quant and partly optimisation. We launched two products a year ago and are now looking to launch sector smart beta.” MOTIVATION AND LOYALTY
Abou-Jaoudé was responsible for alternative investments in Paris for UBS Asset Management France, which Dexia bought in 1999, bringing along 150 people. He became CEO of Dexia Asset Management in 2007. The following year saw Dexia become the first Eurozone bank to need state assistance. Abou-Jaoudé says some asset management operations had to close but manufacturing was still supported.  Having gone through a period of major uncertainty under Dexia culminating in a sale, it is no surprise when Abou-Jaoudé says his main concern is to keep his people motivated, and he credits himself with success in doing this.  “The team tenure of senior management working with me is 12 years. The CIOs [chief investment officers], for example, in alternatives in Paris and traditional in Brussels have been working with me since 1998.” So, if you are hired as part of Candriam’s expansion in the next 18 months, you could be there for a long time. ©2015 funds europe

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