August 2008

EXECUTIVE INTERVIEW: An Unconventional Marriage

Laurent Seyer (pictured), CEO of Lyxor, talks to Fiona Rintoul about how the firm fits in at Société Générale. Laurent Seyer, the affable CEO of Lyxor Asset Management, has a quick answer for competitors who question how his firm, a wholly owned subsidiary of Société Générale, can happily co-exist within the same group as the French bank’s more traditional asset management subsidiary, Société Générale Asset Management (SGAM).

“Perhaps competitors are very annoyed that we are so flexible as to allow institutions such as Lyxor to grow,” Seyer (pictured) suggests when we meet at the Lyxor AM headquarters in Paris’s draughty space-age business park at La Défense.

It may seem a little strange to be visiting SGAM in the ‘Immeuble SGAM’ one day and Lyxor in the ‘Tour Société Générale’ the next, and the Société Générale ménage à trois may provoke sniggers from jealous competitors on the Grands Boulevards, but Seyer insists that Société Générale’s marriage to two asset management brides is all part of the bank’s culture.

“If you look at the banking market, you have Société Générale, but you also have Crédit du Nord,” he says. “It’s still trading under its own name. It’s a subsidiary with a very specific identity.”

Strong identity
The comparison with Crédit du Nord is a good one. The bank has retained its own identity since being taken over by SocGen; if you visit its website, you have to search for any mention of its parent. Similarly, although the Société Générale name appears on the Lyxor business cards, brochure and website, the firm has its own corporate look and feel and SocGen’s signature two-tone red and black square logo is missing from its literature.

The Lyxor/SGAM axis also works because, although Lyxor competes with SGAM “in the sense that we are fully independent”, the two firms have an entirely different focus, says Seyer. “We have some 1,500 funds and there’s only one where there’s an overlap,” he notes.

This means that while SGAM and Lyxor might conceivably be in a position where they target the same business, “they would do so with different answers”. This, one could argue, strengthens the overall position of the Société Générale group, as it means they can have two bites at the cherry.

“It’s acceptable as long as Lyxor has a specific identity,” observes Seyer.

The fund where the overlap exists is the Turquoise Fund, a fund of hedge funds (FOHF) that “is similar to what SGAM does”. The Turquoise Fund is one of three FOHFs offered by Lyxor through the Alternative Investments plank of its business – the others are the Lyxor Diversified Fund and the Lyxor Global Arbitrage Fund – and the only one to offer access to Société Générale's proprietary FOHFs.

The three FOHFs, in turn, form just one part of Lyxor’s Alternative Investment division. The firm’s palette of alternative products also comprises the Lyxor Platform, with access to more than 170 single-strategy hedge funds, and a range of three absolute return funds, Lyxor Quantic, based on what the firm bills as “a new source of alpha: implied assets”.

Additionally, Lyxor offers tailor-made solutions within its Alternative Investment arm, as well as the MSCI Hedge Invest Lyxor Tracker Funds, investable indices representing eight hedge fund strategies, and Lyxor Generis, a range of systematic statistical asset management strategies.

At first glance, it can seem hard to marry this ‘egg-heady’ range of alternative investments with the other two silos of Lyxor’s business – structured products and exchange-traded funds (ETFs). Structured products, OK. But ETFs? Even the target client group is different, with alternative investments and structured products aimed at sophisticated institutional investors, while the ETF range also attracts retail investors.

“What connects them is the use of capital markets know-how,” explains Seyer. “We’re not a traditional asset manager. We really focus on a limited number of business lines emerging from the investment banking side.”

Seyer should know. A graduate of Institut d’Etudes Politiques in Paris, he joined Lyxor AM as CEO in 2006 from Société Générale Corporate and Investment Banking (Société Générale CIB) where he had been working in the equity derivatives team since 1999.

Although Société Générale’s investment bank has been in the news for all the wrong reasons this year, it is the number-crunching expertise contained within Société Générale CIB that forms the bedrock of Lyxor’s offer – and what makes it different from SGAM. Lyxor AM was the first firm to specialise in structured management and it now manages €20.5bn in structured products. In addition, it now has €25.8bn in alternative investments and €28.9bn in its ETF business, bringing its total assets under management to over €75bn.

Growth has been opportunistic. “When we created Lyxor we had in mind that structured products were one of the fastest growing segments,” says Seyer. “It was a great advantage to have a specialised asset manager because you can wrap products within registered funds. We then used Lyxor when opportunities passed by.”

Experience and expertise
If the firm has a guiding ethos within its variegated business it is perhaps what might be termed ‘sensible packaging’. On the ETF side, Lyxor has leveraged SocGen’s index expertise to offer a range of over 100 ETFs across a diverse range of countries, regions, sectors and themes. A recent addition was an ETF on the WISE Quantitative Strategy Indices developed by Yannick Daniel at Société Générale Index.

On the alternative investment side, meanwhile, there are the Jersey-domiciled FOHFs, the MSCI Hedge Invest Lyxor Tracker Funds and the Quantic Funds, which, despite being invested in something as esoteric as ‘implied assets’, are in a Ucits III Sicav. The use of fund structures for these sophisticated investments has made it easier for Lyxor to expand.

“Being a French-registered asset manager we are able to benefit from the European passport,” says Seyer. “That makes it easier for us to sell in Europe.”

At the moment, the firm’s ETF business is focused in Europe, where it is the second largest player behind Barclays Global Investors. It doesn’t sell ETFs in the US, but it is starting to sell in Asia, where the funds are listed in Hong Kong
and registered for offshore sale in Japan.

“In terms of assets our ETF business in Asia is embryonic,” says Seyer, “but we hope the market will grow significantly in the next five years. Today more than 95% of our ETF assets come from Europe, though of course it’s hard to say because they are listed and a Chinese bank could buy them on Euronext.”

The structured product business is global and supported by the SocGen sales network, while on the hedge fund side Lyxor has clients in the US, Europe and Japan. “Japan is an important market for us,” says Seyer. “We are working hard to promote our managed account platform and our FOHF in Japan.”

Lyxor is also developing new business in the Middle East, both through SocGen Dubai and SocGen offices in Europe, that have relationships with clients in the Middle East, for example in Switzerland. But Seyer is quite clear that the firm is not interested in being all things to all people. That applies both to expanding into new markets and to the firm’s product range.

“We are pragmatic,” says Seyer. “We do a limited number of things and we want to do them well. We provide innovative investment structures with added value. If you want to invest in a hedge fund, you don’t need Lyxor, but if you want enhanced service you can buy a managed account and invest in the same hedge fund but with better liquidity and risk controls.”

In line with this ethos of targeted development, the new absolute return products in the Lyxor Quantic range are currently promoted solely in Europe.

“We launched them less than two years ago,” says Seyer. “We are doing it step by step. We will push them to the home market where we know the clients, then widen the scope outside of Europe to the US, Hong Kong and Japan.” ©  2008 funds europe

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