Amid much antipathy, controversy and bureaucracy, Philippe Marchessaux, of BNPP IP, sees positive signs for business in Benelux, reports Nick Fitzpatrick
The prospects for BNP Paribas Investment Partners (BNPP IP) when it expanded in the Dutch and Belgian markets on the back of its parent’s acquisition of Fortis Bank did not look so good if you considered the welcome that Belgian shareholders in Fortis gave the deal.
Fortis was the bank listed in Belgium, Holland and Luxembourg that became a casualty of the financial crisis. The governments of all three countries bailed it out and Fortis’s banking operations were subsequently sold off to France’s BNP Paribas group.
The sale followed a tempestuous meeting in April 2009 when Belgian shareholders in Fortis reportedly threw coins and shoes at the old management as they tried to get the sale approved. An element of national rivalry was seen to play a part in Belgium’s emotional reaction to the French purchase of what was both symbolically and, thanks to nationalisation, literally a national asset.
However, in reality the trounced life savings of many Belgian shareholders after Fortis’s top-of-the-market purchase of ABN Amro in 2007, which precipitated the failure, was probably more to do with their reaction.
Whatever the case may be, Philippe Marchessaux, CEO of BNPP IP, which landed asset manager Fortis Investments from the deal, sees the post-acquisition growth of BNPP IP through new mandates as a promising sign of acceptance for the French brand in the Fortis markets.
“We have won more than ten key mandates in the region since the beginning of 2010, including Dutch pension funds and local authorities,” he says, adding that BNPP IP is now the largest mutual funds provider in the Netherlands.
He says: “We have had a very significant recent mandate win in the Netherlands from a large Dutch pension scheme, and the fact that this win came about after the acquisition of Fortis is a breakthrough for BNP Paribas Investment Partners. It shows that the local market recognises our capability.”
The mandate was divided into several asset classes, he says, and the client selected BNPP IP for its asset allocation capability, particularly between active and passive, and risk overlay.
Marchessaux says assets have increased since the acquisition and stand at €58bn in Northern Europe and the Netherlands. The breakout of assets under management for Northern Europe and the Netherlands are €16bn and €42bn respectively, he adds.
Globally, BNPP IP has €539bn in assets under management (as at 30 September). The Benelux region is its second largest market, representing 20% of its asset base after France with 45%. The rest of Europe is the third largest base with 15%.
But what about Belgium, where passions were most high about the Fortis sale? Marchessaux says assets in Belgium total circa €40bn.
“The consolidation of Fortis Investments in Belgium has been proceeding well, with no notable changes,” says Marchessaux.
Immediately after Fortis shareholders’ approval for the sale, BNP Paribas group said it was committed to the economy of Belgium by ensuring that all decision making affecting Belgian customers would be local. It also made the same commitment to Luxembourg.
BNP Paribas also said the chairman of the board of directors of Fortis Bank would be a Belgian national, and that the bank remained committed to having several centres of European or international expertise based in Belgium and Luxembourg.
Did BNPP IP make similar displays of appeasement?
Marchessaux says: “Belgium is one of the five domestic markets of BNP Paribas Investment Partners, which gives it weight within the group. Belgium is currently the third market for BNPP IP, which in itself shows our commitment.”
He adds: “BNPP IP has decided to locate in Belgium its IT operations – a key function for an asset manager – and marketing and sales teams and some portfolio managers on specific products tailored to the Belgian market.
“There haven’t been any changes in the distribution networks in Belgium, which remain very powerful.”
It was possibly one of the most bureaucratic acquisitions of all time, albeit understandably political given the extraordinary backdrop to it. But perhaps if there’s one thing BNPP IP is used to, it is being regarded as a bureaucracy, which is perhaps a reasonable subject to raise given the firm’s strenuous efforts to market itself as a nimble collection of boutiques – yet one that lugs half-a-trillion euros around with it and reports in to the Eurozone’s largest banking group by deposits.
Marchessaux says: “Sometimes having a multi-boutique model could produce a little bureaucracy. But a large organisation with an integrated business can also be a bureaucracy.
“To govern a collection of boutiques you have to put in place common rules so that everyone knows what they are doing and the first of these concerns the investment philosophy and process. If you want talent and creativity then you need to have autonomy in this area, but we do not compromise in risk, so risk controls are centralised.”
There is at least some streamlining going on. BNPP IP is currently rationalising its fund range, says Marchessaux, after the Fortis acquisition left it with two large Luxembourg Sicavs with different investment capabilities and costs.
“Both flagships, Parvest and BNP Paribas L1 (formerly Fortis L funds), have aligned their marketing and their fund management. This includes alignment of fee structure, investment policy, share classes and management entities. Additional countries of registration are being added in both flagship funds.”
It has to be “very clear for clients if they are in one Sicav or the other that they have the same fee structure and management capabilities”, Marchessaux says.
He adds: “We will merge about 50 compartments out of 250 in the Sicavs.” He goes on to say that in the global fund range there are more than 1,200 funds but BNPP IP will have merged 100 before the end of the year and will merge around 300 over the next three years.
Back- and middle-office operations will be further streamlined as Fortis’s operations are migrated to third-party outsourcer BNP Paribas Securities Services (BNPPSS), where BNPP IP’s operations already sit.
The deal between BNP Paribas and Fortis Investments closed on 1 April this year and the combined entity now operates under the BNP Paribas Investment Partners brand name. As a result of the integration, BNPP IP became the fifth largest asset manager in Europe and the eleventh largest in the world.
“The benefits of the acquisition include the extended footprint into Northern Europe, particularly the Netherlands where Fortis was a highly visible investment management company, and also the Nordics where BNPP IP had no presence, but Fortis owned the fund manager Alfred Berg,” says Marchessaux, who became CEO in July last year.
So for a manager that was previously widely associated with southern Europe, its Northern expansion is notable, regardless of the drama of the Fortis deal behind it. But BNPP IP faces tough competition. A ranking by Dutch consultancy Bureau Bosch showed that BlackRock, the world’s biggest fund manager, had leapt over most of its Dutch and international rivals in the past year to become the number two fund manager in the Netherlands after APG Investments, the asset manager stemming from the ABP pension fund. Like BNPP IP, BlackRock’s ascendancy was on the back of an acquisition and mandate wins.©2011 funds europe