Following Generali Investments’ huge internal restructure, CEO Gianluigi Costanzo (pictured) tells Angele Spiteri Paris how the unification programme will drive the company forward ...
By June this year Generali Investments will have migrated its e300bn-odd of assets under management to a common IT platform – a momentous stride in the integration of the group’s asset management activities.
The asset management arm of one of Italy’s biggest insurers has been gaining strength and broadening its scope over the last few years. The assimilation of the IT system in its various offices symbolises a major step towards its goal of bringing together its management capabilities. ianluigi Costanzo, chairman of management board & CEO of Generali Investments SpA, explains the significance of this integration and how it will impact Generali’s operations.
In 2005, the Generali Group took the decision to unify all its asset management activity under one umbrella entity called Generali Investments. Historically, the insurance company itself undertook the management of the group’s internal assets. This, however, changed when the asset management became a separate body also offering its service to third-party investors.
However, having a combined legal entity was not enough – further integration had to be implemented for the management activity to be streamlined. Costanzo says the first port of call was to bring all of the asset management activity onto a single IT platform.
“The only way you can carry out truly integrated activity is to stand on a common IT platform,” he says. Generali Investments has a presence in a slew of European countries, but its largest offices are located in Italy, France and Germany. These are also the branches that carry out all of the Generali Group’s asset management.
Costanzo confirms migration of the assets within these larger offices was completed at the beginning of this year. The other, smaller offices situated in Austria, Spain, Luxembourg and Switzerland, among others, will migrate to the new system by the middle of 2008.
Working with the same software will allow Generali to improve its efficiency on the back office and administration side and also reduce operational risk.
“We can now price securities in the same way across the whole of Generali’s asset management. This is vital for less liquid securities,” Constanzo notes. He explains that once a market becomes illiquid, pricing securities is intuitively more difficult. The software integration will help Generali achieve its goal of aligning its asset management operations and therefore lead to a more efficient business model.
Generali Investments is the result of a number of changes that took place within the Generali Group since the year 2000. As mentioned earlier, the asset management activities were separated from those of the insurance arm in 2000 and in 2005 the decision was taken to form an asset management company.
Home is where…
In spite of the changes that have taken place, Generali still maintains a strong local presence in the countries in which it operates.
“The approach we follow is quite simple and straightforward,” Costanzo says. “We need to be close to our final client as this is he only way you can really understand the needs of that client base – which are very specific from country to country,” he continues.
The CEO explains that the IT platform is the first operational change that took place in the integration effort. He adds that the Italian, French and German offices have been pooling their research and analysis expertise for a few years.
Some had suggested Generali concentrate its asset management in one country, but Costanzo says this would not be feasible since it would negate the idiosyncrasies within each regional market.
“Managing money is not solely a financial endeavour. You need to take several other issues into account, such as accounting, tax treatment and regulation. These differ greatly between countries,” he states, adding that being well versed in the local way of thinking also plays a vital role to success in Europe.
Costanzo uses the Italian retail market as an example. “A few years ago there was a time when the Italian and European equity markets were up by 25% while the MSCI World Index had suffered because of a weakening dollar and only rose 3% or 4%,” he explains.
Italian clients would not be satisfied with the chosen index being used as an excuse for the lowly performance. This is because they would first compare their investment to the way Italian bonds and equities have fared, irrespective of the benchmark. In view of this, Costanzo says managers can only be aware of these reactions and handle them effectively by having a strong local presence and staying in touch with their client base.
In January 2007 Generali Group newsletter, Costanzo ad said Generali Investments planned to further develop sset management activities or non-Group institutional investors and increase the distribution of its savings products to retail clients.
Questioned on the status of his, Costanzo explains that being an investor itself, Generali puts o market solutions it has ested and used to manage its insurance assets.
Third party efforts
“We have wrapped our internal investment skills into Sicavs which we sell from our Luxembourg office. These are then available to institutional investors looking to tap into our expertise,” he says.
Costanzo points out that although the extension of its third-party management is important, the most vital to Generali is the performance of these funds. They are not ‘asset gatherers’, but rather strive to generate the best ossible performance. This is because the Group’s ultimate agenda is to meet the liabilities of the insurance company.
In fact, although Generali has been offering Sicavs since 2002, it wasn’t until the last couple of years that a concerted effort has been made to market them. The firm also offers the option of managing segregated accounts on behalf of institutional clients, within its regional offices.
Asked which of the services ill be focused on over the oming year Costanzo says: Sicavs will always be important vehicles. They allow both us and institutional investors to get exposure to markets in a very efficient [email protected]
© 2008 funds europe