Reducing risk and complexity has been Yves Perrier' key contribution to Amundi, one of Europe's five largest asset managers, he tells Nick Fitzpatrick. A background in banking helped him see this need.
He says he has needed patience working in the asset management business and this is because Yves Perrier, the chief executive officer at Amundi Asset Management, comes from an investment banking background where results are expected so much quicker than in fund management.
Credit Agricole, the third largest French bank, made Perrier head of Credit Agricole Asset Management (CAAM) – which is now called Amundi – in 2007, so he has seen how fast the machinery works on both sides of the fence.
Prior to becoming head of CAAM, Perrier worked for the bank itself and feels this experience helped him decide how to steer the asset management business through the financial crisis.
He says that the track records of investment management businesses need to be several years long whereas investment banks always depend on the past year for their success. Perrier came to Amundi, nee CAAM, in 2007 virtually at the onset of the sub-prime problems in America that led to the credit crunch and the financial crisis.
As markets heated up and eventually tumbled, Perrier says he started to implement certain risk controls. The effect was to remove risks from the investment business that were perhaps more appropriate kinds of risks for an investment bank to take, and they centred on those erstwhile very clever, and very complex, structured products – or more specifically, structured products within Amundi’s money market funds.
Amundi has a €119 billion money market business and the measure could not have been more needed. Some other firms that found complex products within their supposedly simple money market funds were bashed against the rocks when the underlying assets of derivatives, particularly mortgages, crashed.
“When I joined Amundi in July 2007, I had two main ambitions. One was to develop investment management and risk management,” says Perrier.
“I had a view of how to manage the crisis and I centralised some key elements of the investment management process, especially liquidity and sovereign risk management.
“I forbade the use of structured products in the balance sheet of liquidity funds. [Also] we decided at the end of 2009 to get out of all government bonds issued by the Pigs [Portugal, Ireland, Greece, Spain] countries.”
He also says: “Risk management has been a key point of competitiveness throughout the crisis. Amundi has not witnessed any problems of liquidity in our funds and this is down to strong risk controls.”
Focus on growth
Group risk management director, along with chief operating officer, is a role Perrier held in the past with Credit Agricole. He has also been a chief financial officer at Societe Generale and it was with this firm that Credit Agricole launched the asset management joint venture, Amundi, in 2009. Credit Agricole has a 75% share.
After focusing on risk, then on Soc Gen’s integration, Perrier says the focus is now on growth. “After the integration process, we found ourselves with more synergies than we had expected. We had a 25% share of mutual fund distribution in France, and joint ventures in China, India and South Korea.”
Perrier adds: “When we completed the merger I did not realise how much exposure it would give us to institutional investors. To be in the top ten [by assets] of asset managers worldwide gives us much better visibility.”
Perrier says half of Amundi’s revenue is retail and “a bit less than that” is from institutions and third-party distributors.
Growth plans include being able to service several different partner networks more efficiently through one platform, and developing its institutional and third-party distribution business.
“We will increase the institutional business through the quality of our products’ performance and by reinforcing our position in global fixed income and equities. Our aim is also to strengthen our position with institutional investors outside France.
For example, we have recruited a new sales person to reinforce our presence in the Nordic countries.
“Our coverage of the corporate market in France is 30% but we only have a small position in Europe. However, we are attracting this segment with money market funds and we think we can have a market share of 5-10% in three years.”
He adds that net flows of €1 billion were registered with third-party distributors in February, and that Amundi recently concluded a partnership with Dutch bank ING to be a preferred provider, and a similar deal with a regional Japanese bank.
He also plans to reinforce Amundi’s London presence with more equities capability and to make London the platform for its currency operation.
Fund flows were affected last year because distribution banks directed funds to their own products to shore up balance sheets, he says.
Assets under management declined in 2011 by 7% year-on-year to €658.6 billion (at 31 December). The Paris CAC 40 fell nearly 17% over the same period.
Outflows totalled €35 billion and were mainly in France. The first half, when the financial crisis had not been as bad, had seen net inflows of €1.7 billion.
Amundi claimed a success last year with €3.1 billion in new international institutional inflows.
The financial crisis hurt its banking parents last year, too, with Credit Agricole and Societe Generale downgraded by S&P, the credit ratings agency. Perrier claims this did not affect Amundi.
“As Amundi, we were not specifically concerned with problems that French banks were having, but more concerned about the eurozone.
“In February, we had €1 billion of inflows from third-party distributors and this is improving.”
However, he does say that Asian investors had fears about the eurozone which coincided with the downturn in flows for Amundi.
“Last year, there were two phases for us. During the first phase we were collecting money from outside France, which compensated partially for the outflows coming from retail networks. These came primarily from monetary funds as banks promoted other products to bolster their balance sheets.”
In the second phase, not only did outflows continue, said Perrier, but inflows reduced. One reason for the lack of inflows was that Asian investors were not comfortable with the eurozone sovereign debt increase.
Perrier is known for taking an industrial approach to fund management, building Amundi to become a funds factory, albeit, the firm will say, one that also innovates.
However, Perrier is also taking Amundi through a wide-scale rationalisation of its funds. “Asset management is like gardening: occasionally you have to pull out the weeds,” he says.
Four hundred mutual funds are being withdrawn out of 1,050 in total. “These funds were distributed in partner networks and we felt they were too complicated for our agents to sell.”
Perrier’s desire to simplify matters could be one of his biggest contributions to Credit Agricole’s asset management operation. Amundi could easily be the unwieldy oil tanker of asset management, or rather, the hulking factory. Throwing out structured products, the bonds of troubled eurozone countries, and pruning funds that were too complex, will no doubt bolster Perrier’s track record.
©2012 funds europe