Magazine Issues » November 2013


Pierre ServantThe chief executive of Natixis Global Asset Management tells George Mitton about the challenging French market, acquisition plans and why significant asset managers must be present in the US.

The Franco-American relationship has had some hiccups in the past – there was the renaming of French fries to “freedom fries” when France refused to support the Iraq war, for instance – but for businesses such as Natixis Global Asset Management, based in Paris, the appeal of the American Dream has never diminished.

Pierre Servant (pictured), chief executive, knows about the allure of the US. Thirteen years ago, he was chief financial officer of state-owned institution Caisse des Dépôts et Consignations as it considered the acquisition of Nvest, a Boston-based asset manager with $130 billion (€96 billion) of assets.

The acquisition, made through subsidiary CDC Asset Management, was the biggest Caisse des Dépôts had done. It was a deviation from the institution’s strategy to expand by internal growth. But Servant and his colleagues had made a decision: the company must Go West.

“If you look at the European players who are doing well in asset management, they all have a large business in the US,” says Servant. “The US is the biggest market. If you want to be a significant player in this business you have to be significant in the US.”

In 2006, the merged company became part of Natixis, the financial services arm of French bank Groupe BPCE, and was renamed Natixis Global Asset Management. Servant has been chief executive since then. Under his watch, non-French assets have risen to account for 45% of the firm’s assets under management and 65% of the firm’s profits.

“When I look at what we’ve done in the past ten years, we’ve changed completely the profile of the company,” he says. “The company was purely French and now most of the profits come from outside of France, mainly from the US, which is still the biggest and most profitable market.”

Servant, who is grey-haired and bespectacled, met Funds Europe in his office in Paris, which overlooks the Seine. A former accountant, he is a calm and methodical man, who is under no illusions about the difficulties facing his industry.

The difficulties are acute in its home market of France. Due to prudential regulation, the banks would rather have on-balance-sheet deposits than mutual fund assets.

Many retail clients are risk averse. On top of that, says Servant, taxes introduced by the government of President François Hollande have acted as a disincentive to invest in funds.

On the institutional side, France does not have the same kind of pension system as the UK or the Netherlands. The only stable institutional investors, says Servant, are the life insurance companies. “But it’s a very low fee business,” he says. “You’re talking basis points.”

The one client type in France that is still buying funds are high-net-worth investors, he says, but “this kind of clientele is very tough. They change their mind all the time, they switch from one product to another; we need to be more active on that segment.”

Servant is pessimistic about a return to growth in the French funds market. He argues the market was overinflated in the past, and says what has happened in the past few years is a form of normalisation, returning the French funds market to a shape and size that is more comparable to, say, Germany or the UK.

Given these challenges at home, the decision in 2000 to buy Nvest seems, in retrospect, to have been shrewd. Other European firms have bought operations in America too. Axa Investment Managers has a significant US presence through its subsidiary AllianceBernstein. Allianz, from Germany, has a successful US operation in Pimco.

But Servant says building a US business requires more than just one acquisition.

“It’s difficult to be present significantly in the US market because it’s a very heavy investment,” says Servant. “We have people in Boston and the various US states, working with the distributors, warehouses, investment advisers. You can’t create it in one day. It’s a long process.”

Natixis GAM has sought to expand in its adopted home through internal growth and further acquisitions. Last year, the firm bought a municipal bond manager in the US called McDonnell Investment Management, which has $13.5 billion under management.

Servant says previous purchases have shown it can help business grow. Harris Associates, a value equity investment manager based in Chicago, has been part of the group since 1995    . Then, Harris Associates had $8 billion under management. This has risen to nearly $90 billion.

The acquisition shows “you can be very classical and still make a lot of money if you’re able to deliver distinctive performance”, says Servant.

Natixis GAM also owns Loomis Sayles, Gateway Investment Advisers and others – 27 affiliates in all – which are linked together as part of a multi-boutique structure. The firm has begun to extend its reach outside of the US and France too. Natixis GAM backed the founding of London-based H2O Asset Management in 2010.

Servant says there may be more acquisitions in future.

“Our shareholders like the asset management business because of the profitability and because it is less risky than most of the investment banking business,” says Servant. “Natixis is willing to invest more in asset management, if we find the right target.”

However, Servant says he must evaluate potential targets carefully to ensure there is no overlap with boutiques it already owns.

“You want to diversify the offer, but it’s not a good idea to buy another firm which is doing exactly what one of your existing affiliates is doing, unless you like fights and conflict.”

Given Servant’s comments on the difficult French market, with its shrinking retail segment and pressure on institutional fees, it is clear why he is happy with the US portion of his business. For Natixis GAM, America has been a land of opportunity.

©2013 funds europe