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  1. 1. Know your clients, know your market : a perspective on France AIMSE Annual Conference February the 2nd, 2006
  2. 2. Table of Contents <ul><li>1. The French Asset Management industry </li></ul><ul><li>2. The Institutional market </li></ul><ul><li>3. Market players and winning strategies </li></ul>
  3. 3. 1. The French Asset Management industry
  4. 4. The 4th largest asset management industry in the world Source: AMF/AFG A growing market… … highly invested in mutual funds Source: EFAMA Market shares of the European fund industry 2004 2001 1997 813 1412 1830 French UCITS Mandates 1000 2000 12% CAGR In Billion Euros 1080 750 Luxemb. 21% United Kingdom 9% Others 13% Italy 7% Ireland 8% France 22% Germany 16% Spain 4% A strong appetite for money market UCITS <ul><li>Money market funds historically dominate as interest-bearing current accounts only appeared in 2005. </li></ul>Source: EuroPerformance Guaranteed 9% Balanced 10% Equities 24% Money market 47% Bonds 10%
  5. 5. Mutual funds distribution in Europe is dominated by banks. No major change expected in channel market share Source: Cerrulli Associates <ul><ul><li>Banks 76% </li></ul></ul><ul><ul><li>Insurance 19% </li></ul></ul><ul><ul><li>IFAs 3% </li></ul></ul><ul><ul><li>Direct 2% </li></ul></ul>France Source: Cerulli Associates, BNP PAM. Figures estimated as of 2005. However, open architecture expected to increase dramatically Assets Under Management in Europe (mutual funds only) Source: FEFSI € 3 700 Bn 2004 2014E Third Party Funds In-house Funds € 6 000 Bn 92% 8% 70% 30% <ul><li>Push strategy shifts to pull strategy </li></ul><ul><li>Selection and advice become the new paradigm </li></ul>
  6. 6. 2. The Institutional market
  7. 7. The institutional market is dominated by insurance companies. Assets by institution type (2004 estimates) Source: BIPE/Af2i <ul><ul><li>Life insurance = € 992 Bn </li></ul></ul><ul><ul><li>Non life = € 138 Bn </li></ul></ul><ul><li>Insurance companies hold € 1130 Bn of a total € 1386 Bn held by institutional investors </li></ul>
  8. 8. Institutional investors’ importance in the economy is growing. Assets of the institutional investors in % of GDP Source: Af2i, Ministry of Finance… 2004 2000 1995 55% Non-life insurance Life insurance 50% 100% % of GDP 35% <ul><li>Life insurance companies account for almost the whole trend. </li></ul>Mutual benefits & social protection Employees’ savings Others 89% 91% 61% 61% Share of the institutional investors in the households financial wealth Source: BIPE, Ministry of Finance… 2004 2000 1995 25% Life insurance (unit-linked contracts) Life insurance (guaranteed contracts) 25% 50% % H. financial assets 19% <ul><li>Unit-linked insurance contracts are developing, but major flows go to guaranteed insurance contracts . </li></ul>Retirement plans Employees’ savings Others 34% 38% 21% 26%
  9. 9. How are they invested ? } Asset allocation and UCITS Source: Bank of France (securities survey of insurance companies and retirement institutions) <ul><li>One third of the mutual funds in asset allocation (global balanced) </li></ul>Money market 6% Others 6% Balanced 10% Equities 4% Bonds 3% Asset management delegation Source: Image et Finance (panel on competitive market, excluding. delegation within the same Group) AuM (Bn €) Insurance companies Social protection inst. Banks Miscellaneous Total Total 217 92 20 12 341 Delegation 19 (9%) 53 (58%) 4 (20%) 7 (58%) 81 (24%) <ul><li>Total delegated assets are estimated at € 130 Bn in different forms : </li></ul><ul><ul><li>Mandates 8% 8% </li></ul></ul><ul><ul><li>Dedicated funds 47% 59% </li></ul></ul><ul><ul><li>Dedicated f. of funds 14% 7% </li></ul></ul><ul><ul><li>Open mutual funds 31% 26% </li></ul></ul>2004 2003
  10. 10. Market trends in 2005 35% of institutional assets are managed externally in Continental Europe <ul><li>France, Germany, Nordics and the Netherlands are the major markets for externally managed assets in Continental Europe. </li></ul>Continental Europe 29% Via pooled or commingled funds Via dedicated institutional asset management 6% France 37% 9% Germany 33% 2% Source: Greenwich Associates Use of Investment Consultants Source: Greenwich Associates Continental Europe 32% 2004 2005 41% France 26% 19% Germany 29% 28% Increasing use of RFPs in France Source: Image et Finance % of the panel Insurance companies Social protection inst. Banks Miscellaneous Average 2004 38% 84% 13% 39% 46% 2003 43%
  11. 11. 3. Market players and winning strategies
  12. 12. Looking to the future : opportunities in France <ul><li>Upcoming development of corporate pension plans (PERCO…) </li></ul><ul><li>Increasing demand for sophisticated products : absolute return strategies, portable alpha, credit derivatives, hedge funds… </li></ul><ul><li>Cash rich institutions will continue to demand money market funds, including innovative dynamic funds </li></ul><ul><li>Development of open architecture by domestic players… </li></ul>
  13. 13. The asset management industry recognizes four macro-clusters of players. Assets under Management Client and product coverage Mapping of Asset Management players Hedge funds… Opportunistic players Equities, ccy overlay … Niche players Euro banks … Challengers Local banks & Insurance Comp. Market leaders <ul><ul><li>Challengers face the issue of profitability and critical size issues </li></ul></ul><ul><ul><li>Niche players leverage on one or two core competencies to defend their franchise </li></ul></ul><ul><ul><li>Opportunistic players step into the market on high margin products </li></ul></ul>
  14. 14. The French asset management market is still mainly local. <ul><ul><li>IXIS Asset Management </li></ul></ul><ul><ul><li>AXA Investment Management </li></ul></ul><ul><ul><li>Crédit Agricole Asset Management </li></ul></ul><ul><ul><li>SG Asset Management </li></ul></ul><ul><ul><li>BNP Paribas Asset Management </li></ul></ul><ul><ul><li>Fortis Investment Management </li></ul></ul><ul><ul><li>Dexia Asset Management </li></ul></ul><ul><ul><li>Natexis Asset Management </li></ul></ul><ul><ul><li>Groupama Asset Management </li></ul></ul><ul><ul><li>Sogeposte </li></ul></ul><ul><ul><li>MMA Finance </li></ul></ul><ul><ul><li>Sinopia Asset Management </li></ul></ul><ul><ul><li>Edmond de Rothschild Asset Management… </li></ul></ul>Source: IPE <ul><li>Most established asset managers in France : </li></ul><ul><li>International global players are entering the market, but their market share is still quite low : </li></ul><ul><ul><li>French companies 80% </li></ul></ul><ul><ul><li>Europe (excl. France) 19% </li></ul></ul><ul><ul><li>International (excl. EU) 1% </li></ul></ul>Source: AMF
  15. 15. Key success factors <ul><li>Demonstrate long-term commitment to the market (human resources, brand, long-term credibility…) </li></ul><ul><li>Maintain leading edge technology, structuring capabilities and clients service : create differentiation through permanent product innovation </li></ul><ul><li>Develop your ability to understand your clients’ needs and be a solution-provider (IFRS, ALM, Liability Driven Investments, absolute return strategies…) </li></ul><ul><li>Create a superior risk management discipline and apply a clear and consistent investment philosophy </li></ul><ul><li>Performance is not the main criteria for hiring an asset manager, but it is the most frequently cited criteria for terminating managers… </li></ul>Products are not bought anymore, they are sold