Lyxor AM Innovation in investment


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Lyxor AM Innovation in investment

  1. 1. Why Asset Managers Fear Investment Banks? Alain Dubois Chairman of Lyxor AM
  2. 2. SG CIB, first Investment bank to create its own asset manager <ul><li>In 1998, SGCIB decided to create its own Asset Management Company </li></ul><ul><li>It was a new concept coming from an Investment Bank </li></ul><ul><li>Lyxor has been created, separated from the existing Asset Manager of the Group </li></ul><ul><li>As an Asset Manager, regulated in France according to the UCITS Directive </li></ul><ul><li>The business was initially very limited: Structured Funds. There was no reason to be afraid. </li></ul><ul><li>But ... </li></ul>SG CIB Investment Bank Investment Bank Created in 1998
  3. 3. Lyxor AM, a success story <ul><li>After 10 years Lyxor AM manages more than 100 bn USD </li></ul>
  4. 4. Lyxor AM: an Asset Manager recognized by the market Pioneer and leader for ETFs in Europe A recognized Hedge Funds specialist Lyxor AM and SG CIB Structuring expertise recognized several times 2006 2004
  5. 5. Lyxor AM: a Specific Business Model <ul><li>3 businesses : </li></ul><ul><ul><li>Structured asset management and quantitative strategies: </li></ul></ul><ul><ul><li>- AUM EUR 20.5 billions </li></ul></ul><ul><ul><li>Alternative Investments: </li></ul></ul><ul><ul><li>- AUM EUR 26.5 billions </li></ul></ul><ul><ul><li>- world leading managed account platform </li></ul></ul><ul><ul><li>- 7th in global Ranking of Fund of Hedge Funds asset managers* </li></ul></ul><ul><ul><li>ETF: </li></ul></ul><ul><ul><li>- AUM EUR 27 billions </li></ul></ul><ul><ul><li>- number 2 in Europe </li></ul></ul><ul><li>Each business is developing with a lot of innovation </li></ul>* InvestHedge Ranking Dec. 2006
  6. 6. However, Lyxor is an Asset Manager , not an Investment Bank <ul><li>We see ourselves as Asset Managers not as an Investment Bank </li></ul><ul><li>We have strong Chinese Walls with the Investment Bank </li></ul><ul><li>We are closer to the world of Asset Management </li></ul><ul><li>But we try - like all Asset Managers - to benefit from the environment and ideas provided by Capital Markets </li></ul>
  7. 7. Investment Banks and Asset Managers are both providing Investment Solutions Investment Banks may provide: <ul><li>warrants </li></ul><ul><li>certificates </li></ul><ul><li>structured products </li></ul><ul><li>indexed products </li></ul><ul><li>advisory </li></ul><ul><li>managed accounts </li></ul><ul><li>… </li></ul>
  8. 8. The World of Asset Management offers plenty of Opportunities Alternative Investments Structured Asset Management Passive Asset Management (Trackers) Advanced financial techniques: options, stock lending, risk control Systematic approach Active Asset Management Discretionary approach « long only » portfolio allocations &quot;INVESTMENT BANK INTRUSIONS&quot; &quot;INVESTMENT BANK INTRUSIONS&quot;
  9. 9. Investment Banks are also Active Managers <ul><li>Proprietary Trading is similar to Hedge Funds </li></ul><ul><li>Structured Products are Dynamic allocations. This dynamic allocation can be achieved: </li></ul><ul><ul><li>directly: CPPIs etc. </li></ul></ul><ul><ul><li>or by buying a pay-off (Structured Products) </li></ul></ul><ul><li>From Passive to Active </li></ul><ul><ul><li>structured Products can be &quot;managed&quot; </li></ul></ul><ul><ul><li>indices can also be managed </li></ul></ul><ul><li>This stays however very limited </li></ul>
  10. 10. The Legal Distinction between the two is being blurred <ul><li>MIFID knows only &quot;Investment Firms&quot; </li></ul><ul><ul><li>investment Banks and Asset Managers are Investment Firms </li></ul></ul><ul><ul><li>both can render the service of &quot;Portfolio Management&quot; </li></ul></ul><ul><li>MIFID creates a level playing field between the two </li></ul><ul><ul><li>same regulations for marketing, inducements etc. </li></ul></ul><ul><li>The only Asset Management-specific Directive is the UCITS Directive </li></ul><ul><ul><li>but a recent interpretation by the EU Commission is that management of a UCITS by delegation is a service of Portfolio Management </li></ul></ul>
  11. 11. Keeping Chinese Walls is key <ul><li>Blurring the distinctions may be ok, but: </li></ul><ul><li>There is a fundamental difference between: </li></ul><ul><ul><li>managing with a discretionary mandate </li></ul></ul><ul><ul><li>or subscribing to Products that provide pre-determined returns </li></ul></ul><ul><li>This is often forgotten in the &quot;level playing field&quot; arguments </li></ul><ul><ul><li>different products should be regulated differently </li></ul></ul><ul><ul><li>there is nothing wrong in regulating differently Structured Products and discretionary mandates </li></ul></ul><ul><li>It is important to keep appropriate Chinese Walls between different businesses, where they are necessary. </li></ul>
  12. 12. Asset Managers can also enter the business of Investment Banks <ul><li>Asset Managers have a broad mandate, and can enters the traditional business of Investment Banks </li></ul><ul><ul><li>and this is the future </li></ul></ul><ul><li>Hedge Funds have been doing just that </li></ul><ul><ul><li>investment bank traders creating new Asset Management businesses </li></ul></ul><ul><li>Structured Funds is a way for Asset Managers to enter the Structured Products business </li></ul><ul><li>ETF can also be seen as a way for Asset Managers to enter the &quot;listed products&quot; business </li></ul><ul><li>We are happy Asset Managers </li></ul>