F &C Asset Management, the London-based international funds house running £104bn ( �� 134bn), has laid down a global distribution plan which envisages a move towards wholesaling and away from the group’s roots of marketing institutional mandates to Dutch and UK pension schemes.
Despite questions hanging over its future ownership – both majority owner Friends Provident and F&C itself have committed themselves to examining all options for the future structure of the company – the house has recently moved back into profitability.
Its chief executive, Alain Grisay, launched a three-year plan last year to diversify products, geographical outlets and the client base. This plan’s mission statement – “to negotiate new and existing markets and substantially increase revenues” – sounds suspiciously like the aims of Captain Kirk in the popular 1960s sci-fi TV series Star Trek. Rather than increasing assets, F&C has laid down targeted earnings per share increases of 50 per cent by the end of 2009.
WIDER REACH
The company wants to aviod being perceived as a me-too player, and tries to position itself at the forefront of asset management trends in Europe.
F&C’s recent investments in innovation have included the launch of 130/30 and FX arbitrage products, the recruitment of top professionals to Latin American, Asian equity and fixed income hedge fund divisions and forays into new markets such as Austria, Switzerland and Sweden.
The moves already seem to be paying off. While assets are falling marginally, mainly due to Dutch pension schemes withdrawing mandates as they move to fiduciary arrangements, revenues are rising.
It is down to a newly recruited Spaniard, Cristobal Mendez de Vigo, who previously spent 11 years at Allianz Global Investors, to institute a global plan to spread the distribution net across new markets such as Italy, Spain, Chile and Russia.
First he must consolidate existing wholesale efforts in France, Scandinavia, Germany, Switzerland and the Netherlands. He must keep his eye on the ball regarding the UK, F&C’s only retail market adventure. And then he is committed to exploring distribution opportunities in Asia and the Middle East, where he promises an imminent announcement of distribution agreements.
The group’s previous institutional bias and expertise will not be ditched at the first stop on this international journey, promises Mr Mendez de Vigo. Bulk distributors such as UBS, Deutsche and Credit Suisse are treated as if they are institutional clients. “We came to realise that the discussion with an asset consultant is quite similar to the work and process you go through with a fund selector or global distributor.”
This is the reason he has combined the wholesale and institutional segments at F&C. The other major change has been to separate business development from client relationship managers. “Once attracted to being clients, institutions can now expect a dedicated service,” he says.
BROADER STRATEGY
The old F&C enjoyed some distribution success through shareholding partnerships in jurisdictions including the Netherlands, Ireland, Portugal and the UK. But the new broader strategy entails nurturing relationship with a much wider set of distributors.
“Partnerships are an important part of our strategy,” says Mr Mendez de Vigo. “In markets where we don’t have any shareholdings, we are starting to look at partnerships on the distribution side to achieve a local presence and then to expand beyond that.”
A strong wish from Mr Grisay to vastly increase and broaden distribution capacity does not however mean F&C will “shoot around to get on every platform possible,” as Mr Mendez de Vigo puts it. In the new markets where F&C is not yet present, it will concentrate on relationships with one or two strategic providers. Where it already has some outlets, there will be attempts to broaden distribution away from one or two banks and get onto more platforms.
There is also a distinction being made between the global distributors, where relationships are local, but the client is serviced centrally from London; and the so-called ‘national champions’ – big regional groups with no global reach, that can be handled in their home countries.
A typical example of a global distributor is HSBC. F&C hopes to get some cross-border leverage from the bank, through an initial distribution deal in the UK. Similarly, it hopes to build on some early success selling products through UK and Swiss outlets of UBS.
Its most prominent national champion would be HVB in Germany, with whom F&C once had a shareholding relationship. “They are very important in helping expand our German presence, but they are not a global distributor,” reveals Mr Mendez de Vigo. The relationship is a productive one, but conducted at “arm’s length”, and does not preclude similar deals with the likes of Deutsche and Commerzbank.
In fact, F&C recorded “very convincing inflows” from Germany in 2007, despite the country’s funds market losing investors’ money overall. Swiss private banks have also seen significant asset flows into F&C funds. “We are very strong in emerging markets, Asian equity, Latin America and global convertibles,” says Mr Mendez de Vigo.
“These are our best funds, and they are very suitable products for the Swiss private banking business.”
F&C has also secured berths on the guided architecture platforms of banks such as Rabobank and FortisMeesPierson in the Netherlands.
INTERNATIONAL FOCUS
Managing the transition towards a more retail-friendly environment will not prove impossible, says Mr Mendez de Vigo. He believes his experience at Allianz makes him well suited for this task, but he does not carry any baggage from the old firm, with its almost intensely institutional mentality.
He will also be helped in his international aims by the diverse nature of the staff in the London HQ. “We hear many languages spoken in the building, including Portuguese, Spanish, Italian and Dutch. This all helps us to think in a global mindset.”
