Over a few days at the end of Q3, Philippe Setbon sat down to reflect on 2017 so far and revealed ambitious plans for the future development of Groupama Asset Management…
Interview with Philippe Setbon, Chief Executive Officer, Groupama Asset Management
The market environment has proven favourable to investment globally in 2016 and 2017. In this context, what is your view on the evolution of Groupama Asset Management’s products and investment management activity?
Groupama Asset Management benefits from strong and regular inflows of assets. Long-term savings solutions are particularly sought by today’s investors, which we have witnessed through the take-up of our equity and absolute return products.
Globally, during the first eight months of the year, net inflows into our business by third-party customers exceeded 3 billion euros, effectively the equivalent of our 2016 inflows. Total assets under management have reached 101.5 billion euros, of which 20% comes from external clients.
This progress is the fruit of efforts to rationalise and reposition our offering to clients, within the framework of our former strategic plan. From 2015, we worked on diversifying our distribution offer. Today, our business is developing rapidly within this segment, with approximately 1.5 billion euros of inflows since the start of the year. The increased presence of Groupama AM among private banking clients and fund distribution platforms is an important strategic driver of our growth.
Net inflows of 3 billion euros
And how are you positioning yourselves among institutional clients?
We retain a high market share within the institutional segment. The first quarter was very active; we won two key tenders, one in equity management and the other in credit. The quality of service we provide as a third-party insurance business owes to our historic engagement with our parent company, Groupama. Designing solutions that are adapted to the regulatory, financial and accounting environment for institutional investors has always been a part of our culture; it’s in our DNA. Alongside developing our target client base, the internationalisation of our activity is also an engine of our growth strategy.
Where do you see these international growth opportunities?
Our international activity has contributed to the gathering of 1.2 billion euros of assets since the start of the year. Outside France, Spain and Italy are our most important markets in terms of attracting assets. The management we offer, via our Italian subsidiary and our Madrid branch, is designed for pension funds and distribution professionals. Other growth channels we have identified are in Latin America, a region that Groupama AM approaches via an intermediary network of third-party marketers. We have just finished a series of roadshows, which have enabled our team to capture new subscriptions, predominantly from institutional and pension fund clients.
What’s your strategy in Switzerland?
We are very active from few years on distribution segment, in the French-speaking Switzerland. In this area, we target private banks, family offices and distribution platforms. Moreover, we start to address the German-speaking Switzerland where we target institutional investors, especially pension funds.
Delivering yield is not enough
Scarcity of yield in a low interest rate environment, the weight of regulatory constraints, and the necessity of undergoing a structural digital transformation mean that today professional investors face many challenges. How is Groupama Asset Management responding to such demands?
We are unequivocal in our assessment that within the asset management industry, performance assessed by delivering yield alone is insufficient. This approach, which for a long time was the main basis upon which asset management firms did their marketing, does not work anymore. Because of the complexity of challenges that investors are confronted with, this places the value of services and support, from the upstream to the downstream of investment processes, at the heart of the offer. And these needs are now felt as much by traditional institutional investors as distribution professionals!
We therefore considered very early on that our management of assets should be based upon a good understanding of our clients’ needs, the generation of innovative investment solutions (in terms of alpha, decorrelation/diversification of sources of yield, reducing exposure to risk), and finally, bespoke services. The continued strengthening of our capacities in the area of asset and liability management, focused on managing insurance assets within a context of constraints, but also in the field of financial engineering, ensure that we meet these objectives.
What are the ambitions of Groupama AM for the years to come?
We are departing from our previous strategic plan 2013-16, thanks to which we have managed to reduce our cost base and maintain quality of management. The result is that today our objective has been reached: a return to profitability and a cost base in line with the parameters of the benchmark that we implemented.
The result of these efforts has enabled us to envisage new investment capacities in the years to come, within the framework of our new plan, ‘GAM 2022’, and in line with the objectives of our parent company, Groupama. The goal is to consolidate our organic growth, based on the dynamism of our inflows — Groupama Asset Management is among the French asset managers which have attracted the highest level of inflows in the last two years — but also to throw our energy into new growth channels. We would like, for example, to increase our quantitative analysis skills in a way that will optimise the upstream part of our investment process, at a time when data processing has become essential in order to generate value. We wish also to expand our management offering into new asset classes, such as unlisted assets, where financialisation is integral.
Finally, the asset management industry is a consumer of skills and highly qualified human resources. Our investment will therefore be both human and industrial in nature. We intend to attract new talent and continue our digital transformation. The digitilisation of processes is another catalyst to support the maintenance of financial and operational excellence at Groupama Asset Management