Amundi, Europe's Biggest Asset Manager, Needs to Go East in 2018
(Bloomberg Gadfly) -- It's taken Yves Perrier a decade to build Amundi SA into Europe's biggest asset manager. His next challenge is to deliver on the pledge he made just before the firm's November 2015 initial public offering -- to expand in Asia and become a truly global contender in his industry.
At the time of its IPO, Amundi had 952 billion euros ($1.1 trillion) of assets, and was aiming to grow that by 120 billion euros by 2018. It's done that -- and more, boosted by its 3.5 billion-euro purchase earlier this year of Milan-based Pioneer Investments, which added about 220 billion euros in assets.
The market capitalization of the Paris-based company Perrier formed in the immediate aftermath of the financial crisis by merging asset management businesses of Credit Agricole SA and Societe Generale SA has more than doubled to 14.6 billion euros since the shares were listed (Credit Agricole retains a 70 percent stake). Moreover, Amundi stock is outperforming its peers.
The industrialization strategy Perrier has explicitly pursued -- scaling up the business, controlling costs and eschewing so-called star stock pickers -- has created a template that the rest of the industry is slowly embracing. The mergers that created Janus Henderson and Standard Life Aberdeen validate Perrier's argument that size matters.
In 2009, Perrier decided to get Amundi out of hedge funds, citing a "lack of transparency" and "reputational risk." His caution has since been vindicated; hedge fund liquidations have outpaced launches for three consecutive years as the high-cost investment vehicles have struggled to beat the returns available from low-fee trackers.
Perrier says he has no ambitions in the U.S., which is probably smart given the dominance of domestic incumbents and the seemingly inexorable move into low-cost exchange-traded funds. Vanguard, for example, has taken in more than $330 billion this year, with second-placed BlackRock Inc. snagging about $200 billion.
But in Asia, a surge in affluence will create a market for savings, pensions and other investments that's too big for any market player with global ambitions to ignore.
The Brookings Institute, for example, estimates that in the coming decade, 88 percent of the next billion people joining the middle class will live in Asia. China and India alone will each add more than 350 million to a group that will account for $64 trillion of global spending by 2030, almost double the current middle-class economy.
"The goal is to make Asia into a second domestic market," Perrier told the Financial Times in October 2015. So far, he's fallen short -- Asia still represents only a small part of Amundi's business.
While the value of assets in Asia has climbed by almost 38 percent in the past two years to 164 billion euros, the Pioneer acquisition actually diluted the region's share of assets under management to less than 12 percent -- its lowest since at least the start of 2016.
Competition for that source of income will only increase. Earlier this month, Standard Life Aberdeen secured approval to become a private securities investment fund manager in China, giving it the right to offer products to institutions and high-net worth individuals in the country. UBS Asset Management and Fidelity International have also secured Chinese licenses. Man Group, meantime, just launched its first Chinese investment strategy, three months after becoming the first foreign edge fund to get permission to operate there.
Perrier could grow his Asian business organically. He could expand the range of joint ventures in the region. Or, he could buy an existing business, using his shares as currency -- the main motivation for the IPO in the first place. That allowed him to raise 1.4 billion euros in a rights offering to help finance the purchase of Pioneer.
Amundi's name was created by combining AM, for asset management and MUNDI, which reflects the word for world in several languages. With more than 80 percent of the company's assets in Europe, Perrier still has work to do to realize the global ambition embodied in his company's title.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Mark Gilbert is a Bloomberg Gadfly columnist covering asset management. He previously was a Bloomberg View columnist, and prior to that the London bureau chief for Bloomberg News. He is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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