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10 December 2007
FT REPORT - FUND MANAGEMENT: Sustainability gains weight
Source: www.ft.com
By John Bonaccolta, Financial Times
Published: Dec 10, 2007
The strategies of smaller, independent asset managers are often easy to discern: specialisation, identification of a niche where the big operators have yet to look, and a focused business model that does not try to be too much to too many.
But with the big financial supermarkets - banks, asset managers, insurance companies and the like - corporate strategy can often be tough to pin down, as these players seemingly want to be in every market imaginable. Add to this confusion the general question of what it takes to be a pan-European operator, or, worse, how a European asset manager competes internationally, and things don''t become much clearer.
Jean-Louis Laurens, president of Robeco France, is trying not only to contribute to the construction of a panEuropean asset management business, but also help his group move into new markets abroad in Asia, the US and the Middle East. Backed by the powerful balance sheet of Rabobank in the Netherlands, Mr Laurens nevertheless remains opportunistic in executing a strategy he sees as selective rather than comprehensive.
"You cannot be everywhere," he says. "First and foremost, Robeco is a European asset manager. Europe is our stronghold, so we have to have a strong presence here. But we also need to expand into the US and Asia."
Mr Laurens characterises the Robeco model as being "medium-sized and multiexpert," meaning not too big - €147bn ($217bn, £105bn) under management - and picking its spots wisely. For Robeco, this means European fixed income, US, European and emerging market equities, alternatives and sustainability investing.
Based in Paris, the "Boston of Europe" as Mr Laurens calls it, Robeco France is trying to leverage what has always been a strong market for fixed income, structured products, derivatives and dynamic money market funds.
In other words, Paris is hardly just a distribution presence: rather, Robeco tries to decentralise its innovation.
"With Europe converging, asset management is becoming increasingly competitive. While performance is what counts, it''s not enough - you have to be innovative," says Mr Laurens.
Innovation, for Robeco, might be best displayed in its December 2006 acquisition of a 64 per cent stake in Sustainable Asset Management (SAM), Zurich. With the stated goal of creating a "leading platform for sustainability investing", Robeco and SAM will make joint investments to develop sustainability investing.
Sustainability investing is in vogue right now, and has changed considerably from its early days centred on ethical principles.
Where many agree that investing based on sustainable principles may be sound, various business plans for how to go about that are on offer, and a consensus seems distant.
Nevertheless, Mr Laurens remains sanguine, noting that questions about sustainability are becoming commonplace even in more traditional investment approaches.
More broadly, however, Robeco France unveiled plans 18 months ago to double its size in terms of assets under management and revenues by 2010. This strategy was anchored in bolstering marketing and distribution presence, refocusing its business on its core strengths, acquiring or collaborating to access new areas of expertise and repositioning its private banking function.
To Anglo sensibilities, such language might seem rather corporate, suggestive of big, slow organisations.
But Mr Laurens concedes that running a continental European asset manager may be different from running an Anglo rival. On the continent, Mr Laurens says, branding is at least as important as performance-based star manager selection, something that perhaps goes back to continental clients'' culture of fixed income, versus the Anglo sphere''s bias towards equities.
"Even today, recent studies show that about 70 per cent of allocations in the French institutional market are to fixed income strategies," says Mr Laurens.
Another difference is compensation structure. "The continent tends to reward its sales people on more of a discretionary basis, or out of pools of commissions rather than individualised sales commissions," says Mr Laurens. "In the Anglo world, there is more of a tendency to reward the big producers and hence to encourage product push."
And managing a European player comes with other challenges. "Taxation, economic culture, and investment habits differ widely from market to market, from country to country," says Mr Laurens.
Based in Rotterdam, Robeco runs its French equities, small- and mid-cap European equities and money market funds out of Paris, making it an investment centre as well as a distribution centre.
Other investment centres include the US, where Robeco has made investments in the American firms Boston Partners, Weiss, Peck, & Greer, Sage Capital and Harbor Capital Advisor, and Zurich, where SAM is based. Distribution centres include Belgium, Spain, Germany, Bahrain, India and Japan.
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Sustainable Investment Research Platform
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