As Amundi Asset Management seeks to become one of the top five asset management firms in the world, finding growth in China has become a key thrust. Last month, the French asset manager launched a wealth management joint venture in Shanghai so as to tap growing wealth in that market. It also plans to establish an outbound investment business in Beijing as China becomes more welcoming to global asset management firms, as part of a broader reform of its financial sector.
The flurry of activity in China might lead some to think that Amundi is shifting focus out of Southeast Asia. But Eric Bramoullé, CEO of Amundi in South Asia, says this is not the case. In an interview with The Edge Singapore, he maintains that the region continues to play an integral part of the asset manager’s bid for expansion outside its core market of Europe. Southeast Asia holds much potential for growth, despite its diverse markets, he says. As such, the asset management firm intends to expand further in Southeast Asia, apart from its existing presence in Singapore, Malaysia and Thailand, notes Bramoullé, who has more than two decades of experience in this industry.
In particular, the Philippines and Indonesia stood out for Amundi: Both countries have a combined population of about 400 million and Bramoullé expects the retail markets there to “boom” in the coming years in line with the rapid economic growth. “So, at some point [in time], if you want to develop your activity, you have to get there,” he adds.
David Poh, Amundi’s head of investments in Singapore, agrees. He tells The Edge Singapore that the huge populations of the Philippines and Indonesia are largely made up of young people, thus presenting a huge opportunity for Amundi to tap as more workers enter the labour market and want to increase their income. Poh also reckons the “wealth effect” will be flowing through the whole masses maybe in two, three, five or 10 years from now. “So, if you think long-term, this is where Amundi wants to be,” he adds.
But with Covid-19, many businesses have been forced to scale back ambitions for capturing new markets. Amundi is no different as its plans for the Philippines and Indonesia have been put on hold. Bramoullé says the pandemic has introduced a lot of uncertainties, apart from wreaking havoc across many economies. “We see 2020 as [somewhat] a gap [year]. It has put some things on standby,” he says.
Established on January 1, 2010, Amundi is a relatively new entity. Its brand might be relatively unfamiliar to people outside the financial services industry but it can trace its roots to two larger and better known French financial institutions as Amundi is the result of the merger between the asset management businesses of Crédit Agricole and Société Générale (SocGen).
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Asia pivot
Achieving organic growth has been a difficult task for many asset management firms over the last decade. With the rise of passive investing — particularly in exchange traded funds (ETFs) — asset managers find it challenging to outperform the returns of ETFs. This had shifted money to passive investing from active investing. The relatively buoyant US market — the world’s largest — also made it relatively simple for investors to make returns by just betting together with the indices. Many investors have wondered if active asset managers deserve their fees. The impact of Covid-19 has only made things worse.
For 1HFY2020 ended June 30, Amundi recorded revenue of EUR1.24 billion ($1.9 billion), down 7.2% y-o-y. This was due to the strong negative market effect on financial income, it says. As a result, Amundi registered earnings of EUR439 million, down 13.1% y-o-y.
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Nevertheless, Amundi’s total asset under management (AUM) grew 7.1% y-o-y to EUR1.59 trillion. This was despite investors having withdrawn 4 billion euros from its core markets of France and Italy. Amundi saw outflows of EUR10.2 billion from short-term money market funds versus inflows of EUR6.2 billion into medium and long-term strategies.
The growth of its total AUM can be attributed to Amundi’s operations in Asia. The region saw inflows of 5.6% in the half-year period, versus outflows of 6.6% last year. Amundi’s AUM in Asia leapt 44% y-o-y to EUR292 billion.
This is expected to grow further. Last December, the Chinese regulator approved the plan to create a wealth management joint venture (JV) between Amundi (55%) and BOC Wealth Management (45%). The latter is a subsidiary of Bank of China — the fourth-largest Chinese bank — with 500 million private customers and 11,000 branches. The JV is expected to launch its products by the end of this year following a final approval from the Chinese regulator.
Growth in Spain will also give a boost to Amundi. Apart from starting the distribution of Amundi products through the Banco Sabadell network, the asset management firm completed the full acquisition of Sabadell Asset Management (Sabadell AM) on June 30. The latter is the fifth largest player in Spain with EUR21 billion in AUM. Amundi expects Sabadell AM to book earnings of EUR33 million in 2020.
Amundi has also renewed its partnership with SocGen for five years. Under the partnership, the asset management firm remains the leading provider of savings products and services for its networks in France and the Czech Republic. It also remains the partner in employee savings schemes in France and the fund manager for the Sogecap (SocGen’s life and insurance unit) mandate.
Expansion plans
So, what will Amundi’s expansion into the Philippines and Indonesia look like? How will it cater its products to a diverse set of demographics in the Philippines and Indonesia? How will Amundi work around the respective regulations and bureaucracy of these two markets?
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Bramoullé says establishing a JV — like how it has done so in China — could be one option, but he notes that Amundi will explore all possibilities. Meanwhile, Poh adds that undertaking a partnership would probably be the easiest way to enter both markets. That will mean Amundi has to find a local partner with the right ability and marketing machinery.
Bramoullé says Amundi will customise its sales strategies and products to each market. The key is to listen to the local distributors to understand the needs of clients, he says. Amundi, he adds, does not what to offer products it thinks clients want, but products that clients want. “By answering their issues, we design to give them the solutions that are fitting their needs,” he says.
Still, with customisation comes the loss of economies of scale. Poh says that Amundi can leverage its global network of analysts and portfolio managers. The asset management does not rely on a small team to create products for each market. “That’s how we achieve the economies of scale.
A good example of customisation and partnership is the Amundi-OCBC Momentum Fund, says Bramoullé. The fund, which is managed by Amundi and exclusively distributed by OCBC Bank, was launched in Singapore in August. He describes this fund as a “milestone” between the two financial institutions. “It combines the engine of Europe’s largest asset manager and the expertise of one of Singapore’s longest-established banks.”
Dollar cost averaging is a well-known investment strategy but according to Amundi, there is a key difference with this fund. Instead of waiting for the investor to top up his or her investment to average down the cost, the portfolio manager of this fund has the mandate to initiate dollar cost averaging for the investor. The fund leverages the cost-averaging effect when it systematically allocates assets from an initial pool of fixed income securities to equity ETFs. Investors are paid a regular dividend and get to enjoy further capital appreciation when markets move higher. To make a bet for an upside, the fund allows up to a maximum of 25% into non-investment grade bonds, which comes with higher risks but higher coupons.
Poh says the fund reflects a systematic and disciplined approach to investing. He says it is always better to be invested, rather than trying to time the market. “If the client gives us the funds, we will surely be invested in the market, regardless of the volatility of the market. It is the investment in the market that is more important [as it] is able to generate a much better alpha, than trying to time the market,” he adds.
