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M&A alone not enough to save fund managers says Amundi architect

Yves Perrier updates

The chair of Amundi, who over the past decade built the group into Europe’s largest asset manager, says that mergers and acquisitions are not enough to solve the challenges facing his industry and cautioned against striking deals in pursuit of scale alone.

Yves Perrier, who served as chief executive of the French group from its creation in 2010 until he stepped down in May, told the Financial Times: “Acquisitions can accelerate organic growth but they can never be a substitute for it. If you do not have skills to bring to the target . . . you don’t deliver synergies.” 

Perrier has transformed Amundi — itself the result of a merger between the asset management companies of Crédit Agricole and Société Générale — into a €1.76tn group through a series of savvy acquisitions and a strong run of organic growth.

Its size and scope means it is often referred to as the “BlackRock of Europe” and analysts say that Amundi has excelled at managing costs and striking tie-ups with retail banking distribution networks.

Notable deals have included its 2016 acquisition of Pioneer Investments from Italy’s UniCredit for €3.55bn, which propelled it into the top 10 players by assets globally. The move strengthened Amundi’s position in equities and included a distribution partnership with the Italian bank to sell its funds to Pioneer and UniCredit clients across Italy, Germany and Austria.

“For me, acquisitions have never been a question of scale,” said Perrier, who was succeeded as CEO by his deputy Valérie Baudson. “It’s a question of reinforcing a business model. The problem for each company is to grow and to grow with profitability,” he added, noting that three-quarters of Amundi’s growth had been organic.

The group’s net income of €962m last year has almost doubled since its 2015 initial public offering and its cost-income ratio of 51.7 per cent make it one of the industry’s most profitable players. Assets under management reached €1.76tn on March 31, up 14.9 per cent year on year.

Investment managers are striking deals in pursuit of scale as they grapple with the pressures of persistently low interest rates, rising costs and downward pressure on fees. Many are seeking to increase their exposure to fast-growing markets like passive investing, private assets and ESG strategies, as well as open up new distribution channels. 

But asset management M&A is fraught with execution risk: cost synergies can be offset by outflows as disconcerted clients yank funds and cultural clashes can destabilise teams of fund managers, resulting in departures or hurting investment performance.

Perrier’s 11-year tenure as chief executive concluded with the €825m acquisition in April of Lyxor from Société Générale, which allowed Amundi to leapfrog German rival DWS and become the second-biggest player in European ETFs behind BlackRock.

Angeliki Bairaktari, European asset managers analyst at Autonomous Research, said that “Amundi is one of the very few asset managers where investors see M&A as a positive catalyst for them. The Lyxor deal seems to be logical and has low execution risk.”

She added: “Amundi’s positive track record with historic deals gives investors confidence.”

Perrier acknowledged the risks as well as the advantages. “Scale also means sometimes that you are less agile, that you create bureaucracy,” he said. “From a managerial point of view, you have to try to compensate to maintain a strong entrepreneurial spirit.”

He poured cold water on the idea of the star fund manager, saying that “in Amundi there are no stars, except Amundi itself”.

“Asset management of course is a people business, but it’s also a business of technology and a business of industrialisation,” he added.

Last year the group created Amundi Technology, which sells its proprietary software to rival asset managers and institutional investors and is targeting €150m in revenues within five years.

Under Perrier, the group focused on Europe and Asia. He said it was “not a good idea” for Amundi to have big US ambitions because “it’s a market which is dominated by the American players and it’s difficult to win . . . we have accepted not to be in the same kind of size as [US giants] BlackRock and Vanguard”.

Instead it is among a growing number of foreign asset managers who are ploughing into China as the country liberalises its financial markets.

Last year it gained approval for the first majority foreign-owned wealth management joint venture in China, through a partnership with Bank of China that will allow it to design and manufacture products to sell to mainland investors.

Some investors have cautioned that western asset managers may be underestimating political risk at a time of strained relations between Washington and Beijing.

But for Perrier, the risk of expanding in Asia’s biggest economy is far outweighed by the potential cost of missing out on the opportunity of a growing asset management market, worth an estimated $18.9tn last year.

He predicts there will continue to be “some confrontation” between the US and China “but I think that the worst is behind us . . . and it’s in the interests of the Chinese to have this partnership, especially with Europeans”.

Private assets is another area that Amundi has flagged for growth. Its real assets division, which includes real estate and renewable energy infrastructure as well as private equity and debt, stands at €56.7bn.

I have never found a way to develop private equity strongly within Amundi,” says Perrier, who last month joined the board of Edmond de Rothschild Group. “It is not the same culture, it’s not too simple to integrate people from private equity in a culture like Amundi.” 


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