Emerging markets yes, but there's money still in Europe: Axa

The €524 billion ($713.1 billion) Axa Investment Managers is keen to source more business from emerging markets, particularly Asia, and is re-jigging its product offering to cater to such investors.

However, Paris-based CEO Dominique Carrel-Billiard says developed markets continue to offer key opportunities as well.

He says that Asia, Japan and the Middle East today comprise under 10% of sourced assets under management.

(According to AsianInvestor’s December edition, Axa IM sources $39.8 billion from Asia and Japan, ranking it 39th among asset managers running the region’s money.)

“Asia is the long-term growth engine, but if you can achieve just 2% or 3% organic growth in a single European market, that can equal the entire size of an Asian market,” Carrel-Billiard says.

For instance, Axa IM has made some senior hires, including former Mercer pensions consultant Tim Gardner and ex-Russell Investments managing director Jon Bailie as global head of distribution. They are meant to help Axa win business in the big UK pensions market, in the Netherlands, and the US, as well as emerging markets.

“To win market share we need to boost our distribution capability or package investment solutions better,” Carrel-Billiard says, citing a strategy that blends equities and commodity futures done in partnership with specialist firm Diapson Commodities Management.

He notes that Axa IM has a large business in alternative investments, including real estate, private equity and structured finance. “This is our core space and we need to enlarge this offering in emerging markets,” he says. Investors are also turning to liquid risk assets such as equities and corporate bonds, after 2010’s flight to fixed income.

The firm has bolstered the staff in its fixed-income division and in Framlington, its UK-based equities franchise, to cater to demand from emerging-market clients, as well as boosted its sales teams in Asia.

“The challenge is to package our regional credit and equities offerings with our global ones,” says Carrel-Billiard. For example, the real-estate division has added eight people to its team to launch more products aimed at investors in both the US and Asia.

But the firm is prepared to go only so far. It prefers to run a platform of products that are centralised (such as Ucits). Carrel-Billiard notes how many governments in Asia and the Middle East are wooing global asset managers onshore, but to be everywhere is costly.

“This is not consistent with the globalisation of financial markets,” Carrel-Billiard says. “It is planting the seeds of further fragmentation and ever-rising costs.”

Axa IM has a joint-venture with Korea’s Kyobo Life and a standalone business in Japan, as well as a real-estate fund co-managed with Sumitomo Trust & Banking and another real estate JV recently established with Ping An Insurance.

Asset management is by nature a fragmented business. The biggest manager in the world, BlackRock, has only about 3% of market share. Axa IM has around 1%, as the 15th biggest player. And this 1% is lumpy, with huge market share in France, and above-average size in Germany, but below average in America.

According to AsianInvestor magazine statistics, Axa IM’s Asia-Pacific sourced assets are 9.4% of total AUM, in line with the industry average (see our December edition for details).

“Further expansion in Asia is possible if we have the right set up, which includes a strong local partner,” Carrel-Billiard says.