Thierry Mequillet, Asia CEO at Credit Agricole Asset Management in Hong Kong, is careful to temper his optimism in the face of obviously difficult business conditions for fund houses.

Nonetheless he says the firm can still enjoy a measure of growth thanks to strategic relationships in China and Korea, where it has asset management joint ventures with Agricultural Bank of China (ABC) and Nonghyup, respectively.

The firm is also looking to create a similar relationship in India this year. Mequillet says CAAM has been in talks with potential partners for two years but had been daunted by high valuations demanded by counterparts to establish a funds business together. ôBut now everything has been re-priced,ö he says.

CAAMÆs strategy has been to leverage its roots in France as an agricultural cooperative to forge relationships with similar financial groups in China and Korea. In China, the funds joint venture with ABC is now seven months old and manages around Rmb10 billion ($1.5 billion), in two funds.

Nonghyup (officially called the National Agricultural Cooperative Federation) has meanwhile gone through a modernisation process, with the government replacing older management with a new generation of leaders and introducing merit-based compensation. This is creating a more dynamic partner that can help the funds JV with CAAM continue to win business from KoreaÆs biggest institutional investors, such as Korea Investment Corporation and the National Pension Service, which will continue to outsource.

Mequillet expects institutions around the region to calibrate new asset allocations to match the new economic environment. This means more mandates in vanilla global equities and global fixed income, he predicts. He recognises that many institutions, notably sovereign wealth funds, are also interested in private equity û not a strength for CAAM, although it can market some Europe-oriented funds of private-equity funds.

Despite some bright spots, CAAM, like other fund management companies, has seen its AUM hit hard by severe declines in market valuations. This is especially true for the assets managed in Hong Kong and Singapore, which are mostly Asian equities, an asset class that lost around 60% in 2008. This is forcing the company to think about restructuring its regional presence.

Mequillet would not comment on specific plans, but says the economic recession is accelerating, or making more clear, the difference in opportunities between financial hubs in Hong Kong and Singapore.

CAAM has no plans to fire people in Asia û ôWe are, after all, a European company,ö says Mequilletû but it will realign resources to focus on North Asia, notably China; and it is also outsourcing its back-office functions.

French service provider Caceis, a Credit Agricole Group-affiliated custodian and fund administrator, is setting up operations in Hong Kong in the next few weeks. CAAM is transferring areas such as transfer agency and fund accounting to Caceis, including its back-office personnel. So these people wonÆt lose their jobs, although they will have a new employer. For CAAM, meanwhile, this is an opportunity to replace a fixed cost with a variable one.