Laurent Ramsey is group managing director at Pictet and chief executive of Pictet Funds in Geneva, which administers, supervises and distributes the group's investment funds. The group's institutional and funds business as a whole manages around $200 billion, of which Pictet Funds accounts for around half. Pictet Funds is one of the group's four strategic business lines.

Ramsey joined Pictet in 1993. After two years he relocated to Asia, where he spent time in Hong Kong and Singapore as a senior investment manager, responsible for institutional business development, and subsequently became executive director of Pictet Asia. In 2000, Laurent returned to Geneva as head of marketing and sales at Pictet Funds.

How much of the Pictet Funds business is institutional?
If you look at the institutional side of the funds business, we're talking about $80 billion to $90 billion of assets under management, including retail, institutional, hedge funds and so on. It's a major chunk of our business that's grown substantially over the past 10 years. Ten years ago the fund business represented 20% of our institutional franchise -- today it's 80%.

This has come on the one hand from the ramping up of our distribution activities and the opening up of banking and financial architectures in Europe and elsewhere. It is also a result of the increased appetite for the investment fund vehicle from almost all market segments, including from institutional clients who traditionally would have given you more segregated mandates than investing in portfolio investment vehicles.

Where is the majority of your funds business sourced in Asia?
By far the biggest market for us is Japan -- we're now the largest foreign mutual company in the country, with $20 billion of AUM there. [Pictet obtained its licence to create and distribute domestic funds (investment trusts) in Japan in 1998.] Even though it's been a tough market for us for many years, in the past five years we have really reaped the rewards from our long-term view of the market.

The domestic equity market was difficult, the interest rates were at zero, economic growth was not there, the yen was stronger for many years, so the whole climate was not very prone to investment. Little by little investors have taken more risk -- a lot of education had to be put in place, we do a lot of investment seminars with our distributors to explain the benefits of diversification; first through, say, eurobonds then more aggressive products.

It's been a very gradual initiative where we have to hand-hold investors; you had to understand that Japanese investors are not as savvy as probably Hong Kong investors, who are much closer to the market. You need to deliver something that is simple. If you went to Japan five years ago and spoke about alpha and beta, you would not have had any success.

Beyond Japan, we've built our fund distribution coverage out of Hong Kong starting three years ago, so this is a much newer initiative. In Asia ex-Japan, the largest markets are Hong Kong, Singapore and Taiwan.

Where do you foresee the fastest growth globally in AUM?
We aim to double our assets every five years -- our long-term objective is 15% compound annual growth, and we have exceeded that in the past 10 years. We never enter a market unless we feel we can reach $3 billion to $5 billion in assets in a reasonable time frame -- say, within 3-5 years. We build up the franchise step by step -- we don't try to have a big win and then if it doesn't work, pull out. We're not in the trial-and-error business.

The most promising area for us, as far as developed markets are concerned, is one place we're not present and want to focus efforts: the UK. We believe we have a good value proposition for the market. There were a number of reasons we weren't present before, mainly tax- and regulatory-related.

As far as regions are concerned, we see the most promising growth in Asia and Latin America on a mid- to long-term basis. We set up the office in Asia three years ago, and then the world experienced the worst crisis ever. But that doesn't change the fact -- and my current trip here confirms it -- that the potential remains intact in the region.

Taiwan and Hong Kong are very big markets as far as mutual funds are concerned. Korea is a very interesting market, although the regulations tend to change more often. China is starting to open up.

What about some of the other developing markets -- Indonesia or Malaysia, for example?
We're looking at them. Some of our partners are pretty active in Southeast Asia, so through our partnerships we go there. We tend to develop with our clients -- so if we work with a bank or insurance group that says 'we have a sizeable distribution business in Indonesia, we need you to extend your coverage there', we'll go with them.

But if you ask me where the big potential is, it's more in North Asia than South Asia. We tend not to be willing to spread the jam too thin -- then you end up trying to do a lot of things, but not actually doing very much. Pictet has 3,000 people worldwide, so even if we have sizeable assets, we can't do everything; we have to prioritise.

On a different topic, there's been a lot of debate in recent months about the relative benefits of active versus passive management of funds. Have you seen investors show more interest in passive funds, for example?
If you look at fund flows in Europe, especially in the core equity space, core investments have been passive funds -- index trackers or ETFs. There is the whole debate about whether the asset management industry has added value. One certainty is that, net of fees, if you hug the benchmark, you're always going to be below the benchmark, so if you're active you need to be really active. There is no space any more for benchmark huggers -- if you go active, you must go highly active.

And if, as an investor, you want to capture the alpha of a fund manager, you have to give them time to deliver that alpha. If you're taking tactical exposures to the equity market -- and 12 months is a tactical exposure -- you should clearly go passive.

There's a tendency to pick the manager when they in the first decile -- not even the first quartile -- in the core equity space and then fire them when they're in the fourth quartile. If you have identified a good fund manager over a long period -- and in the core equity space you have managers with 10-year track records -- you should invest in them when they are fourth quartile, if you are convinced about their process and track record. The turnaround rate for is really good among the best fund managers, if you look at it.

In the end, it depends what you want to do: if you want to get exposure to beta, go passive; if you want to play the market, go passive. If you want to be invested in an asset class for the long term, go active. But often the opposite happens: strategic exposures are passive and tactical exposures are active. I think it should be the other way around, because when it's strategic you give it time, and when it's tactical you move too fast.