Andrea Rossi says investment manager has global ambitions in alternatives and real assets
A family skiing holiday has energised Andrea Rossi, the chief executive of Axa Investment Managers. But his upbeat mood is not solely due to clean mountain air.
Natixis and BNP Paribas last year proposed takeovers of Mr Rossi’s business to parent Axa, the Paris-listed insurance group. But they were rebuffed and Axa said in November that the group’s investment management operations would remain a core asset.
Mr Rossi refuses to comment on the discussions as “market rumours”. But it is clear he welcomes the endorsement of his business from Axa’s top brass.
“Axa IM is a growth business that makes sense for an insurer to own. It is a strategic asset that provides double-digit earnings growth for the wider Axa group,” he says.
Underlying earnings for Axa IM reached €257m in 2017, up 14 per cent on the previous year. But net investor inflows dropped to just €7.9bn last year, compared with a record €56.4bn of new business in 2016. This suggests that the uncertainty over Axa IM’s future ownership did affect client sentiment.
But Mr Rossi says the decline “was expected” after new regulatory requirements relating to Axa IM’s Chinese joint venture led to a number of maturing products not being replaced.
He dismisses any suggestion that growth is slowing, noting that Axa IM’s assets have risen to €746bn, from €547bn at the end of 2013, the year when he first arrived as chief executive. More than half of its assets flow from the parent company.
Mr Rossi says: “2017 was another positive year when we delivered strong investment performance and good service for clients.”
The vote of confidence in Axa IM coincides with a sweeping group reorganisation aimed at improving profits by focusing activity in fewer countries and rationalising business lines. By the end of June, Axa also plans to list a minority holding in its US life and savings business and its stake in AllianceBernstein, the US asset manager. These two businesses will be combined in a new US-listed entity, Axa Equitable Holdings, which is expected to have more than $600bn in assets.
Mr Rossi has set the target of raising assets managed on behalf of external clients to €400bn by 2020, from about €310bn currently. He believes that Axa IM is one of the asset management industry’s “best-kept secrets”.
“All asset managers face pressure on fees. That is why it is important to gain scale and to become more efficient. Everyone is looking at increasing scale, whether geographically or by asset class or via distribution,” says the 51-year-old Swedish-Italian.
About €420bn of Axa IM’s assets are held in fixed income and Mr Rossi insists that its strengths in quantitative investing, multi-asset strategies, structured finance and alternatives are under-appreciated.
“Few people realise that we have $110bn in alternatives and real assets. That makes Axa IM one of the biggest providers in Europe but I want to be one of the largest players globally,” he says.
He says more will be done to build its client base in Asia and the Americas. It currently manages €80bn of US assets but only €3bn belongs to US clients, mostly long-term institutional investors.
Mr Rossi’s immediate priority after his interview is to catch a plane to Mexico where Axa IM established an office in 2016 as part of a push to expand in Chile, Peru and Colombia.
To strengthen its presence in Asia, it acquired Eureka, a Sydney-based property specialist, in 2016. It has also gained approval to launch onshore investment products in China after setting up a wholly foreign-owned enterprise, known as a WFOE, in 2017. It already operated a joint venture in China with Shanghai Pudong Development Bank, which has existed for a decade.
“We just celebrated the 10 year anniversary. Not all the asset management joint ventures in China have prospered but ours is a strong marriage with €80bn in assets today,” says Mr Rossi.
He is also bullish about prospects for Japan where he expects both institutions and retail investors to increase exposure to overseas assets because of the very low yields available in their home bond market. Japanese investors have been enthusiastic buyers of Axa’s Framlington Robotech fund, which has accumulated almost €4bn in assets since launching in 2016.
“This shows the strength of Japanese distributors who need top notch products as well as strong robust performance. The Japanese market has enormous potential for us. It is critical for Axa IM,” says Mr Rossi.
Further investments in new technologies are also planned to advance Mr Rossi’s ambitions to build Axa IM into a global player. It is working on a blockchain project for fund distribution with BNP Paribas Securities Services and has agreed a number of partnerships with fintechs aimed at improving efficiencies across investment processes, operations as well as servicing and distribution.
Research suggesting that funds managed by mixed gender teams have attracted higher inflows has also caught Mr Rossi’s attention. Axa IM launched a Mix In Perspective fund in 2016, which invests in companies that have a high representation of women in management or which have a strong commitment to diversity.
Mr Rossi says the fund’s gender-friendly approach must also be seen to be applied to the business he runs.
“We need to promote gender diversity and cultural diversity. It helps make us more interesting to our clients,” he says, pointing out that the Axa IM executive board has four women members.
“Young women have to be able to see that they have the same chance as men to succeed in asset management and, importantly, to make it to executive board level,” he says.