Matt Shafer, head of international distribution at Natixis Investment Managers, tells Funds Europe about the benefits of Natixis’s multi-affiliate model and business opportunities over the next few years.
How does the multi-affiliate model fit in an industry increasingly dominated by mega-managers?
Clearly the world and the industry are shifting toward solutions and away from product, and I think that that reality fits the multi-affiliate model.
It also aligns to what we’ve been doing as a firm for many years now, which is a very solutions-oriented consultative sales process providing guidance from a portfolio-construction perspective and not pushing product.
What that’s allowed us to do then is be viewed in the industry as a true consultative solutions provider and not a product-pusher, which is where the industry as a whole is going today.
What that means for the multi-affiliate model is, when you have this wealth of investment expertise that we do, that we can offer great, strong, more boutique-style asset managers through a global distribution platform in a consultative and solutions-oriented way. So, having these affiliates either primarily or fully owned by Natixis with the leverage of their global distribution platform is incredibly powerful.
Is specialisation a key to survival then as well, in that case?
Yes, I think so. There’s a significant amount of desire still in the industry, especially from wholesale banks, to provide differentiation and specialisation and to not create a bunch of ‘me too’ products and investment capabilities.
You see, of course, that convergence of big asset managers continuing to win, but when we go out and talk to clients, in the end they are always looking for specialisation and differentiation, and it can be harder or more challenging for a private bank, for example, to access that capability.
That is why firms like Natixis with the multi-affiliate approach are quite attractive to a private banking client, for example, because we can offer them access to that specialisation differentiated asset manager, whether it’s a highly active long-only equity strategy, private debt or real assets. We offer access to all of those capabilities through our model.
So, in a sense, it’s a completely different client experience in the end?
Yes it is. There’s a whole lot of different ways that our clients can access asset management companies, and of course a lot of serious competition in the industry.
But we feel strongly that the value proposition in the group and having access to all of those independently operated asset management companies who may take a very different view from each other, don’t follow necessarily the same house views but are operating on their own and have access through this global distribution platform is quite powerful.
How does the model help address industry fee pressure at the moment?
It helps where we can provide scale by offering multiple asset managers through the platform and provide multiple asset managers, especially smaller asset managers who might use the global distribution platform to provide them with scale, so that they’re not running their own smaller management companies.
It also means they’re not running their own operational infrastructure and are leveraging that from Natixis’s global distribution platform.
That includes not only sales, marketing and all the front-office component but includes middle and back office as well.
There’s an industry trend at the moment towards having fewer trusted partners. What will that mean for the industry in the future?
That’s the nature of the strategic partnership programmes. Of course, banks have been squeezed for many years now on resources, they’ve had to look outside of their own firms for more support and frankly help to continue to grow their business and they know that many asset management companies offer a lot more than just investment products.
Again what that means ultimately for asset management companies is it’s doing more than pushing product or offering solutions. It could mean help on the portfolio-construction side, it could mean offering an outsourced CIO, it could mean offering a dedicated investment product that is exclusive to that client’s network, it could mean education and training.
Where have you been seeing most demand recently?
The world is very focused on continued wealth generation in Asia-Pacific, and we have taken part in that for sure. We’ve seen a significant amount of growth in Asia ex Japan over the last couple of years. We have also invested a lot in Asia and have opened a regional hub in Hong Kong, hired people from Seoul to Sydney and all points inbetween and continued to see a great amount of growth there, especially in Singapore and Hong Kong.
We continue to grow in Europe as well, which is more of a core area for us, along with the US domestic business.
In Europe we have seen growth in markets that we have only expanded into in recent years, like the UK and Germany, while also seeing southern Europe growing in countries like Spain and Italy in recent years.
A significant amount of our activity is focused on ESG with our clients, but we see now a significant amount of business going into ESG integrated solutions.
What major trends are you expecting to see over the next few years?
I think the winners in asset management in the next three to five years will be those that are dedicating themselves to providing ESG solutions to clients, not only ESG-rated funds but truly being an ESG solutions-oriented asset management company.
There has been a big shift toward sub-advisory and we expect that to continue, mainly in core equity and fixed income, but a big shift away from funds to mandates, and we expect that trend to continue.
There will also be more demand for alternatives and clients looking for alternative sources of returns, looking for less correlated solutions to the markets in their asset allocation, both from a liquid and illiquid perspective.
I also expect that there’ll be more product creation and there’ll be different vehicles that allow clients access to private markets capabilities.
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