Matthew Shafer, head of international distribution at Natixis Investment Managers, tells Funds Europe about the rollercoaster ride that COVID-19 has put the industry on this year and how it fits into his department’s strategies.
How has the pandemic changed things in 2020?
It’s been a rollercoaster ride for the industry and, most importantly, our clients. We went from everyone throwing virtual darts at a bullseye, hoping an idea would stick, to riding a wave between doing things virtually and in person as restrictions have evolved in some places and lifted in others.
Right now, we’re back into a blend of doing things virtually and in person in Europe. But we find that most people, when doing business, prefer to see the whites of our eyes, even if it’s just doing it on Facetime, Zoom or WebEx. We’re still finding our way on this, but this one is for sure… The asset management industry has to do a better job of meeting the ever-changing needs of our clients, period. We have to adapt to our clients’ thinking and be nimbler and more responsive than ever before.
How are you factoring Covid-19 into your planning for next year?
That’s a difficult one to answer because there is definitely, with sales leaders such as Natixis, along with the leaders in the industry out there, a sense of caution. Marketing has certainly been affected, and I think that’s been the most difficult one to tackle as large asset management companies participate in big events, public relations and advertising campaigns. In terms of business development strategy, it may evolve but is unlikely to change. We’re going to continue to focus on promoting our multi-affiliate model of high active share asset managers, including those focused on Environmental, Social, and Governance (ESG) investing – and that’s not a new trend, but one that is picking up steam around the world.
Natixis has been talking and focusing on ESG for some years now. Is that where you are seeing the most growth?
We’ve spent years working closely with clients to help them develop individual approaches to ESG investing. What we’re seeing right now is all that work coming to fruition. But this is not a trend, it’s a strategic part of asset allocation, particularly in the emerging world, Asia and Latin America, as well as the US.
Has Covid-19 affected that?
There have been huge increases in inflows into ESG or similar strategies after the big bout of volatility in March. Otherwise, equities across the board have been quite strong for us and that’s where we continue to see interest.
Last year, you told Funds Europe that ESG discussions were taking up 50-60% of your time, but that you hadn’t yet seen the fruits of those discussions. Has there been any shift on that?
We continued to see an increase in discussions on ESG with our clients, however the topics have shifted gears. Whenever we have a discussion about ESG, the questions are, “Do you have a rating? Does it have full ESG integration?” These are the standard parts of due diligence from a client perspective. ESG is always part of the story, even if they have different dynamics when it comes to specific queries and searches or how they measure their impact.
Geographically, what have been the drivers this year?
The trend has really, and obviously, been led by the pandemic in terms of flows. We started incredibly strongly in Europe, but there was a considerable slowdown in March. After that, the trend of getting back into the market quickly, from the Asia-Pacific region, has been incredibly strong. That’s really been across the board in equities, fixed income and private assets, both institutionally and on the wholesale side. What’s been interesting, on the wholesale side in the private banking world, is the shift towards ESG. A lot of clients took their money out of those markets in the part of the world when Covid-19 began to strike early in the year, but a lot of that has since come back into ESG-orientated strategies, starting on the equity side but increasingly into the fixed income world.
Where do you see the risks within emerging markets?
There’s been a critical focus on diversification that’s continued throughout the pandemic and the situation in Greater China, alongside greater demand in the wholesale and private banking world. We’ve seen this, too, across northern Asia, Japan, Korea and Taiwan. Clients are becoming more adaptable to working through the situations around them because, let’s be honest, markets don’t stop on a daily basis. That’s why we are continuing to put resources into Asia, because it continues to be a strong driver of growth.
And the other territories?
There have been some changes in Latin America this year, but we do see opportunities for growth in wholesale retail. There are also emerging local markets such as Brazil. So, we continue to see strong opportunity for growth in Latin America.
What about regulation? What’s coming up on the horizon that you are keeping a close eye on?
The honest answer is ‘everything’. Brexit is one that we are watching closely. We’re focusing on distribution, on being able to deliver the private asset solutions into a vehicle or framework to a wide, and widening, client base. That’s both through wholesale and, increasingly, through retail, and we’re looking at different vehicles in order to do that. There’s a huge regulatory aspect to it, depending on wherever the fund is domiciled.
There has been a move towards a ‘strategic reset’ this year from Natixis’s new CEO, Nicolas Namias, as part of a move to restore confidence in the company’s multi-boutique model. How is this being reflected in your planning?
Our strategy has not changed. Our mission as a group is to invest, grow, and diversify; to make the appropriate allocations; and to invest in areas of the business and the markets we operate in a way that will deliver the greatest opportunities for us and our clients.
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