T.HE PRACTICE The appointment of a CEO of a company as chairman is frowned upon, if only because a new boss often finds it difficult to break free when his predecessor looks over his shoulder. Not so with Amundi, Europe’s largest money manager. In May, Yves Perrier, will be CEO He has been moving up since 2010 and Valérie Baudson, his current deputy, takes over the helm as managing director. Shareholders reacted quite well to the news: Amundi’s share price has risen 11% since it was announced in February.
That shows how much they value continuity in the company. Under Perrier Amundi, assets under management and net income more than doubled to EUR 1.7 billion ($ 2.1 billion) and EUR 962 million by the end of 2020. The market capitalization has risen from EUR 7.5 billion in 2015 when it went public to around EUR 7.5 billion and EUR 15 billion. The company is still below the American titans: BlackRock, for example, manages around $ 9 trillion in assets. Still, Amundi is almost twice the size of its closest continental rival and the only European company in the global top ten. The question for Ms. Baudson is whether the company has much more room to grow.
Three factors have underpinned Amundi’s rise since its inception in 2010 as a result of the merger of the wealth management businesses of Crédit Agricole and Société Générale, two French banks. One of these is the € 650 billion in assets that it inherited from its parents, which has given it the ability to distribute costs and generate recurring income. Cleverly, she signed quasi-exclusive distribution agreements with the banks to ensure her role as the main manufacturer of investment products for her institutional clients and to ensure that revenues remained stable.
Amundi then used his excess cash to buy up competitors, including asset management from UniCredit, an Italian bank, in 2016 and Banco Sabadell, a Spanish lender, in 2020. While the portfolios he inherited were able to gain a foothold in retail investments, Bei With higher margins, the sales network could be further expanded through these deals. Amundi made the integration of these entities smoother by developing its own data and portfolio management platform rather than relying on suppliers – the third smart choice BlackRock also made. This has reduced operating costs: at 51% of income, they are among the lowest in Europe.
Ms. Baudson can count on benign months. Households did not have much to spend during the lockdowns and have kept record amounts with banks, some of which should go to money managers. Beyond the short-term crisis, being “the largest and most efficient manufacturing machine” may not be enough, says Haley Tam of Credit Suisse, a bank. Unlike BlackRock, Amundi cannot open a huge domestic market and its growth paths are narrowing.
Some problems are common in the industry. Edges are squashed. The move to low-cost “passive” funds that track an index is accelerating in Europe and reducing average manager fees. The competition is tough. Lower interest rates (and thus returns) make the high fees of active managers more noticeable when the supervisory authorities demand more transparent disclosure of costs and fees.
Other concerns concern Amundi. Some of the contracts it has so cleverly signed with banks are about to expire. History suggests that they are usually renewed, but on worse terms for the manager, says Mike Werner von UBS, another bank. In order to generate additional returns for its customers, Amundi is looking to expand its alternative investment franchise. But it faces tough competition from specialists. And its size is a problem. The company is too big for this comparatively small company to make a big difference in return on sales.
Mr. Perrier is unfazed by any of this. Amundi has room for expansion, he argues. More than half of the wealth still comes from France (see graphic). The company already has a presence in fast-growing markets, such as India, where it has a joint venture with the country’s largest bank, and China, where it works with AgBank and Bank of China, two major lenders. Asian assets of EUR 500 billion are targeted by 2025, compared to almost EUR 300 billion today. “The idea that China will become just as important as France in the next five to seven years is not stupid,” says Perrier.
Organic growth is also possible in Europe. Moving from defined benefit to defined contribution pension schemes, which give savers more discretion in investing, should boost retail investment, says Tom Mills of Jefferies, an investment bank. The great interest in environmental, social and governance products also helps: last year, these accounted for around 70% of Amundi’s net inflows.
Amundi also has around EUR 1.2 billion in excess capital for acquisitions. The company is in talks to acquire Lyxor, Europe’s third largest provider of exchange-traded funds (ETFs) from Société Générale for € 825 million. A merger would make Amundi the second largest supplier of ETFs (after BlackRock).
The company is also venturing into new activities. A department was set up last year to license the software suite to smaller managers and compete with BlackRock (analysts expect Amundi to rate its services more cheaply). The aim is to increase this turnover sixfold to 150 million euros by 2025. This would improve the share price: Mr. Perrier notes that such companies are typically valued at 20 to 22 times earnings, compared to 13 to 14 times the whole corporation.
Well done, all of this could support rapid growth. It helps that Ms. Baudson has experience with the fastest growing parts of the business, especially the ETF Unit that she currently operates. She has relatively little experience with making acquisitions. But when she needs advice, the consummate dealmaker is just a flight of stairs away. ■
Correction (April 25, 2021): An earlier version of this article stated that Amundi’s net income in 2020 was € 962 billion. In fact, it was EUR 962 million.
This article appeared in the Finance & Economics section of the print edition under the heading “Alpha plus”.