‘India’s growth will be 6% and it represents a tremendous potential’

How is your wealth split between Europe and Asia?

Today, of the €2 trillion in assets we manage, almost €400 billion is in Asia. We have a little over €100 billion in the US and the rest in Europe. We have a strong diverse customer base with over 100 million retail customers. We work with around 600 distributors and banks all over the world. But we also have a very strong institutional client base with 1,500 clients. We can meet the simple needs of customers in 35 countries, on the one hand, and work with the world’s largest institutions, large pension firms, large sovereign firms, on the other, and we have a lot of them in Asia. .

What do you look for when considering acquisition targets?

We are delivering over 65% of our reserves, which will represent roughly €3 billion by 2025. We will have €2 billion to invest in potential external growth, acquisitions between now and 2025. We will look at any potential acquisitions as long as they align with our overall strategy and as long as it is in Europe or Asia as those are the two main geographies for us. The other criteria for us is that it should give us a return of at least 10% – that’s a financial guideline that we give to the market and we’re very disciplined about that. An acquisition can bring a lot of value as long as it is executed properly. So, this is the fourth part of our strategy. It is ultimately market dependent as we always need a buyer and a seller.

How important is the SBI MF joint venture for the Amundi Group?

SBI MF is important to us not because of its strong profitability but because of its incredible growth potential – it represents the Indian growth engine for the next decade. The growth that we will see in SBI MF in 2022 should be higher than the average growth in the rest of the world. And this is for several reasons. Firstly, because SBI MF is a very well managed company. Second, the world average for the asset management industry is 50% of GDP (Gross Domestic Product). In India, it is just 15%. This shows the growth potential of the asset management industry in India for the next 10-20 years.

When we look at the world today with the energy crisis, the geopolitical uncertainties, the inflation that we see everywhere, we know that we will see a small recession in Europe as well as in the US. We know the uncertainties that exist in China today. So, when we look at the world map today, India is the country where the growth rate will be 6%, probably the best in the world. India today is the fifth largest economy in the world. Therefore, India represents a tremendous potential. India’s population is reaching 1.4 billion, the middle class is growing, and so on. It is not so much what it represents today, even though it is important and growing, it is what will happen tomorrow that is important to us.

As of today, India accounts for half of our assets under management in Asia and we aim to reach €500 billion in Asia by 2025. Due to India’s growth potential, we should be able to achieve this target easily.

What role have you played in the JV with SBI MF?

From Amundi, first we bring our expertise in asset management and risk management. We have increased the capacity to launch ETFs (Exchange Traded Funds). SBI MF is the leader in ETFs in India today. SBI MF has always had a very clear and strategic vision for the industry.

The ETF market was at a nascent stage in India at that time. They called us and asked us to explain how it works. This was back in 2015-2016. We explained them about ETF business, how it works in US and Europe, what kind of team you need to build, what kind of relationship is required with stock exchange, implications in terms of regulation, how to manage risks , and what kind of portfolio manager is needed for this. So, it was a strong acceleration of technical knowledge in a simple and fluid way. Then, SBI MF finds its way – it is not exactly the same in India as it is in the US or Europe. Market dynamics are different, regulations are different.

It is the same with ESG. When SBI MF wanted to launch its ESG fund, its team came to Paris to meet our ESG team. We have over 60 professionals dedicated to ESG related work, in terms of acquiring the database, integrating it into our asset management practice, etc. But the only reason it works is because of the power of SBI in India. I think what we want to bring is the ability to drive growth and the ability to help us grow faster, but the strength of SBI is obviously the main factor.

Another thing we’re bringing to the table is our international expertise. Indian retail and institutional clients are investing mostly in India, which is higher than usual. So, here too, we have a role to play. We have played a role in the launch of SBI International Access-US Equity FOF. We have 500 people in Boston working on US equities, bonds, multi-asset strategies, etc.

How has the SBI MF partnership helped Amundi?

When we sell Indian equities or Indian bonds to our clients anywhere in the world, it is advised by SBI MF as we have a strong asset manager here with in-depth knowledge of the Indian market and Indian companies.

Indian expertise is under-invested in the world today. For bonds, there is a technical reason. This is because Indian bonds are not yet included in global indices. This is unfortunately more complicated because asset managers are always benchmarking themselves against an index, so when bonds are not in an index, there is a greater range. But, Indian equities are in the indices and I am sure that in the next three years, investment in Indian equities will grow exponentially, given the global economic situation and the potential of Indian markets as compared to other parts of the world. ,

How much of your wealth in India is advised or managed by SBI MF?

We run a dedicated Indian equity fund with over €400 million in Assets Under Management (AUM). Apart from this fund, Amundi AUM of close to €400 million held in various funds is advised by SBI MF.

Which asset class has generated the most growth for you over the past five years and where do you see the most growth in the coming years?

If I exclude passives, the growth that happened in the last five years was multi-property and equity, but it was also real estate in the alternative world.

In France, we have a fund that invests 50% in physical real estate such as buildings and 50% in financial instruments linked to real estate such as REITs (real estate investment trusts), or money markets, bonds, etc. Powerful tool for retail clients as it allows them to buy real estate and be liquid at the same time. You can come in and out all the time, which is always a problem for retail customers when they don’t have their liquid assets.

For the next five years, we expect bond investment to increase given the global situation, rate levels, hence the return of bonds. I think multi-assets will continue to be an important part of our growth over the next five years, as it is a way for retail customers to take on a lot of risk without taking on too much risk. Honestly, this is the best way to provide good advice to clients through discretionary portfolio management or advisory.

And there’s one trend that’s been clear for the decade: an increase in real property investment, particularly by retail investors. When I say real assets, I’m talking about real estate, but also private equity, private debt. There is a trend of retailing these assets, which can be very useful in retirement planning when you are investing for a very long time. It is a clever way of getting returns.

Hence, the trend in this sector will remain as retail investors look to protect themselves against inflation. Inflation is under control in India to a great extent, but it is an issue everywhere in the world. I also believe that ESG as a form of responsible investing will grow rapidly around the world.

What’s the mix globally between active and passive and the growth you see for active versus passive?

Answering this question from a global perspective is complicated because markets are so different. Roughly speaking, passive will probably grow twice as fast as active, but I’m still fairly certain we need active. Many of our customers require active. The only way to have a proper asset allocation is to do active asset management. That’s why I still strongly believe in active.

In Amundi, if I were to leave out the big institutional mandates, I would say the split is still 80:20, in favor of the active. This is a lot because of the multi-property. Multi-assets cannot be inactive. By definition, multiple assets require an asset allocation process.

In equities, our split should be 50:50, considering open-end funds.

So, global passives are also driven by institutional investors and not retail?

Yes, even globally, inaction is driven more by institutional investors than retail.

Do you also run quantitative funds in Amundi?

At Amundi, we have quantitative teams for both equity and multi-asset portfolios. We call it the Smart Beta Team or the Equity Competitive Team. The idea is to work with multiple quantitative models, but the main idea is to diversify risk as much as possible.

What is the split of your responsible investment assets (ESG, €800 billion) between active and passive funds?

That’s about half. About €400 billion is in these open active-ended funds. And the other half is mostly in two things. The first is passive management on which we have a large number of ETFs or index funds, where we choose ESG indexes. So we are keeping an eye on ESG indices. And the second part is huge mandates from institutional clients, where we are implementing either our own ESG regulations or regulations that our clients are asking us to implement, if they have specific requirements with respect to environmental or social governance topics. There are demands.

This will be an important part of the development of Amundi. It is very important in Europe and is gaining more importance in Asia. When I look at the flows in Asia; About 25% of flows today are directed towards ESG in the form of responsible investing. We are proud to be a part of it.

Article 9 Funds – Funds Targeting Sustainable Investments – Why Looking for Downgrade Risk in Europe?

Regulation in Europe is evolving at a rapid pace, which is great but a bit complicated for the industry to follow. But, let’s focus on the positive side. Europe has always wanted a strong leadership in the ESG space. Regulators want to ensure that the money invested goes towards responsible investments as much as possible, which can accelerate the transition. So the regulators are giving some guidelines and the industry has to follow them. We will need to realign our fund’s portfolio to comply with the new Article 9 standards.