Acting continentally, while thinking locally

Asset managers, both domestic and foreign, are lining up for a renewed European distribution push in 2005. These are no longer new entrants to a virgin market. In the early 1990s, Europeans and Americans set up Luxembourg-based fund ranges to exploit European Union Ucits legislation, allowing free marketing of investment products across borders. The wisdom today is that you need a Luxembourg range for pan-European distribution and some locally based, domestically registered products to cater for particular needs in onshore markets. France is a good example. The big houses there hope to build market share in Italy and Germany and have had some success doing this. But they know they must not neglect the French market and its specific needs. One of these is money market products. These have to be regularly updated, packaged and made easily available for French investors. But as the strategy department at Axa Investment Managers in Paris says, there are few economies of scale in marketing these across Europe. Clients of Spanish banks also currently have an appetite for cash. But it is a waste of time trying to sell them elsewhere.While all the French houses have one eye on the markets of their European neighbours, they are nervous of taking their eyes away from their doorsteps. Société Générale, whose cash machines seem to adorn the corner of every Parisian avenue or boulevard, originally gained fame in France by being one of the first banks to channel asset management products through its branch network. Now the bank’s asset management affiliate, SGAM, is beefing up products for this key channel. Structured products and absolute return oriented funds are believed to feature strongly in the new suite, designed for the low-yielding environment.French banks are clearly making tentative steps into open architecture distribution. There are few French banks you can walk into and buy a third-party fund off-the-shelf, as you now can in Germany at Deutsche and Commerzbank and in Holland at ABN Amro and its competitors.But investors can increasingly buy into a fund of funds, including externally managed options, sold by groups such as BNP Paribas, Banque Populaire, and insurance company owned distribution house Ofivalmo.French banks are keen to strengthen profits from internally managed funds and expect asset management subsidiaries to create suitable products for their clientele. Some may still be reluctant to include strangers’ funds on the menu. But the democratically minded French investor will eventually want the best of everything. In many cases, only the banks’ wealthiest clients are offered a full choice of products. Perhaps the time has come to let the paupers taste the rich man’s soup.