French dressing

Yuri Bender examines the inner workings of the BNP Paribas distribution machine.

The likes of Crédit Agricole, Frank Russell and Société Générale have been casting jealous glances at the volumes generated from the French market by Marc Raynaud, mastermind behind the BNP Paribas distribution machine. The BNP headquarters, on Avenue Kléber, is within shouting distance of that world-recognised Parisian landmark, the Arc de Triomphe. It is Mr Raynaud’s aim to get similar international recognition for the BNP PAM brand. When BNP launched its Yéti, K2 and Booster guaranteed products earlier this year, the bank surprised rivals by pulling in E1bn in a matter of weeks from high net worth customers during a period of market turmoil. Its position as top French distributor is now in little doubt. “We admit these structured products are not very sophisticated, but they are exactly what the public wants,” admits Mr Raynaud. “From a purist’s point of view, we would prefer to sell equity funds, but the current market does not help us.” These products are sold by the bank’s French branch staff direct to customers. While competitors put the success down to a well-rewarded workforce and innovative advertising, Mr Raynaud credits the product design team. “All French distribution is through our branch networks, which have their own objectives. But sales are not purely down to incentivisation. It is also a question of having the right product at the right time. At the moment, it is difficult to sell equity and bond products.” In order to leverage this domestic expertise for cross-border sales, BNP Paribas has first created a new organisational structure, before constructing a separate distribution model for each market. Joint forces The fund management arms of French banking giants BNP and Paribas merged in July 2000, just three months after the banks joined forces. By September of that year, the two Luxembourg ranges of funds, licensed under European legislation for cross-border distribution, had merged. The French domestic ranges, where customer loyalty to two distinct brands was more of a factor, merged in June 2001. “Now we have a standardised offer to our clients,” says Mr Raynaud. At the same time, BNP Asset Management was split into four groups:

• institutional asset management;
• new markets such as China, India and Korea, where BNP must set up joint ventures in order to adhere to regulations;
• risk managed strategies including hedge funds and currency overlay;
• BNP Global funds – Mr Raynaud’s empire – responsible for development and distribution of all mutual fund products. The company has E170bn under management. But of the E70bn in mutual funds, the lion’s share – E55bn – has been sold through the French banking network, which has so far been the most lucrative channel. Now it is Mr Raynaud’s task to exploit the other, less travelled, channels. “We have a segregation of clientele in our approach to distribution,” he says. “Even if we sell the same products to different clients, they are packaged in a different way.” “All these funds are feeders to one single master,” reveals Mr Raynaud. “The difference lies not in the underlying investments, but in the price of the share, fees, brand name and marketing material.” The key offering outside France is the Luxembourg-based internal Parvest range, composed of 70 sub-funds, containing E12bn. External managers are also used for some sectors, such as Neuberger and Berman for US small caps, and IT Asset Management for technology funds. But rival distributors should not be fooled into thinking a major French bank has embraced the concept of open architecture. “People ask us – why not distribute the funds of our competitors? But this is not the case today,” explains Mr Raynaud. “When we sub-contract asset management, we prefer not to give it to someone who is a competitor. If we sub-contract to Axa or Crédit Agricole, why should clients then buy our funds in France rather than Axa or CA funds? We want to give them access to funds they can’t normally get.” Mr Raynaud does not mince his words: “Our aim is to distribute Parvest everywhere.” Sales teams are active in 17 countries, with particular emphasis on Italy, Spain, Germany and Austria. The teams sell to authorised intermediaries – retail banks, private banks, fund management and insurance companies, independent financial adviser platforms, fund supermarkets and retail outlets. “We need to be close to the distributor,” says Mr Raynaud. The sales teams in each country are always composed of local people. Their job is to negotiate distribution agreements and to give support to clients, including the training of distributors. Distributors in Italy, BNP’s most fertile hunting ground since it entered the country in 1996, include the AreaBanca network of specialist wealth advisers known as promotori, and the BPCI bank, which acts as a funds supermarket. The right moment Mr Raynaud explains that the strategy of targeting middle-market Italian banks was because the European currency was coming in, interest rates were going down and investors were starting to realise that treasury bills and government bonds were not giving the same returns as before. “The alternative to bonds were the mutual funds investing in equity and banks did not have their own products, so they had to sub-contract. For Italy, we arrived at the right moment. We had some brand recognition which the Italian banks did not have. “In Spain, they want the Spanish bank’s name. We can adjust to what the people in the country want. We don’t think like Americans, that what is good for America is good elsewhere. Every country in Europe is different.” The only major market which BNP’s funds arm has yet to enter is the UK. “The UK is not Europe and is far from being Europe,” says Mr Raynaud. “Little Frenchies that we are, we are not credible in the UK market, apart from among top professionals.”

Fund facts

• 65 per cent of BNP PAM’s fund products distributed externally are bought by insurance companies, private banks and funds of funds for asset allocation purposes
• 35 per cent are retail sales, directly through banks
• Italy accounts for 80 per cent of BNP PAM’s total fund sales. A huge growth area is groups of IFAs known as Sims. BNP works only with those affiliated to banks or insurance companies
• Out of 900 distribution deals signed by BNP PAM, 350 are in Italy

Models and labels 1 In France, huge volumes of simple fund-based products, such as medium-term guaranteed offerings, are channelled through the branch network of BNP Paribas, staffed by well-incentivised advisers. These are predominantly own-brand. 2 Products sold to BNP’s private banking customers are branded Antin. These include the tax-friendly ‘Pea’, similar to the UK’s personal equity plan, sector funds and funds of funds not currently licensed for cross-border marketing under European legislation. 3 High street retailers: French supermarket chain Carrefour sells its own branded fund products, with assets managed by BNP PAM. But at Spanish department store El Cortes Ingles, the funds are labelled with the BNP PAM name. 4 Italian regional institution Banca Populare di Verona e Novara is BNP PAM’s largest client in Italy. It sells the fund products through its insurance company and fund of funds operation, rather than over the counter.