Global outlook in bid for asset expansion

In order to further increase profits, one of the key tasks for Mr Abou-Jaoudé, is to boost the size of funds. While he insists there is “no natural size in terms of assets under management” for a group such as Dexia AM, it is clear that his ideal size, to gain better returns on equity, is much higher than at present. But he already has the comfort factor of having breached the ?100bn barrier, which means that with a well-established IT and research infrastructure, revenues should now increase much faster than costs. Mr Abou-Jaoudé’s objective is to raise assets from today’s ?111bn, to ?150bn by the end of 2009, through organic growth. This he hopes to achieve through a series of moves, both top down and bottom-up. One of the key moves on the distribution side, will be to try to achieve partnerships with global distributors, rather than dealing with sales networks on a “country by country” basis as before. “The idea is to have a global distribution contract, and then develop the agreement locally with affiliates of organisations.” Last year, Dexia AM developed ?10bn in net new cash, and enjoyed a market effect worth ?5bn. The objective for this year is broadly similar, although the market is not expected to be quite so benevolent. However, net new cash generation is expected to step up, with ?12bn slated for 2008 and ?14bn for 2009. “We are expecting bigger numbers, but we are a bigger company today, employing 625 people, which is double the size of four years ago, and the market is growing well in Europe,” says Mr Abou-Jaoudé. Although Dexia AM has a strong position in its European home markets, Mr Abou-Jaoudé hopes that much growth will come from a less opportunistic and more systematic approach in other regions, including North America and Asia. In addition to picking up mandates in the US, he hopes that his mooted purchase of a small American firm, managing approximately ?10bn in equities, will also boost European sourced assets through offering a new strategy for investors. But as well as the big picture management so beloved of many chief executives, Mr Abou-Jaoudé is not afraid to roll up his sleeves and get his hands dirty with some in-depth housekeeping. Currently, an average fund in his 258-strong product range contains ?185m, which is approximately ?10m below the typical Continental figure. Through an “active management of the product range,” the management team managed to double the assets in an average fund from 2002. But the latest target involves boosting each fund to at least ?200m within 12 months. One of the ways to do this will be to register the funds in as many key European markets as possible. In 2004, just 25 per cent of Dexia funds were registered for distribution in more than eight European countries. Today that figure is 45 per cent. “We want more than 50 per cent of our products registered in more than eight countries, to help the distribution business,” says Mr Abou-Jaoudé. “Our range is currently too big, and our assets are not enough.” Sources within Dexia AM have claimed that they want to identify 100 core funds, and 150 satellite funds, for occasional specialist sales. “At this time, we are trying to rationalise our range, not by closing down funds, but by identifying which are core funds, to be sold by every sales channel, and which ones are to be sold only in one country, or through a specific sales channel,” says one product specialist. But this housekeeping is an operation which requires great sensitivity, because funds demanded by customers of the retail network cannot be easily closed down. “We need to adapt to the interests of the retail network,” says Mr Abou Jaoudé. “It is very difficult to stop a product if there is a retail demand for it.”