Pioneering french alternatives

Next to the thorough, yet mild-mannered due diligence conducted by Jean-Luc Paraire’s team, the probing of his sister group in alternatives can seem almost aggressive.

“Our purpose is to find the best hedge funds in the world and assemble them into a fund of funds,” says Jean-Claude Kaltenbach, chairman of the Crédit Agricole Alternative Investment Products Group (CA-AIPG), which runs more than ?10bn. “We make thorough due diligence, which can be very intrusive. If a hedge fund manager is off work for two weeks, we would know about it, if it is a deep issue. What we want to know is if there is a real team at work, or just an assembly of individuals who don’t get along. We want to assess if people really work together, as we don’t like a one-man show.”

His group is now diversifying from its staple hedge fund products into private equity, which currently accounts for just ?500m of total assets. Mr Kaltenbach sees strong dynamics, powered by the French government’s push for insurance companies to invest balance-sheet assets in private equity.

“Life insurance products are one big tax shelter in France, which is very costly for the government. This means the insurance industry has a lot of incentive to comply with the government,” smiles Mr Kaltenbach. “Behind the curtain, there is always the risk that the tax structure will be reviewed again. So the promises they have made to invest in private equity will be met.”

Unit-linked insurance products, known as DSKs, after former French finance minister Dominique Strauss-Kahn, have to invest 5 per cent of their assets in private equity.

So-called FCPI funds, tax-advantageous products investing in venture capital, are also sold across Crédit Agricole’s banking networks. Alternatives, and hedge funds in particular, were almost unheard of in the French market five years ago, says Mr Kaltenbach, keen to boost his private equity fund of funds operation. “It was difficult to get any interest. We were pioneers. Now everyone wants alternatives in their portfolio. We anticipate a similar move in private equity. It will be slow, but it will happen.”

Jean-Claude Kaltenbach