Honing systems for tough markets
The systematic approach favoured by Kirk Hotte means that a plan of action is identified for each country. Axa IM has sourced ?164bn of its asset from outside France. In 2004, the strategy team at Axa IM, which was headed by Mr Hotte at the time, before his transfer to the distribution department, decided that in Germany the sales team would concentrate on selling the Immoselect property fund, in addition to products managed by the quantitative led Axa Rosenberg subsidiary.
“Immoselect is a very successful product,” reflects Mr Hotte, “almost too successful. We are getting calls all the time from people wanting to put large sums of money into that fund, and we have to manage that successfully.”
Immoselect, which is now nudging ?1bn, pulled in more than ?320m in the first seven months of 2004 alone, after which time the German sales team under Christian Wrede, stopped promoting the fund and began diverting new money into the Axa Rosenberg pan-European and Japan small-cap funds.
Other key markets include Italy and the UK. Mr Hotte recently hired extra staff in Italy, where Axa IM has a strong pedigree selling institutional strategies to pension funds and foundations. His focus there will be on the main banking groups, although like its competitors, Axa has been hit by substantial outflows from equity funds in Italy.
The UK market is one that Axa IM simply cannot escape from. “It’s one of those markets you can’t really avoid,” sighs Mr Hotte. “It is a good place to develop good practices and good products,” he adds. There is reservation at the highest levels about the UK, with Axa IM’s CEO Nicolas Moreau having famously told PWM that if Axa had not already been in the UK when he took over in 2002, he would probably have steered clear.
“The UK market is very tough, highly regulated and very competitive, very much driven by products and fund performance to get inflows,” says Mr Hotte. “The years 2003 and 2004 were quite disastrous there in terms of net inflows into unit trusts. That said, you can’t avoid being present there.”
The current strategy at Axa is that although there may be some benefit to distributing funds through retail banks who opt for a multi-tied approach, choosing a small number of “privileged providers” as depolarisation regulations being to bite, profitability will come from elsewhere. Namely institutional money, flooding in from pension funds into the group’s liability matching products, and also retail money funnelled into unit linked products sold by the group’s life company.
There appears to be less of a certain plan for distribution in the Nordic markets, where Axa Rosenberg has been successfully bringing in institutional money.
