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Axa wants a piece of the action as Asian investors target Europe
ANDREA Rossi doesn't buy into the story that Europe is a dead end for growth. In fact, he sees luring Asian investors to his continent as one of the key ways that Axa Investment Managers will expand in years to come.
The CEO of the Axa SA unit thinks that institutional and retail investors from Asia's booming economies will increasingly want insurance and investment products. And more of them will want to buy from Europe, he said, because the political outlook is becoming more stable, growth is picking up and banks are in their best shape for years.
"Four years ago, most non-European investors were looking at Europe thinking it's going nowhere," Mr Rossi, a 51-year-old Swedish-Italian, said in an interview at Bloomberg's London headquarters. Now, "Japanese pension funds and insurers are all increasing their asset allocation to Europe, and we're taking a lot of that." Rising disposable income and ageing populations are likely to drive spending on pensions and investments in Asia, where the number of middle-class families is projected to grow by as much as four times by 2030. China is already the world's second-biggest economy and India is starting to approach the UK and Germany in terms of output.
Axa Investment Managers has only a relatively small foothold in Asia at present and still generates 84 per cent of its revenue from Europe. Since becoming chief executive officer in 2013, Mr Rossi has increased assets under management by almost 200 billion euros (S$323.7 billion) to 746 billion euros.
Mr Rossi said that he is particularly interested in growing the firm's third-party assets, which currently stand at 42 per cent of the total - and for that he needs new markets.
The firm has started joint ventures in Shanghai, Seoul and Mumbai, and is betting particularly heavily on China, where it last year received a Wholly Foreign Owned Enterprise licence, allowing it to run a business independently. The company's Hong-Kong based Axa IM Chorus team, which has more than 30 staff, launched its first investment strategy last year.
Mr Rossi attributed his firm's success in taking these steps into Asia partly to its European roots, which he said gives it an inherent advantage over US asset managers when selling European exposure.
Simplifying the firm's message to clients and "becoming a little more Anglo-Saxon" in its marketing has also helped, Mr Rossi said. And building from a relatively low market share in Asia means that "it's pretty easy to double and double going up" he said.
Also key to the money manager's future is industry consolidation. Axa confirmed last year that it had been approached by several firms with a view to acquiring the asset management business.
Axa was linked recently with Natixis SA - a deal that fell apart, according to people familiar with the matter. But mergers and acquisitions (M&As) will continue to be a theme, Mr Rossi said, as firms struggle to cut costs and deal with increased regulatory scrutiny.
"There'll be a lot of consolidation," he said, adding that the industry's biggest challenge is lowering unit costs. "I can probably manage double the business with pretty much a similar number of people" to what the company has now because of the benefits of technology, he said.
In an M&A situation, "our strength is to have Axa behind us" for its risk and compliance framework, Mr Rossi said, adding that since he arrived at the company, he has tripled the number of compliance staff.
"I can go to a boutique and say, listen, you are doing one billion today," Mr Rossi said. "If you were with us, I can give you the strength of distribution, I can give you seed money."
He does not expect a free ride in building the business, though, and predicts that Asian money managers will increasingly compete with Europeans for the top 20 global positions in the industry. The market is currently dominated by US firms with, he said, only a handful of European players at the top.
Mr Rossi reckoned that the Americans will maintain their dominance but that some Chinese firms - possibly names that are not well known yet - will emerge on the global scene.
"In five years' time, how many of those are going to be left?" he said. Of the big European companies, "I hope some of us will still be there". BLOOMBERG