Asian ambitions

PARIS-based fund management group Amundi has big designs on Asia, where the discipline of retirement savings remains relatively nascent in many populous countries. Eric Bramoullé, chief executive of Amundi South Asia, says the group aims to expand assets under management in the Asia-Pacific by more than 60 per cent, from around 303 billion euros (S$491.4 billion) at end-September to 500 billion euros by 2025. To achieve this, it is determined to grasp major avenues in its toolkit including organic growth, partnerships and joint ventures particularly with parties which wield distribution clout, and mergers and acquisitions.

To date, it has partnerships in South Korea and India. In 2020, it announced a new joint venture with BOC Wealth Management, a subsidiary of the Bank of China, which expects to launch products targeted at retail investors.

The partnership is the first foreign majority-owned company in China permitted to offer wealth management products; Amundi holds a 55 per cent share and BOC Wealth Management 45 per cent. Amundi BOC Wealth Management is expected to garner over 60 billion euros in AUM and more than 50 million euros in net income by 2025.

Said Mr Bramoullé: ''Asia is a patchwork of countries with many differences. We have to adapt our strategy to each of the different countries. We aim to expand in countries where we are already in, and also in countries we're not. It's true that for many years we focused a lot on institutions but we want to establish partnerships in the retail space. This is really the DNA of Amundi.

''Partnerships can take many forms ... Everything is on the table. (Our AUM) in Asia is bigger than what we have in the US where we have less than 100 billion euros. Asia is our second pillar and we want to reinforce it.''

Amundi is coming into a crowded landscape where giants such as BlackRock are also intent on a major presence. Mr Bramoullé believes Amundi offers a number of key strengths. One is the flexibility to be able to customise wealth management solutions, including structured products with capital protection or guarantees. Its products include passive low-cost exchange traded funds, giving it the ability to structure lowcost asset allocation portfolios, for instance.

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But by far, among its most competitive propositions is its strength in sustainable or ESG (environmental, social and governance) investments where it is a pioneer. Amundi was among the first to join the UN Principles for Responsible Investment in 2004 and is active in a number of collective efforts including the Carbon Disclosure Project.

Of its total AUM of around 1.7 trillion euros, about 20 per cent or 345 billion euros is classified as responsible investment. Its oldest responsible investment strategy, the Amundi Funds Global Ecology ESG strategy, was incepted in 1990.

Last year it partnered the Asian Infrastructure Investment Bank (AIIB) to launch a US$500 million portfolio dedicated to Asia Climate Bonds, that had set out to accelerate climate action among AIIB members and to address the underdevelopment of the climate bond market.

At the same time, the project expects to mobilise another US$500 million from institutional investors focused on climate change. Amundi and AIIB have developed a first-of-its kind climate change investment framework, which analyses issuers' ability to cope with climate change.

In 2018, Amundi partnered the International Finance Corporation (IFC) to raise US$1.42 billion for the world's largest targeted green bond fund focused on emerging markets. The fund is expected to deploy US$2 billion into emerging markets green bonds over its lifetime, as proceeds are reinvested over seven years.

Mr Bramoullé says Amundi will further deepen its commitment to sustainability in 2021, following a three-year action plan incepted in 2018. It aims to accelerate, for instance, ESG analyses for the securities in its portfolios and benchmarks to 100 per cent, which means coverage of over 10,000 securities. It has targeted 100 per cent ESG integration for all open-ended funds and 100 per cent of proxy votes in 2021 will take ESG into consideration.

''We apply the same policy across the board. The next step is to make sure all fund managers implement this. We decided to adopt a new approach called 'beat the benchmark'. We ask that the fund manager's portfolio should have a better ESG rating on average than the benchmark in order to fulfil its performance target. We have to make sure we are good not just in performance but in the ESG rating as well.''

Mr Bramoullé believes sustainability needs a top-down push from governments which he reckons is already happening. ''Over the last three years I saw the dramatic change in interest across the board in Asia. If your government in the region is not convinced you will go nowhere.''

In Singapore, he believes the turning point was Prime Minister Lee Hsien Loong's speech in 2019 when he pointed to climate change as ''one of the gravest challenges facing humankind''.

Still, he says questions continue to be raised about whether ESG or a sustainable screen in security selection might compromise performance. Research published by Amundi has found that between 2010 and 2013, returns were negative for ESG investing in North America and the Eurozone. Between 2014 and 2019, however, ESG was a source of outperformance.

The paper points out that ESG investing is growing in complexity as new themes emerge - such as the importance of the social pillar. Managers also need to expand beyond just the exclusion of worst-inclass stocks. It found there is potential for outperformance among ''ESG improving'' or ''second-to-worst'' stocks.

Mr Bramoullé believes that appetite is growing among retail investors in Asia for sustainable investments. Amundi's product range in the sustainable category runs the gamut of broadly three types - exclusion approach; best-in-class portfolios; and impact.

''The younger generation and millennials who are coming into the savings industry think far more about the environment ... They are probably now the ones who will trigger the rest of the industry and demand a greening of the shelves of the industry.''