Oddo BHF Asset Management is pursuing expansion in Europe and is set to develop its alternative fund range. Its CEO Nicolas Chaput (pictured) explains all to InvestmentEurope.
The relationship of the Franco-German couple is often described as a plinth of the European Union’s unity. It is also a key feature of Paris-headquartered financial group Oddo & Cie, which strengthened this facet of its business by changing its name and logo to Oddo BHF in March.
The rebranding aimed at reflecting Oddo’s new identity as an integrated Franco-German financial services group, following the acquisitions of Meriten Investment Management and BHF Bank in the past two years.
Following the renaming, Oddo Meriten Asset Management has become Oddo BHF Asset Management. The firm managed €43bn of the €100bn in assets under management reported by Oddo BHF as at 31 December 2016.
“55% of Oddo BHF AM clients are located in Germany, 35% in France and the rest on other markets. There is no other such balanced Franco-German asset manager in the industry. Our Franco-German DNA backs the idea that we are eurozone specialists because Germany and France form over half of the eurozone’s GDP growth and more than 60% of the MSCI Euro index,” says Nicolas Chaput, chief executive officer of Oddo BHF AM.
The investment firm has developed itself on the fundamentals of the Oddo group that originally was a French equity broker founded in 1849. The Oddo family and employees own the company.
Oddo BHF AM can trace its asset management expertise back to 1978, starting with European equities and a focus on mid-sized companies matching Oddo’s own DNA.
“The first funds Oddo BHF AM ever launched were focused on French and European equities. Within our “Avenir” fund range, we currently have over €4bn of assets invested in European mid-cap stocks, making us one of the key players in that asset class. The flagship funds are Oddo Avenir (French mid-caps), Oddo Avenir Euro (eurozone mid-caps) and Oddo Avenir Europe (European mid-caps).
“Another characteristic of Oddo BHF AM remains investments in family businesses, which is the core of the Oddo Generation fund launched in 1996. The fund has around €640m in assets under management. Family businesses have another time horizon compared to most listed companies owned by markets and we believe they provide better return on capital over the long term than their listed peers,” Chaput explains.
Until 2010, Oddo BHF AM focused on the French market with a strong client base of CGPIs (French IFAs), banking distribution networks and institutional clients. Its local development was boosted by the purchases of Cyril Finance in 2005 and Orsay Asset Management in 2010.
The firm then started to tackle new markets outside France, as from 2011- 2012 with the opening of a first office in Geneva. Milan and Frankfurt offices followed.
Chaput underlines the strategy has been successful as a switch was observed in Oddo BHF AM’s net inflows between 2012 and 2015.
“French clients historically accounted for 90% of our net inflows, but from the moment we opened offices outside France, foreign clients have represented over 60% of our total net inflows,” he says.
“Germany was rather a challenge for us compared to our successes in Switzerland and Italy. The German market is a closed one and it remains hard to enter if you are not from the country. It was very important for us to get a foothold in Germany as alongside France it forms one of the two largest institutional and saving markets in Continental Europe,” Chaput emphasises.
In 2015, Oddo BHF AM acquired Düsseldorf-based boutique Meriten Investment Management from BNY Mellon. As the German institutional boutique was running fixed income and quantitative strategies, Chaput explains there was almost no overlap between Oddo AM and Meriten IM.
“Once we completed the acquisition of Meriten IM in July 2015, we set up a management board common to both companies with a Franco-German parity under one entity. The best way to integrate two companies in a unique business is to work on the same tools.
“We set up working groups to assess the better practices in Oddo AM and Meriten IM. From October 2015 to June 2016, we achieved implementation of a single IT-architecture for the whole asset management business. That has enabled us to forge a common identity,” Chaput says.
Shortly after, Oddo BHF AM reinforced its position on the German wholesale market. This led to the hiring of additional sales people throughout 2016, including Matthias Mohr, head of Sales for Germany & Austria, who joined from BlackRock to target distribution networks and German IFAs.
The acquisition of Oddo BHF Bank (formerly BHF Bank) last year bolstered the complementary nature of Oddo BHF AM and enhanced the firm’s cross selling options.
“When you make an acquisition, it might be that analysts put your company on a watchlist. That has not been the case as we did not want to reduce team capacities or change investment processes.
“We built our common identity through internal tools we already had prior to the merger. Of course, an acquisition can lead to outflows but we only faced €60m of outflows on €43bn of AUM after the slight reshuffle of Oddo’s shareholding,” says Chaput.
The firm also opened an office in Madrid with two staff, to initially target Spanish distribution networks and fund buyers then local institutional clients.
Regarding Italy, which remains Oddo BHF AM’s third market, additional hires were made to focus on promotori (financial advisers) as well as on banks.
But Oddo BHF AM’s largest inflows last year have come from the Nordic region, where the firm established its presence in 2015 by opening an office in Stockholm.
In addition to equities, Oddo BHF AM runs fixed income and asset allocation funds.
“We have 40% of our assets under management invested in global fixed income of which more than €4bn is in European high yield securities. The Oddo Compass Euro Credit Short Duration has been our bestseller in 2016 and hit the €1bn mark. We have recorded some €200m of inflows since the start of 2017 for this fund,” says Chaput.
“We have worked with Frankfurt Trust and BHF Trust, the investment arms of BHF Bank in Frankfurt, to build global asset allocation funds that have launched on the French market (Oddo BHF Total Return and Oddo BHF Value Balanced). In addition to the fund selection done in Paris, we can rely on US stockpicking operated by BHF Trust,” he adds.
Regarding fund launches, 2017 has so far seen the launch of the Oddo Credit Opportunities consisting of a total return multi-asset credit strategy.
Furthermore, the manager is set to develop its alternative fund range.
“We are going to launch our first long-short equity fund that will be supported by Oddo BHF AM’s stockpicking skills. It will apply a systematic approach,” the firm’s CEO reveals.
“We want to draw on ever more talent and to bolster our fund offering. We have the ambition of developing the firm’s expertise in the alternative segment. We currently have one global merger arbitrage hedge fund. We are seizing all opportunities in the alternative space if they match our DNA.”
Oddo BHF AM does not want to miss an eventual turning point in green investments and has decided to increase its focus on ESG criteria.
“We have hired a specialist to help us outline our ESG policy, and we will work with our fund managers to implement the ESG approach in their funds. In Oddo Generation, ESG is already implemented.
“We have done a lot of research on the ‘G’ component as we have a proprietary tool to rate the quality of the management of companies. We have started with the G and are ready to consider even more the E and the S,” Chaput argues.
Oddo BHF AM’s CEO reveals corporate green bonds might be one of the components the firm’s newly hired ESG specialist will look at in his ESG review.
This feature was first published in the May 2017 issue of InvestmentEurope.