Many unknowns still persist at this stage

An industrial agreement that combines the efficiency of the production with the power of the distribution. "It is by these words that George Pauget, General Manager of Credit Agricole SA, has called the creation of a joint venture asset management between Bank and Société Générale. The joint press release of the two groups was eloquent, with references to the industry: "industrial tool", "production"... But third-party management originally remains a service activity. Is it to say that, as of a certain size of assets, it must choose an industrial model to thrive or even survive

Today, "the search for critical size in a context of crisis, declining markets and falling margins imposed on many actors, finds Charlotte Quiniou, Director in the management of assets of the credit rating agency Fitch Ratings Department. "The transaction between SGAM and CAAM is emblematic of the movement and will not be in itself the catalyst for restructuring in France or in Europe, which are a necessity regardless of this rapprochement." With less control over their income, the players try to have more on their costs by their sharing, management is a business to significant fixed costs, which represent, according to the groups, between 30 and 40 of their total costs. This trade was able to give the illusion of issuing significant, and recurring income regardless of the environment.

Common points

"Asset management is not, as such, a really strategic activity for French banks in view of its low synergies with their other professions", said Guillaume Jonchères, President and CEO of Cogefi management. Officials of the line business management of some banks to network assets have also integrated the Executive Committee of their establishment after a certain period of time. A sign that this trade was not really at the core of their strategy and their priorities. So he did the cost of refocusing when the crisis is installed. Suddenly, it recalled that this activity could be consumer of own funds, as testified the woes of management companies to mobilize their balance to ensure liquidity of some of their funds in difficulty. SGAM Alternative Investments (not included in the joint venture) tests on the monetary funds dynamic caused harm to SGAM. Sometimes also in a weak position in this association after two difficult years in which it were battered and eroded its profitability. It does weigh 30 in the new joint venture with Perier Yves, the current President of CAAM, will ensure the branch.

Two management companies have common points: an approach rather centralized their organization, a European bias and a part of their assets (just under two-thirds) invested in bonds and the currency. They find it difficult to be overall performance on the shares, with the exception of niches. They also lost both mandates before their term for the Reserve Fund for pensions (RIF) as a result of inadequate performance. Their clientele is also composed in majority of individual investors. These commonalities will facilitate their reconciliation but they will also translate into many duplicates must be eliminated. The rationalization of the ranges of funds is a site in itself, as the compatibility of both the computer and technical platforms.

A new "factory".

Both groups use the Sungard company Decalog but Credit Agricole Asset Management has migrated to the Murex early 2008 system. "The bulk of the assets of the two entities is easily adaptable and"industrialisables"traditional activities where economies of scale is all the more important." "It is also significant to note that, in the joint venture, SG has not provided Lyxor, including margins and growth dynamics are more important," said Aymeric Poizot, responsible for the management of assets of Fitch Ratings Department, for which "the new set benefit a broad clientele, relatively captive, a mattress of significant security in this environment."

The new "plant" will thus loaded supply products the networks of the two banks, either in France or abroad. However, the commercial performance of the two banking groups on their own market these past two years, at least mixed (see illustration), encourage a certain modesty on potential claims to the international.

Institutional customer expects, it see the means that will be dedicated to him. As in such cases, some outputs are expected on the part of concerned actors of the effect of the approximation performance or to comply with certain rules of risk dispersion.

A client institution of two management companies may thus decide to reduce its investment in the new set. Operational complications of such a transaction are not trivial but may be more manageable for CAAM, which has already experienced a reconciliation with Credit Lyonnais Asset Management (CLAM) and therefore in shooting experience. What to avoid some missteps and pitfalls. The difficult economic environment should, in any case, reduce the risk of departures of teams of both companies to base their own shop to try their luck elsewhere.

Many unknowns still persist at this stage. Examples The new joint venture will market it two lines or of CAAM will continue it The fate of Caceis and GSS, the two respective depositories of Crédit Agricole and Société Générale, is also outstanding. Finally, this delicate operation occurs in a context of economic and financial weight and always threatening. Thinning would help.