Edmond de Rothschild AM relishes German adventure
The Rothschild group has been trading in Germany since the 1760s, but is only now establishing a presence there as an asset manager, with the aim of building a complete business.
Firms investing money for wealthy individuals and their family offices are known for making decisions in a considered manner, and not too rashly. That was indeed the case for Edmond de Rothschild Asset Management (EdRAM) when it opened an office in Germany to grow its distribution business there over the coming years.
It has been nearly 250 years since the 1760s, when Mayer Amschel Rothschild first established his business in Frankfurt. EdRAM, based in Paris, opened its own office in the German financial capital this year.
This will have four fund management staff, plus distribution professionals. It recently hired Thomas Gerhardt from DWS Investments to become head of global emerging markets and commodities. He will join in September, reporting to chief investment officer Philippe Uzan. On the sales side, EdRAM has hired Stefan Zayer from Lazard Asset Management, and Selina Sezen, from AXA Investment Managers, to handle a broad range of clients from institutional and corporate to various areas of distribution.
EdRAM Deutschland’s general manager Rupert Hengster says: “Having people in Germany shows our commitment simply to have people in Germany. It is also better for salespeople to have portfolio managers around them in the office.”
Philippe Couvrecelle, chairman of the executive board of EdRAM, says: “In the coming five years, Germany will become one of our most important markets in Europe after France. We want to build a complete business in this country.”
The €14.7bn asset manager’s growth there forms all but part of its international expansion following two years making preparatory investments. Courcevelle adds: “We’ve made all of these investments during a down cycle, as we were strongly convinced of our competitive positioning. We have reinforced fund management teams, developed new areas of expertise and made major investments in risk management and information systems.
“With a competitive range of funds, we are now positioned to accelerate our development abroad and mainly in Germany, where we have great expectations.”
Last year, about 60% of EdRAM’s business was from outside France.
Hengster says EdRAM is fully aware of how large and competitive the German market is. Excluding money market products, it was Europe’s fourth-largest fund market at the end of 2010, with €489bn total fund assets, according to Lipper. France, EdRAM’s home market, has €672.5bn.
In terms of absolute appetite for such funds last year, however, EdRAM’s home market was not a healthy place. French investors redeemed net €73.4bn from collectives, ranking them bottom of 33 European nations; Germans bought net €3.1bn, ranking them fifth.
In addition, Germans have appetite for foreign managers’ product eclipsing almost all other European countries. Foreign asset managers have 13.5% of total market share, bettered only in Italy (14.1% share) and Switzerland (16.8%).
Hengster says: “We will not be going after Germany’s big asset managers – DWS Investments, Allianz Global Investors, DekaBank and Union – but we believe we can compete with them and do plan, over the next three to five years, to be one of the international houses there with a good business, good service and products to offer.”
Hengster adds that EdRAM will not be adopting a mass mainstream approach to building its client base through distribution. “We are not looking to place product in the pure retail market. For us, it is about being an independent investment company with special products for the right kind of clients,” he says.
EdRAM will have three main distribution channels. “The first is segregated accounts for institutional investors, Spezialfonds for insurance companies and savings banks, endowments or corporates. The second is third-party distribution, for example placing existing funds with funds of funds, private banks, family offices and maybe also with a few independent financial advisers. The third is working with consultants.
“We will discuss what we can offer with these investor groups, but we will not for example be putting our funds en masse onto platforms. We are not saying we want to target 5,000 clients, we want to be setting the right tone. The name ‘Rothschild’, with good performance and services, should be something special. We want it to adopt a sensible business plan there.”
Hengster says some managers that tackled Germany’s market in the past wanted to expand there too quickly, “but asset management is a bit like a marathon, and one year is a sensible minimum to set to establish good links to consultants or the institutional side”.