Recession is looming, says Natixis Global AM chief executive
The chief executive of Natixis Global Asset Management (NGAM), Pierre Servant, believes a global recession is looming and is already harming the commercial real estate sector globally.
Despite his confidence in NGAM’s business model and the stability of its parent groups, BPCE and Natixis, Servant believes an imminent recession can only be bad for business.
A recession “is not going to be pleasant but there is nothing I can do about it. Everyone will be affected and it won’t be good for profits,” Servant warned.
Commercial real estate has already been affected by the prospect of a long-lasting economic downturn. NGAM accesses this sector through its affiliated investment management company, AEW Capital Management.
According to Servant, NGAM was expecting investor interest in the commercial real estate sector to return by mid 2011. Market volatility, renewed concerns about European banks and disappointing growth statistics throughout August have frustrated these hopes and investor demand is low, Servant said.
The one region in which commercial real estate remains attractive is Asia, Servant added. There are greater opportunities to invest there as well as a wider pool of interested investors, he said.
As a result AEW is “stable and profitable” but is not experiencing the same growth as NGAM’s other affiliates, Servant admitted. NGAM currently allocates 5.5% or €29.2bn of its total assets (€533bn) to real estate.
NGAM recently announced its acquisition of French hedge fund advisory firm Darius Capital. Servant believes continuing to boost NGAM’s alternatives expansion is the best way to adapt to the current economic climate.
“We have been expanding our alternatives offering since 2008 and are far from being finished. Core long only investment is heavily challenged and we need to keep diversifying our products,” Servant stated.
While acknowledging a potential global recession would be damaging for the NGAM business as a whole, Servant is not worried about the stability of its parent company, French bank BPCE.
BPCE’s corporate, investment management and financial services arm, Natixis, is about to be expelled from the CAC 40 on September 16.
The Index Steering Committee of NYSE Euronext Paris has decided to replace Natixis with Safran, a French conglomerate focused on defense, aerospace and security. Servant said Natixis’ exit from the CAC 40 will have “no impact” on NGAM.
Servant added that the backbone of BPCE’s business lies in the retail banking market which remains “sound”. He says the bank has reduced its risk exposure since the 2008 financial crisis and has less risk exposure than other banks, notably in the ‘PIIG’ (Portugal, Italy, Ireland and Greece) economies. “I believe we are on the right side,” he said.
BPCE is France’s second largest banking group with €1,048 billion of assets and tier one capital of €38.8bn. Its share price has dropped over the course of 2011 from €103.73 at the end of 2010 to €99.13 in September 2011.