Italy’s Generali is taking steps towards the construction of a multi-boutique portfolio aimed at increasing its assets under management to €500bn by 2020.
As part of its growth plans, Generali launched Aperture Investors at the beginning of September. It is an innovative asset manager with a disruptive revenue model led by Peter Kraus, the former chairman and CEO of AllianceBernstein (AB) and global co-head of Goldman Sachs’ investment management division, who partners with Generali 16 years after being ousted as head of fund manager AB.
Generali will put €4bn into the new joint venture, which is promising a “unique revenue model” with low initial fees – on a par with those charged for ETFs – that will increase just if the managers beat their benchmarks. According Generali, the managers themselves will start with low initial base salaries with bonuses awarded on the basis of performance rather than on the amount of assets under management.
The Italian group started expanding its asset management business last year, saying that it wanted to increase profits from the business from €84m in 2016 to €300m by 2020, while increasing assets under management by a tenth to €500bn.
It has followed what it calls a multi-boutique strategy, aiming to build a portfolio of asset management businesses rather than a single large one. Aperture Investors will be one of those boutique businesses.
Generali announced in August that it was in talks to buy a majority stake in Sycomore Asset Management, a Paris-based asset manager specialised in environmental, social and governance investments, as well as in socially responsible ones.
Through the acquisition of Sycomore AM, which has over €8.3bn in assets under management, Generali would strengthen its multi-boutique leading position in Europe as well as its ESG ambitions, given the French manager is a pioneer in the ESG segment in France (Europe’s largest market for ESG/SRI investment solutions).
If the two firms make the deal, Generali would own the majority of Sycomore but Sycomore’s founders would also remain significant shareholders and its employees would increase their ownership.
The potential agreement builds on the existing business relationship and strategic alignment between Generali and Sycomore AM, and aims at offering substantial potential for revenue synergies, in particular through the acceleration of Sycomore’s international expansion and the development of tailored offerings towards retail and institutional clients.
“This announcement is an acceleration of the execution of our money management strategy: by partnering with Sycomore, we will be able to enrich our offer with innovative investment solutions targeted to our insurance and individual clients, and to strengthen our focus and capabilities on sustainability and responsible investments,” said Timothy Ryan, Generali’s chief investment officer and CEO of asset and wealth management.
Emeric Préaubert, founding partner and chief executive officer of Sycomore Asset Management, added: “Demand for Socially Responsible Investment solutions is rising as investor awareness and appetite increase. Generali’s multi-boutique platform will enable us to capitalise on the significant opportunities that this offers, while also allowing us to retain the unique cultural attributes which have supported our success to date.”
The move follows a multi-boutique strategy that Generali announced in May 2017, in which the firm echoed its plans to bring its assets to €500bn ($580bn) by 2020 from the current figure of €455bn.
Pending the outcome of negotiations, Sycomore’s team would continue to run independently. However, the two firms would form a strategic partnership that would enable them to potentially maximise revenue synergies.
Generali also mentioned ESG and socially responsible investing expertise as key factors that pushed the firm’s intention to acquire the French manager.
Any future agreement remains subject to the approval of Sycomore’s worker council and authorisation of the relevant antitrust and regulatory authorities at the date of writing.