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Lyxor AM Innovation in investment
Why Asset Managers Fear Investment Banks?
Alain DuboisChairman of Lyxor AM
2Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
SG CIB, first Investment bank to createits own asset manager
In 1998, SGCIB decided to create its own Asset Management Company
It was a new concept coming from an Investment Bank
Lyxor has been created, separated from the existing Asset Manager of the Group
As an Asset Manager, regulated in France according to the UCITS Directive
The business was initially very limited: Structured Funds. There was no reason to be afraid.
But ...
SG CIB
Investment Bank
Investment Bank
Created in 1998
3Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Lyxor AM, a success story
After 10 years Lyxor AM manages more than 100 bn USD
Lyxor AM Assets Under ManagementAs of February 29th, 2008 (USD bn)
Alternative Investments 0.2 1.8 3.1 6.6 14.0 26.7 24.8 30.6 37.92 40.24
Structured Management 0.12 0.5 1.8 5.0 10.2 17.3 23.4 23.2 25.1 31.16 31.00
Index Tracking 0.2 1.1 2.2 4.7 9.0 12.9 24.7 37.74 40.80
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD 2008
0.12 0.73.8
9.119
36
59.1 61.0
80.472.7
106.8
112.0
4Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Lyxor AM: an Asset Manager recognized by the market
Pioneer and leader for ETFs in Europe
A recognized Hedge Funds specialist
Lyxor AM and SG CIB Structuring expertise
recognized several times
2006
2004
5Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Lyxor AM: a Specific Business Model
3 businesses :
Structured asset management and quantitative strategies: - AUM EUR 20.5 billions
Alternative Investments:- AUM EUR 26.5 billions
- world leading managed account platform
- 7th in global Ranking of Fund of Hedge Funds asset managers*
ETF:- AUM EUR 27 billions
- number 2 in Europe
Each business is developing with a lot of innovation
* InvestHedge Ranking Dec. 2006
AUM Breakdownas of Feb. 28 2008 (EUR billions)
Index Tracking
26.88
Structured Management
20.46
Alternative Investments
26.53
6Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
However, Lyxor is an Asset Manager, not an Investment Bank
We see ourselves as Asset Managers not as an Investment Bank
We have strong Chinese Walls with the Investment Bank
We are closer to the world of Asset Management
But we try - like all Asset Managers - to benefit from the environment and ideas provided by Capital Markets
7Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Investment Banks and Asset Managers are both providing Investment Solutions
Investment Banks may provide:
warrants
certificates
structured products
indexed products
advisory
managed accounts
…
8Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
The World of Asset Management offers plenty of Opportunities
Alternative Investments Structured Asset Management
Passive Asset Management (Trackers)
Advanced financial techniques: options, stock lending, risk control
Systematic approach
Active Asset Management
Discretionary approach
« long only » portfolio allocations
"INVESTMENT
BANK
INTRUSIONS"
"INVESTMENT
BANK
INTRUSIONS"
9Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Investment Banks are also Active Managers
Proprietary Trading is similar to Hedge Funds
Structured Products are Dynamic allocations. This dynamic allocation can be achieved: directly: CPPIs etc.
or by buying a pay-off (Structured Products)
From Passive to Active structured Products can be "managed"
indices can also be managed
This stays however very limited
10Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
The Legal Distinction between the two is being blurred
MIFID knows only "Investment Firms" investment Banks and Asset Managers are Investment Firms
both can render the service of "Portfolio Management"
MIFID creates a level playing field between the two same regulations for marketing, inducements etc.
The only Asset Management-specific Directive is the UCITS Directive but a recent interpretation by the EU Commission is that management of a
UCITS by delegation is a service of Portfolio Management
11Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Keeping Chinese Walls is key
Blurring the distinctions may be ok, but:
There is a fundamental difference between: managing with a discretionary mandate
or subscribing to Products that provide pre-determined returns
This is often forgotten in the "level playing field" arguments different products should be regulated differently
there is nothing wrong in regulating differently Structured Products and discretionary mandates
It is important to keep appropriate Chinese Walls between different businesses, where they are necessary.
12Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008
Asset Managers can also enter the business of Investment Banks
Asset Managers have a broad mandate, and can enters the traditional business of Investment Banks and this is the future
Hedge Funds have been doing just that
investment bank traders creating new Asset Management businesses
Structured Funds is a way for Asset Managers to enter the Structured Products business
ETF can also be seen as a way for Asset Managers to enter the "listed products" business
We are happy Asset Managers
Lyxor AM Innovation in investment