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Being a successful independent active asset manager requires agility and a strong focus

26/05/2020

The asset management industry has professionalised a lot in recent years under the combined effects of the growth in assets under management, regulations and technological disruptions.

At Carmignac, our mission is to offer European investors the best of active and alternative investment strategies to help them achieve their long-term projects. Early on, this ambition led us to assess our organisation and focus on our core capabilities where we differentiate ourselves and where we can bring the greatest added value to our clients.Rather than size, we have always favoured a boutique approach and the search for excellence in a limited number of investment strategies. To achieve these objectives, we have been selective with regards to the development of new investment strategies or additional performance engines. We are constantly looking for the best talent. Our value-added lies in skills such as global-macro analysis, stock and bond-picking, portfolio construction and risk management.

Obviously, this focus on activities where we can bring the most to the value chain cannot be done at the expense of the other areas of our operations. A chain is only as strong as its weakest link. That is why the management of delegation and outsourcing is also a strategic element.

The asset management industry has professionalised a lot in recent years under the combined effects of the growth in assets under management, regulations and technological disruptions. These developments have an inflationary impact on the capital intensity required for our day-to-day operations. Because the quest for excellence is a set in stone at Carmignac, it became clear to us that we had to make choices.

In light of these observations, as the company was created, the decision was made to outsource our back-office operations and partner with key financial services suppliers for the management of our range of Mutual Funds and our Private Client business. It turned out to be an efficient and scalable solution allowing agility as our operations were picking up. From 2008, our assets under management grew significantly from different European countries in which we established our own distribution network. We obviously had to find solutions in most areas of our daily operations to deal with this growth and its implications.

At a time when the regulatory framework was continually reinforced, this led to heavy investments in technology infrastructures to adapt our processes. Encouraged by the successful outsourcing of our back-office operations, we considered the possible outsourcing of most of our middle-office operations, including trade management, position keeping, OTC and collateral management, leaving us to focus on our real added-value and leverage large external providers. These providers have the scale to meet all markets’ evolutions, including regulatory ones, and allow us to benefit from the market’s best practices while managing our cost base efficiently. As an independent asset manager, we are not constrained by group policies. We select and appoint whoever we believe is the best service provider.

We obviously set imperative rules that we should never arbitrate against the quality of the service while always keeping in mind the efficiency of our organisation and our business model. We also had to avoid the pitfall of requiring, from our suppliers, the handling of all the specific processes that had been implemented for reasons most have forgotten. If you really want to leverage the outsourcing of operations to best-in-class partners, you must accept to leave the past behind and trust that the chosen supplier is the one offering best-in-class operational processes.

That is why outsourcing is never a default choice. It requires the total involvement of the teams in charge of selecting the best-in-class partners. From the formulation of the current need and the anticipation of its evolution, through the support of the partner in understanding the specificities of each organisation, to the creation of the necessary conditions for successful collaboration. The partner must become both a natural extension of the asset manager in a seamless fashion and a source of improvements.

That being said, let me tweak a Russian proverb, “Trust is good, control is better”. For our middle-office staff, whose number has remained stably low over time, the outsourcing of their operational tasks meant redirecting their daily activity towards two main tasks: the supervision and control of our outsourcing partners and support for our fund management teams. All controlling activities have thus remained in-house, as we are committed to retaining responsibility for the quality of service we deliver to our clients. At Carmignac, we believe that maintaining a direct relationship with our clients is a permanent requirement when dealing with our partners.

This organisation has proven its relevance and its scalability allowing for the successful implementation of our product roadmap through the expansion of our fund range and scope of investments, as we now manage 21 investment strategies across asset classes. For example, this organisation made it possible to launch, in 2019, a focused range of UK-domiciled funds (Open Ended Investment Company, OEIC) dedicated to UK investors with the required level of flexibility and resources.

With the benefit of hindsight, selecting the right providers, considering them to be true business partners for the outsourcing of our back and operational middle-office, has proven to be a winning and differentiating strategy.

 

CHRISTOPHE PERONIN
Deputy General Manager
Carmignac

Graduated in 2001 with an engineering degree from Telecom Paris and a master degree in maths and finance from the Jussieu University in Paris, Christophe Peronin started his career at Sophis. In 2004, he joined the Structured and Alternative Investment Management department at AXA IM, where he was later promoted to Global Head of IT solutions for Fixed-Income. In 2010, he joined Carmignac to create the Change Management team. In 2014, he was appointed Chief Operating Officer before being appointed as Deputy General Manager in 2018.

 

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