Edhec-Risk
Institutional Investment - December 08, 2006

Interview with Dominique Carrel-Billiard

In this month's interview, we speak to Dominique Carrel-Billiard, CEO of AXA Investment Managers, notably about his views on the issues addressed in the EDHEC study, "The Impact of IFRS and Solvency II on Asset-Liability Management and Asset Management in Insurance Companies".


Dominique Carrel-Billiard

How does AXA IM view the proposed Solvency II changes in terms of insurance companies’ needs for financial solutions?

Dominique Carrel-Billiard: Depending on the choices made by the CEIOPS on the structure, granularity and calibration of the model, Solvency II will develop to a greater or lesser extent the needs of insurance companies in terms of asset allocation and management style. The risk is that asset allocation would become less economically efficient in the long term if the cost of regulatory solvency in terms of holding long-term assets to hedge long-term liabilities were to become prohibitive. AXA IM has developed investment, allocation and stock picking solutions that are specifically adapted to the problem of solvency and long-term liability hedging faced by the insurance companies among our clients. For example, the stock portfolio risks taken by these companies are different from those on the stock market generally. A decrease in shareholdings would affect policyholders by a rise in the cost of insurance and would have a negative impact on the provision of finance to the economy as a whole. The real solvency risk facing insurance companies is that their operations must include measures to hedge their long-term liability structure, while Solvency II insists on measuring purely theoretical liquidity risks on a short-term basis. The new risk management and asset return solutions that we will propose will be the result of our clients’ choice for a balance between regulatory and economic objectives that contradict each other both in terms of their nature and their economic horizon.

Do you believe the new IFRS framework is likely to favour new active management offerings and, if so, what will they be?

Dominique Carrel-Billiard: We are only in Phase 1 of the IFRS, where assets are valued according to their “fair value” while liabilities will still be valued according to local accounting rules, which are largely based on historical cost, until the beginning of Phase 2, expected in 2008. Our added value is the ability to structure and categorise assets in accounting terms, including when they are held in mutual funds, in such a way that our clients retain their asset allocation and the same sources of return and economic risk on their assets, while minimising the impact on their income statement and balance sheet. To do this, we use all the tools authorised by the IASB, and our know-how in consultancy and the use of derivatives is also a real bonus for our clients. We have developed our management offerings to make them compatible with the solutions for structuring all of our clients’ balance sheets. The IFRS and the new solvency rules have encouraged us to develop and adapt our guidance and management services to all of our clients’ assets in light of the need to monitor the impact on accounts and shareholders’ equity, which is potentially greater than in the past. From a manager’s point of view, we hope that Phase 2 of the IFRS will simplify the structures we have developed in Phase 1 and that the Solvency II rules will be based on information that can be easily reconciled with the accounting data so as to limit the potential impact of these new constraints on the capacity of management companies to generate long-term financial wealth.

Does the fact that AXA IM belongs to a leading insurance company give you a competitive advantage when addressing institutional investors?

Dominique Carrel-Billiard: AXA IM, which is a fully-owned subsidiary of the AXA Group, benefits from the support of one of the world’s top companies in financial protection — a guarantee for us of strength and financial stability. The AXA Group is also one of our largest and most demanding clients. To meet its demands we are constantly developing innovative and ever more sophisticated investment solutions. For example, we have successfully developed such cutting edge expertise as structured finance or private equity. Similarly, we have pioneered ALM (Asset Liability Management) and liability constraint solutions that optimise balance sheet management within the IFRS framework. We have also developed leading expertise in risk management to respond to the investment needs of the AXA Group. All this innovation and expertise is of benefit to all our clients and represents a real competitive advantage in a context that is marked by increasing investor demands in terms of risk management, absolute performance and structured solutions.

What are AXA IM’s strategic plans for the institutional asset management market in Europe?

Dominique Carrel-Billiard: In a very fragmented industry, where the world’s 20 leading companies represent 34% of the market share, there are considerable growth opportunities for innovative and responsive companies. With a 2% institutional market share in Europe, AXA IM’s multi-expert model gives it a real chance to make further gains. Development at AXA IM is superior to that of the market through a system of organic growth based on the promotion of specialised platforms (stocks, interest rate products, alternative investment and investment solutions). In order to provide high-performance and adaptable solutions and products, we have organised our sales approach according to two pillars: product specialists offering on-hand expertise for management platforms and sales personnel based locally so as to be near the client. AXA IM has set ambitious objectives in line with the 2012 Ambition Plan developed by AXA and already has a wide client base of pension funds, insurance companies and banks.

Why has AXA IM chosen to support the EDHEC Risk and Asset Management Research Centre?

Dominique Carrel-Billiard: AXA IM wants to participate in current research in the area of asset management, as we have been doing for several years through other initiatives such as Paris Europlace. By supporting this study — both in the definition of its objectives and through the technical expertise provided by AXA IM professionals — we aimed to support a project which deals with an area that is of great interest to us, as an asset manager for insurance companies, and also to our clients. We thereby hope to contribute to the debate on a subject that is of current importance and which has already impacted upon management behaviour. Our partnership with the EDHEC Risk and Asset Management Research Centre was therefore a natural element of our company strategy.



Dominique Carrel-Billiard is Chief Executive Officer of AXA Investment Managers Group and Chairman and CEO of AXA Investment Managers Paris. He is a board member of AXA Framlington Group Ltd, AXA Real Estate Investment Managers S.A., AXA Investment Managers Private Equity S.A. and AXA Rosenberg Investment Management LLC. He is also Director of AllianceBernstein L.P.

Before joining AXA Investment Managers, Dominique Carrel-Billiard was Senior Vice President, Business Support and Development of the AXA Group in charge of US insurance, and of the group’s asset management and reinsurance activities.

Prior to joining AXA in 2004, Dominique was Partner at McKinsey & Company where he worked between 1992 and 2004. He started his career as an associate in the mergers and acquisitions department of Crédit Commercial de France in 1987.

Dominique Carrel-Billiard graduated from HEC (a French business school where he appeared on the Dean’s List) in 1987 and has an MBA from Harvard University.


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