Edhec-Risk
Institutional Investment - November 16, 2007

Interview with Nathalie Boullefort-Fulconis

In this month's interview, on the occasion of the launch of the AXA Investment Managers/EDHEC research chair in regulation and institutional investment, we discuss the current and future environment for institutional investment in Europe with Nathalie Boullefort-Fulconis.


Nathalie Boullefort-Fulconis

Why has AXA IM chosen to endow EDHEC’s chair in regulation and institutional investment?

Nathalie Boullefort-Fulconis: The objective of this project is to pursue the partnership initiated in 2005 between AXA IM and the EDHEC Risk And Asset Management Research Centre. Our objective at the time was to support a study which was published in November 2006 about the impact of the IFRS & Solvency II regulations on insurance companies.

This initial partnership was fruitful, and led AXA IM to want to continue this collaboration. Indeed, we remain convinced that supporting academic research studies enables us to strengthen the knowledge of market actors (eg. institutional investors, the asset management industry) and contribute to the emergence of best practices.

As new regulations such as IFRS rules or Solvency II are being implemented throughout Europe, we believe that the impact of regulations concerning how institutions manage their assets will remain a critical issue in the coming years.

As such, we are happy to begin a new 3-year partnership starting September 2007. This partnership will be based on several research topics, which will be jointly defined. Our common ambition is to increase the awareness of institutional investors not only relative to the development of regulations, but also to the progress of research within the asset management industry in general - and the Asset-Liability-Matching space in particular - in order for them to efficiently face the regulatory challenges ahead.

Do you think that Solvency II will be an opportunity for investment managers to create new products and do new business?

Nathalie Boullefort-Fulconis: The different financial regulations (Solvency II, Basle II and IFRS) are putting at risk the sophisticated asset management techniques currently used by financial institutions, thereby potentially leading to a change in asset mix in the long run. There will therefore also be a need to support institutional clients in this shift of their asset mix in order to comply with the new regulatory environment, while preserving investment performance.

Thus, asset managers will need to take into account the new constraints placed upon their institutional clients’ assets, and develop more sophisticated LDI services. Asset managers who gain an in-depth understanding of regulations and are able to offer tailor-made / best-in-class solutions will have a definite edge in this environment.

How well positioned is AXA IM with respect to the large European pension funds? Is its status as an affiliate of a large international institutional investor an advantage?

Nathalie Boullefort-Fulconis: AXA IM has a large client base of pension funds, insurance companies and banks. The needs and investment issues for pension funds and insurance companies tend to be quite similar.

Therefore, as a wholly owned subsidiary of the AXA Group – which is also a highly demanding and challenging client – AXA IM constantly develops and improves the quality of its solutions, notably regarding long-term investment strategies, investment processes, risk management, and product innovation. For instance, AXA IM is a pioneer in Asset Liability Management solutions and also offers strong expertise in risk management solutions such as Liability Driven Investments.

What are the main changes you’ve noticed in the world of institutional investment over the last few years and what, in your opinion, are your main challenges for the future?

Nathalie Boullefort-Fulconis: The institutional investment environment has dramatically changed over the last years. We have observed four main drivers of change in the recent past: an increasing pressure from the regulatory environment; the persistence of a low-return environment compared to what was experienced in the ‘90s; continuing demographic imbalances and finally, chronic underfunding of most of the pension funds as a consequence of the most recent market turmoil.

In such a context, institutional investors have had no choice but to change their approach to investment management. One of the major changes is the shift from balanced mandates to specialist mandates and a strong question mark surrounding benchmarked management. New investment concepts have emerged such as core-satellite or the alpha-beta polarisation. Also, new investment solutions have been used by pension funds such as for example LDI.

Institutional clients are actively looking for alpha, which has led to a diversification into new asset classes such as private equity or hedge funds and to the demand for total and absolute return products.

In the future, we anticipate that the regulatory environment will continue to have an impact on the way institutional investors approach investment management. (e.g. Solvency II). Demographic imbalances will also continue to weigh on pension funds. Eventually capacity of some asset classes such as private equity or even of some investment strategies will also be an issue.

What European institutional investment markets should experience the strongest growth in the next few years, and is AXA IM going to focus on those markets?

Nathalie Boullefort-Fulconis: At present, the European institutional market is dominated by two markets: the UK and the Netherlands. To quote only two figures: Watson Wyatt estimates the size of the pension fund market to $2,338 BN in the UK and $873 BN in the Netherlands.

We anticipate that these markets will continue to dominate the European institutional landscape in the foreseeable future. Having said that, other markets will also offer opportunities due to the reforms that they have or will implement. For instance, the creation of the FRR (Fonds de Réserve des Retraites) in France has dramatically changed the French institutional market landscape. Another example, Italians can now invest their severance pay TFR into pension funds. Germany is also a market that will grow over the coming years.

The EU’s Institutions for Occupational Retirement Provision (IORP) directive, which establishes the framework for the creation of pan-European pension funds - can also have an impact on the attractiveness of different markets. The most attractive markets will be those that are hubs for cross-border pension funds. However, this trend will be slow to materialise.

AXA IM has developed distribution capabilities in major European countries to answer both institutional and retail client demands. These capabilities encompass a full range of investment expertise from an LDI offering to Alpha engines, in both the mainstream and alternative spaces.



About Nathalie Boullefort-Fulconis

Nathalie Boullefort-Fulconis joined AXA Investment Managers in January 2003 as Global Head of Institutional Business and as a Member of the Executive Committee. She was appointed Global Head of Sales, Marketing & Client Service in July 2005 and Global Head of AXA IM Distribution in July 2007.

Nathalie has 24 years of experience in the asset management industry, beginning her career as an analyst in 1983 at "Associés en Finance" a consulting company specialized in quantitative equity management and asset allocation techniques. In 1993, she joined Paribas Asset Management’s Institutional Business covering French institutions, becoming Head of the French Institutional Business in 1997. In 1998 Nathalie took on the additional responsibility for Product Management. From 2000, after the merger between BNP and Paribas she was appointed Global Head of Institutional Business Development at BNP-Paribas Asset Management.

Nathalie Boullefort-Fulconis holds a HEC diploma (Ecole des Hautes Etudes Commerciales, France) and a post-graduate diploma in Finance from Dauphine University in Paris.


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