Institutional Investment - November 28, 2012

Institutional investors are potential bridges for the demand-supply mismatch in specialised financing - an interview with Laurent Mignon

In this month’s interview, Laurent Mignon, CEO of Natixis, discusses the recent launch of the research chair at EDHEC-Risk Institute supported by Natixis on the investment characteristics and governance of infrastructure debt instruments, his hopes for the research that will be conducted within the chair, and the usefulness of debt infrastructure for institutional investors.

Laurent Mignon

Natixis and EDHEC-Risk Institute have launched a research chair on the investment characteristics and governance of infrastructure debt instruments. Could you tell us why you decided to focus on this area of investment?

Laurent Mignon: Within Wholesale Banking, Natixis has developed a strong franchise in the Infrastructure sector and it seemed normal to assist corporate clients and investors in this challenging and changing environment, and enable the institutional investors to play a larger role in this market.

The aim of the partnership is to deliver original research in the underdeveloped field of infrastructure finance and to present this research directly to institutional investors. Could you tell us more about your hopes for the chair?

Laurent Mignon: The partnership with EDHEC-Risk Institute will facilitate the cooperation between banks and institutional investors by sharing an understanding of the investment characteristics within this asset class and for which there is a relative shortfall of publicly available information, as most of the assets are on the banks’ balance sheets.

What do you think are the advantages for institutional investors of investing in the debt side of infrastructure rather than the equity side?

Laurent Mignon: Debt and equity investments are simply different ways to invest in long-term cash flows of an infrastructure asset with different risk and return characteristics. The difference lies in the priority access of those cash flows. The infrastructure debt benefits from a “project finance” contractual structure and associated security package that brings a strong control on cash flows of the asset that historically have demonstrated a lower default rate compared to corporate but more importantly much higher recovery rate (around 80%). The infrastructure debt offers a priority claims access to secured cash flow with long maturities and interesting yields (which makes it attractive for investors that need to match their liabilities, such as pension funds and life insurance companies).

The research chair is being managed in Singapore through EDHEC Risk Institute—Asia. What are Natixis's ambitions in the Asia-Pacific region?

Laurent Mignon: In Asia, GDP growth and global wealth are both increasing way faster than in the US or Europe. To support the development growth of businesses in the region, Natixis will leverage on its recognized set of expertises (Aircraft, Infrastructure, Energy & Commodities, Bonds, Strategic Equity...) to offer tailor-made financing solutions. In countries with excess reserves and liquidity, Natixis will work in close relationship with investors to structure customized products that match their investments needs. In a low interest rate environment, Asian investors are a significant business target not only for our capital markets activities but also for our financing activities.

In a context where European banks are undertaking stringent measures to reduce the utilization of scarce resources (RWA & USD LT liquidity), institutional investors are seen as potential bridges for demand-supply mismatch in specialized financing (infrastructure/ asset finance). The implementation of the “originate to distribute” business model will improve the value chain to structure transactions and package investment vehicles that better match the specific needs of each investor segment.

What made you decide to partner with EDHEC-Risk Institute on this research chair?

Laurent Mignon: We have found in EDHEC-Risk Institute a very unique research institution which has succeeded in combining high standard academic research with a very practical approach and strong sense of requirements for practitioner-oriented publications.

About Laurent Mignon

Since May 2009, Laurent Mignon is the Chief Executive Officer of Natixis and member of the management board of BPCE.

From September 2007 to May 2009, he has been General Partner of Oddo & Cie, a French investment bank privately owned.

Before joining Oddo & Cie, Laurent Mignon was the Chief Executive Officer of AGF France. He joined AGF in 1997 as Chief Financial Officer and was nominated to be a member of the Executive Committee in 1998. He then has been in charge of the Group’s activities in asset management, banking, life insurance and credit insurance (Euler & Hermes group) before becoming Chief Executive Officer.

Laurent Mignon is Chairman of Coface and Natixis Global Asset Management, a member of the Board of Sequana, a member of the Board and of the Audit Committee of Arkema and an independent Director of Lazard.

Laurent Mignon is 48 years old, married and has three children. He is a graduate of HEC (Hautes Etudes Commerciales) and of the Stanford Executive Program.

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