Performance Measurement - April 16, 2007

Alpha League Table France

The reference rankings in Europe

The Alpha League Table compares asset management companies on the basis of their capacity to deliver positive alphas. The table’s leading companies are the best providers of alpha, i.e., those that offer a good compromise between the value and frequency of the alphas produced. This second ranking for France reveals considerable stability in the production of alpha, with 17 of the 25 ranked companies appearing for the second time. This confirms that the alpha being produced is the result of a management process that is more to do with the talent of the asset managers than with the configuration of the markets.

Fifty companies were considered for the second Alpha League Table in France. Only the top 25 were selected, based on the number of funds analysed and the regularity with which alpha is created.

ODDO Asset Management takes the top spot with an alpha frequency rate of 51.4% and average alpha of 3.2%, making a final rating of 1.6. The company is a fully-owned subsidiary of the group ODDO & Cie. It is the largest independent financial company in France, offering services on the capital markets, consultancy services (to issuing companies and family-owned companies in particular) and asset management and private wealth management services to institutional investors and companies.

Second place goes to HSBC Private Bank France, the entity that covers the private banking activities of HSBC France. With a frequency of 41.7% and average alpha of 4.6%, HSBC Private Bank France received a final rating of 1.4. Martin Maurel Gestion finished in third place. This subsidiary of Banque Martin Maurel specialises in wealth management. Its alpha frequency is just above 28%, with an average figure of 4.6%, leaving the final rating at 1.4.

Most of the top ten places are awarded to independent companies. The various asset management companies divide up the lion’s share with more than six of them receiving an honourable mention. EDRAM, an asset management subsidiary of Compagnie Financière Edmond de Rothschild, takes fourth place with an alpha frequency of 47.3% and average alpha of 2.7%. The portfolio management company Comgest is ranked fifth with a frequency figure of 43.6% and average alpha of 3%.

Behind Banque Martin Maurel, the second wealth management bank in these rankings is Banque Palatine, whose asset management branch, Palatine Asset Management, ensures its place in the top 10. Banque Palatine, which is a subsidiary of the Caisse d’Epargne group and the Italian Sanpaolo IMI group, takes sixth place with an alpha frequency figure of 30.7% and average alpha of 4.4%. The insurance sector is represented in the top ten by MMA Finance and AXA Investment Managers, 8th and 9th respectively, while Financière Atlas and CCR Gestion take the 7th and 10th positions.

The lower half of the table is partly occupied by banking networks, with HSBC France — through its asset management firm Halbis Capital Management (France) — in 11th place, CIC (CM-CIC AM), which, like last year, holds the top spot among the French networks just ahead of BNP Paribas Asset Management (16th), IXIS Asset Management (17th) and Natexis Asset Management (18th), which is a subsidiary of Natixis, the leading French asset management company.

For the whole of the equities market, the proportion of funds that deliver significant alpha is around 30%. This frequency measure provides investors with the probability that a fund will deliver a performance that is superior to the remuneration that might be normally expected from the risks to which the portfolio is exposed. In this context, the result produced by State Street Global Advisors (France), with an alpha frequency of 57.5%, is particularly remarkable. A special mention is awarded to this company for showing the highest level of frequency on the market and in this particular ranking. With an average alpha rate of 1.2%, State Street receives a score of 0.7 and is ranked 19th overall.

Two asset management companies are also present in the second half of the table: Lazard Frères Gestion (21st) and Meeschaert Asset Management (23rd). It is also worth noting the strong presence of certain insurance companies: Aviva Gestion d’Actifs (13th), Cardif Gestion d’Actifs (15th), AGF Asset Management (22nd) and Generali Finances (24th). Following on from BNP and CIC, the major French networks are represented through their specialist subsidiaries, such as BFT Gestion (12th) or Gestion Privée Indosuez (25th) for Crédit Agricole. Etoile Gestion (20th), a Crédit du Nord subsidiary, represents Société Générale.

In broader terms — and this comes as no surprise — the ranking includes a majority of asset management firms from the leading French and European networks (7 networks + 3 specialists). Independent companies or firms belonging to private banks took a total of 9 places, while insurance companies are also present with six honourable mentions.

The table shows that without a doubt alpha in France remains the domain of the specialists, even in groups, where it is the specialist branches that achieve considerable outperformance on a regular basis.

Stability of the ranking

Seventeen of the twenty-five companies selected according to the quality of their active management were already present in the previous rankings. The new entrants are: ODDO, which takes first place; COMGEST in the 5th spot; BFT; CCR Gestion; and Meeschaert. Three insurance companies make it into the top 25: MMA Gestion, Cardif Gestion and AGF.

Developments in the ranking methods used have proved fatal for three companies: Financière de l’Echiquier (less than 55% of funds analysed – 66% required); Fortis France (present in only three categories) and Compagnie 1818 (less than six funds analysed). The other companies not to have made it into this year’s ranking posted results in 2006 that no longer enable them to reach the top 25: SINOPIA, OFI, CPR Gestion, Federis Gestion and Groupama Asset Management.

The strongest progression was made by Banque Palatine (+16 places) and HSBC Private Bank France (+15 places). AXA and BNP gain 4 places, followed by Martin Maurel and Lazard Frères Gestion, with a gain of 3 places each. The upper ranks of the table show stability, with 4th place being held by Compagnie Financière Edmond de Rothschild. In contrast, State Street, Generali and Gestion Privée Indosuez fell by ten places in this year’s rankings.

Although HSBC has maintained its strong presence in the table, it is CIC that occupies the first place among the French networks. AXA has preserved its rank as best-placed insurance company and, finally, in terms of the larger networks, BNP has managed to overtake the Natixis group (IXIS Asset Management and Natexis Asset Management).

Another way of understanding this ranking is to analyse the alpha produced by the Alpha League companies according to investment zones.

The French Equities class tops the table with almost 24% of funds generating alpha. This is followed by International Equities (21%), European Equities (13%) and North American Equities (9%). In comparison to the previous Alpha League Table, these figures represent a dropoff in the French Equities class (24% as against 46% in 2006) and a concordant and significant rise in international and European investment. These changes would have been even greater if the geographical dimension of the sector funds had been taken into account.

The requirement for companies to be present in at least four categories no doubt contributes to the diversification of the geographical zones represented, but also tends to limit the concentration of investment in French equities. However, the stability among the leading companies in the 2007 table also shows that outperformance was sought through an increased focus on the world markets.

This distribution according to investment zones is also a reflection of the companies’ expertise. While all companies may have at least one fund in French equities, the management of foreign equities in a given country or investment zone is generally the domain of the larger networks, which offer extensive product ranges covering all zones. BNP Paribas is now well ranked thanks to good results in its North American, Japanese and international funds. Specialised firms can also offer excellent performance on international markets, as is the case for Comgest (5th), which makes it into the ranking without any alpha fund in France, but with good results on the Asian and emerging markets. State Street also offers a wide range of alpha funds in Europe and internationally, without a single fund invested in France. In contrast, companies like Martin Maurel Gestion, Financière Atlas, AGF Asset Management and Aviva Gestion d’Actifs are characterised by their capacity to generate regular alpha from their French investments.

The analysis of exposure to style factors reveals considerable sensitivity to small and mid caps in the Euro Zone, France and Europe, with more of an emphasis on large caps in Asia, North America and the International Zone. Our second French-based ranking confirms the information acquired from the first: alpha on the European markets is quite sensitive to small caps, while on the more distant markets asset managers seek alpha through investment in large caps.

Alpha remains the domain of the specialists, notwithstanding a methodology that is now more demanding. Four of the top five companies — the exception being the HSBC subsidiary, HSBC Private Bank France — are independent structures that target high wealth individuals or institutional investors. This expertise no longer depends on knowledge of the French market, but extends to all markets worldwide.

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