When one plus one does not add up to two, usually something is wrong. Not so in the world of Fortis Investments. William De Vijlder, managing director and CIO, regards the takeover of ABN Amro Asset Management as a most positive case of one plus one equals three. Why?
“One, because we have selected the best team [of investment managers]; two, because we now have more capabilities and investment centres and three, because we have new eyes looking at old ways of doing things and helping to provide new insights,” says Mr De Vijlder.
Fortis is now in the process of communicating its post-merger strategic review to clients and consultants.
That review has yielded a wide range of investment capabilities, many of which overlap. The firm is examining the investment philosophy, process and performance of each shared investment strategy with a view to deciding which to keep.
Armed with an expanded product range, Fortis Investments aims to develop its market share among large and mid-sized institutions and funds of funds in Eastern Europe, Middle East, Latin America and Asia-Pacific.
With the purchase in April by China’s second-biggest insurer, Ping An, of a 50 per cent stake in Fortis Investments, the €238bn Belgo-Dutch funds house would appear to have taken a giant step towards growing its market share in the world’s most populous country and beyond. The alliance makes Fortis Investments preferred provider to Ping An’s distribution network in China and Asia.
“If you could choose your second home market, it would be China. In terms of sustained economic growth, there is no comparison between what we will be able to do to what we would have been able to do otherwise. Also Ping An is a well-recognized and regarded brand in Asia,” he says.
Fortis Investments will also be preferred provider for strategies launched under China’s Qualified Domestic Institutional Investor (QDII) scheme, which allows investors to buy foreign assets.
Fortis already operates two joint venture fund management companies in China, one of which was formed with Shanghai-based Haitong Securities in 2003, and the other, ABN Amro Teda, which was inherited following the merger.
Given that Chinese law forbids the operation of two separate joint venture companies, Fortis has put ABN Amro Teda up for sale.
The type of investment products distributed in China through Ping An will be influenced by the value of the renminbi, says Mr DeVijlder. The current appreciation of the currency renders equity strategies more appealing than fixed income.
That said, he maintains that emerging market local currency-denominated bonds offer good opportunities for Chinese investors.
The QDII scheme has led to the launch of mainly Hong Kong and Asian equity funds, even if the performance of such products has been poor on account of volatile markets. Consequently, Fortis Haitong has delayed the launch of a QDII fund until conditions improve.
“Before we launch we want to gauge investor interest. Recent QDII product launches have attracted very few assets which is not surprising as international investing is not a story to get excited about at the moment.
“The emphasis now is on explaining to investors that when you invest, your horizon should be more than a matter of months,” says Mr De Vijlder.
Going forward, he believes that global equity funds will become the preferred route to international exposure for investors in the Asia-Pacific region.
“When you start to diversify outside your home market the easiest route is a global product. The attraction for the client is that they don’t have to worry about assessing the relative merits of investing in the US and Europe. Secondly, it gives the asset management company all the flexibility for coming up with a solution that maximizes the alpha delivery. Our global equity product is a sector and region-neutral product but we can still choose how we are going to gain the exposure to a certain sector.”
Other products being promoted by Fortis to institutional investors in the Asia-Pacific region include funds of hedge funds, currency overlay, structured products, infrastructure, emerging market equity, Australian equities (to Australian institutions only), global fixed income (to central banks) and global emerging markets fixed income in local currency.
One of Fortis’ key strategic goals to 2011 is to capitalise on the trend in mature pension fund markets towards so-called outcome-oriented solutions as opposed to buying specific investment products.
“The way we have organised our business leaves us really suited to capture that trend,” says Mr De Vijlder. “We have the range of products and the people to guide you through the forest [of different products]. Outcome-oriented solutions mean less rigorously benchmarked investment strategies. This does not mean that the investment will be completely unconstrained, which was the fashion in 2002-2003. With unconstrained investing, you start walking but you don’t have a clue where you are going. A less constrained mandate is more tailor-made and shows what a certain combination of assets can lead to in terms of returns.”
CV
William De Vijlder
Ph.D. Economics, University of Ghent.
Managing director, CIO Fortis Investments;
1987 - 1989: Generale Bank, Brussels;
1989 - 1997: Generale Bank Asset Management, Brussels;
1997 - 2000: CIO, Fimagen Belgium;
2000 to date: Fortis Investments, Brussels.
