Posted inSOUTHERN EUROPE

the italian job

As the man responsible for JP Morgan Asset Management’s product strategy in Europe, that means he has to get information from fund buyers across all the countries in which he wants to do business and across every investor type, whether institutional or wholesale; he needs to gather data from all the local sales teams; he has to liaise with marketing departments; and he needs to do all this without losing focus.

His previous job was in some ways far simpler – he was a fund buyer for UniCredit. “I was doing fund selection on a pan-European level,” he explains. “I was primarily focused on Italy, Germany and, to a certain level, Austria. So in that sense, I had a fairly narrow view. And I was looking at a very specific channel – the private banking channel.

Biography

Jean-Francois Hautemulle, executive director, is head of EMEA product strategy at JP Morgan Asset Management. An employee since 2013, he leads the product strategy team to grow JPM’s EMEA funds distribution platform.

Before this, he worked at UniCredit, where he led the pan-European fund selection team. He was responsible for the evaluation and selection of the funds that are offered by the UniCredit Private Banking Division in Italy, Germany, Austria and CEE. He initiated and rolled out their Preferred Partner programme, with a selection of 10 international asset managers as exclusive providers of fund solutions.

He has worked in the investment management business since 1992. Previously, he worked at Pioneer Investments, AIG Investments (now Pinebridge Investments) and Alliance Capital Management (now AllianceBernstein).

His first role in the sector was with Citigroup Asset Management, where he was responsible for European product management and development.

“With the 10 countries I now look at, they have different mixes of what they do. In Italy, we do a lot of business with fund of funds selectors and gatekeepers. I actually just came back from two weeks with the promotori finanziari – the Italian equivalent of the independent financial adviser. That is a different model altogether.”

According to Hautemulle, when it comes to gatekeepers, they generally require rational, technical details. “But with the promotori finanziari, you give them the three reasons why they should buy the fund. It’s more story-telling and it’s very quick.”

Hautemulle gives the example of JPM’s EM bond fund. The company is positioning it as a one-stop shop for exposure to EM debt as it mixes hard and local currency, government and corporate debt.

So if you don’t have the time or expertise to do asset allocation between these sub-asset classes, hand it all over to us, says JPM.

“Fund pickers already have a tough enough challenge to make asset allocations. Independent advisers are looking for simple solutions they can put to their clients. Hence the success of Carmignac – it’s one solution.”

Hautemulle has not long been in the job – he joined in March 2013, so he’s still gathering data and getting a sense of all his various markets, but he has developed a strong view that investors everywhere are getting increasingly unhappy with the traditional asset classes. People want a multi-sector, multi-asset approach.

Across the board there has been an increased use of multi-asset products – especially those with an absolute return mandate. But that brings up an interesting question – if the portfolio is supposed to be self-contained and have low correlations to everything, what is its role? You can’t match it against anything else in order to improve the overall volatility, for instance.

“The answer is that these sorts of strategies are becoming the core of people’s portfolios – then they put satellites around it,” he says. “Or you get into the situation where you target an outcome instead – such as income generation: ‘We need to generate 4% to 6% annual return and this is how we are going to achieve our goal’.”

Country focus

While eventually Hautemulle will look at most of the continent, he’s starting with Italy. Why there? Because in fund management, it is exploding with growth.alt=''

“This year is going to be the best year in Italy for flows across the board for goodness knows how long – and not only for us but the whole industry,” he says. “The banks no longer have to go to their distribution channel to shore up their capital through deposits and subordinated debt.

“The other thing is that deposit rates in Italy are particularly unattractive and the core products such as the five-year BPTs [government bonds] – everybody owns them – have gone down. So the banks can’t make any money out of this. But they can make money out of selling investment products, either from their own asset management companies or from third parties.”

Continental drift

Of course, institutions across Europe have said for years that they are moving towards open architecture and offering third-party funds. Actually getting there is a different matter. “It’s changing institution by institution,” he says. “We have a couple of elements going on here. Number one, you have the promotori finanziari and there are a lot of them in Italy. It’s very important.

“If you look at the region between Milan and Turin, it is probably the richest part of Europe. Remember, Italy is built not on massive multinationals but on smaller European businesses that have done extremely well. Consequently there is a lot of wealth out there. The promotori are not tied to a financial institution so they tend to have very broad open architecture. For example, Banco di Fineco – UniCredit’s promotori business – has about 2,000 funds on the platform.”

The private banks have moved in the same direction, mainly because their clients tend to be more sophisticated in investment terms – many of them will have personal accounts with fund platforms so they know what is available – and they know what they want.

Opening up

That brings us to the last point Hautemulle makes. Why is it that fund selectors, when choosing their funds, refuse to make their process public knowledge. “I would like fund selectors to get in more of a dialogue with the fund houses, and be much more open and transparent about what they’ll do, how they approach the markets.

“What it means is that although most of the fund selectors are looking for their providers to give them transparency and access to the fund managers, there is very little reciprocity.

I would like fund selectors to get in more of a dialogue with the fund houses, and be much more open and transparent about what they’ll do, how they approach the marketsalt=''

Jean-Francois Hautemulle
Head of EMEA product strategy, JP Morgan Asset Management

“I say: ‘This is what we want to do, this is where we want to go, these are the asset classes we are working on now, this is the context, but help me figure that out’. I’ve said this a couple of times at conferences and fund selectors look at me in horror. They say ‘We can’t tell you about everything we do’ and I respond ‘Why not?’

“I am not interested in pushing products. If you have problems with my products, help me find solutions for this!”

Having switched from the buy side to the sell side, Hautemulle has now developed a keen understanding of the needs of fund groups and their sales people, and their business development process.

“It goes down to something very simple,” he explains. “You go through the exercise of asking the fund manager to go through all the hoops to get a fund rated, then when you make a decision, a lot of the selectors don’t even let you know whether you have been selected or not.

“It’s not only annoying because you spend all that time working on it, it’s not very good practice, because if you don’t explain to someone why their fund hasn’t been selected you can’t improve. The transparency aspect is something we should all be working on.”

And so, on this point at least, the man in the middle is very prepared to take sides.

Dylan Emery

Dylan Emery is the group editorial director of Last Word. He is one of the founders of the company and he created International Adviser, Portfolio Adviser and Expert Investor. His primary responsibilities...

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