Natixis Investment Managers (Natixis IM) is one of the world’s leading multi-affiliate asset managers. Natixis itself is also affiliated with a larger financial institution, being 70.7% owned by France’s second largest retail bank, Groupe BPCE (Banque Populaire Caisse D’Epargne). The other 29.3% of the firm is publicly traded (ticker: KN on the Paris exchange), of which some 2.52% points of the shares are owned by employees.
Natixis IM runs close to USD 1 trillion and was ranked as the world’s 16th largest asset manager based on assets under management as of December 31, 2017, according to the Cerulli Quantitative Update: Global Markets 2018. Approximately 13% of assets are in alternatives, with 48% in equities, 27% in fixed income, 9% in multi-asset and 5% in money market.
Natixis IM includes over 25 investment managers spanning the Americas, Europe and Asia. “They are autonomous, and at the same time are supported by a value-adding federation. At the heart of the business model is a centralised, global distribution network and platform to drive the organic growth of affiliates. Natixis fosters innovation by seeding affiliates’ new investment solutions. New affiliates’ funds systematically go through the Natixis IM investment product committee. During that process, a seed request may be flagged. For each seed capital request, affiliates will go through the investment seed committee, this process is a great opportunity for Natixis IM to support fund launches and our affiliates’ development program to better serve investors’ needs,” says Bénédicte Rabier, International Head of Investment Specialists Group at Natixis IM.
Natixis IM also maintains a global oversight of risk management and controls, which preserves the autonomy of each affiliate through three pillars: a Board of Directors; internal audit with an enterprise compliance and risk program; and a compensation committee.
The Natixis philosophy is that active, insight-driven, diverse and unconventional thinking can help to generate alpha and support investors in making the best decisions.
Many of the world’s largest asset managers have substantial levels of passive, index-tracking assets, but Natixis IM is only in the business of active investment management. “The Natixis philosophy is that active, insight-driven, diverse and unconventional thinking can help to generate alpha and support investors in making the best decisions. Each of our affiliates has a unique investment process and culture, which is a great fit with our platform identity. We do not intrude in their investment philosophy,” says Rabier.
Natixis has a dedicated global team, keeping close relationships with existing affiliates and talent-scouting for new ones. Candidates are sourced via several channels: networks, bankers and industry contacts.
“The broad, long term aim is to develop a mix of affiliates diversified by asset class, strategy, and location to cover all areas that clients are seeking. The bigger picture is that diversifying the locations of affiliates also helps Natixis to expand the geographic footprint of its own client base,” says Rabier.
“Idea generation for specific manager searches arises from macro and long-term investment views, gap analysis, and current affiliates’ plans. It is very much a team effort based on market intelligence coming from internal product development teams, sales feedback from client meetings, and opportunities seen in the market,” she continues.
“Natixis seeks affiliates with a solid background, strong and resilient track record, and robust investment philosophy and process, some of whom may already have an interesting investor base. An entrepreneurial mindset is also needed for a cultural fit with the wider group”.
Natixis’ spectrum of alternative strategies ranges from liquid ones such as global macro, managed futures, equity long/short, volatility arbitrage and alternative risk premia, to illiquids including private equity, private debt, infrastructure and real estate, aircraft leasing, and natural resources. Investment vehicles can range from UCITS funds, AIFM closed-ended funds to managed accounts. On top of this, Ostrum Asset Management has recently launched co-lending opportunities for private debt in real estate, infrastructure and aviation. In private equity, Natixis IM recently launched Flexstone Partners at the end of 2018, bringing together three existing private equity affiliates: Euro-PE, Caspian Private Equity and Eagle Asia, to give clients global access to primary, secondary and co-investments in the private equity, mezzanine and infrastructure markets.
Several Natixis IM managers run both traditional and alternative strategies. For instance, AlphaSimplex Group LLC runs long only asset allocation strategies, and is also active in managed futures, trend-following CTAs and alternative risk premia strategies.
DNCA manages both long only equity and equity market neutral strategies. Ostrum manages traditional equity and credit strategies, and also private debt in areas including infrastructure, aviation, real estate, leveraged loans, and structured credit. Seeyond runs low-volatility long-only equity, equity market neutral and also alternative equity volatility strategies. Loomis Sayles may be most well-known for leveraged loans, corporate credit and emerging market credit, but also manages equity long/short strategies and credit long/short strategies. H20 manages absolute return and total return strategies in global macro.
H20 illustrates some of the qualities sought by Natixis IM: “H20 has a strong team who have worked together for decades, take a high conviction approach, and have one of the best track records in discretionary global macro. The PMs are resilient money managers, with very strong macro trading experience,” says Rabier.
Natixis is well attuned to the rise and rise of ESG investing, Despite the independent nature of Natixis investment affiliates, 75% of assets under management are under PRI signatories.
“As a group the firm is leaning towards ESG, but affiliates choose whether and how they implement ESG. We do not intrude into the investment process of affiliates, and are not prescriptive about their approach to ESG,” says Rabier.
One Natixis IM affiliate with a special focus on ESG is Mirova. “Mirova was created with the aim of delivering sustainable investment solutions, and was one of the first in the field to be so vocal on sustainability and infrastructure. It invests in infrastructure equities to help the transition to a lower carbon energy sources, and takes pride in being innovative,” says Rabier. She further argues that, “some newcomers do not have a really sustainable approach”.
One of the most recent affiliates added – UK based private debt manager MV Credit – provides a case study of how Natixis finds new affiliates. “We had identified private corporate debt as a priority strategy gap to fill, based on our active management and discussions with clients who are seeking news sources of diversification,” says Rabier. Tactically, “we are of the opinion that credit markets are relatively late in the cycle, and hence sought a manager that would prove resilient,” she continues.
“MV specialise in European credit, and have since 2000 built up one of the largest and most stable teams, with a strong reputation, and good access to opportunities. When banks and brokers are reaching out to private equity funds to finance loans, they seek MV Credit’s view on the pricing and structure of deals,” she adds.
Natixis’ network alerted them to MV Credit, who demonstrated not only a long investment track record, but also team longevity: PMs had been in place for 18 years and staff turnover was low. The team also scored well on diversity metrics. Natixis used its network to verify the credit team’s credentials, and obtained positive references from MV credit investors. MV Credit had also demonstrated the ability to offer tailored investment solutions.
“Crucially, MV Credit had performed well through several credit cycles, and produced strong risk-adjusted returns in the most complex part of the capital structure – subordinated debt. The firm had delivered strong risk management with a very low default rate over the last ten years, and multiple co-investors testified to the resilience of the investment process. They are a great team to work with,” says Rabier.