Even as it labors to gain visibility, Natixis Global Asset Management LP is forging ahead with plans to make acquisitions, particularly of firms that offer alternative investments.
Even as it labors to gain visibility, Natixis Global Asset Management LP is forging ahead with plans to make acquisitions, particularly of firms that offer alternative investments.
But the Boston and Paris-based multiboutique firm has its work cut out for it as it faces the twin challenges of translating complex strategies into the retail market and making its brand name more recognizable.
In the past year, Natixis has made two acquisitions to its group of 15 affiliate asset managers.
RECENT ACQUISITIONS
"We are always looking for potential acquisitions that fit into our overall strategic plan. Broadly, we are very interested in companies offering alternative strategies as our recent acquisitions of ... Gateway [Investment Advisers of Cincinnati] and AlphaSimplex [Group LLC of Cambridge, Mass.] illustrate," said John Hailer, who took over as president and chief executive of the company's Asian and U.S. operations just over a year ago.
"We anticipate offering other alternative products in the future," Mr. Hailer said. "We also look for other traditional managers in deeper asset pools such as large-cap U.S. equities."
Marketing alternatives is challenging, however, according to Burton Greenwald, a Philadelphia- based mutual fund consultant.
"In the institutional space, alternatives are widely used and recognized. These products are sexy and get increasing publicity, but it's always an issue whether or not you have the resources to put it into a retail package," Mr. Greenwald said.
"You also have to make a substantial investment in the educational level on the retail level," he said. "You really got to get out there and do a lot of explanation about the expertise."
Natixis already has seen growing demand on the retail side, Mr. Hailer said. "We believe that increasingly, retail investors will be interested in alternative products as a way to increase returns and diversify their portfolios," he said.
"We have seen this demand from retail investors and financial advisers in response to the introduction of the Gateway Fund in February 2008," Mr. Hailer said. "Since that time, the Gateway Fund has been one of our top-selling solutions."
But firms need to be mindful of costs, said Cern Basher, chief investment officer at Madison Wealth Management of Cincinnati, which manages $170 million in assets.
"Many of the [alternative] products out there have a lack of track record and high fees," he said.
"Alternatives can give nice, steady non-volatile returns. But there has been a price for that," Mr. Basher said.
"We like Gateway a lot," he said. "It has many attributes of an alternative vehicle in a mutual fund structure, and it's attractive from a cost perspective."
POTENTIAL CONFUSION
In addition, acquiring companies that offer alternative products can mean running the risk of confusing retail investors.
And yet "my perception of Nati-xis is that they find niche products that many advisers can use," Mr. Basher said. "They have a pretty broad view."
What financial advisers really need is information on how best to use those products, Mr. Basher said.
To boost sales, Natixis will need a larger wholesale presence, Mr. Greenwald said.
"Up until now, they had depended on a large Internet communications program with intermediaries," he said.
Natixis is expanding those relationships, Mr. Hailer said.
"We see great growth potential in the [registered investment adviser] and independent channels," he said.
"We are known for addressing financial advisers' problems and providing solutions, rather than selling products," Mr. Hailer said. "An ability to build relationships is key to success, and our sales force excels at this."
Meanwhile, the firm's identity is a big issue that could be related to its multiple previous incarnations.
CDC Ixis Asset Management was founded in 2000 following the merger of two firms. The company was renamed Ixis Asset Management Group in 2004, following another merger.
Last year, following the merger into Natixis, one of the largest fi-nancial services organizations in France, the asset management business was renamed Natixis Global Asset Management.
'SOLUTIONS PROVIDER'
Mr. Hailer defended the firm's identity.
"While many of our affiliate brands are more recognizable than the Natixis ... name, we have made a lot of inroads in name recognition with financial advisers and wirehouses over the last five to 10 years," he said. "Intermediaries that know us view us as a solutions provider, and we have strengthened this perception in the last year with the introduction of new products, such as the Gateway Fund."
Gateway Fund gross sales were $1.4 billion between the time Natixis acquired it and Aug. 29, according to the firm. Since last year, Gateway has seen a 75% increase in net flows, which Mr. Hailer said illustrates the demand for alternative investments from the retail channel as Natixis began selling the fund through its intermediary distribution channel.
Another issue is that Natixis doesn't have a centralized marketing program, and its affiliates operate independently, from how they manage money to marketing.
Certainly, Natixis owns well-known managers such as Loomis Sayles & Co. LP of Boston, Mr. Greenwald noted.
Nevertheless, "it will be a real challenge in putting together an identity that gives them a higher profile in the intermediary community," he said. "They are little known in the business."
Marketing is not the only task at hand.
Natixis funds posted total net flows last year of $14.3 billion and $7.9 billion for the year to date through July 31, the company said. Its global affiliates also had positive net flows, Mr. Hailer said.
Naturally, the firm wants to keep those assets.
"The [challenge] is making sure that we are educating clients the best way we can and help[ing] our investors understand what the markets are doing and why they are invested for the long term," Mr. Hailer said.
E-mail Sue Asci at sasci@investmentnews.com.
