PARIS - Fidelity Investments and Raymond James Asset Management International have won regulatory approval to market their mutual funds to French institutional and individual investors.
They are the first U.S. mutual fund managers to gain approval from the Commission des Operations de Bourse, France's equivalent of the Securities and Exchange Commission. There now are 170 "societes de gestion de portefueille" - asset managers - registered with the COB, of which only 10 are foreign institutions.
Other non-French SGPs include Barclays de Zoete Wedd Investment Management, London; Bacot-Allain, which is controlled by S.G. Warburg PLC, London; and BNP/N&B, a joint venture between Banque Nationale de Paris and Neuberger & Berman, New York.
"We are hoping to register additional foreign asset management companies. It is good for our market as a whole," said Pierre Fleuriot, managing director of the COB.
Andre Galas, managing director of Raymond James Asset Management International, Paris, said it took his firm less than four months to get SGP status.
For Boston-based Fidelity, it's the mutual-fund giant's second foray into the French market. Brian Storms, managing director of Fidelity Investments Luxembourg S.A., said the firm first opened its French operation in 1987.
"We set up shop in Paris in the late '80s with a small effort and our timing - a month and a half before the crash - could not have been worse. Today, we are coming back with long-term business targets and a measured approach to the marketplace," he said.
Raymond James, which is based in St. Petersburg, Fla., and manages $9 billion, also opened a European branch in Paris in 1987, but to provide institutional brokerage and financial analysis support for U.S. equities.
Both Fidelity and Raymond James are eyeing the $533 billion French mutual fund market, which offers tremendous growth potential for equity mutual funds. Now, banks have 83% of the market, insurance companies have 9%, brokerage firms have 6% and private intermediaries, 2%.
In addition, anticipated adoption of legislation encouraging development of private pension plans is expected to create an additional rush of money for investment managers.
"Presently, foreign managers represent between 1% and 2% of the French market," Mr. Storms said. "It is not unreasonable to expect that could go to 4% or 5% by the year 2000. We are bullish in France in the long run."
Created by 1989 legislation as alternatives to traditional bank, brokerage and insurance company vehicles, use of SGPs has exploded, with assets now reaching 200 billion French francs ($40 billion) - seven times their 1990 level.
With their low capital requirements and only a COB registration, non-French institutions can use SGPs to offer a variety of investment products, including investment trusts, mutual funds and futures funds.
To protect customers' assets, the COB requires SGPs hire outside custodians, which must be French or at least have a French-regulated branch.
"From a Fidelity viewpoint, the SGP status allows us to operate as we do in the United States. We can directly market our products to the public and solicit funds from institutional investors," Mr. Storms said.
Fidelity is marketing to investors through intermediaries - mainly brokers, banks, insurance companies and others - an umbrella fund that includes 29 subfunds. These Luxembourg-based societes d'investissement a capital variable range from conservative bond funds to growth equity funds to country specific funds.
Fidelity has signed up some 60 French intermediaries to market its funds, and is enhancing its marketing through advertising.
Raymond James, on the other hand, is pushing equity funds only. It has received regulatory approval to offer a U.S. equity fund and a French equity fund, although it plans to offer a European stock fund later this year. A similar fund also will be offered to U.S. investors.
Raymond James also owns 51% of another SGP called I.T. Finance, which offers a technology fund.
