PARIS - While many U.S. money managers have lost money and sleep over their European subsidiaries, Boston-based State Street Bank & Trust Co. can slumber peacefully over its Paris operation.
In four years, State Street Banque S.A. has built up 6.5 billion French francs ($1.3 billion) in assets under management and established itself as a contender in the French marketplace.
Half of State Street's assets are managed mutual funds, while the other half is managed in discretionary accounts.
It has won these assignments under the leadership of Monique Bourven, who founded the bank in 1991 after leaving her post of deputy general manager at Credit Agricole S.A., France's largest commercial bank.
Ms. Bourven is legendary in international circles. While still with Credit Agricole, she swooped into Chicago, signing up overnight about 20 commodities traders from Jack Karl Futures Inc.
In Japan, she negotiated the opening of a Credit Agricole branch with her assistant Isabelle Lang-Petitmangin - an awesome task for an all-female team encountering Japanese male business mores.
In France, she stands out as one of the few women who has succeeded in spite of the old boys' network that dominates French business. Her male peers call her "The Banker" and "Our Lady of Mutual Funds" - stemming from the time she oversaw Credit Agricole's 300 billion francs in mutual fund assets, a stunning 20% chunk of the French market.
She was the first woman appointed to the Conseil des bourse de valeurs, which monitors the French stock exchange. Ms. Bourven vents her views freely, on anything from professional ethics to money management.
The lure of quant techniques
After studying literature in Montpellier, Ms. Bourven received her M.A. in Roman history at the Sorbonne in Paris. She then enrolled in the prestigious Institute d'Etudes Politiques in Paris, majoring in economics and finance.
Rising from a lowly financial analyst at Credit Agricole to deputy general manager, she left the bank in 1990 in a dispute with the bank's chief executive. Her departure caused the bank's entire trading floor to walk out in protest.
State Street executives seized upon the opportunity. They already knew Ms. Bourven from her time at Credit Agricole. Several meetings ensued, culminating in an intense three-day negotiation to bring on Ms. Bourven and her staff.
For Ms. Bourven, she had set her sights on State Street - in part because of its vast experience with quantitative investment management. A measure of her savviness is that while she might have targeted State Street as her next stop, she was the one pursued.
Nicholas Lopardo, chairman of State Street Global Advisors, Boston, said another institution was flying in a team to talk with Ms. Bourven, just as State Street successfully concluded its talks with her. Mr. Lopardo has no regrets. Ms. Bourven is "a consummate professional" and also has served "as a bit of a confidante" to him on business matters, he said.
The lure of quantitative investment techniques was compelling. Ms. Bourven describes quant management as "a perfect mix between the analyst and the decision-maker using financial, macroeconomic and microeconomic input." State Street employs a host of multifactor models tailored to French and European markets.
But quantitative techniques are not widely accepted by French investors, who are more accustomed to traditional stockpicking. Ms. Bourven is trying to persuade them to switch over through superior performance relative to various indexes.
State Street runs a host of mutual funds, split between two types: fonds communs de placement and societes d'investissement a capital variable.
The manager aims to beat its benchmarks by two to four percentage points over a five-year period, but most of its funds have a limited track record.
Its State Street Actions France fund has returned 6.7% on an annualized basis for the four years ended Oct. 31, beating both the CAC 40's -2.3% and the SBF 120's 2.5%.
Penetrating the French market
Ms. Bourven decided the key to gaining access to the French market was through private-client investments in mutual funds.
Ms. Bourven also was adamant that to succeed in France, the staff and products would have to be French. Unlike other Anglo-Saxon groups that relocated employees to Paris in the early 1990s, State Street is staffed predominantly with French personnel.
Also, it established a full-fledged banking service, registering as a depository bank offering French-based products, she noted.
Still, the bank is short of its market share targets. While at year-end 1994 it managed 26% of French quantitative SICAVs, and more than half of French quant equity funds, it still has only 1.3% of the total French SICAV market. Ms. Bourven had hoped to reach the 2% threshold by the end of this year, but poor-performing markets have put off that goal.
Jean Echiffre, SSB's marketing director, noted State Street has done well to maintain its market share, as French investors have fled stock funds - where State Street is strongest - to higher yielding bank deposits. French equity SICAVs have dropped 10% so far this year, while the CAC 40 has fallen 2.4% so far this year. Mr. Echiffre added many French equity managers tend to keep up to 30% of their assets in bonds, which tends to soften the effect of bear markets on their performance. SSB stays fully invested.
International assets rising
But State Street Banque is not wholly dependent on the French investor. At the end of 1994, international clients represent 36% of assets under management, with a preference for tactical asset allocation products.
In Switzerland, the bank has found outlets for its SICAVs by entering into distribution agreements with Geneva Discount Bank and Trust Co. In Italy, it has reached a similar agreement with Unintesa SIM Spa, part of the Bologna-based Unipol insurance group. Its partner in Germany is Direkt Anlage Bank GmbH, a Munich-based discount broker.
Looking ahead, Ms. Bourven is keeping a close eye on proposals for a French private pension system. While many French observers believe the resignation last August of Finance Minister Alain Madelin set back pension reform, Ms. Bourven thinks France probably will end up with a combination of state and private pensions.
The prospect for growth in the French pension market is 40 billion francs to 50 billion francs ($8 billion to $10 billion) a year until 2000. That is a prospect State Street hopes to capitalize on.