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September 29, 1997 01:00 AM

WORLD NEWS: SINOPIA MOVES AWAY FROM BANK UNIT ROOTS

Joel Chernoff
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    PARIS - Sinopia Asset Management is emerging from its bank cocoon to service the expanding demand for French institutional money management products.

    Known as CCF SAM for the first six years of its existence, the quantitatively driven money manager was hidden within the sprawling structure of parent Credit Commercial de France.

    French banks, however, have been driven to create separate subsidiaries for their money management units under a new law that implements the European Commission's investment services directive.

    Ownership of CCF SAM - which stood for Structured Asset Management - was rejiggered. The Paris-based bank now owns 86% of the firm - down from 100%. San Francisco-based Mellon Capital Management, which has a longstanding joint venture with the unit, has 9% and Berlin's BHF-Bank, took a 5% stake.

    Its new moniker of Sinopia is designed to indicate its independence, as the unit emerges from under the bank's wings.

    The firm's assets under management have been growing between 40% and 60% a year, and now runs about 22 billion French francs ($3.7 billion) in assets. Assets managed on behalf of the bank account for one-quarter of its total mandates.

    The firm has three primary products. Its biggest winner is a guaranteed product, geared for the retail savings market. The open-ended guaranteed product has nearly 8 billion francs in assets.

    A major source of distribution is France's 18,000-branch postal system. The contract with La Poste is a coup, given the traditional links between the postal system and giant Caisse des Depots et Consignations, the Paris-based institution started by Napoleon Bonaparte. CCF provides the guarantee while Sinopia manages the market risk, running a book of options that are issued daily.

    When the first version of open-ended product was unveiled in late 1993, it provided a 100% guaranteed return of the CAC 40 index plus 100% of principal after five years.

    But falling interest rates have made it more expensive to provide protection. The latest version offers a three-year capital guarantee plus 100% of the average CAC 40 return over the period, explained Jacques Sikorav, chief investment officer.

    Sinopia officials are hoping to offer a similar product managed from Luxembourg.

    Sinopia also offers a fully hedged global bond product. Using a tactical asset allocation process to locate value, the 3-year-old product has outperformed the J.P. Morgan French bond index by nearly 250 basis points a year since inception on May 10, 1994 through the end of August 1997. Because of the 100% hedge, the product is 98% correlated with the domestic bond market.

    The product has pulled in $1 billion in assets from French, U.S. and Japanese clients, including Dreyfus Corp., New York, a unit of Mellon Bank Corp. Another $500 million are invested in global hedged equities and global balanced hedged strategy.

    The TAA product, which was launched earlier this year, identifies the long-term equilibrium between bonds, currencies and equities in major markets.

    The bond process relies on a valuation model that uses inflation, short-term real interest rate, the ratio of debt to gross domestic product, and long rates in leading bond markets, defined as the United States, Japan and the euro.

    The equity process relies on stock and bond inputs. It inputs data from the bond process into a quantitative dividend discount model and consensus earnings growth figures from I/B/E/S, building an earnings expectation forecast country by country. Managers use futures, options and swaps to implement the asset allocation.

    Sinopia officials anticipate continued demand for equity-based products in Europe. "Continental Europe in general and France in particular, the appetite for equities" is increasing, noted Didier Miqueu, chairman and chief executive officer.

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