LONDON -- Out of the depths of scattered insurance operations, AXA Investment Managers hopes to become a world-class money manager.
With $230 billion in assets, London-based AXA Investment Managers is the second money manager in the Paris-based insurance company's stable, after Alliance Capital Management LP, New York, which manages $321 billion in assets.
"Our mandate was to create a second world-class investment management business which would increasingly be focused on third-party activities (external clients)," explained Ron Gould, senior executive vice president.
After a two-and-half-year integration process, however, AXA Investment Managers still has a way to go to prove itself. At this time, about 80% of its assets are managed for its parent company.
"It's too early to tell" whether the firm will be successful, said one observer who asked to be unnamed.
But the presence of Donald Brydon, one of the leaders of U.K. investment management, at the head of the business makes the firm one the entire industry is watching.
Mr. Brydon previously had built up the former BZW Investment Management business, now part of Barclays Global Investors. He joined AXA Group in April 1997 after being passed over for the top slot at Barclays de Zoete Wedd, the former investment banking unit of Barclays PLC.
The selection of Mr. Brydon, a Scot, to run the business also reflects the firm's multicultural approach. "You don't have to be French," said Mr. Gould, an American who has lived in Tokyo and London for a total of 16 years. He acknowledged, however, that in meetings in Paris, "Wine makes up only 1% of the assets but 90% of the conversation."
Mr. Brydon and his team had their work cut out for them, pulling together the asset management capabilities from AXA operations in Paris, London, Brussels, Cologne, The Hague, Hong Kong and Tokyo.
"What we tried to do was develop this magnetic force in the middle and create a corporate structure to make that real," Mr. Gould said.
Research is key
Research is at the heart of the investment process, and will provide a way of unifying approaches across the firm. Most of 1997 and 1998 were spent restructuring the unit and building equity and fixed-income research teams. While the firm still uses external research, it has put lots of resources toward expanding its internal capabilities.
Jason Maude was hired to run equity research; previously he was director of research at Warburg Dillon Read, London. Also, Perry Beaumont, formerly managing director and senior market strategist at Salomon Smith Barney, London, was recruited to run fixed-income research. Jean-Pierre Hellebuyck, previously chief investment officer of AXA Asset Management in Paris, became head of global investment strategy.
The key for AXA Investment Managers is to become a company that not only obtains lots of information, but also can use it effectively in making investment decisions, Mr. Gould said.
The manager has European centers in both London and Paris. In London, the July 1997 combination of AXA Equity & Law and Sun Life & Provincial Holdings created a London center with 31 billion ($51.5 billion) in assets under management. Chris Cheatham, formerly director of research at Prudential Portfolio Managers Ltd., now is chief executive of AXA Sun Life Asset Management, which is part of AXA Investment Managers. Last December, the unit hired Roy Gillson from Independent Advisers Inc. as chief investment officer.
In Paris, Kevin Dolan serves as chief executive, while Thierry Deheuvels, formerly head of equities of Paribas Asset Management, is global head of equities.
The next objective is to create a single equity investment team and a single fixed-income team at AXA Investment Managers.
The firm has adopted a global sector strategy, beginning in greater Europe. The process -- which focuses on industry selection instead of traditional country allocation -- will be extended to other regions, such as the Far East.
Stake in Rosenberg group
The late 1998 purchase of a 60% stake in Rosenberg Group, Orinda, Calif., for about $125 million, is designed to substantially beef up the entire organization.
The purchase, Mr. Gould said, had two purposes: to buy in to a very successful quantitative money manager with a bright future; and to infuse a level of "intellectual capital" throughout the firm.
A small group within AXA Group, dubbed "Rosebud," is developing ways of spreading Rosenberg's investment savvy throughout the organization.
The group, headed by the California manager's founder, Barr Rosenberg, is looking, for example, at how analytical processes work, thus enabling the group to develop better tools for analyzing securities and the investment process. It will look first at equities and later fixed income.
Mr. Rosenberg also spends a huge chunk of his time on risk management issues for AXA Group as a whole, examining the ways insurance companies use information to underwrite risks, Mr. Gould said.
"There's no question that the massive Rosenberg database is something we intend to address," Mr. Gould said. Mr. Rosenberg declined requests for an interview.
While Europe is central to the manager's strategy, Asia also plays a key role. AXA executives have made no secret of their desire to acquire life insurance operations in Japan, which would in turn increase the manager's asset base in that area.
Asia offers tremendous opportunities to the firm. It recently recruited Tetsu Hirano as its chief executive in Japan. Mr. Hirano formerly was a director at Nomura Asset Management Co., Tokyo. The manager hopes to build its institutional and retail fronts there, Mr. Gould said.
AXA officials want to build a truly global operation. In general, most U.S. firms have taken advantage of a huge domestic institutional and retail asset base but "none have been particularly aggressive in applying that outside of the U.S.," he said.
Mr. Gould said retail will play a major role in the development of the business, reflecting in part the growth of defined contribution plan savings. Over time, retail could surpass institutional assets in importance, he said. The firm plans to offer a broad range of mutual funds.
Mr. Gould acknowledged it will take some time to become recognized as an external manager. But mandates are starting to come in. The Fondicri Group in Rome choose AXA Investment Managers to run its non-domestic mutual funds. That relationship has brought in about $1.3 billion in assets.