LONDON - BNP Paribas SA, Paris, plans to boost its U.S. asset management business and plug a major hole in its global expansion strategy by forming an alliance with or buying an American money manager.
The French group hired a U.S. investment bank to devise a list of candidates, said Philippe Lespinard, BNP Paribas Asset Management's new chief investment officer.
"We are looking for partners in the U.S. We are hoping to duplicate the sort of alliance we made with Fischer Francis Trees & Watts," Mr. Lespinard said. In 1999, the company (then known as BNP Investment Management) bought a 10% stake in Fischer Francis, a New York bond manager; BNP Paribas increased the stake to 69% this year.
The candidate almost certainly would be a specialist money manager with abilities in U.S. equities and possibly other asset classes such as real estate, alternative assets or global equities.
"We don't want to duplicate what we already have with FFTW," Mr. Lespinard said.
Industry sources said the deal is expected to involve BNP PAM taking some sort of equity stake.
Sources also said BNP Paribas is a leading candidate to buy Deutsche Bank AG's custody business.
BNP Paribas, which recently bought Cogent, the AMP-owned fund administration business, has E2.3 trillion in assets under administration or custody, and has stated it would like to grow this further.
Charles Cook, BNP Paribas' head of global custody, did not return phone calls seeking comment.
Custody industry sources said other interested parties may include the Bank of New York, and J.P. Morgan Chase, both of which are keen to expand their securities services businesses.
Meanwhile, Mr. Lespinard did not rule out opportunistic investment management acquisitions in the United States, but he declined to reveal whether the company was bidding for any of the money managers now being touted.
One possibility is Montgomery Asset Management, San Francisco, which has been put on the block by financially troubled owner Commerz Bank AG.
No push for U.K.
In his first wide-ranging interview in his new role, Mr. Lespinard said BNP PAM has no immediate plans to enter the U.K. market, citing heavy competition and the question over Britain's entry into the European monetary union.
"We don't have a strategy for the U.K. market. We have some U.K. products, but we are not a player" there, he said.
"The U.K. is very competitive and it is not our strength ... but if a British euro entry comes along, it will remove some hurdles to being a U.K. specialist."
One British investment consultant, who did not want to be named, said: "They are not even on the radar screen here for global equities, and our clients don't tend to do a lot of European equities mandates. It is more that the products BNP have are not really suitable."
Tony Maddock, head of U.K. sales and marketing for BNP PAM, responded: "Those comments don't surprise me, given the bulk of our push has been in retail."
There are plans to boost the group's institutional business by expanding the sales team and ensuring consultants are aware of the money manager's competitive strengths, such as European equities, Mr. Maddock said.
The group also hopes to benefit from the continued shift by European pension funds from balanced to specialist mandates, and what he identified as a trend away from global equities mandates to regionally focused mandates.
While BNP PAM's core European markets are holding up, its businesses in some Asian markets are not.
One example is Australia, where BNP managed several billion dollars on behalf of pension fund clients.
The April 2000 technology-inspired market fallout hit BNP PAM hard in Australia, where it is known as a highly aggressive bottom-up growth-style manager. Performance in its key equity strategies slid dramatically, while a flood of senior staff departures during 2001 - including the chief investment officer, the head of equities and several analysts - resulted in an outflow of clients.
The group lost as much as one-third of its institutional business within a few months, while an exchange-traded funds initiative designed to attract retail customers, costing hundreds of thousands of dollars to develop, failed to attract any significant interest.