Lombard Odier, Switzerland's oldest private wealth manager, is expanding its global institutional business on the back of the financial crisis.
The firm has embarked on a hiring spree, luring institutional management talent from prominent players that include Towers Watson & Co., Goldman Sachs Asset Management and Fortis Investments, which merged with BNP Paribas Investment Partners last year.
In addition, a strategic soul-searching exercise over the past couple of years has resulted in a more concentrated effort to separate beta and alpha in the management of fixed-income and equity strategies in order to deliver more consistent alpha.
“We had trouble understanding how a niche player (like us) would be able to compete against the very large providers. More and more clients were going toward pure beta or pure alpha,” said Hubert Keller, managing partner of Lombard Odier Darier Hentsch & Cie., based in London. “We came to the conclusion that the part in the middle — in which clients buy into one portfolio that features market returns as well as alpha — is not going to be the way forward.”
Institutional assets under management increased 17% in calendar year 2009 to $35 billion, officials said. About $3.5 billion, or 70%, of the gains came from net inflows, while the remainder was a result of market returns. Of the institutional assets, $6 billion is invested in equity, $3 billion in alternatives and $11 billion in multiasset strategies. Overall, the 214-year-old asset manager has about $145 billion in assets.
While European clients still dominate, Lombard Odier is pushing to gain market share in the U.S., particularly in equity hedge fund strategies including global, emerging markets and thematic funds, but it's still early days for their effort.
It is in fixed income, however, where Lombard Odier has been making strong gains, with most of the growth coming from European and Canadian institutions. Overall, $15 billion, or 43%, of the institutional assets under management are invested in fixed-income strategies. The goal is to double that amount in the next two or three years, said Stephane Monier, global head of fixed income and currencies based in Geneva.
In the convertible bond strategy alone, which is largely institutional, assets grew to about $5 billion at year-end 2009, compared with just $850 million two years earlier. The strategy was up 18.8 percentage points for the year ended Dec. 31, 2009 and down 18.7 points the previous year compared to a custom benchmark.
Elsewhere in fixed income, Freddy van Mulligen, head of research for Belgium, Netherlands and Luxemburg at Morningstar Inc., based in Amsterdam, said the firm's emerging-market bonds strategy has “a lot of potential,” even though fees are average to above average.