"Natixis is entering Israel for the potential growth"

Jean Raby  photo: PR
Jean Raby photo: PR

Natixis Investment Managers CEO Jean Raby: We regard Israel as a completely European market.

The continual increase in the volume of financial assets managed by investment institutions in Israel, together with the recent regulatory changes allowing foreign investment concerns to offer their wares directly to investment institutions and private investors in Israel, are attracting more and more prominent international investment houses. A leading example is Natixis Investment Managers, one of the world's largest investment management companies, which expanded activity in Israel last month.

Natixis Investment Managers is following in the footsteps of UK company Schroders, which has been active in Israel for many years and manages $500 billion in assets, and US company Franklin Templeton Investments, which manages $760 billion in assets and also recently began doing business in Israel.

Natixis manages $1 trillion in assets and is active in international markets though 26 affiliated managers. Natixis Investment Managers is a subsidiary of Natixis, a company traded on the Paris Stock Exchange at a market cap of €22 billion, and sub-subsidiary of BPCE, the second largest banking group in France. Natixis is located in Paris and Boston. Natixis has 20,000 employees, including nearly 5,000 analysts in various areas. The company's revenue totaled $3.4 billion in 2017 and its operating profit was $1.1 billion.

Natixis Investment Managers, founded 12 years ago as a merger between asset investment entities from the French investment bank Natixis, is managed by CEO Jean Raby, who visited Israel last week to attend a conference and hold meetings with investment institutions in Tel Aviv.

Before joining Natixis, Raby was CFO of French telecommunications company SFR and senior VP and chief financial and legal officer of global telecommunications equipment manufacturer Alcatel-Lucent. Before that, he worked for 16 years in the investment banking division of Goldman Sachs, including stints as head of Goldman Sachs Russia and of Goldman Sachs France, Belgium, and Luxembourg. Raby has a LLB from Universite Laval (Canada), an M Phil in international relations from the University of Cambridge, and an LLM from Harvard Law School.

"We decided to expand activity in Israel mainly because of the growth potential in the Israeli market and regulatory changes. Our business model promotes growth and international expansion to new markets. Up until now, we have been very active in Europe, in particular in the French and UK markets. We regard Israel as a completely European market with potential," Raby told "Globes."

"Globes": The market here has become very sophisticated in recent years. There are many players, including several very large foreign companies. What can you offer that the others don't?

Raby: "Our business model offers the best of all possible worlds. One difference between us and Templeton, for example is that we have 26 affiliated managers of various sizes and each of them has its own investment philosophy with an active investment approach and an entrepreneurial spirit.  We bring to investors the power of our asset management capabilities while giving our affiliates absolute freedom in terms of investment decisions."

Will you offer investments to both institutions and private investors?

"Yes, both of them".

Many people are unaware of it, but in investment, in contrast to other spheres, there are no economies of scale; there is an advantage of small scale - in other words, a small professional firm can achieve greater returns in the long term at less or the same risk.

You are a huge firm, so what are your advantages and what can you offer an investor?

"You're right. Our business model addresses precisely this. We do not operate as one large firm. We have 26 managers, each of which operates separately and with full autonomy, managing several billion euros in assets, and can therefore be more flexible, respond faster, and take advantage of opportunities in the market and ultimately better manager risk."

"The investment team has full autonomy"

4F Investment Partners, a third party distributor operating in Israel, will be responsible for marketing Natixis's funds and products in Israel. 4F Distribution Israel co-CEOs Itay Barkan and Yossi Vaknin will lead this activity.

Barkan is a former manager at Oppenheimer in Israel, while Vaknin managed the pension assets investment of Israel Electric Corporation's (IEC) (TASE: ELEC.B22) employees. Another distribution firm, a quasi-intermediary, is likely to mean additional management fees paid by the end customer buying one of Natixis's funds. Raby, however, does not wish to provide details about management fees in funds or the distribution commissions that will be paid to 4F. "It depends on the strategy of each of our funds or units," he says. "Our investment teams have full autonomy. We usually charge an average of what is customary. We have to provide value for the money invested with us."

Let's talk a little about macroeconomics. What do you think about the current situation in the global economy? Is the potential negative effect of a trade war already reflected in share and bond prices?

"When I compare the situation we are in today with the situation a year or two ago, there is now more balance. There are certain economies with healthy growth, such as the US, while growth is slowing in other economies. In general, the economic situation continues to support improved results of companies in the future. You can see strong cash flows. Pricing in the markets was high at the beginning of the year, but it is more reasonable now, primarily due to continued strong worldwide growth."

What about the development of the trade war?

"There's background noise in the markets, such as the talk about the trade war, but it definitely looks like the players in the markets have realized that there is a new situation. We have to wait and see how it develops. If it stays on the level of tens of billions of dollars, it's really not so bad, but if it's a lot more than that, it's liable to affect the markets.

"In the US, there's a process of normalizing the interest rate, which is developing in orderly fashion, and it looks like the situation is under control. In Europe, I believe that, in 2019, we'll start seeing a slow process of raising the interest rate. We're at the end of a historically unprecedented period of negative interest rates, and now we're entering another unprecedented period of gradually emerging from such a period. No one knows how it will develop, but as of now, the general conditions in the economy continue to support the stock market."

What is the main risk in the markets today? An outbreak of inflation?

"It's hard to know. A lot of people feel that it’s the geopolitical situation. I believe that the pricing of certain sectors, such as big data, is still in the process of being assessed by the players in the markets. In other words, there's a lot of uncertainty. Incidentally, there's both upside and downside risk."

Published by Globes [online], Israel business news - www.globes-online.com - on July 16, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Jean Raby  photo: PR
Jean Raby photo: PR
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