By Fathi JERFEL – Global Head Retail Clients Division at Amundi
Investors all face the same evolving macroeconomic and financial environment, but each must deal with it in their own context. How will asset owners adjust their decision-making process and operating models, and what investment choices should they make? Fathi Jerfel set the scene for the second day of the Forum for three different types of clients, sovereign wealth funds, pension funds and insurance companies, and distributors and retail clients.
Focusing on finding solutions to the problems outlined during the first day, Fathi Jerfel promised that Amundi is there to help asset holders navigate the changing environment where sectors are being disrupted by new technologies and commercial models.
For sovereign wealth funds, one of the fundamental problems is how to generate a strong absolute return in a low interest rate environment. “We believe that factor investing is a promising solution. In an uncertain environment, we are increasingly choosing securities based on specific attributes, which are risk factors, and not just choosing according to asset class,” he underlined.
Investment factors can include attributes such as style (growth versus value), size (large cap versus small cap), and risk, as well as the debt level of a company or its sensitivity to inflation. Amundi is creating smart beta solutions around this, to be able to invest in the factor itself. Clients can also work with Amundi’s special advisory service for factor investing.
“We are living in an increasingly ‘Amazonian’ world, where new technologies and commercial models are disrupting familiar ways of doing business, creating both dangers and opportunities.”
Concerning pension fund and insurance clients, Mr. Jerfel stressed that they also face the problem of generating high returns in a low interest rate world. In addition, they must balance the short-term liquid assets they hold for regulatory reasons, against the longer-term liabilities they have toward policyholders.
Amundi suggests shifting to more illiquid assets of longer maturity. These include private equity, as well as real assets such as infrastructure and real estate. Another way institutional investors can build a strong portfolio is through investments meeting recognized environmental, social and governance (ESG) standards. This is a long-term trend, which Amundi actively promotes, in part because a properly constructed ESG portfolio can enhance long-term returns.
Addressing the final group of clients, distributors, Mr. Jerfel, underlined that Amundi can help them understand the conundrum of increasingly complex regulations, rapid digital transformation, and fickle customer loyalty.
With the threat of litigation becoming permanent, “you cannot just sell products to clients anymore and be done. You have to understand the regulatory implications of your sale, and your liabilities,” he counselled. For this, training is crucial, so Amundi has created training modules for salespeople across the retail and distribution chains.
“Asset holders are also confronted with an increasingly unpredictable geopolitical landscape. Brexit, Trump, populism, and protectionism— the megatrends we spoke about at last year’s forum are resulting in unexpected outliers.”
Finally, on digital transformation, Mr. Jerfel underlined that “nowadays an online sales strategy is not just a nice-to-have, it is a must-have,” and that you cannot be competitive if you do not have an online sales platform and back office.
The digital transformation has also affected client relations. When clients use digital portals, they rarely meet customer representatives, so brand loyalty fades fast, with clients going where the most interesting product is. One way to combat this is through permanent year-round interaction with clients, advising them on what is happening with the product, and telling them when to sell or switch to something different.