By Robert Maharajh Lombard Odier is set to launch a Financials Growth fund. This will aim to capita...
By Robert Maharajh
Lombard Odier is set to launch a Financials Growth fund. This will aim to capitalise on two sets of opportunities: one presented by the growth of financial assets worldwide, and the other by the restructuring of the global finance industry.
The fund will invest in the companies best-positioned to gather, manage and enhance financial assets and provide financial advice.
In order to do this manager Jean-Marc Bianchi will aim to identify the most promising strategies in asset gathering and related businesses, and to identify integrated financial service companies that quickly adjust their strategies to new environments and develop asset gathering as a core business.
The growth of financial assets worldwide is a sustainable dynamic, fuelled in particular by four mega-trends, Bianchi said.
He added: "We are seeing increasing globalisation, disintermediation, wealth creation and the ageing of the population, evidenced by the restructuring of pension systems around the world.
"At the same time we are seeing great change in the financial services industry, as a result of intense competition, deregulation, consolidation, new entrants and the changes brought about by the internet.
"This process will create new winners and losers. The key element will be how fast existing players can adapt to the new environment."
As with other Lombard Odier funds the investment process will use the industry knowledge and contacts of a scientific advisory board made up of prominent industry figures, including Li Kwok-Po, chairman and CEO of the Bank of East Asia, Reto Francioni, CEO of ConSors a German discount broker, and Philippe Sarasin, a Lombard Odier partner, as well as others.
The fund will focus on those companies that have developed a winning strategy via either specialisation or consolidation, Bianchi said. "We believe these are the strategies likely to offer long-term returns. For a consolidated company to qualify as an asset-gatherer by our criteria it must have at least 60% of its business in asset-gathering activities such as private banking, asset management, fund management or investment banking."
Examples of consolidators would include Aegon and Prudential, while specialists would include Amvescap, Sarasin and Legal & General. The general split in the portfolio will be around 40% in specialists and 60% in consolidators, although there can be 10% potential divergence either way from this.
A key opportunity for the fund is the improved value offered through what Lombard calls 'disaggregation' and 're-aggregation'.
As asset-gathering operations are unbundled Bianchi sees four distinct areas of focus emerging: product engineering, product management, distribution and advice. He said: "This process of 'unbundling' gives us the potential to buy the best company at each step.
"For each of these four areas we intend to identify the best players, using both qualitative and quantitative analysis. For example, in product engineering we look for innovation, recognition and the ability to produce value-added products. In this area we like BlackRock. Among distributors, we like Charles Schwab and MLP, among others."
Domiciled in Luxembourg, the fund will be benchmarked to the MSCI World Financial index, and will have between 30 and 40 positions. The management fee will be 2%pa.
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