Close attention to risk management coupled with transparency, solid research and a predisposed tendency towards innovation has helped make Lyxor Asset Management one of the most respected alternative managers globally.
Established synergies between portfolio managers and Lyxor's independent research department have helped develop reliable and innovative investment solutions in each of Lyxor's areas of expertise: alternatives; ETFs and indexing; structured; active quantitative and specialised investments.
Inès de Dinechin, chairman of Lyxor, is confident that this mix will continue to be a winning combination in future.
"I think it will grow in a very natural way because all these areas, management techniques, are modern investment techniques. We see them as complementary ways to create performances alongside the more traditional investment techniques," she says.
Looking at the passive, ETF and indexing area, de Dinechin says Lyxor has around 13% of the total investment in passive products. She expects Lyxor's market share in this area to increase compared with active management, which dominates Lyxor's offering.
Within the alternatives area she sees "a great convergence" between traditional mutual funds and hedge funds. "The hedge fund world will become more mainstream," she predicts. This move will be accelerated by the implementation of the EU's alternative investment fund managers directive (AIFMD).
"If we take the model-driven, specialised part, the models have a big advantage. You can define how the performance will go according to market movements. So there is a risk control, you can handle it. There is also an ability to have some performance indicators that help investors understand the performance," explains de Dinechin. "We have the best of the two worlds: the model management and the human management."
Looking at expansion, de Dinechin is keen for Lyxor to continue to expand in Europe but wants to see a shift in focus towards northern Europe and in particular Scandinavia. To that end, Lyxor has been rapidly expanding its London headquarters. From only a handful of people in 2012, the office has grown steadily in 2013.
"We wanted to open a UK office for different reasons. The main reason was that we identified the development of our business in northern Europe as a priority," explains Pierre Gil, CEO of Lyxor Asset Management UK. "From London we cover not only the UK but also the Scandinavian region," he continues.
"From London we run or participate in all the business lines of Lyxor group: the alternatives, the fund of hedge funds and managed account platform and the multi-asset business line, with a team in London specialising in credit funds. We are also part of the ETF business line."
Gil believes "there is plenty of room" for Lyxor to grow in the UK. "We have good products, we have a good team. It is just that the market is not fully aware that we have what it needs," he says. "We have plenty of things to bring to the market in terms of liquidity and innovative indexation, so I think we can make progress." On the multi-asset side, Gil is also optimistic.
In 2013 his priority was to establish Lyxor UK as a company and as a team. The company is now regulated by the Financial Control Authority in the UK. In terms of corporate development it was important for Lyxor to establish cross-selling opportunities between the different businesses, says Gil.
Asia is also another area where de Dinechin expects Lyxor to grow. "It's probably an area where the growth will be one of the most important in coming years," she notes, particularly emphasising the importance of China's potential appetite for alternative products.
Looking at prospects for 2014 and beyond, de Dinechin thinks the main challenge will be helping investors to change attitudes towards alternative solutions and understand the significant performance returns available. While investors clearly understand the traditional ways to produce performance, "using different techniques to do performances with more complex and sophisticated techniques and products requires some additional effort compared to what is usually done," she explains. However, she thinks many investors are "beginning to be more and more comfortable with that. They want to invest in these techniques".
She notes: "Alternatives are going to be more and more mainstream, helped by the fact that they are regulated. They will become more commonly used. Then Lyxor will benefit from them as well."
Lyxor Asset Management's managed account platform was recognised as best MAP platform and best overall platform in the European Fund of Hedge Funds Awards 2013.
The week in Risk.net, May 19-25 2017Receive this by email