As BNP Paribas aggressively gobbles up banks in the West and Midwest, its U.S. asset management arm also plans to grow by acquisition, but its chief says it will be buying specialties it can sell through its global distribution network, not primarily looking to add scale.
Gilles Glicenstein, the Paris-based chairman of BNP Paribas Asset Management, said the deal it announced last week for FundQuest, a Boston asset manager that specializes in separately managed accounts, will be a model for the unit's purchases of smaller firms. These deals would constitute a platform to spur growth in the United States and cross-selling globally.
The asset management arm wants to be selective and strategic rather than just hunting for big deals, he said.
"We have never been interested in buying large firms with large sums of money," as other institutions have done, "just to develop scale," Mr. Glicenstein said. "We are much more interested in expanding by acquiring good products and services."
"We have a number of partners already in the United States," he added. "If we increase our scale more, that is fine, but we would rather increase our specialties."
Mr. Glicenstein, who was promoted to chairman on June 1 after six years as a managing director, said BNP Paribas Asset Management is interested in buying high-profile product platforms in the United States that the company can then cross-sell through its channels globally. This means acquiring highly specialized equity or fund managers with a strong identity, he said.
The asset management unit has a strong presence in southern Europe and Asia, particularly Japan, Mr. Glicenstein said, but needs to develop its presence in the United States. He said he hopes to add $50 billion of highly specialized equity assets in the next five years in the United States. BNP Paribas Asset Management has $266.3 billion of assets under management worldwide, including $51 billion in the United States, he said.
Acquiring specialized asset managers "is the only way to differentiate yourself on a worldwide basis on the asset management side," he said. "Customers want to work with the best of the best."
"We'd rather partner with two small firms than one big firm," he added. "We aren't just after size."
Mr. Glicenstein said he knows this strategy is in stark contrast to the one employed by the parent bank. BNP Paribas has aggressively bought midsize banks in the West and Midwest in the past two years. Last month it bought Commercial Federal Corp. of Omaha for $1.36 billion. With $10.4 billion of assets, the Nebraska thrift is nearly twice the size of the last U.S. banking company that BNP bought, Community First Bankshares Inc. in Fargo, N.D., last November. The latter deal thrust BancWest Corp. of San Francisco, the French bank's U.S. arm, into the Midwest.
Don J. McGrath, BancWest's president and chief executive, said in June that he is still looking for deals to add scale. BancWest, which has $51.4 billion of assets, operates First Hawaiian Bank in Honolulu and Bank of the West in San Francisco.
Mr. Glicenstein said making asset management deals is much different. Adding banks and branches gives BNP Paribas economies of scale and other cost savings, he said.
"The risk imbedded with an asset management firm is different and bigger than with acquiring a retail bank," he said, so it requires a different approach. The asset management unit must be selective.
"We'd rather diversify our acquisitions rather than put a lot of money into something that might be unstable," Mr. Glicenstein said. " … We need to expand our asset management unit globally by expanding in areas where we are not that strong."
FundQuest, which was founded in 1993, has $10 billion of assets under management. It is a turnkey asset management provider that sells wealth management solutions through more than 60 financial institutions, mainly banks and insurance broker-dealers.
BNP Paribas said once the deal closes, in August, it would use FundQuest as its global brand for wealth management solutions in open architecture. In the United States, the asset management unit will focus on managed accounts, capitalizing on the parent's strong banking network. In Europe, FundQuest is to join forces with Cortal Consors Fund Management, an open architecture and investment advisory firm with $18 billion of assets under management. Cortal Consors is a wholly owned subsidiary of BNP Paribas.
Mr. Glicenstein said BNP Paribas would use FundQuest to develop a strong platform of fee-based products such as managed accounts and multidisciplinary accounts and then sell these products in the United States and abroad. This strategy of buying a strong platform and then using it to stimulate cross-selling has worked, using hedge funds, for BNP Paribas in Europe.
"We do not want to be a one-stop shop," he said. "We want to have a series of platforms that can find ways to expand."
Analysts said this strategy for growth could succeed, especially as ever more financial services companies quit proprietary asset management and consider fee-based platforms and open architecture models.
"Banks are very interested in being distributors of strong open architecture platforms," said Richard X. Bove, an analyst at Punk, Ziegel & Co. "They don't want to run their own fund families and asset management products. They are looking for providers and alternatives."
Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia, said its parent's global platform would enable BNP Paribas Asset Management to grow quickly. "Cross-selling is the key to success," he said. "That really requires the asset management arm to work with the bank and through its distribution channels."
Mr. Glicenstein said BNP Paribas Asset Management is one of the largest fund distributors in Europe, with a 10% market share and is one of the largest life insurers and retail brokers in France. The parent company has one of the 10 largest private banks in the world. It offers its products and services to third-party distributors, including other banks, funds of funds, and broker-dealers.
Growing in the United States is all about finding the right partners in the right markets and then cross-selling the expertise globally, he said.
"We believe our clients are changing thanks to the open architecture trend," Mr. Glicenstein said. "What is taking place in the United State is very interesting. Customers, both individuals and institutions, are looking for a turnkey asset management program. We want to develop more platforms, like FundQuest, that we can distribute nationally and internationally."
"We want to be one of the most important open architecture solution providers globally," he added.
