September 29, 2017 / 1:46 PM / 10 months ago

Lyxor CEO open to ETF deals, eschews large-scale active fund M&A

LONDON (Reuters) - Lyxor Asset Management is prepared to buy a rival provider of index funds to help it maintain its European No.2 market position, but has no plans to join a wave of large-scale deal-making within active fund management, its chief executive said.

Lyxor is the sixth-biggest asset manager in France, managing around 120 billion euros ($142 billion), of which around 60 percent is in exchange-traded funds. The rest is in actively managed funds and products using funds from rival companies.

ETFs are a strategic focus for Lyxor, part of Societe Generale (SOGN.PA), and it aims to continue its strong organic growth and at least keep pace with broad-market growth, currently around 15 percent a year, Lionel Paquin said.

“At the end of the day, (we want to) be the undisputed and unquestionable number two in Europe,” he told Reuters.

“Scale matters to us, but it’s less of a necessity in the other businesses we do ... where we have more of a niche approach.”

As a result, Paquin said he was also open to buying in assets from rivals to help drive ETF growth.

“External growth in ETFs is not a necessity, but definitely not a taboo ... we are open for growth,” he said.

The impending launch of new European Union rules aimed at making the costs of investing more transparent, part of the Markets in Financial Instruments Directive II, would also help demand for ETFs grow, Paquin said.

This approach means Lyxor has no interest in doing a blockbuster deal for an active manager such as French peer AXA Investment Management, part of insurer AXA (AXAF.PA), which is currently looking for a partner, sources said.

AXA and others mentioned as possible partners, including French peers Natixis and BNP Paribas, all have a large interest in actively managed stock- and bond-picking funds, something Lyxor has relatively little exposure to.

“We’re not in that game, we have a very different business model,” Paquin said.

An AXA deal would be the latest in a string of industry tie-ups as some companies look to join forces to save money amid a tightening of regulation across the world and growing pressure on fees from cost-conscious investors.

Among them are the 11 billion pound merger of Standard Life and Aberdeen Asset management and deals involving Janus Capital and Henderson Global Investors, and Amundi and Pioneer.

Additional reporting by Maya Nikolaeva in Paris; Editing by Catherine Evans

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