After two years of declining assets, the French money management industry had no choice but to adapt or wither. Three cross-border deals signed this summer indicate that it's adapting and blossoming. First, Fimagest, the asset management arm of the Belgian Générale de Banque, acquired a majority stake in Boston based Harbor Capital Management (HCM), with an option to increase its holding up to 75% within 7 years. Second, BGP a private banking subsidiary of Credit agricole, hired Boston Partners Asset Management to outsource all their US equities management. Third, United Asset Management (UAM), another Boston based firm, started a French subsidiary from scratch, named Expertise Asset Management, with four parisian professionals. UAM owns 80% as the management keeps 20% of the Joint Venture.

Three encouraging trends
These three deals illustrate three encouraging trends in the French asset management industry. The Fimagest-HCM case shows that French money managers can commit necessary means to expand internationaly. The big French commercial banks haven't decided such acquisitions yet, but SocGen and BNP have nevertheless confirmed earlier this year that they would consider possible US buys or partnerships.

The hiring of Boston Partners by BGP gives indications that the French market is specialising, segmenting and opening. With the high qualitiy standards now required for asset management, those too small to specialise in certain asset classes prefer to outsource the money management side to professionals with proven track records. It opens doors to many foreign-French partnerships, as many French asset managers have real distribution powers, but rarely reach the critical size to meet performance and quality standards in all asset classes. It also points to the growing role of consulting firms in the selection process. Mercer handled the BGP tender offer, but Frank Russell and Watson Wyatt are the most mentioned in the French market.

The UAM start-up also hints how the French market is opening, from the outsiders' view. Of course it still has to prove consistent over time, as many foreign attempts to enter the French market failed or waned in the past. But it suggests that Americans are eyeing at the French market as a growth area for the future. Making his first official visit in Paris as newly named Merrill Lynch COO, Herbert Allison confirmed this opinion in June. He emphsasised that the Continental and French markets will offer similar opportunities as the US did with the pensions and mutual funds boom, and he declared his interest in acquiring one or more European or French asset management operations. It is true that the persistent bull market is rekindling the mutual funds business. After losing FRF 300 billion of managed assets between 1993 and 1995, essentially because of the money market rate fall from 9% to 3%, the French mutual funds assets grew by more than FRF 200 billion in 1996. Moreover, the long awaited equity shift has begun. According to the fund tracking consultant Europerformance, net buys have been flowing into equity Sicavs every month since the beginning of the year, totalling FRF 15 billion for the first half of 1997, a modest pace compared to the US or UK, but it had not been seen in France for the last decade or so.