CEO of BNP Paribas Asset Management since July 2021, Pierri cut his teeth in the competitive Italian asset management business at ING in the 1990s and 2000s. He now has to deal with changing client demographics in the institutional and retail sectors, as well as maintaining an edge in active management, private markets and ESG, where there is increased competition for assets and people.
Pierri’s predecessor as CEO, Frederic Janbon, centralized a previously somewhat cumbersome multi-affiliate asset management business and overhauled risk management.
All of this, Pierri believes, has left the company in a position of strength, enabling the creation of a single platform for emerging markets by bringing together the capabilities of former subsidiaries, for example, as well as a centralized solutions unit. multi-asset and quantitative (MAQS) in the same vein. This one was created from two of the previous affiliates and an existing multi-asset team.
Recent activity has seen BNPP AM bolster its capabilities in private assets – fully integrating BNP Capital Partners into the private markets platform and acquiring specialist Dutch manager, Dynamic Credit.
With EUR 9 billion in assets under management, Dynamic Credit specializes in Dutch mortgage lending and retail/SME lending in a diversified loan fund. It also offers valuation, performance benchmarking and portfolio transaction services.
The company will remain a separate entity under CEO Tonko Gast, but will be “part of the family”, as Pierri puts it, on the private markets platform.
Pierri says the private markets platform is “already quite diverse from a supply perspective”, but will continue to “grow organically across the risk-return spectrum”, with areas such as credit risk sharing slated for launch, as well as an expansion of infrastructure. junior debt, to sit alongside a senior debt capacity.
The CEO is not ruling out add-on transactions such as Dynamic Credit, but warns, “It will be very surgical to support and accelerate some of the strategic imperatives we have in this area.”
Pension funds and insurers are looking for more complex multi-asset private markets strategies to meet cash flow needs, and Pierri points to a recent win for a diversified private markets mandate. This policy was created with input from the MAQS Solutions Group.
MAQS has also made “quantum mental” improvements to fundamental active investment processes over the past few years, adding enhanced data and analytics capabilities to bolster traditional security analysis and research. As a house, BNPP AM is largely active, despite a small passive activity which represents less than 10% of overall outstandings.
Pierri points to an increased focus on high-conviction active strategies as strategic positioning in what he sees as a polarized active-passive world. “Active has to be very active in good times and bad, which means when you’re wrong, you’re absolutely wrong, but when you’re right, you’re absolutely right.”
He points to initial success in the fundamental equity space: “This is probably the first asset class where we see this new direction working. But we are also very pleased with global fixed income which, after a difficult start to 2017, is now showing very strong numbers also on a two-year basis, at the end of last year.
All this implies a greater investment. Pierri says, “There’s no compromise on building a strong research platform internally, which is the journey we’ve been on. It is clear that this comes with costs and pressures, but it is part of our business proposition and it is what we must do.
Pierri inherited a diversified client base, with external institutional currency accounting for around 55% of total outstandings. Captive customer AUM, at around 18%, is lower than many bank-owned peers, and Pierri sees potential for growth.
Millennials are becoming an important group of retail customers, especially as they inherit family wealth. BNPP AM was relatively early in the game as early as 2017 with its acquisition of Gambit, a robo advisor.
The millennial generation, aged around 25 to 40, is also becoming an increasingly important cohort of employees now that its members are beginning to occupy higher positions. Millennials tend to hold different values than their older, more conformist Generation X and Baby Boomer colleagues.
Pierri hopes his company’s early focus on sustainability, at group level as well as in asset management, will attract new talent and drive future revenue growth.
At group level, BNP Paribas stepped up its coal exit program in 2020. The bank joined the Katowice Accord in 2018 to work on a common methodology with other lenders to align with the Paris Agreement, and has committed to stop financing new coal-fired power plants in 2017.
In asset management, a sustainability center was also created in 2017 to bring together research and expertise to support investment processes and marketing. The center is led by Jane Ambachtsheer, who joined Mercer in 2018, and Pierri himself chairs a sustainability committee.
Within the EU SFDR fund typology, BNPP AM manages approximately €191bn in Article 8 strategies (which take ESG into account) and €39bn in Article 9 funds (which promote ESG) .
Achieving good ESG integration has been more of an organizational art than a science so far. Too cumbersome and centralized approach would risk suffocating the teams. Too loose would risk inconsistency.
But the dynamics are changing and the integration of ESG into specialist areas like credit or sovereign fixed income is emerging but clear trends. Pierri hopes that managers like BNPP AM, with a long track record in ESG, will be well positioned as regulators and policymakers look to sustainability.
All of this increasingly means that ESG is now a language everyone needs to be fluent in – everyone needs to be able to answer sustainability questions directly, not pass them on to ESG specialists.
“Sustainability as a key ingredient in asset management is not only here to stay, but will be everywhere,” says Pierri. “We see that everyone – regulators, clients, asset managers – are busy trying to catch up and I think we are only seeing the start of a major trend. My point of view would be that in five years, ESG will only be mainstream. Everyone will have to, because that will be the way we as an industry do business.