The abrupt departure of Andrea Rossi this week from his role as chief executive of Axa Investment Managers has reignited speculation about the future of the €757bn asset management business owned by Axa, the Paris-listed insurer.
Axa IM received takeover proposals from two French rivals in 2017 and now faces fresh questions following a sudden reshuffle of its top ranks.
Mr Rossi, who has filled the chief executive role since 2013, will be replaced by Gérald Harlin, who had previously announced he would retire at the end of this year. Mr Harlin, deputy chief executive, will also take on the role of executive chairman of Axa IM in December, replacing Christof Kutscher.
“Mr Harlin has pushed back his retirement date to take on the role but it is unclear how durable this new leadership structure is as he has not specifically been named CEO,” said Mathieu Caquineau, an associate director at Morningstar, the data provider.
Mr Caquineau, who met with Axa IM in July, said he was surprised by Mr Rossi’s exit as the company has not provided an explanation for his departure. Mr Rossi will become a strategic adviser to Mr Harlin in December.
Axa said the change of leadership was to “prepare a new phase of its development”, but it declined to comment further.
Earlier this month, Axa also made changes to some senior investment roles. It promoted Marion Le Morhedec to head of active fixed income for Europe and Asia, replacing Chris Iggo, who moved to the role of chief investment officer for core investments.
Serge Pizem was named head of multi-asset and Laurent Clavel, an economist who led the research team, took the role of head of the “quant lab”. Mr Clavel’s role has been set up to focus on quantitative research, portfolio engineering and product structuring.
But longstanding tensions over the strategic direction of the asset management unit remain unresolved, according to company observers.
“Mr Harlin is not an experienced asset management leader. He has been appointed as an interim caretaker and it suggests that the parent insurer does not know what it wants to do with Axa IM. The speculation over whether it might sell or perhaps agree to merge the business with another partner will start again,” said a senior French investment executive.
Takeover proposals for Axa IM were made by Natixis and BNP Paribas in 2017. Both approaches were rebuffed by Axa, the parent company, which said the investment management arm under Mr Rossi would remain a core asset.
Thomas Buberl, Axa’s chief executive, reiterated this week that asset management would remain a “core” activity for the wider company.
After the takeover bids were rejected in 2017, Mr Rossi was tasked with achieving demanding targets, which included raising assets managed on behalf of external clients to €400bn by 2020. But achieving that objective looks improbable with third party assets standing at about €307bn at the end of last year.
Mr Rossi believed that Axa IM could develop its alternatives and real assets business into one of the largest players globally. He oversaw the acquisition of $9.4bn of US commercial real estate loan mandates and an investment team from Quadrant Real Estate Advisors in November 2018 in a move designed to strengthen its global debt business.
Mr Rossi also oversaw the launch of a successful range of thematic equity funds focused on robotech, fintech and digital economy strategies.
Mr Caquineau says Axa IM has “some pockets of strength” but the overall quality of its fund range is uneven.
Other changes have been made in an effort to revive the business’s fortunes.
Last year it embarked on a restructuring that involved about 210 job cuts and the departure of senior executives including John Porter, global head of fixed income, and Christophe Coquema, head of the client group.
Mark Beveridge also stepped down in June 2018 from his role as head of Axa’s Framlington equity platform and was replaced by Matthew Lovatt.
But growth over the past 18 months has reversed, with large client net outflows of €5.8bn in 2018 and a further €3bn in the first half of this year.
Those outflows contributed to Axa IM’s underlying earnings falling 12 per cent to €123m in the first six months of 2019.
The investment management unit accounted for just 4.2 per cent of Axa’s group earnings last year, a small contribution that will decline unless client outflows are reversed.
An ex-employee who did not wish to be named said Mr Rossi had struggled to balance his ambitions to develop the third party business with the parent company’s requirements to take care of its internal insurance assets.
“He [Andrea Rossi] had a very difficult role. He was a prisoner. There was a lot of politics going on which created volatility. It was never clear what the parent group wanted to do with the investment management business. Axa could have created another Amundi if the strategy had been clearer,” he said.
Nick Holmes, an analyst at Société Générale, says the importance of asset management has been de-emphasised under Mr Buberl, partly as a result of Axa’s shift away from life insurance and towards property and casualty insurance.
“Running assets for a P&C focused insurer is different from managing the savings accumulated though life insurance products,” said Mr Holmes.
Mr Buberl’s strategy of growing the P&C business means Axa IM is primarily needed to function as an efficient manager of its insurance assets and so it will retain an important role within the group, according to Mr Holmes.
“However, building a strong third party business that could compete against Amundi or BlackRock does not really fit with Axa’s focus on expanding its P&C insurance operations,” he said.
Company watchers say that the appointment of a successor to Mr Rossi will be a key signal of Axa’s intentions, depending on whether it recruits an external high calibre asset management leader or plays safe with another internal candidate from within its insurance operations.