Jul, 2001

Spotlight on Paris

Once touted as Europe's cultural mecca, Paris is now at the center of major financial change and integration. Both the advent of the euro and the new Euronext exchange are transforming the city into an international market. Now a part of the eurozone, Parisian money managers are diversifying their portfolios, moving away from French bonds and into pan-Eurozone assets - equities as well as fixed interest investments. 'This has been a key trend in the last few years,' says Pierre Bollon, director general of AFG-ASFFI, the French fund managers' association. 'All funds and bond products are now open, whereas many [investment managers] were limited to French investments before.' According to Bollon, the new openness of the French market to non-French investments makes it easier for foreign IROs to approach Parisian investors.

The new pan-European exchange, Euronext, secures Paris's place as a financial center. Born in September 2000, the exchange is the result of the integration of the Paris, Amsterdam and Brussels exchanges. 'All of them are now under one umbrella,' explains Antoinette Darpy, Euronext spokesperson. Trades are routed through all three exchanges, with the goal of running on the same platform soon. 'You will still have local entry points but the aim is to have one single order book and platform,' she adds.

With nearly 500 investment management companies, Paris is a good stop for any Europe-bound IRO. Big names like AGF Asset Management, Axa Investment Managers Paris and CDC-Ixis make this city a venerable center of private and public asset management. The French buy side is, however, a complicated community that requires some inside knowledge.

Most of France's investment assets are run by insurance companies, banks and mutual fund houses. 'There are two distinct categories of institutional investors in Paris,' explains Christophe Nagy, fund manager with Carmignac Gestion, an independent French group specializing in international equities. 'On the one hand, you have large banks and insurance companies whose money managers benchmark against international indices and, on the other hand, you have medium-sized and small investment companies who specialize in private asset management.'

France has recently seen a surge of individual investors putting their money into savings plans. 'If you compare France to the US, we have a higher concentration of individual investors who invest either directly in stocks or indirectly through the OPCVMs (French investment funds) because we have no pension funds,' explains the AFG-ASFFI's Bollon. According to the AFG-ASFFI, investments in employee savings funds doubled from $140 bn to $331 bn between 1996 and 1999. 'There has also been a surge in retail investors putting their money in life insurance products and mutual funds,' adds Bollon.

Smaller independent money managers also play an important role. Among them, Carmignac Gestion, Tocqueville Finance and Richelieu Finance are strongly focused on the US market. 'Money managers will often break away from major institutions following a merger,' explains Steven Greenwood, senior vice president of investments at Prudential Bache International, an affiliate of US-based Prudential Insurance of America. Greenwood thinks these smaller firms present more difficult targets for foreign companies. 'They are constantly changing and a lot of their research is still done through major institutions.'

Paris has a strong sell side with players such as BNP Paribas, Exane and SG Cowen all located here. In terms of sell-side research, the city is home to a pool of strong analysts in the technology, retail, banking and auto sectors. The French analyst community is not, however, the best target for foreign companies. While most large brokerages provide decent coverage of large-cap foreign companies, there is little interest in foreign small caps. 'With the exception of SG Cowen, most French brokerage houses do not cover foreign companies from Paris,' says Carmignac Gestion's Nagy.

Fundamental and diverse

The Parisian buy side is evenly split between index fund managers, on the one hand, and active money managers on the other. It's the latter, of course, who actually choose which stocks to invest in. 'Stock pickers generally follow a fundamental approach,' says Pierre Laurent, partner of Paris-based IR consultancy NewCap. 'Of course we all use a top-down approach but this is a very American way of defining the money management community,' adds Bollon.

However, Greenwood from Prudential Bache International thinks the majority of French money managers adopt a combination of fundamental and aggressive investing. 'The base is fundamental but portfolio managers are also always looking for the next big winner,' he says. Generally speaking, French money managers, regardless of their particular style, are long-term investors.

Greenwood works with both institutional clients and private individuals, and he describes his own investment style as diverse with a special focus on biotech. 'But my clients have a whole range of interests,' he adds. Greenwood's criteria for assessing potential investments depend on the company's sector. 'If it's General Electric, it won't be judged the same way as a small biotech company,' he asserts. 'But there is room for both.' When asked what he likes to hear from companies, Greenwood responds frankly, 'Stories of survival'.

Over at Carmignac Gestion, Christophe Nagy specializes in small to medium-cap technology and biotechnology companies. With over $12.8 mn under management, Carmignac Gestion invests roughly 50 percent of its investment dollars in early stage US companies. 'We are growth investors looking for companies that have already established a market presence or seem like a very promising prospect,' says Nagy. When considering new investments, he looks for basic characteristics like 'a sound product, good market presence, solid network and marketing systems, experienced management, and strong communications.'

Solid ground

All agree that the key to attracting investors in Paris is to build a solid relationship with buy-side money managers. Greenwood says the majority of buy-side managers like to get to know management and 'feel comfortable' with the company before they invest. 'It's very much relationship-based,' he says. 'Fund managers must know the fundamentals of a company inside-out simply because they are accountable for the investment decisions they make.' As such, it's very important that the IRO be accompanied by a member of senior management when visiting Paris. 'They need that face-to-face contact with the CEO rather than just some IR or public relations person,' says Greenwood.

Some French money managers in larger firms will not even attend a company's presentation, sending a junior analyst instead.

IR professionals must not, however, be discouraged by a no-show from a French money manager and should continue to keep them informed about company news. 'It's essential that the IR person continue to send a constant flow of information because there are many who just present and then disappear,' says Greenwood.

Fund manager Christophe Nagy is familiar with this phenomenon. 'Two years ago, a lot of companies at the IPO stage would show up and do a lovely exercise for two hours and then we would never hear from them again,' he recalls. 'There is really no point in showing up once and not keeping us informed - it's a waste of time and reputation,' he adds. Especially with early stage companies, he suggests returning for a second visit within a year in order to update potential investors on a company's story. Nagy also encourages IROs to be very candid about the issues facing a company.

Return visits

Remember that the idea is to educate the money management community about the basics of your business, notes NewCap's Laurent. It's best to keep the presentation simple and avoid elaborate multimedia props that have a tendency to divert attention away from the key message. 'The IRO has to prove the value of the stock by showing that the fundamentals are good, that earnings will go up and that the company is undervalued in its home market,' says Pierre Bollon of the French fund management association. According to Laurent, the best time to set up a meeting with the French investment community is during lunch. And the most popular location for meetings is the center of town, where most investment firms have their offices.

French portfolio managers are not averse to meeting in groups. 'It really depends whether they already have a relationship with the company,' says Greenwood. 'After the first meeting, one-on-ones are usually best because it's very much about building trust and feeling comfortable calling up the CEO when there is a problem with the company,' he adds. NewCap's Laurent has a similar recommendation. 'Initially, we recommend lunch meetings with both buy- and sell-side money managers, because the first meeting is a basic presentation,' he says. Three months later, you can come back and do a series of one-on-ones and then, once you have established a relationship with Parisian investors, you can visit on a quarterly basis during regular investor roadshows.'

Some of the major institutions will often set up large meetings for companies and invite other money managers to hear their story. At Prudential Bache International, 'We set up a lunch for Intel and invited around 50 members of the investment community,' says Greenwood. 'That way the company knows it will be presenting to the right group of people.'

Media attention

Foreign companies have a good chance of attracting press coverage from the major Paris-based media. Established French newspapers like Le Figaro, Les Echos and La Tribune all have international business columns. Weekly financial papers like La Vie Financière, Le Revenu Français, Le Journal des Finances, Investir and News Bourse also have sections dedicated to news of foreign listed companies. The best approach is to submit a story idea to the publication's business editor in French. The media is most likely to cover stories that relate directly to the French market.

An education

For IROs worldwide, a trip to Paris can be an educational experience. 'It's a good opportunity to familiarize oneself with European roadshows and make contact with potential investors who can provide feedback about the French marketplace,' notes NewCap's Laurent. The first step is to research which firms are interested in international stocks. In order to target the right portfolio managers, Prudential Bache International's Greenwood suggests enlisting the services of a local expert. 'It's better to have someone on the ground who knows the market either within an IR agency or through a contact at one of the big investment houses like Prudential or Merrill Lynch,' he says.

Chances are, if the firm invests internationally, it will be interested in hearing from your company, according to Greenwood. Even money managers who are not actively invested in foreign stocks are worth paying a visit. 'The French 'Street' is very open to meeting with foreign companies and interested in hearing about trends in other markets,' Laurent reports. 'And French fund managers are always looking for new benchmarks by which to measure the success of their domestic investments.'

Visiting IROs should not expect to participate in local IR events with their Parisian colleagues. The Parisian investor relations community is more 'atomized' than the North American IR community. 'The local IR market is very competitive, with each firm treating its clients like a jealously guarded secret,' adds Greenwood. 'The best reason to come here is to set up meetings with money managers rather than fraternize with IROs,' sums up Laurent.

Targeting Parisian investors is very similar to targeting North American investors: it's a careful blend of regional knowledge and a solid understanding of IR. Like other investors, French money managers want to build a personal relationship with senior management and really get to know a company's fundamentals. That being said, there are plenty of opportunities here for European, Asian and North American companies whether looking to take advantage of acquisition opportunities in France, seeking additional capital or even attracting key European executives. In any case, foreign companies will build new relationships with a population of investors who have a reputation for being both loyal and long-term.


Major buy-side institutions
AGF Asset Management
Axa Investment Managers
Banque Populaire Asset Management
BNP Paribas Asset Management
Crédit Lyonnais Asset Management
CDC-Ixis
SG Asset Management
Victoire Asset Management

Sell-side firms to visit
ABN Amro
BNP Paribas
Crédit Agricole Indosuez Chevreux
Crédit Lyonnais
Deutsche Bank
Exane
Julius Baer
Merrill Lynch
Oddo Pinatton Equities
SG Cowen

Helpful web sites
paris.org
Museums, tourist information, hotels, weather forecasts, currency rates
paris-touristoffice.com
Events around town, business tourism information, conference and trade show database
wcities.com/paris
Guide to the city including historical background, as well as entertainment and restaurant reviews