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Investment Uncovered: Global players need a foot in the US, but don’t ignore China

An interview with Axa Investment Managers CIO for fixed Income Chris Iggo

Axa Investment Management is chasing for more space outside of Europe. “Ever since I’ve been here, Axa has been trying to get away from being associated with France only,” says chief investment officer for fixed income Chris Iggo.

Iggo, who has been in his role for almost a decade, says it is inevitable people link Axa to France, where the firm has the bulk of its clients and assets. Axa IM, the asset management arm of the wider insurer Axa Group, currently runs £654bn globally.

As a Pan-European asset manager with a large presence in the UK, a Brexit chat comes naturally.

Iggo, who manages a team of more than 40 people between London and Paris, says: “I haven’t heard anything about disinvesting [at Axa IM] but it will be prudent to know what the future arrangements will be before committing to new investments or changing business strategy.

“Banks have said they are going to move some operations to Frankfurt or Paris but when you look at the details it is just a handful of people; it is not all the trading floors for Morgan Stanley or JP Morgan.”

Iggo says neither Paris nor Frankfurt has the depth of skills and the regulatory environment to be a real competitor to London.

Aside from Brexit, has life for fixed income managers in today’s low return environment been difficult?

Iggo says the perception that returns in bonds have been low is different to the reality. However, the perception that active management does not deliver value for money is something that needs to be addressed. He admits fund managers need to design new products that maintain performance and keep costs low.

“The perception is that you are not going to make money in bonds and therefore investors have been looking for new ways to get returns and get them cheaper.”

Equity ETFs have captured more flows than bond ETFs over the past couple of years. But while it is not easy to replicate bonds with ETFs, Iggo sees this part of the market growing.

Iggo is also responsible for the fixed income team in Asia, where he says the company is likely to grow further, as well as in the US.

“To be a real global player you need a bigger footprint in the US but ignoring China is a big mistake.”

In fact, he argues China can become the world’s number one bond market. “China priced two bond issues recently. They didn’t raise a lot of money, just $2bn, but the amount of people that want to invest is over 20 million. China is going to be big.”

Another growth area for Axa IM will be in alternative credit, such as structured credit and infrastructure. “Investors are looking for new things all the time, like multi-asset, and we are a bit behind in that, so that’s a big push,” he says.

Iggo started his career as an economist, landing his first job at an intelligence service of The Economist.

“This was mid-1980s at a time when banks had lent money in developing countries and there was the Latin American debt crisis, so they made more effort in doing their credit analysis of countries. Our service provided the economic intelligence to help them make those decisions.

“At the same time, Russia’s economic system was down and the Berlin Wall came down. It was exciting, as I got Eastern Europe to cover, doing analysis on Bulgaria and Romania when we had no data at all. It was hard to do.”

In the late-80s Iggo joined Chase Manatthan, where he continued with country risk analysis. He moved to New York with the firm in 1992 to focus on foreign exchange. In 1996, he was approached by Barclays, moving there to become chief US economist, then chief European economist.

He joined Axa in 2005 and was appointed to his current role in 2008. He recalls the difficulties of starting the job just as the financial crisis really hit.

“It was a beautiful day the Sunday of the weekend Lehman collapsed and I was walking with my wife. We met some neighbours, one of whom was a lawyer and very sophisticated.

“I remember him saying: ‘It reminds me of September 1939 when they said there was not going to be a war but then it was.’ It was a scary period and I learned a lot in a short time.”

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