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Amundi’s ETF chief on building a scale business



Three framed pictures occupy pride of place in the sleek Paris office of Amundi’s Valérie Baudson.

One shows the team of colleagues she leads in the exchange traded fund unit she built from scratch at the French asset manager. Another features CPR, Amundi’s thematic investing division, of which she is chief executive. And the final picture is of Ms Baudson alongside her fellow Amundi management committee members.

The triptych is a visual representation of Ms Baudson’s manifold responsibilities. How does one person carry out three jobs at the same time? “Very naturally,” she tells me over a video call with her characteristic poise.

Ms Baudson’s multiple titles at Amundi — she has recently taken on a fourth, head of third-party distributors and wealth — are partly a quirk of the €1.7tn asset manager’s structure. All the senior executives supporting chief executive Yves Perrier are responsible for several business lines.

But they are also testament to the drive that has helped her rise to the highest echelons of Europe’s largest asset manager since joining 13 years ago.

Brought in to launch Amundi’s ETF business, she now oversees a €140bn-in-assets unit spanning conventional tracker funds and ETFs, and smart beta funds that track indices tilted to one or more factors.

Her promotion to deputy chief executive in 2016 means she is regarded as a potential candidate to one day lead Amundi. Mr Perrier, 65, has not indicated when he will step back but speculation is rife over who will replace the longstanding chief.

As a life-long careerist with the Crédit Agricole group, the French bank that is Amundi’s majority shareholder, Ms Baudson understands the demands of internal politics and shows restraint when asked about her ambitions. “All that I can say is that I’m totally focused on my current roles, which are extremely interesting and demanding,” she says with a smile.


Established 2010

Assets under management €1.65tn

Employees 5,000

Headquarters: Paris

Ownership Crédit Agricole has 70 per cent stake, with a free float of close to 30 per cent

Dressed in a Chanel-style bouclé jacket, the 49-year-old exudes self-confidence and speaks in a direct, matter-of-fact manner. But she is also a careful diplomat — a close colleague describes her style as “an iron fist in a velvet glove” — and an expert at toeing the corporate line.

She is tight-lipped about whether Amundi is preparing to do a deal to grow its ETF business. Media reports in November suggested it is one of the bidders for domestic rival Lyxor, owned by Société Générale, one of the founding shareholders of Amundi.

“The Amundi ETF business was pure organic growth starting from zero and we maintain this objective,” she says. “But if there are [external] opportunities, obviously we will look at them. There is more room for consolidation in the ETF industry and in asset management as a whole.”

An acquisition of Lyxor, a predominantly passive player with €157bn in assets, would propel Amundi into the position of Europe’s second-largest ETF provider, making it better placed to compete with US passive juggernaut BlackRock. With $72.8bn in ETF assets, Amundi lags far behind BlackRock, which has $532bn in Europe alone, according to ETFGI.

The rumours come as the ferocious fee war among passive funds is straining margins, making scale essential for managers to compete. Ms Baudson knows this well. She joined Amundi just before Mr Perrier set about transforming it into the region’s largest fund group through a series of deals, the most recent of which was the 2016 acquisition of UniCredit’s Pioneer.

Reflecting on the rationale for the dealmaking, she observes that the seismic changes that would reshape asset management were already on the horizon in 2007. “We knew that the industry was increasingly going in two directions, with very large actors that are willing to provide all types of solutions and benefit from scale [such as Amundi] on one side, and smaller boutiques on the other side.”

While this, and the emergence of ETFs, were enough to convince Ms Baudson to swap investment banking for asset management, her switch surprised some at the time. “I left a very nice corner office [at broker Cheuvreux, then part of Crédit Agricole],” she laughs. “Everyone found my choice completely crazy — but I was really looking for a challenge and it [turned out to be] the best decision of my career.”

Valérie Baudson’s CV

Born 1971 Paris


1992-1995 MA, Finance, HEC Paris

Total pay Not disclosed


1995-99 International audit manager, Banque Indosuez

2000-07 Various roles including head of marketing, Cheuvreux

2008-present Chief executive of ETF business, Amundi

2016-present Member of general management and executive committee; CEO of CPR AM, Amundi

One former colleague says that Ms Baudson’s lack of previous asset management experience worked to her advantage, with her business-minded attitude gelling particularly well with Mr Perrier’s approach.

The coronavirus crisis has blunted Amundi’s ETF sales this year. While most European ETF providers have been hit, the slowdown has been more pronounced for Amundi, with year-to-date sales down 32.5 per cent year on year compared with 11.7 per cent for the rest of the sector, according to ETFGI.

Ms Baudson blames the weak numbers on several large one-off redemptions due to big investors moving into less risky assets. She is optimistic that Amundi can meet its objective of achieving €200bn in passive assets by 2023 thanks to its expertise in sustainable investment — an increasingly popular area for ETF investors.

Amundi is developing a climate ETF that will track a benchmark that is aligned with the goals of the Paris agreement. “We believe it’s a misconception that ESG criteria cannot be taken into account in ETFs.”

Sustainable investment is something of a pet project for Ms Baudson, who, outside of her work at Amundi, is leading work within French finance lobby Paris Europlace to make it easier for investors to select stocks using ESG criteria.

She strongly believes Europe needs a classification system for what constitutes a good or bad social investment, an expansion of the EU’s green taxonomy. This is particularly important given the spotlight cast on social inequalities by the pandemic, she says. “A company can’t perform well in the long term if it doesn’t take care of its social footprint.”

The Europlace committee led by Ms Baudson is also pushing for Europe to develop a centralised database of companies’ ESG information in order to reduce investors’ reliance on ESG rating providers, many of whom are based in the US. “It’s extremely important that Europe keeps its sovereignty when it comes to extra-financial data.”

But Ms Baudson is an internationalist at heart. She talks fondly about her time travelling the world as an international audit manager for Banque Indosuez earlier in her career. Another picture in her office shows her alongside former US secretary of state John Kerry, who she met at an Amundi event last year.

A mother of two, she balances home life with a demanding career in international finance. But her advice for women breaking into asset management is to be bold. “I always advise them to express their ambition and take risks,” she says. “They hold the same cards as their male colleagues and should dare to use them.”

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BNP under fire from Europe’s top wine exporter over lossmaking forex trades




BNP Paribas is facing allegations that its traders mis-sold billions of euros of lossmaking foreign exchange products to Europe’s largest wine exporter, the latest accusations in a widening controversy that has also enveloped Goldman Sachs and Deutsche Bank.

J. García Carrión, founded in Jumilla in south-east Spain in 1890, is in dispute with the French lender over currency transactions with a cumulative notional amount of tens of billions of euros. It claims the lossmaking trades were inappropriately made with one of its former senior managers between 2015 and 2020, according to people familiar with the matter.

BNP is one of several banks facing complaints from corporate clients in Spain over the alleged mis-selling of foreign exchange derivatives, which pushed some companies into financial difficulties.

Deutsche Bank has launched an internal investigation of the alleged mis-selling that this week led to the departure of two senior executives, Louise Kitchen and Jonathan Tinker.

An internal investigation at JGC found that BNP conducted more than 8,400 foreign exchange transactions with the company over the five-year period, equivalent to about six each working day.

That level of activity was far higher than what the company would have needed for normal hedging of exchange-rate risk on international wine exports, the people said, adding that the Spanish company had shared the results of its internal probe with BNP.

While the vast majority of the lossmaking trades related to euro-dollar swaps that moved against the bank, some were in currency pairs where JGC has little or no operations, such as the euro-Swedish krona.

As a direct result, the €850m-revenue company made about €75m of cash losses in those five years, while BNP could have made more than €100m of revenue from transactions, the people added. Many of the deals were made through trading desks in London.

Executives have demanded compensation for at least some of the losses, arguing that BNP’s traders or compliance department should have spotted and reported the disproportionately high level of transactions and profits from a single client, according to multiple people with knowledge of events.

JGC says the deals were designed as bets on currency markets, rather than for hedging, and is considering a lawsuit to try to recover some of the money, one of the people said.

“BNP Paribas complies very strictly with all regulatory obligations relating to the sale of derivatives and foreign exchange instruments,” the bank said in a statement. “We do not comment on client relationships.”

JGC declined to comment.

Separately, the Spanish wine producer is suing Goldman Sachs in London’s High Court for a partial refund of $6.2m of losses caused by exotic currency derivatives. Goldman has maintained the products were not overly complex for a multinational company with hedging needs and were entered into with full disclosure of the risks.

In Madrid, the wine company has also brought a case against a former senior executive who was responsible for signing off the lossmaking deals. JGC alleges this person conducted the deals in secret and covered them up internally by falsifying documents and misleading auditors.

In the London lawsuit, JGC alleges its executive was acting “with the encouragement and/or pursuant to the recommendations” of Goldman staff “for the purposes of speculation rather than investment or hedging”.

Deutsche Bank has been investigating for months whether its traders in London and Madrid sidestepped EU rules and convinced hundreds of Spanish companies to buy sophisticated foreign exchange derivatives they did not need or understand.

The Financial Times has reported that the German bank has settled many complaints brought against it in private and avoided going to court.

People familiar with the matter told the FT that the departures of Kitchen and Tinker were linked to the probe into the alleged mis-selling, which appears to have occurred in units that at the time were overseen by the two.

The bank declined to comment. Kitchen and Tinker did not respond to requests for comment.

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Will the Fed dare to mention tapering?




Will the Fed dare to mention tapering?

When Federal Reserve officials convene on Tuesday for their latest two-day monetary policy meeting, questions over whether the central bank should start talking about tapering its $120bn monthly bond-buying programme will lead the agenda.

Since the US central bank last met in late April, several senior Fed policymakers, including vice-chair Richard Clarida, have cracked the door more widely open for a discussion about eventually winding down the pace of those purchases, which include US Treasuries and agency mortgage-backed securities.

The recent comments align with those referenced in the latest Fed meeting minutes, which indicated that “a number of participants” believed it might be “appropriate at some point in upcoming meetings” to begin thinking about those plans if progress continued towards the central bank’s goals of a more inclusive recovery from the pandemic.

Recent economic data support this timeline. Consumer prices in the US are rising fast, with 5 per cent year-on-year gains in May revealed in last Thursday’s CPI report — the steepest increase in nearly 13 years. Additionally, last month’s jobs numbers, while weaker than expected, still showed signs of an improving labour market.

Most investors still expect the Fed to only begin tapering in early 2022, with guidance on the exact approach delivered in more detail around September this year at the latest. Goldman Sachs predicts a more formal announcement will come in December, with interest rate increases not pencilled in until early 2024.

“The Fed is signalling they are going to start talking about it,” said Alicia Levine, chief strategist at BNY Mellon Investment Management. “They are softening up the market to expect [something] this summer.” Colby Smith

Are inflation risks rising for the UK?

Consumer prices in the UK have risen at an annual rate of less than 1 per cent for most of the pandemic due to low demand for goods and services and weak wage pressure.

However, with the recent easing of Covid-19 restrictions releasing pent-up consumer demand, the nation’s headline inflation figure doubled in April from the previous month.

When core consumer price inflation data for May are released on Wednesday, some analysts expect an even bigger leap, predicting that annual CPI growth will jump to the Bank of England’s target of 2 per cent.

Robert Wood, chief UK economist at the Bank of America, said such an inflation surge would add to the BoE’s hawkishness. He also forecast further rises later this year as commodity price increases continued to elevate energy and food costs.

Additional price pressure would come from supply chain disruptions and higher transport costs that push up input costs.

“The upside risks to our inflation forecast are growing from all angles,” said Paul Dales, chief UK economist at Capital Economics, who expected consumer price levels to peak at 2.6 per cent in November.

“The reopening may result in prices in pubs and restaurants climbing quicker than we have assumed,” Dales added, while labour shortages in some sectors, such as construction and hospitality, were also starting to push up wages and prices.

However, both analysts expect the increased price strain to be temporary.

“Once higher commodity prices have fed through to consumer prices, inflation will fall back again,” said Wood, forecasting that UK inflation would drop back below the BoE’s target in late 2022. Valentina Romei

Line chart of Annual % change on consumer price index showing UK consumer price inflation is set to rise above target

Will the BoJ keep its rates policy on hold?

Japan’s economic recovery has diverged from Europe and the US this year as it struggles with its Covid vaccination campaign and big cities such as Tokyo continue to be partially locked down under states of emergency due to the pandemic.

Although the nation’s wholesale prices rose at their fastest annual pace in 13 years last Thursday on surging commodity costs, Japan has otherwise faced a lack of price pressures compared with the US.

That means that when the Bank of Japan concludes its two-day meeting on Friday, analysts believe it will not alter monetary policy.

“I don’t expect any change in policy,” said Harumi Taguchi, principal economist at IHS Markit in Tokyo. “They increased flexibility in March and I expect they will continue to watch that.”

After a policy review, Japan’s central bank in March scrapped its pledge to buy an average of ¥6tn ($54.8bn) a year in equities, and the pace of its exchange traded fund purchases dropped sharply in April and May. The moves signalled a shift away from aggressive monetary stimulus in favour of what the BoJ termed a more “sustainable” policy.

“Japan is one of the few countries whose property prices have not risen, and since rent is a major component of the consumer price index, it is not likely to see much inflation ahead,” said John Vail, chief global strategist at Nikko Asset Management in Tokyo.

“Interest rates can remain extremely low, which in turn keeps the yen on a weak trend,” Vail added. Robin Harding

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Dollar traders chill after the tantrum




It was a classic case of buy the rumour, sell the fact.

In February this year, investors and analysts were concerned that the US economy was beginning to hot up, sparking fears that inflation would pick up and force the Federal Reserve to quicken its policy tightening. This, in turn, led to a surge in US government yields, which propelled the dollar to the year’s high against its peers a month later.

Fast-forward to the end of the first half of the year and inflation in the US is running at its fastest pace since the global financial crisis, but the dollar has weakened for two straight months after appreciating in the first quarter.

Most of the shift is down to US central bankers who rushed to reassure investors that they would keep conditions extremely accommodating, soothing the flare-up in Treasury yields and the dollar’s exchange rate.

As a result, analysts are pretty confident that Fed chair Jay Powell and his board will “look through” the rise in prices at the central bank’s rate-setting meeting next week, keeping the dollar on its current weakening path.

“The combination of steady Fed expectations and a broadening global economic recovery should allow recent dollar weakness [to] continue,” said Zach Pandl, co-head of foreign exchange strategy at Goldman Sachs, in a research note. He expected the euro to benefit the most against the US currency.

Still, some strategists cannot help but wonder whether they should stick to selling the fact, or if it is time to start buying the rumour — and the dollar — again. Despite inflation powering to above 5 per cent year on year, yields on 10-year Treasuries fell to their lowest in three months, in a counterintuitive reaction fuelled by the anticipation that policymakers will shrug off the building heat in the economy.

“Getting US inflation right may be the most important market call for the rest of the year,” said Athanasios Vamvakidis, global head of currency strategy at Bank of America in London.

A decision from the US central bank to keep its policy unchanged would allow the dollar to continue with its weakening path, but maybe not as much as traders anticipated at the beginning of 2021. Vamvakidis notes that currency markets are quietly pricing in less dollar weakness than at the start of the year, with the consensus view now calling for the euro to trade at around current levels $1.21 by the end of December rather than at $1.25.

“For now, high US inflation and a still dovish Fed keep real US rates highly negative and this supports the euro. The question is for how long this is sustainable if US inflation proves persistent,” he said, adding that the bank expected the euro to finish the year at $1.15.

Line chart of Dollar index (DXY) showing The dollar has weakened after first-quarter gains

There are signs that investors might be getting too relaxed. Options markets display little nervousness about the Fed meeting, and Mark McCormick, global head of currency strategy at TD Securities said negative bets on the dollar had begun to build up heavily again in recent weeks.

This adds to the risk of a sharp snapback in the currency’s exchange rate if the Fed does hint at tapering its asset purchases on Wednesday or before analysts expect.

“Don’t expect much more dollar weakness into the summer,” said McCormick.

There are also some offbeat signs that there is a risk of traders betting too heavily on the Fed’s commitment to keeping liquidity ample. Analysts at Standard Chartered noted that Treasury secretary Janet Yellen, a former Fed chair, mentioned the potential benefits of a higher interest rate environment twice in recent weeks.

John Davies, a US rates strategist at Standard Chartered, said that it was most likely that the Treasury chief was defending the Biden administration’s fiscal plans rather than criticising Fed policy, but it was highly unusual.

“It is still striking when the Treasurer of a public or private entity argues for higher borrowing costs,” said Davies.

Investors now expect the US central bank to start cutting its asset purchase amounts in the first quarter of next year, with an announcement pencilled in for potentially September, when the Fed meets for its annual symposium at Jackson Hole, according to Oliver Brennan, head of research at TS Lombard.

But while an earlier than expected announcement would cause some ructions, the real risk is that investors will have to start anticipating the timing of rate increases in the US, which could come sooner and harder than they anticipated.

“The taper sets the clock ticking for the first rate hike and real rates rise [and] big changes in Fed policy are rarely smooth-sailing,” said Brennan.

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