Asset manager: Amundi

Amundi has expanded its client base among reserve managers over the past few years, notably drawing on its expertise in environmental, social and governance (ESG) investing, mortgage-backed securities (MBS), eurozone markets and training.

These elements came to play a role in 2023, when the firm notably secured a mandate – one of eight external managers – with the Central Bank of Colombia for the first time. 

The Colombian central bank has run an external asset management programme since 1994. It offers the same mandate to all its managers to better assess their performance relative to the central bank’s benchmark and to one another. 

“We’ve developed a really good framework in terms of how we select managers and how we evaluate them,” says Andres Cabrales, head of the international investments department at the Central Bank of Colombia.

The central bank studies asset managers’ overall capabilities, their knowledge-transfer proposals, their investment processes, as well as the historical performance for accounts that they manage. In this screening process, Amundi recorded an “outstanding performance”, Andrea Galeano, risk management director at the Central Bank of Colombia, tells Central Banking.

The central bank’s officials highlight the French asset manager has a notably robust investment process, including a systematic approach for implementing active investment decisions. 

Amundi’s Colombia mandate started in May 2023. It is an active fixed income programme for $1.7 billion of assets covering Treasuries, MBS and G10 currencies. Overall, 90% of the portfolio is focused on US dollar assets and the rest in other major currencies.

The Colombian central bank focuses on duration, currency, credit and inflation strategies. In terms of credit risk, the central bank tolerates up to A- in sovereign bonds and A+ for corporate issuers.

“During these months we have been working with them we have seen they use the breadth of the strategies we allow in this mandate,” says Galeano.

Cabrales stresses Amundi has a “very strong team overall”. Nonetheless, one of the factors that set it apart from other asset managers is its team in the US specialising in MBS. “MBS is a really sophisticated asset,” adds Cabrales. “You must have a lot of models in terms of prepayments. It requires expertise, large staff numbers and plenty of models.” 

European presence

Amundi’s European roots are also reinforcing its offering to central banks in other regions. After a decade of negative interest rates, euro-denominated government and corporate securities are offering positive returns. The firm is making the most of its presence and understanding of this large and diverse market to offer diversification opportunities to its global clients.

“The fact that they are mostly located in Europe was also interesting because the vast majority of our asset managers are located in the US,” says Galeano. “We thought that having an asset manager in Europe would be beneficial for the mandate due to diversification benefits.”

In fact, Cabrales explains “we’ve seen new names come into the mandate that we’ve never seen before both in sovereign-related bonds and corporate”.

In November, the Central Bank of Colombia’ total reserves stood at $58.6 billion. Overall, 6% is allocated to euro-denominated assets. But the institution sees room for increasing this share in the coming years.

Knowledge transfer

The central bank added it was impressed by Amundi’s knowledge-transfer proposal. The French asset manager has a dedicated team to design and organise training for clients. 

Once a year, Amundi organises a one-week standard training course for portfolio and risk managers at central banks that is focused on the fundamentals of asset allocation, as well as portfolio and risk management applied to FX reserves. 

“This course offers a deep dive into major asset classes, covering the principles of portfolio management, risk management and trading, strategic and tactical asset allocation, and also specific topics such as ESG,” says Vlada Savcenko, global relationships manager for sovereign clients at Amundi. “The idea is to support central banks in training their employees involved in the reserve management process.”

Amundi also offers executive programmes designed for senior members of staff, including governors, heads of strategic asset allocation, heads of reserve management or risk management. “Here we offer a much deeper perspective of a specific topic,” explains Savcenko. “For instance, the last programme we organised in October 2023 was focused on currency-hedging strategies and currency as a factor.”

Amundi also offers ad hoc specific sessions that are organised following inquiries from clients about a particular asset class. 

Overall, training is viewed as an important building block for developing a solid relationship between Amundi and its clients.

ESG

The final point of strength that reinforces Amundi’s position is the know-how it has accumulated in ESG. The company has another dedicated team to this area.

“ESG – and more specifically climate – integration within reserve investments has been gaining momentum, notably in Europe. Lately, we have been providing ample support to our central bank clients on understanding the implications of evolving sustainable finance regulation, the variety of ESG data sources and methodologies, and stringent requirements in terms of ESG reporting,” explains Savcenko.

“We have a large team of ESG experts and quantitative analysts, and we also work with a large sample of index providers on various benchmarks, because there is no one-size-fits-all solution,” she adds. “In this environment we need to have a variety of possibilities to present to clients that would be in line with their own trajectory.”

The Central Bank of Colombia has not added ESG criteria to its investment policies. Nonetheless, it has been taking steps to consider the exposures it has in its portfolio. In 2021, it changed its investment policy statement. “We still look for the three factors of security, liquidity and return,” Cabrales says. “But we also acknowledge that ESG factors are relevant in terms of mitigating and monitoring risk. They can reduce any type of credit risk.”

Amundi has been developing an ESG exchange-traded fund that is specifically designed to meet the investment requirements of central banks, while allowing them to have exposure to investment strategies that are sustainable and socially responsible.

“Offering overperformance against the benchmark is always good,” says Christine Samano, relationship manager for official institutions in Latin America with Amundi, based in Mexico. “But our clients value so many other aspects. When an asset manager like Amundi has accumulated all these experiences throughout the years when it comes to ESG and climate investing, central banks are conscious of the added value we bring to the table.”

The Central Banking Awards 2024 were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Joasia Popowicz, Ben Margulies, Riley Steward, Jimmy Choi and Blake Evans-Pritchard.