Although it wasn’t in the league of some of the mega-mergers publicized earlier this year, the announcement was no less eye-catching. France’s La Française, a manager with around $50 billion in assets under management, decided to partner up with Forum Partners, which has closer to $5.7 billion of capital, for an international diversification effort.
First, it is no surprise that a French institution such as this is going international. As per a feature in the June issue of PERE, some conservative French institutional investors are looking for ‘smarter investments’ nowadays, and that means going abroad. Indeed, Paris-based real estate fund managers with French clients were flagging this up earlier this year as part of a trend of ‘opening up’ towards more international investment than historically has been the case. La Française is no exception, although perhaps the asset manager may have surprised many by choosing to go with a firm considerably more boutique than itself.
To step back a moment, it was three years ago that La Française embarked upon a global diversification strategy in various asset classes after reaching a decision that loading up on assets primarily in France wasn’t clever. At the end of last year, the firm decided that real estate was next. With a significant €9 billion of French direct property in an economy that has been disappointing, it began looking for a partner that could provide it with exposure to other markets. It appointed an advisor, which in turn invited in Forum and others for talks.
According to Forum’s chief executive Russell Platt, the two groups hit it off right away despite their obvious differences. “There was really a cooperative spirit for all the tough issues two parties face when contemplating such a partnership,” he said. Though La Française is a large French asset manager, one factor that isn’t immediately obvious is that it is run by professionals with some “entrepreneurial” and “boutique” backgrounds, so the tie-up is less of a culture shock as one might suppose.
At first, discussions centered on how Forum could provide La Française with a suite of global products and strategies, but it developed into a deeper conversation about committing more than $600 million to Forum’s investment strategies in Europe and Asia, as well as taking a minority stake of 24.9 percent in the firm through the issuance of new shares.
Patrick Rivière, managing director at La Française, said: “We have been looking to partner with someone since the end of last year and met with Forum in March. It is a good fit in terms of international development, given our strategy is to broaden our investment scope to Europe and Asia.”
Platt added: “The combined La Française and Forum is now one of the top 20 or 30 global real estate managers and one that people will be hearing a lot more about as we begin to roll out some of our new funds and products around the world.”
The new partners are not revealing all their plans just yet, but highlights include using the capital of La Française and parent company Credit Mutuel Nord Europe to seed existing strategies. Some 75 percent of the expected investment will go towards Europe, with the pair collaborating on a pan-European mezzanine and debt capability with an initial $200 million in equity. The pair also has created a joint venture to tackle direct real estate investments outside of France and will be launching a global real estate securities fund. Forum’s Asia business will see some fresh capital as well, and there is even talk of potential expansion to the Americas.
Forum will not just benefit from capital but also from La Française’s distribution channels. The asset manager has tens of thousands of individual investors around Europe via a Luxembourg-based vehicle. It also has a large and growing institutional customer base, mainly within France (though 25 percent of its assets today are drawn from outside the French market).
According to Platt, European investors have taken to the strategic partnership. The two firms, including senior members of the La Française team, were in Germany for Forum’s annual European LP meeting, where investors were assured that the founding Forum partners were not selling shares. La Française only would be taking seats on the investment boards of new jointly-produced funds and strategies, not existing ones.
According to one LP at least, the announcement has indeed gone down pretty well. “I think this tie-up will be good for Forum,” he said.
Though not the only issue, it is clear that we are beginning to see announcements of strategies that were put into place some time ago, when France was weaker. Although the country is far from being in a good place today, it has pulled out of a shallow recession. Perhaps this will offer a reason for other French institutional investors to pause for thought as they contemplate international expansion. On other hand, it might boost their confidence.
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