Lyxor AM Innovation in investment

Lyxor AM Innovation in investment

Why Asset Managers Fear Investment Banks?

Alain DuboisChairman of Lyxor AM

2Lyxor AM Perpetual innovation in investment © Lyxor Asset Management. All Rights reserved – 2008

SG CIB, first Investment bank to createits own asset manager

In 1998, SGCIB decided to create its own Asset Management Company

It was a new concept coming from an Investment Bank

Lyxor has been created, separated from the existing Asset Manager of the Group

As an Asset Manager, regulated in France according to the UCITS Directive

The business was initially very limited: Structured Funds. There was no reason to be afraid.

But ...

SG CIB

Investment Bank

Investment Bank

Created in 1998


Lyxor AM, a success story

After 10 years Lyxor AM manages more than 100 bn USD

Lyxor AM Assets Under ManagementAs of February 29th, 2008 (USD bn)

Alternative Investments 0.2 1.8 3.1 6.6 14.0 26.7 24.8 30.6 37.92 40.24

Structured Management 0.12 0.5 1.8 5.0 10.2 17.3 23.4 23.2 25.1 31.16 31.00

Index Tracking 0.2 1.1 2.2 4.7 9.0 12.9 24.7 37.74 40.80

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD 2008

0.12 0.73.8

9.119

36

59.1 61.0

80.472.7

106.8

112.0


Lyxor AM: an Asset Manager recognized by the market

Pioneer and leader for ETFs in Europe

A recognized Hedge Funds specialist

Lyxor AM and SG CIB Structuring expertise

recognized several times

2006

2004

http://www.agefi.fr/grands_prix


Lyxor AM: a Specific Business Model

3 businesses :

Structured asset management and quantitative strategies: - AUM EUR 20.5 billions

Alternative Investments:- AUM EUR 26.5 billions

- world leading managed account platform

- 7th in global Ranking of Fund of Hedge Funds asset managers*

ETF:- AUM EUR 27 billions

- number 2 in Europe

Each business is developing with a lot of innovation

* InvestHedge Ranking Dec. 2006

AUM Breakdownas of Feb. 28 2008 (EUR billions)

Index Tracking

26.88

Structured Management

20.46

Alternative Investments

26.53


However, Lyxor is an Asset Manager, not an Investment Bank

We see ourselves as Asset Managers not as an Investment Bank

We have strong Chinese Walls with the Investment Bank

We are closer to the world of Asset Management

But we try - like all Asset Managers - to benefit from the environment and ideas provided by Capital Markets


Investment Banks and Asset Managers are both providing Investment Solutions

Investment Banks may provide:

warrants

certificates

structured products

indexed products

advisory

managed accounts

…


The World of Asset Management offers plenty of Opportunities

Alternative Investments Structured Asset Management

Passive Asset Management (Trackers)

Advanced financial techniques: options, stock lending, risk control

Systematic approach

Active Asset Management

Discretionary approach

« long only » portfolio allocations

"INVESTMENT

BANK

INTRUSIONS"

"INVESTMENT

BANK

INTRUSIONS"


Investment Banks are also Active Managers

Proprietary Trading is similar to Hedge Funds

Structured Products are Dynamic allocations. This dynamic allocation can be achieved: directly: CPPIs etc.

or by buying a pay-off (Structured Products)

From Passive to Active structured Products can be "managed"

indices can also be managed

This stays however very limited


The Legal Distinction between the two is being blurred

MIFID knows only "Investment Firms" investment Banks and Asset Managers are Investment Firms

both can render the service of "Portfolio Management"

MIFID creates a level playing field between the two same regulations for marketing, inducements etc.

The only Asset Management-specific Directive is the UCITS Directive but a recent interpretation by the EU Commission is that management of a

UCITS by delegation is a service of Portfolio Management


Keeping Chinese Walls is key

Blurring the distinctions may be ok, but:

There is a fundamental difference between: managing with a discretionary mandate

or subscribing to Products that provide pre-determined returns

This is often forgotten in the "level playing field" arguments different products should be regulated differently

there is nothing wrong in regulating differently Structured Products and discretionary mandates

It is important to keep appropriate Chinese Walls between different businesses, where they are necessary.


Asset Managers can also enter the business of Investment Banks

Asset Managers have a broad mandate, and can enters the traditional business of Investment Banks and this is the future

Hedge Funds have been doing just that

investment bank traders creating new Asset Management businesses

Structured Funds is a way for Asset Managers to enter the Structured Products business

ETF can also be seen as a way for Asset Managers to enter the "listed products" business

We are happy Asset Managers

Lyxor AM Innovation in investment

Lyxor AM Innovation in investment

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