Edmond de Rothschild

The president of the private banking group Edmond de Rothschild wants to defend her company's independence - together with her four daughters.

Since the sudden death of her husband about a year and a half ago, Ariane de Rothschild has led the Edmond de Rothschild in Geneva as the main owner. The group not only includes the servicing wealthy private clients (wealth management) and asset management with funds (asset management), but also perfumes, cheese and wine. In an interview with the Handelsblatt, the manager explains how she wants to combine tradition and the problems she encounters in the process.

Mrs de Rothschild, you head the Edmond de Rothschild banking group and, since the death of your husband responsibility as the most important owner. What role do women play in your company? 
We are perhaps the only bank in the bank in the world that is owned exclusively by women: My mother-in-law, my late half-sister of my late husband Benjamin, our four daughters and me. The majority of the votes go to me and the daughters. We have women in management positions. But overall it is a challenge for the industry to get more women into senior management positions. We are trying to achieve parity. But it is difficult.

Why?
In a bank, some work is obviously more male-oriented, some female-oriented. It is not easy to get women into top management. But out of 2600 employees in our bank in Geneva, Luxembourg and Paris, about half are women.

Do you also see your daughters in the future in the management of your group?
Absolutely. Some of them are already active despite their relatively young age of 19 to 26. The oldest is an entrepreneur in the games industry. The second oldest is just finishing her studies in microbiology and wants to work in our private equity division and later do a doctorate. The third daughter is studying environmental science and economics and has already worked in our infrastructure fund. She also one of our wines, which she helped to launch. Our youngest is at Ford in Turkey how industrial production works in practice. She is studying economics and works in our perfume division Caron. It's fantastic how all four of them get involved.

What significance do your daughters for you professionally today?
Since my husband's death, I have been discussing ideas and strategies for our business with them. Our daughters have grown up with our very long-term view. It was extremely important to my husband to set the course very early so that the tradition of the group would be preserved, even if he was no longer here. Our daughters are already bringing a new energy into the group.

They bear the name Rothschild, which originally comes from Frankfurt and is world-famous, partly also as a symbol for capitalism. What does this name mean today?
For us, the name means bringing tradition and renewal into balance. We share this with other family businesses, some of which have been our customers for several generations: At the core, it is about independence, strong convictions and a long-term perspective that is measured in decades - and is always oriented towards the next generation.

Is that why you took Edmond de Rothschild off the stock exchange in 2019?
Yes, that was the main reason for our delisting: our family wanted to make a strong commitment to our customers, partners and employees.

A few years ago there was a dispute with the large branch of the family that runs the investment bank Rothschild & Co. Do the two business groups differ in their culture?
Fortunately, there is now a clear demarcation, also in the naming. But Rothschild & Co, with its focus on merger advisory (M&A), is naturally more transaction-oriented. With us, on the other hand, it is not only asset management and wealth management that are based on the long term. Our investments, for example in the financing of companies, are always designed for the entire life cycle of a company.

There are rumors circulating in the market that you want to sell?
We are not even thinking of selling, and our daughters explicitly do not want to.

And joining forces with one of the other Rothschild clans is not an option either?
It is good to be independent. Every company stands for its culture with its name - and that is important for our customers to know.

You manage around 172 billion euros of client capital, half in wealth management, i.e. advising wealthy clients, and half in asset management. How profitable are the bank and asset management?
The bank is nowhere near where it should be in terms of profit margin. Over the past few years, we have brought together the most diverse structures, cultures and technical systems.
It will take a while for this to pay off fully. But in the long run, I will not be satisfied with a low return.

And how do the market turbulences affect your asset management?
In asset management, clients judge us on how we perform as an active manager compared to the overall market. And that did not go badly at all: over 60 percent of our funds have outperformed the competition this year.

And in wealth management?
There we have to explain the impairment of the portfolios to our clients. But we have won clients because the bank is very well capitalized. Especially in times of crisis, investors entrust themselves to such safe havens. In the past 15 months, we have raised nine billion euros in new capital for the Group as a whole. We are now in a growth phase.

How do you deal with inflation?
Of course, it worries us. We feel this especially in the areas where we are active beyond the financial sector. For example, we run an eye clinic, and our budget for its expansion is currently about 30 percent more expensive.

What goals have you set yourself for the next few years?
We want to strengthen real assets in particular, i.e. private equity, infrastructure, real estate and real estate financing. In asset management, we want to increase the share of this business from currently a quarter of the assets to half. The other part is classic investment funds. We also want to grow in asset management, especially in Germany. The country is one of our fastest expanding core markets, also with its high demand for alternative investments. France is our largest market, but Switzerland, Italy, Spain and Scandinavia are also important. Outside Europe, for example in Japan, we are represented through partnerships.

The focus on the environment, social issues and good corporate governance (ESG) also fits in with the long-term nature of a family business. How much has the debate about accusations of greenwashing hurt asset management?
This has done great damage to the reputation of the industry. Banking only works through trust. In the financial crisis of 2008, one of the biggest issues was to win back the trust of customers. Now it is topical again: this greenwashing debate makes investors suspicious, they feel used.

So is the issue settled?
No. The debate does not change the trend. For institutional investors, ESG is a must anyway, if only for reputational reasons. And for private investors, the topic is also becoming increasingly important, especially among the younger generation. For young people, sustainability is the norm, and they also want returns. Germans, Dutch and Scandinavians are pioneers here.

There is a lot of controversy about how profitable ESG investments are and whether they actually make a difference.
In the long term, which for us starts at five years, ESG also pays off in the form of higher returns. But the whole thing is a test of patience: you don't set up a proper ESG strategy overnight, it takes more time than many think. And many large funds cannot be 100 per cent strictly sustainable, they have too many different holdings for that. The problem with sustainability is that the topic is difficult to grasp at first - people see three abstract terms. You have to find the right standards for your own clients.

How do you solve the problem?
In our private equity strategies, we invest in special projects, such as the remediation of contaminated soil in cities, which can then be recycled. More and more strategies are geared in such a way that the remuneration of the management is linked to the achievement of certain ESG goals. We started 15 years ago with the first private equity fund in Africa, which invests in mid-sized companies across the continent. Our companies in the fund have to meet certain social criteria, such as providing health insurance for all employees.
In total, we manage 29 billion euros in ESG strategies. In asset management: 84 per cent of our liquid assets falls under the EU requirements on sustainability and special sustainability approaches (Articles 8 and 9 EU Disclosure Regulation). We are currently facing three challenges in Europe, which also have a lot to do with sustainability.

Which ones?
It is about energy production, food independence and the fact that we have to position ourselves strongly politically. We have to define together who we are - also against the backdrop of the war on our continent - and this absolutely includes sufficient infrastructure. Our infrastructure funds are also about this: 80 percent of these projects are aimed at energy transition - in the case of equity and loan funds. And large investors like insurers are putting in massive amounts of capital here. Private investors are also keen to participate in such projects, such as sustainable energy production or new urban planning.

You grew up partly in South America and in Africa. Has that shaped your view of business?
Yes, and that definitely has something to do with ESG. My father raised cattle in Colombia for a while. I think the transformation of agriculture is a big challenge - a revolution that we want to be part of and invest in. I have been discussing this with my teams for a long time.

Edmond de Rothschild, your husband's father and founder of the group, also farmed. How profitable is that?
The family owns land, including forest, outside Paris. Edmond wanted to produce cheese there, bought a large herd of cows - and produced. Now the business is profitable: every part of the business has to be profitable, otherwise the whole thing is not sustainable. We have forest there, a fodder plant production, the cheese dairy and supply 2200 homes in the vicinity of the farm with energy. Surrounding the farm with energy from biogas. We want a 21st century agriculture. I often think of the group like a clockwork with different cogs - some run slowly, others quickly, but the mechanics have to work as a whole.

Are all your divisions profitable?
Yes, all divisions are profitable, except for the perfume brand Caron, which we bought in 2018 and saved from bankruptcy. There is still a lot to do.

Where do you see your group in 10 to 15 years?
Private banking and asset management, our core sectors, are - fortunately - an intensive business between people. Digitalization is indispensable and helps to accelerate many things. But Covid, not least, has shown how important it is for people to meet and talk to each other. Therefore, family banks will continue to be necessary, and private banking will remain. In asset management, the recent shocks on the capital markets have once again highlighted the raison d'être of active management, despite the massive trend towards passive investments. For me, active selection and risk-taking is more our style than following this trend.

Ms de Rothschild, thank you very much for the interview.

Translated from the original article in German published on 2022/07/11 in Handelsblatt©