Rebeca Patterson, Chief Investment Strategist at Bridgewater Associates.
Bridgewater Associates is losing its Chief Investment Strategist, Rebecca Patterson, who has decided to resign from her position and leave the company. As she herself has explained, in a post published on her LinkedIn, her decision will be effective at the end of the year.
“After three years of working with incredibly talented, dedicated, and caring colleagues during unprecedented times for the global economy and markets, I have decided to explore my next chapter at the end of this year. Bridgewater Associates was an incredible experience for me, and I am so appreciative of the mentorship I’ve received and the connections I have built. After 25-plus years of researching and investing, I’ve come to realize that my strengths and passion as an investor are best aligned with more discretionary, less systematic approaches,” Patterson said.
She took the time to thank for the opportunity “to have helped build on Bridgewater’s already unparalleled research, including through our Daily Observations, to publicly share our insights with the world, and to engage with clients to shape investment solutions that address their goals”.
In addition, Patterson acknowledged the leadership of Nir Bar, Greg Jensen and Bob Prince and thanked them for their friendship.
“This has been challenging in the best possible ways – a period of personal and professional growth that I am so thankful for. And of course, I will always be grateful to Ray Dalio for convincing me to come to Bridgewater and truly challenge my thinking as an investor”, she concluded.
Patterson joined Bridgewater, the world’s largest hedge fund ($150 billion in assets), in 2020 as chief investment strategist. In addition, as a member of several of the firm’s business committees, including its executive committee, Patterson helped lead the firm’s diversity and inclusion efforts. Prior to Bridgewater, Patterson oversaw $85 billion in assets as chief investment officer at Bessemer Trust, and, prior to that, she spent her career at JP Morgan, where she spent 15 years as an analyst in the firm’s European, Singapore and U.S. offices.
Despite the challenges environmental, social, and governance (ESG) investing has faced in 2022, asset managers across Europe still regard ESG marketing as a key feature of their overall marketing efforts, as well as a powerful sales booster in the long term, according to the latest issue of The Cerulli Edge—Global Edition.
This year, the short-term credibility of ESG has been questioned in Europe, prompted by the recent high market volatility and heightened regulatory scrutiny.
However, despite these challenges, 49% of the asset managers across Europe that Cerulli surveyed consider ESG marketing a very important feature of their overall marketing efforts. Looking ahead to the next 12 to 24 months, 76% believe that the importance of ESG to their marketing efforts will grow.
“An average of 48% of the managers in the largest European fund markets believe that ESG capability is an important enabler of sales and 75% of respondents intend to focus on increasing their production of ESG marketing materials over the next 12 to 24 months,” says Fabrizio Zumbo, director, European asset and wealth management research at Cerulli.
Asset managers’ sales departments are thinking the same way: 51% of the sales executives view the need for a strong ESG proposition as a very important driver of change within sales teams, and 47% said ESG capability is a key topic they have discussed with clients this year.
When it comes to ESG-related themes, 41% of the asset managers plan to promote energy efficiency in their ESG-focused marketing efforts over the next 12 to 24 months. Another 39% will focus on climate change and carbon emissions.
Investors’ lack of financial awareness remains a challenge, particularly for asset managers targeting a retail audience. “Managers that can combine clear and tailored ESG-related communication with strong compliance and reporting features will stand out in the long term,” says Zumbo. “Managers targeting a retail audience should allocate more resources to providing financial education and marketing campaigns to increase investors’ awareness of topics such as the importance of the energy transition, reducing carbon emissions, and investing in line with the UN’s Sustainable Development Goals.”
On the other hand, for 75% of the asset managers in the U.S., the perception that ESG is politically motivated is a moderate challenge to increasing client receptiveness to ESG issues, up from 49% in 2021. To overcome investor skepticism, managers should discuss the merits of ESG and sustainable investing with their clients, highlighting how and why they are using ESG data to drive long-term economic value.
In addition, Asian portfolios are, to some extent, more focused on regional assets and their respective local securities. This focus has sheltered Asian portfolios from the Russia-Ukraine war. Some 88% of the Asian asset owners Cerulli surveyed feel market movements caused by the war are either limited or have short-term return implications that are recoverable. More than half (58%) of respondents said the war has not had much impact on their ESG portfolios.
Morningstar announced the launch of Morningstar Research Portal (Research Portal), an investment research platform for financial advisors.
Research Portal harnesses Morningstar’s independent ratings and research, together with live market data and interactive charting, in an intuitive web-based platform, empowering advisors to bring personalized and timely investment ideas to their clients.
“Clients are looking for more from their advisors as their investment choices increase and the trend toward personalization continues. Research Portal interconnects Morningstar’s research with powerful new tools that enable advisors to swiftly identify investments that meet their clients’ needs, communicate those recommendations, and then monitor their investments continuously in a seamless way,” said Marc DeMoss, head of Morningstar research products.
“Morningstar’s research and ratings are expanding in line with the evolving motivations of today’s investor, and Research Portal helps advisors drive more timely and relevant client conversations.”
Research Portal makes the investment insights across Morningstar’s full analyst and quantitative coverage universe – more than 140,000 stocks, 320,000 mutual funds, and 24,000 ETFs – easily accessible to advisors via a modern, fast interface.
The platform’s workflows – such as the Watchlist, Model Portfolios, Pick Lists, and Compare functions – help a user discover and evaluate investment ideas under chosen criteria. Research Portal then keeps users up-to-date on the investments they care about with a dashboard that tracks global market activity and a Calendar feature that displays upcoming events, all of which can be customized for specific universes of investments.
The suite of tools within Research Portal closely connects advisors to Morningstar research so they can personalize their conversations with clients. For example, with Pick Lists, an advisor could reference the Europe Core list when seeking ideas for European exposure. The enhanced screener also has multiple configurable views that make it quick to broadly search for a security across custom filters.
In addition to data analysis, Research Portal can also be used thematically. The Morningstar Insights tab surfaces the latest editorial content from Morningstar thought leaders, grouped by topics like sustainability, policy impact, and retirement. Analyst notes, security and sustainability reports, and more are also available within the platform, the firm said.
Research Portal is available now to individual advisors and on an enterprise level. It is also integrated within Morningstar Advisor Workstation, replacing Morningstar Analyst Research Center, and within Morningstar Direct, replacing its now-retired Research Portal widget.
Apex Group a global financial services provider announces the growth of its Miami office.
Apex Group now employs over 1,300 experts in the Americas region, across a network of over 25 offices. Apex Group’s Miami presence, located in the prestigious Brickell financial district, employs an experienced team of experts, led by Jay Maher, Senior Advisor and former CEO, Americas at Mainstream Group who joins following the business’ successful acquisition by Apex Group. Maher is supported by senior executives including David Ries, Head of Private Equity Solutions and Alex Contreras, SVP, Business Development.
Apex Group in Miami provides the Group’s full single-source solution to asset managers, financial institutions, private clients and family offices, with a focus on the delivery of services to clients in the Miami, Florida and Latin American markets.
The expansion of Apex Group’s Miami presence follows a period of record new business growth for Apex Group’s Americas region with recent client wins including Participant Capital, Compass Group LLC, a leading independent Latin American asset manager and Florida-based Midtown Capital Partners LLC.
This announcement builds on Apex Group’s strategic growth plan for the Americas, including the acquisitions of events and technology platform Context365, real estate services provider SandsPoint Capital Advisors, tax services firm FTS, Canada-based fund services provider Prometa, as well as the additions in Latin America of BRL Trust Investimentos, Brazil’s leading independent fund administrator and acquisition of MAF, the fund administration business of the Brazil-based Banco Modal.
Georges Archibald, Chief Innovation Officer and Regional Managing Director, Americasat Apex Group comments: “Our clients across the Americas come to us to provide scalable support to bolster the efficiency of their in-house teams. We view the South-East of the US and the Latin American markets as a strategic growth priority and presenting a compelling opportunity for us – and for many of our international client base. The continued growth of our Miami office enables us to better deliver our global experience and outlook to support our clients locally in these regions.”
Jay Maher, Senior Advisor, Apex Group adds: “We are delighted to continue to expand our Americas’ footprint in Miami so that Apex Group further strengthens its position as the global provider of choice for corporates and fund managers, wherever they may be located. Local delivery of our single-source solution partnered with Apex Group’s truly global reach will enable us to help our clients to scale more quickly and efficiently, to fuel their continued growth and success.”
U.S. Bancorp announced that it has completed the acquisition of MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group, Inc.
The transaction brings together two premier organizations to serve customers and communities across California, Washington, and Oregon and support a dedicated workforce across the West Coast. Customers will benefit from an expanded branch network, greater access to digital banking tools, and increased choice, the memo said.
“The acquisition of MUFG Union Bank underscores U.S. Bank’s commitment to creating economic opportunities for our customers and communities across the West Coast,” said Andy Cecere, chairman, president and chief executive officer of U.S. Bancorp. “The closing of this acquisition brings together two premier organizations and their teams who are focused on putting customers first.”
U.S. Bank will provide MUFG Union Bank customers with information regarding the conversion of their accounts in the coming weeks. Until conversion of MUFG Union Bank systems and accounts, customers will continue to be served by their respective branches, website and mobile apps. Systems integration and account conversion is expected to occur in the first half of 2023.
Additionally, once customer conversion has occurred, implementation of U.S. Bank’s five-year, $100 billion community benefits plan will begin.
Investors looking for good news have found some, however, while this may be the beginning of the end of the bear market in U.S. equities, don’t mistake it for the real end, says Lisa Shalett, Wealth Management Chief Investment Officer at Morgan Stanley.
On the good news side, the latest consumer price index report suggested that inflation may have peaked in October, and the Federal Reserve may now be more likely to slow the pace of interest rate hikes. Other reasons for optimism included investor sentiment, as measured by the American Association of Individual Investors, which stood at its highest levels since December 2021, says Shalett .
However, in a Bear Market investors still need to allow this prolonged market downturn to fully play out and make a realistic assessment of the economic slowdown and recession risks.
Historically, when investors’ primary concern shifts from politics and inflation to the health of the economy, the outlook for stocks and bonds tends to diverge. That’s why investors may be relatively well served by favoring bonds over stocks in 2023.
Bond yields have meaningfully increased, providing investors an opportunity to earn decent income. We expect inflation to be around 3.5% by the end of 2023, and U.S. Treasuries, through the 10-year maturity, are yielding more than that. That means their inflation-adjusted, or “real,” yield could turn positive. Meanwhile, municipal and corporate bonds are providing an extra 1.5 to 2.5 percentage points beyond Treasury yields. Here’s the evidence:
Bonds are also relatively fairly priced. Tightening cycles, in which the Fed raises rates to bring down inflation, generally do not end before the Fed funds rate is durably above core inflation, suggesting that bond prices have fully adjusted. Once this adjustment is complete, bonds may be viewed as fairly priced. Currently, the futures market for the Fed funds rate is predicting a peak of about 5%, to be reached in April or May. This appropriately coincides with where core inflation is likely to be.
Bonds may offer attractive capital gains. Investors who are wary about the economy will likely gravitate toward Treasuries, which would push yields lower and prices higher, meaning it’s possible to enjoy relatively high coupon payments now and potentially sell at a premium later.
In contrast, U.S. large-cap stocks, as measured by the S&P 500 Index, do not look as attractive:
They are still too expensive. At current prices and consensus earnings estimates, the S&P 500 Index is selling at a forward price-earnings (P/E) ratio of 17. This is not compatible with where rates and inflation are likely to be next year—risk-free long-term rates around 3.5% and inflation above 3%—alongside lackluster economic growth. A more reasonable forward P/E ratio under these conditions is typically in the 15-to-16 range.
The reward for owning stocks over risk-free debt appears relatively small. Compared with Treasuries, stocks are priced to offer just about 180 basis points (or 1.8 percentage points) more, a huge disconnect from the prior decade’s average spread of 350 basis points.
Wall Street’s 2023 outlook for U.S. stocks looks concerningly unrealistic. Equity analysts currently project that S&P 500 company earnings will be $230 per share next year. Morgan Stanley expects $195, based on our belief that companies’ extraordinary ability to boost sales and profitability in recent years is unsustainable and may soon reverse.
“We continue to believe it is premature to call an end to the bear market for U.S. stocks. Investors may have moved on from inflation concerns, but they cannot ignore the economic picture. For now, investors should consider reducing U.S. large-cap index exposure. Instead, look to Treasuries, munis and investment-grade corporate credit. Stay patient and collect coupon income”, Shalett concluded.
This article is based on Lisa Shalett’s Global Investment Committee Weekly report from November 21, 2022, “Bonds Over Stocks in 2023.” If you would like to read the article in its full version you should click on the link below.
Janus Henderson Investors released the findings of its 2022 Retirement Confidence Report, which seeks to better understand how self-directed investors are coping with this year’s challenging market environment.
According to the report, which is based on a survey conducted by Janus Henderson, rising inflation and stock market volatility are weighing heavily on investors, as 86% of survey respondents are concerned or very concerned about inflation and 79% are concerned or very concerned about the stock market.
Further, 45% of investors said they felt less confident in their ability to have enough money to live comfortably throughout retirement, and 9% have hired or planned to hire a financial advisor in 2022. Notably, less than 2% are planning to change financial advisors as a result of the market downturn.
“With both stocks and bonds posting three consecutive quarters of negative returns in 2022, investor confidence has suffered, but it hasn’t collapsed,” said Matt Sommer, Head of Janus Henderson Investors’ Defined Contribution and Wealth Advisor Services Team.
“The Covid-19 stock selloff and quick comeback that occurred in 2020 put a spotlight on the challenges of timing the markets and remains a vivid example of the importance of creating and sticking to a plan in all types of markets,” he added.
Cash Isn’t King as Investors Eye Market Rebound
Despite concerns surrounding inflation and the stock market, just 13% of investors have moved money out of stocks or bonds and into cash. Instead, investors appear to be tightening their budgets, as nearly half (49%) said they have reduced their spending or plan to reduce spending as a result of the financial markets and rising inflation.
Expectations for better days ahead might also explain why more investors have not moved to cash. The majority of respondents (60%) believe the S&P 500 Index will be higher one year from now, 26% believe the Index will be lower, and 14% expect it will be relatively unchanged.
Strong Desire for Dividends
The preferred investments for generating income in retirement in the current environment include dividend-paying stocks (65%), annuities (24%), taxable bonds (23%), and tax-free bonds (23%).
“The good news is that many investors are taking the common-sense approach of reducing their spending and not moving out of stocks in response to this year’s challenging market environment,” added Sommer. “It’s also encouraging to see that some are seeking the advice of a professional advisor to navigate the current market uncertainty.”
Methodology
The survey was conducted by Janus Henderson Investors in October 2022, and was distributed within its Direct Business Channel (DBC) to a randomly selected group of investors age 50 and older who were the sole or shared financial decision-maker for their households. The DBC caters to self-directed U.S. investors who have established accounts directly with Janus Henderson and without the assistance of a financial professional, some of whom may consult with an advisor for other aspects of their wealth. The final sample consisted of 1,926 investors who completed the full survey.
Santander Wealth Management & Insurance, the division that includes Santander’s private banking, asset management and insurance units, believes growth and inflation will still be causes for concern next year; but markets are already showing signs of a comeback.
“We expect that confirmation of peak inflation in Q1 2023 may lead to a pause in interest rate hikes by central banks, which would set in motion the recovery process in fixed-income markets”, said Víctor Matarranz, global head of Santander Wealth Management & Insurance, in his opening letter in the 2023 Market Outlook report titled The great rate reset. According to Matarranz, “The recovery of more cyclical assets, like equities, should get underway inH2 2023 if central banks announce lower interest rates. More than ever, it is paramount to balance a short- and long-term vision when managing investments”.
Santander expects a macroeconomic shift, with efforts to stabilize prices already entering final stages. “We believe that we are close to terminal policy rates and that the level of monetary tightening reflected in the curves will be enough to change the course of inflation. This phase of monetary stabilization will probably last most of 2023 as we do not expect a rate cut until there are clear signs that inflation is under control. The good news will come first to defensive assets (fixed income) and then to cyclical assets (equities)”, according to the report.
Santander says that, while inflation won’t peak at the same time in every market, there’ll be “clear signs of a trend shift” in Q1 2023.
It also expects low growth in the coming quarters, with moderate recession in some countries. Nonetheless, “it seems unlikely that the economy will see the same upheaval as in previous crises like the financial crash of 2008 and the dotcom bubble of 2000”.
The report suggests that “progress in monetary stability would provide plenty of opportunities in fixed income assets as yields stabilize at very attractive levels relative to the previous decade”. It also says that “rate increases have been the villain of the markets in 2022 but going forward they provide a bedrock of safe yield. Conservative investors are celebrating the fact that liquidity is no longer penalized”. Better bond yields will encourage investors to diversify portfolios. For corporate bonds, the report recommends increasing credit risk in portfolios amid an expected end to economic slowdown.
Santander also advises a cautious approach for equities, until earnings’ review are completed, so investors will have to wait. “Earnings forecasts are being revised”, says the report, but there could be more downwards adjustments, in line with predictions of a slowdown in 2023.
Also, due to shifts in structural inflation (above 2% in the midterm),the report encourages investors to take up more shares, infrastructure, property and other real assets. Alternative investments, especially in private equity and private debt, are also key.
The report affirms that, as interest rates stabilize and the economy recovers, the market will shift focus back to innovative, high-growth companies. The most attractive opportunities will be in biotechnology, energy transition, cyber security, foodtech, robotics, sustainability, with renewable energy at the top of the list owing to the energy crisis.
Bolton Global Capital is continuing to recruit new Advisor talent in the Miami market. The firm has announced that Arturo Hierro, most recently of Loyola Asset Management, has joined the firm.
Hierro has over 20 years of industry experience in the United States, in addition to having previously worked in the industry in Mexico.
His clientele consists primarily of high and ultra-high net worth individuals located in Mexico and the United States.
“Arturo is a top professional and we are glad that he has decided to join Bolton in our Miami office” according to Ray Grenier, CEO of Bolton. “By combining his experience at successfully growing his book of business with Bolton’s global wealth management capabilities, Arturo will be in a position to strongly expand his practice.”
Established in 1985, Bolton Global Capital is an independent FINRA member firm with an affiliated SEC Registered Investment Advisor. The firm manages approximately $12 billion in client assets for US-based and international clients through 110 independent financial advisors operating from branch offices in the US, Latin America and Europe, according the firm information.
Safra New York Corporation, the parent company of Safra National Bank of New York, announced that it has entered into a definitive agreement to acquire Delta North Bankcorp and its subsidiary, Delta National Bank and Trust.
Delta provides private banking and wealth management services to high net-worth clients through its offices in New York and Miami.
The acquisition is a strategic extension of Safra National Bank of New York’s private banking business both in the United States, and throughout Latin America, where it has been providing premier private banking and financial services to high net-worth clients.
With this transaction, the J. Safra Group will strengthen its private banking business and global wealth management capabilities.
Jacob J. Safra, Chairman of Safra National Bank of New York, commented: “This transaction highlights the importance of the Latin American market for the J.Safra Group and represents an attractive opportunity to expand our position in the region. It is a market we know very well and in which we have achieved a highly regarded presence for our clients. Delta’s private banking business fits perfectly with the strategic vision of Safra National Bank of New York.”
Simoni Morato, CEO of Safra National Bank of New York, said: “This transaction underscores our strength as one of the premier brands in Private Banking globally. We look forward to welcoming Delta’s clients and employees to our organization in New York and Miami. Together, we are confident that we will add immeasurable value to clients.”
Guillermo Sefair, Chairman and President of Delta National Bank and Trust Company: “It is an important transaction between two family-owned international private banks, with common principles and values. We are fully committed to this new chapter to continue to bring excellence and quality of services to our clients and employees.”
The acquisition is expected to be completed during the course of the first half of 2023, subject to regulatory approval. Financial terms are not disclosed.
