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Whatever Happened to Markets in October?

Mercados — Pixabay CC0 Public Domain. Wall Street

For the second consecutive month, U.S. equities slipped in October as the economic recovery slowed and a lack of additional fiscal stimulus deal dented investor sentiment. A resurgence in coronavirus cases in Europe and America weighs heavily on an economic recovery, as investors fear another shutdown. Tech stocks trailed the broader market with underwhelming guidance and missed revenue expectations.

The end of the month saw a record high in COVID-19 cases for a week, which led to increasing restrictions in Europe. Despite the surge domestically in the US, resilient optimism around treatments and vaccine progress helped avoid another large market selloff.

October had plenty of political headlines including the nomination and confirmation of Justice Amy Coney Barrett, President Trump’s recovery from COVID-19 and the highly anticipated Presidential debates. As the election has been so close, it may lead to weeks of confusion, unrest, and litigation that could likely drag electoral uncertainty into next year.

Regardless of the final outcome of the US Presidential election, with Joe Biden’s victory, we are confident that our investment portfolio can benefit under the new administration. We will continue to use the upcoming market volatility as an opportunity to buy attractive companies, which have positive free cash flows, healthy balance sheets and are trading at discounted prices.

M&A activity remained robust in October as worldwide dealmaking totaled $420 billion, an increase of 68% from October 2019. Technology and energy were particularly active sectors for consolidation.

Column by Gabelli Funds, written by Michael Gabelli

______________________________________________________

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GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

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Class I USD – LU0687944552
Class I EUR – LU0687944396
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GAMCO ALL CAP VALUE

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GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

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Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to ﬁnd out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reﬂect the manager’s current view of future events, economic developments and ﬁnancial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.

Natixis Ends Its Partnership with H20 AM

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CEO Natixis — Foto cedidaNicolas Namias, CEO of Natixis.. Natixis Ends Its Partnership with H20 AM

Natixis Investment Managers has started negotiations with H20 AM to end their partnership. During the presentation of its quarterly results, the company revealed that the firm of Bruno Crastes is no longer a strategic asset for them.

In a joint communication, both asset managers explained they have entered into discussions to initiate “a progressive and orderly” unwind of their partnership. The process has to be considered by relevant regulatory authorities and will require regulatory approvals.

These discussions relate to a potential gradual sale of Natixis IM’s stake in its subsidiary and include plans for H2O AM to take over the distribution of its products over a transition period due to last until the end of 2021. The management company intends on giving a new direction to its development as the 10-year lock-up period provided for in its shareholder covenant with Natixis IM has come to an end, said the firms.

“In due course and in line with the regulatory process, H2O AM will make a further announcement regarding the impact of these proposals on its business, including its shareholding structure and changes to its governance approach”, they added in the press release.

This process will put an end to a situation that Natixis IM drags since 2019. In fact, last September, the French financial markets authority (AMF) asked H2O AM to suspend all subscriptions and redemptions in three of its funds: H2O Allegro, H2O MultiBonds and H2O MultiStrategies. The asset manager solved its liquidity problems with certain assets through a side pocket mechanism.

A new “European asset management leader”

Last week, Natixis also announced that it has completed with La Banque Postale the combination of their fixed-income and insurance-related asset management activities within Ostrum Asset Management. Both firms are reorganizing those businesses to give them a new dimension in an environment of persistent low interest rates.

“The closing of this combination on October 31 creates a European asset management leader with more than 430 billion euros in assets under management and over 590 billion euros under administration through its services platform as at end-September 2020”, they revealed in a press release.

The combined activities will be housed within Ostrum AM, owned 55% by Natixis through Natixis Investment Managers, and 45% by La Banque Postale as part of its asset management division. Ostrum AM will provide two distinct and independent offerings: asset management and investment services. In line with its client-centric organization, it is setting up two sales teams to manage all aspects of client relationships, one team for asset management and the other focused on its services platform.

Loomis Sayles Adds European Credit Team and Launches 3 Funds

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world-1264062_1920 — Pixabay CC0 Public Domain. Union Bancaire Privée anuncia la adquisición de Millennium Banque Privée - BCP

Loomis, Sayles & Company, an affiliate of Natixis Investment Managers, announced in a press release the addition of an eight-person European credit team. They are launching three euro credit investment strategies, which are now available for institutional separate account management: Loomis Sayles Euro Investment Grade Credit, Loomis Sayles Euro Sustainable Investment Grade Credit and Loomis Sayles Euro High Yield.

The team is based in Loomis Sayles’ new European office, Loomis Sayles & Company, L.P. – Dutch Branch, located in Utrecht, Netherlands. It will be co-led by portfolio managers Rik den Hartog and Pim van Mourik Broekman, who join from Kempen Capital Management.

The other members of the team are portfolio managers Luuk Cummins, Sipke Moes, Quirijn Landman, Marco Zanotto, Ronald Schep; and the product manager Jeroen Potma.

“We believe the Euro Credit team has the potential to add something unique and exceptional to our organization. We are excited to welcome them to Loomis Sayles and establish our presence in the Netherlands. “Similar to all Loomis Sayles investment teams, their investment process is rooted in a differentiated investment philosophy, which has a strong track record of alpha generation”, said Kevin Charleston, chairman and CEO.

Top-down and bottom-up

Loomis Sayles pointed out that the foundational belief that underlies all of the team’s strategies is that credit markets are inefficient and rigorous research can access opportunities. The team seeks to generate alpha by combining a top-down view with bottom-up investment analysis when constructing portfolios. They feature a strong risk orientation and focus on quality, and ESG analysis is incorporated into the fundamental research. Additionally, the team takes an active engagement approach with issuers and uses their investor influence to shape corporate behaviors.

Chris Yiannakou, head of EMEA institutional services, believes that the three strategies they are launching play an important role in their investment lineup, particularly for their “large and growing” book of clients in Europe and the Middle East, for whom European credit and ESG are critical components of their portfolios. “These investors have a stellar reputation and we’re pleased to offer them a competitive and truly differentiated investment capability that complements our diverse product suite and reinforces our global reputation for investment excellence”, he added.

Pim van Mourik Broekman, co-head of the team, said that Loomis Sayles is a “well-respected” active asset management firm with a powerful global distribution platform. “We are very enthusiastic about joining the organization”, he commented.

Meanwhile, Rik den Hartog, declared to be “impressed” with the professionalism, infrastructure and international character of Loomis Sayles. “We look forward to playing an integral role in building out a broader European presence for the firm”, he concluded.

Third Party Distributor BECON Reaches 2.1 Billion Dollars in Assets Under Distribution

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becon_im_equipo — Foto cedidaJosé Noguerol, Florencio Mas y Fred Bates. BECON supera los 2.100 millones de dólares de activos bajo distribución

Third Party distributor BECON recently announced crossing a new milestone of 2.1 billion dollars in assets under distribution. BECON’s now nine person strong team distributes offshore mutual funds for a number of asset managers including Neuberger Berman, Cullen, and New Capital in the Americas.

Approximately 1,5 billion dollars in AUM was captured in Latin America for BECON’s original two partners Neuberger Berman and Cullen. For both managers, BECON focuses on the Latin American intermediary markets including private banks, broker dealers, family offices, funds of funds, insurance companies, and independent financial advisors. The strategies receiving the most interest in the region have been led by the following: Neuberger Berman Strategic Income, Neuberger Berman Short Duration Emerging Market Debt, Neuberger Berman Emerging Market Debt Hard Currency, Neuberger Berman Corporate Hybrid Bond, Neuberger Berman US Real Estate, Neuberger Berman 5G Connectivity and Cullen North American High Dividend Value

BECON also represents New Capital Funds from EFG Asset Mgt. in both Latin America and US offshore for the same retail segments. Since launching New Capital officially at the beginning of 2020 net sales have now surpassed 600 million dollars through the end of October.

Outside of New Capital flagship Wealthy Nations Bond Fund, the team has been gathering additional assets in CIO Moz Azfal’s dynamic multi asset balanced strategy called Strategic Portfolio.

Adapting to the new environment

BECON has been highly active transitioning its regular wholesale model of in office visits to the new virtual environment driven by the spread of the pandemic. BECON’s partners from Neuberger Berman, Cullen, and New Capital having been hosting virtual events in local languages bi-weekly in order to keep investors informed. In addition, they have lightened things up by offering clients more creative events such as cooking classes by world renowned Michelin star chefs, live virtual comedy events and concerts, as well as motivational events with professional athletes such as former NBA star Manu Ginobili from the San Antonio Spurs.

“The first months of Covid19 were extremely challenging” commented Jose Noguerol, Managing Partner from BECON. “Our priorities were keeping clients calm and informing them on a daily basis or how performance was developing as well as what perspectives were going forward. After 20 years in the industry the BECON team and I has seen our fair share of crisis before and were not really phased by the volatility. There was an element of trust that you get after having been around in the industry for decades that is priceless in moments like these. Thankfully most of our clients held on through the worst volatility and were able to participate in the recovery”.

BECON is led by industry veterans Jose Noguerol along with Florencio Mas and Fred Bates. “Whilst decades of experience and relationships helped us navigate this crisis it was the younger generation of the BECON sales team that really got us adapt an lead in the new virtual environment” commented Florencio Mas. “Juan Francisco Fagotti, Lucas Martins, Joaquin Anchorena, and Gian Franco de Bonis are all millennials. Their generation gets a lot of bad press in the news but when it comes to adapting and new technology we couldn’t have done it without them. They helped us move at lightning speed to create specialized digital content, video content, as well as execute transitioning ourselves and the clients to virtual forums”.

Managing partner Fred Bates had a more cautionary tone stating “we were all very fortunate that our industry and the team was able to adapt to this new environment and be able to work from home. Not every industry was as fortunate as we are in the financial sector and it is important to stay humble. You never know what waits around the next corner but all you can do is put the clients first and do right by them so things work out in the long term. If there is anything we have learned over the years is to focus on the client first and foremost.” Bates also commented that partners Neuberger Berman, Cullen, and New Capital rallied to do the same and went above and beyond to over communicate with clients in the most challenging times. “We couldn’t have been able to achieve everything we have over the last three and a half years and through the pandemic without excellent partners and some of the best products in the industry” said Bates.

Bates also added that its not just about selling mutual funds and wholesaling. “Building an asset management distribution business from scratch in the Americas is more than just sales. You really have to know your stuff from legal & compliance, marketing, operations, pricing, platforms, distribution agreements, and regulatory requirements now more than ever. The amount of hours we spend on all of the things to make the sales effort successful can make your head spin. I think our partners really appreciate the decades of experience we have not only in sales but these areas as well throughout the team”.

Miami office opening and new agreement to be announced soon

Now that the 2 billion dollars marker is behind them, BECON is not slowing down. The firm more recently opened their first office on Brickell Ave in Miami and is expanding their distribution in the US Offshore market as well as hiring additional sales support in Latin America.

Partner Bates, Noguerol, and Mas said their main goal is executing more with their existing partnerships but eluded to and exciting new announcement coming soon. The three mentioned that their original business plan was to never represent more than 4 asset managers in the region of which 3 slots are already taken. “From day one, we never wanted to be a supermarket. You have to know the products inside and out and ensure the asset managers think of you as an extension of their team. You can’t do that if you have too many fact sheets in the bag. It’s important our asset manager partners know you wake up everything day thinking of them and their funds no matter if the wind is blowing their way on not. You also don’t want to have too much overlap in the offerings to everyone has a great opportunity to grow AUMs “ ,said BECON’s Noguerol.

A Green Recovery in Europe?

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hummingbird-2139278_1920 — Pixabay CC0 Public Domain. ¿Afronta Europa una recuperación verde?

Europe’s Green Deal’s renovation-wave strategy not only creates a potential opportunity to combat climate change, but also may present a way to boost the economic recovery, says DWS.

When the global financial crisis hit more than ten years ago, climate commitments soon were forgotten for the sake of a fast economic recovery. This is best illustrated by the collapse of the United Nations Climate Change Conference in Copenhagen back in 2009 and the withdrawal of government support programs for renewable technologies.

“That lack of political support was probably reflected in a range of factors, including, perhaps, skepticism toward the scientific evidence, as well as concerns about an apparent trade-off between a sustained economic recovery and climate-change measures needed to move toward a greener economy”, points out the asset manager in a recent publication.

Fast forward to 2020, again in the middle of one of the worst economic recessions, but thanks to many climate activists amid a much more passionate public debate about climate change. This time around, policies to tackle the latter are no longer viewed as an economic luxury. “It is rather evident that the shift to a more sustainable economy entails risks and opportunities for employment creation”, comments DWS.

One such opportunity presented the Green Deal’s renovation-wave strategy published by the European Commission two weeks ago. It aims to dramatically reduce commercial and residential buildings’ carbon footprint in Europe¹. This is “vital” since buildings account for around 36% of the EU’s carbon emissions.

However, energy-efficiency investment in buildings has stagnated and is currently not growing at rates required to reach the Paris-Agreement goals as depicted the chart². The asset manager thinks that, from a capital-market perspective, retrofitting buildings could create opportunities in sustainable equities, real estate, infrastructure, green bonds, asset-backed securities and dedicated sustainable investment funds³.

So history did not end at the failed Copenhagen Climate Summit, but rather continued with the Paris Agreement. The Green Deal aims to double Europe’s renovation rate within the next ten years which contributes to the fulfillment of the Paris Agreement and makes it more likely that the scenario for 2019 to 2030 can be met⁴. “Of course, it’s an open question whether an EU-wide, one-size-fits-all approach is really the best way to tackle economic and climate problems over the medium term, given the varied economic and real-estate cycles in various member states”, says DWS.

^{1. https://ec.europa.eu/energy/topics/energy-efficiency/energy-efficient-buildings/renovation-wave_en}

^{2. IEA 2019; EEFIG 2020}

^{3. https://www.dws.com/AssetDownload/Index?assetGuid=a3e81871-9921-44c9-b4f8-ae0ba2327661&consumer=E-Library}

^{4. https://ec.europa.eu/energy/topics/energy-efficiency/energy-efficient-buildings/renovation-wave_en}

^{This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect.}

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The index sponsors of the indices referred to herein (including Deutsche Bank AG) make no warranty or representation whatsoever either as to the results obtained from use of the indices and/or the figures at which the said indices stand at any particular day or otherwise. These index sponsors shall not be liable to any person for any error in their indices and shall not be under any obligation to advise any person of any error therein.

Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such. All opinions and estimates herein, including forecast returns, reflect our judgment on the date of this report and are subject to change without notice and involve a number of assumptions which may not prove valid.

Investments are subject to various risks, including market fluctuations, regulatory change, possible delays in repayment and loss of income and principal invested. The value of investments can fall as well as rise and you may not recover the amount originally invested at any point in time. Furthermore, substantial fluctuations of the value of the investment are possible even over short periods of time.

This publication contains forward looking statements. Forward looking statements include, but are not limited to assumptions, estimates, projections, opinions, models and hypothetical performance analysis. The forward looking statements expressed constitute the author’s judgment as of the date of this material. Forward looking statements involve significant elements of subjective judgments and analyses and changes thereto and/or consideration of different or additional factors could have a material impact on the results indicated. Therefore, actual results may vary, perhaps materially, from the results contained herein. No representation or warranty is made by DWS as to the reasonableness or completeness of such forward looking statements or to any other financial information contained herein.

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For investors in Peru / Argentina / Chile: Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction neither does it constitute the offer of securities or funds. The offer of any services and/or securities or funds will be subject to appropriate local legislation and regulation.

Additional disclaimer for Chile: This private offer commences on current date and it avails itself of the General Regulation No. 336 of the Superintendence of Securities and Insurances, currently the Financial Markets Commission. This offer relates to securities not registered with the Securities Registry or the Registry of Foreign Securities of the Commission for the Financial Markets Commission, and therefore such shares are not subject to oversight by the latter. Being unregistered securities, there is no obligation on the issuer to provide public information in Chile regarding such securities; and these securities may not be subject to a public offer until they are registered in the corresponding Securities Registry.

La presente oferta privada toma vigencia el date y está sujeta al Reglamento General No. 336 de la Superintendencia de Valores y Seguros (SVS), conocida como la Comisión de Mercados Financieros (CMF). Esta oferta cubre aquellos instrumentos que no están registrados en el Registro de Valores o Registro de Valores Extranjeros de la Comisión de Mercados Financieros (CMF), por lo tanto, dichas acciones no están sujetas bajo la supervisión de la CMF. Debido a que no están registrados, el emisor no tiene la obligación de proporcionar información sobre dichos instrumentos en Chile, los mismos no pueden ser ofrecidos bajo una oferta pública hasta que estén registrados en el Registro de Valores que corresponde.

Additional disclaimer for Peru: The Products have not been registered before the Superintendencia del Mercado de Valores (SMV) and are being placed by means of a private offer. SMV has not reviewed the information provided to the investor. This Prospectus is only for the exclusive use of institutional investors in Peru and is not for public distribution

For investors in Argentina: Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction neither does it constitute the offer of securities or funds. The offer of any services and/or securities or funds will be subject to appropriate local legislation and regulation.

For investors in Mexico: The funds have not been and will not be registered with the National Registry of Securities, maintained by the Mexican National Banking Commission and, as a result, may not be offered or sold publicly in Mexico. The fund and any underwriter or purchaser may offer and sell the funds in Mexico, to institutional and Accredited Investors, on a private placement basis, pursuant to Article 8 of the Mexican Securities Market Law.

Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction neither does it constitute the offer of securities or funds. The offer of any services and/or securities or funds will be subject to appropriate local legislation and regulation.

For investors in Brazil: The shares in the Fund may not be offered or sold to the public in Brazil. Accordingly, the shares in the Fund have not been nor will be registered with the Brazilian Securities Commission – CVM nor have they been submitted to the foregoing agency for approval. Documents relating to the [shares in the Fund], as well as the information contained therein, may not be supplied to the public in Brazil, as the offering of shares in the Fund is not a public offering of securities in Brazil, nor used in connection with any offer or subscription or sale of securities to the public in Brazil.

For investors in Uruguay: The sale of the [Products] qualifies as a private placement pursuant to section 2 of Uruguayan law 18,627. The Products must not be offered or sold to the public in Uruguay, except in circumstances which do not constitute a public offering or distribution under Uruguayan laws and regulations. The [Products] are not and will not be registered with the Financial Services Superintendency of the Central Bank of Uruguay.

For investors in Brazil: The shares in the Fund may not be offered or sold to the public in Brazil. Accordingly, the shares in the Fund have not been nor will be registered with the Brazilian Securities Commission – CVM nor have they been submitted to the foregoing agency for approval. Documents relating to the shares in the Fund, as well as the information contained therein, may not be supplied to the public in Brazil, as the offering of shares in the Fund is not a public offering of securities in Brazil, nor used in connection with any offer or subscription or sale of securities to the public in Brazil.

Francisco Buch and Rodrigo Vela Join Julius Baer’s Mexico Team

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Captura de Pantalla 2020-11-03 a la(s) 12 — Pixabay CC0 Public DomainZúrich. ,,

Julius Baer announced in a press release the addition of Francisco Buch Torres and Rodrigo Vela Bezanilla to its Mexico team, starting November 2. They will both work as Relationship Managers from the Zurich location “to support the region in driving continuing growth”, said the firm.

Buch joins as a senior RM after working for 6 years at UBS. In his latest role, he was a Relationship Manager for HNW and UHNW individuals at the Mexican desk in Zurich. Before joining UBS, he worked as a Director for Business Development at GNP Insurance (the biggest Mexican Insurance Company) and as an Associate Director for Commercial Strategy Private Banking at Santander in Mexico.

Vela joins Julius Baer from Credit Suisse, where he started as an analyst and junior Relationship Manager in Mexico in 2012. After that, he worked as an Account Manager in Singapore before starting as a Relationship Manager for International Wealth Management at Credit Suisse in Zurich. In his latest role, he managed HNWI Mexican clients on an advisory and discretionary basis.

“Mexico is our second-largest market in Region Americas and we continue to see a lot of potential for growth. We are excited to strengthen the existing team with these valuable additions”, said Luis Mariné, Market Head of México, and Beatriz Sánchez, Head of Region Americas

Pictet Asset Management: COVID Second Wave Shines Favorable Light on Asia

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COVID-19’s second wave has left European governments scrambling to impose fresh restrictive measures to contain the rise in infections, raising fears that the continent’s economy will slide back into recession.

The euro zone purchasing managers’ surveys show that services activity, which accounts for around two-thirds of the bloc’s GDP, has contracted, while banks are tightening lending standards as they brace themselves for a rise in bad loans.

With the euro zone’s ground-breaking EUR 750 billion pandemic relief programme not expected to kick in until mid-next year, the region’s near-term prospects have become more uncertain.

Against this backdrop, Pictet Asset Management has downgraded their stance on European stocks to neutral from overweight.

In contrast, the outlook for Asian equities is brightening, thanks largely to China. China’s economic activity has almost fully recovered to pre-pandemic levels, with strong export demand driving the country’s manufacturing PMI to the highest level since January 2011.

While retail sales have lagged the strong recovery seen in other sectors, Pictet Asset Management believes there’s more room for private consumption levels to rise as the economy heads into 2021.

Therefore, Pictet Asset Management retains their overweight stance on emerging market stocks, and also upgrade Japanese equities to overweight. Given its exposure to international trade, the Japanese economy is especially well placed to benefit from Asia’s recovery.

The world’s third largest economy saw its real exports expand for four months in a row, while household spending is expected to pick up thanks to strong and well-coordinated fiscal and monetary stimulus.

What’s more, expectations for continued corporate reform under Prime Minister Yoshihide Suga and attractive valuation of Japanese firms will mean the country’s stocks are well placed to attract more inflows in the coming months. Another positive for Japan is that, much like its North Asian neighbors, the country is managing to control the Covid-19 virus better than Europe and the US.

Pictet Asset Management remains neutral US stocks, among the most expensive of the asset classes they invest in. They also stick to their underweight stance on UK, equities as the economy is facing a double whammy of a resurgence in Covid cases and the risk of a no-deal Brexit.

When it comes to sectors, Pictet Asset Management maintains their positive stance on materials and consumer discretionary stocks – both are attractively priced economically-sensitive sectors.

Among defensive sectors Pictet Asset Management prefers healthcare and consumer staples.

Pictet Asset Management remains neutral on IT stocks. Clouds are hanging over the prospects for US tech giants as there are growing calls for regulatory oversight of the sector. A16-month enquiry by a Congressional panel has concluded the companies wield monopoly power and stifle competition; it has proposed antitrust reform which could potentially see them break up.

Fixed income and currencies: China on the radar

As the mountain of negative-yielding debt grows, the attractions of local currency Chinese bonds hove into view.

The USD 14 trillion market, the world’s second largest, has seen record net inflows of RMB 300 billion in the first eight months of the year alone thanks to such bonds’ attractive yield, low volatility and diversification benefits.

Testifying to the asset class’ growing strategic importance, FTSE Russell followed other global bond benchmark providers to include Chinese government bonds in its flagship WGBI index from next year, a move that could trigger an estimated USD125 billion of inflows. What’s more, continued strength in the renminbi gives investors an additional source of return. The RMB is close to a 18-month high against the dollar and Pictet Asset Management expects the currency to appreciate further as Beijing increasingly opens up its capital market.

China’s 10-year bond trades at an attractive yield of 3.3 per cent and offers a record high spread of 250 basis points over US Treasuries.

Pictet Asset Management continues to express their preference for Chinese onshore bonds with an overweight stance in emerging local currency debt.

Pictet Asset Management also likes US Treasuries, which offer a reasonably priced way to hedge a diversified portfolio at a time when a worsening pandemic weighs on risky assets and elevate volatility. What is more, as the next figure shows, inflation is unlikely to undermine US government bond markets any time soon. Pictet Asset Management remains neutral on all other government bonds.

Pictet AM

In credit, the only market in which Pictet Asset Management holds an overweight position is US investment grade bonds, where the US Federal Reserve’s bond buying continues to underpin prices. In contrast, Pictet Asset Management remains underweight US high yield debt as they believe valuations under-appreciate default risks. Moody’s expects US speculative grade default rates to rise to 9 per cent from the current 8.6 per cent, with issuers in advertising, printing and leisure sectors remaining particularly vulnerable.

In currency markets, Pictet Asset Management likes gold and the Swiss franc as safe-haven assets.

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Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.

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A Lost Decade for Value, but Not for Adaptive Value Managers

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station-3714601_1920_1 — Pixabay CC0 Public Domain. Una década pérdida para el value, pero no para sus gestores si saben adaptarse

The value style of equity investing has faced severe structural headwinds over the past decade. NN Investment Partners thinks that this secular underperformance is due to several factors: the unconventional tools used by central banks across the world, the technological disruption that traditional value sectors face, and the low level of interest rates and absence of inflationary pressures. “Even in the face of these headwinds, value-based portfolios can still beat the market by adapting to the changing world around us”, said the asset manager in a recent publication.

In their view, equity managers with a value style have been left with few tools with which to navigate the turbulence of the past decade. Some have opted to stick with the traditional approach that succeeded prior to 2007 based on a buy-and-hold philosophy. “More often than not this implied waiting for mean-reversion, while facing the risk of holding so-called value traps; that is, companies that are cheap for good reason and that will continue to underperform the market, owing to either a broken business model or poor management”.

Others have integrated new tools in the investment process that reduce drawdowns, while maintaining “true to style” portfolios with key value characteristics. This is the option chosen by NN IP for managing the Euro High Dividend and European High Dividend strategies, and “the results speak for themselves”. Over time, these funds have outperformed on a relative basis, even with the significant headwinds facing the value investing style.

The asset manager points out that this “demonstrates that by taking an adaptable approach, value strategy investors can still beat the market”. To achieve this outperformance against peers and the broader market, they have integrated three key pillars of adaptability into their process.

1. Adapting to their own biases

Every portfolio manager has behavioral biases, which is not an issue as long as they are aware of them and compensate accordingly. By analyzing more than 10 years of portfolio trading history, the firm identified the behavioral biases that negatively affected performance as well as those areas where they work in their favor. “For example, the process of rebalancing our allocations back to target weights has been a substantial source of positive alpha over time. On the other hand, sticking with underperformers and being overly loss-averse was a source of negative alpha”.

Having become aware of these biases, they systematically reviewed the list of potential value traps in their holdings, then acted to cut them. This created significant positive alpha during the period of market volatility caused by the COVID-19 crisis.

2. Managing unintended macro risk

“All portfolio managers know the absolute level of risk in their portfolio. Some, however, aren’t aware of how underlying elements contribute to this risk and thus fail to actively manage it”. By analyzing the sources of risk, avoiding potentially unintended macroeconomic risks and allocating the majority of their risk budget to the idiosyncratic (stock-specific) component, the asset manager significantly reduced their portfolios’ sensitivity to unexpected external shocks.

As they pointed out, this approach did not prevent the strategies from remaining “true to style” as they retained their positive exposures to the value and dividend factors, but in a way that controlled macro risk.

3. Using ESG factors to enhance risk-return ratios

Value portfolio managers can screen their investable universe to seek out the most attractively valued names. However, simply conducting basic valuation screens heightens the risk of owning value traps. NN IP thinks that, as well as screening on valuation, portfolio managers must conduct an in-depth qualitative assessment of each company. “We have found that by consistently integrating ESG factors into our investment process and actively reducing exposure to companies with high levels of ESG risk, we can offer a better risk/return ratio than most of our value/dividend peers”.

Their norms-based approach for exclusion, engagement and voting, combined with the qualitative assessment of a company’s relevant ESG risks and their potential financial impact, reduces drawdown risk for their European and Eurozone dividend strategies. Monitoring ESG risks at portfolio level (using a proprietary Corporate ESG Indicator) provides another layer of risk management that limits unintended ESG risks.

“These three pillars have a common thread: by embracing the changes offered by the investment environment, value portfolio managers can strengthen their risk-adjusted returns while staying true to style”, stated the firm. Instead of sticking with the Value 1.0 approach that worked very well prior to the Great Financial Crisis, but has exhibited very poor risk-adjusted returns since then, NN IP has adapted their processes to this new reality. In doing so, they have delivered significantly better risk-adjusted returns than most of our value/dividend peers. “Value 1.0 is dead; long live Value 2.0”, they concluded.

Azimut Acquires a 55% Stake in Sanctuary Wealth, a Leading Independent Firm in the United States Wealth Management Industry

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iocenters-2673328_960_720 — Pixabay CC0 Public Domain. Azimut adquiere el 55% Sanctuary Wealth, una firma independiente de weath management en Estados Unidos

Azimut Group, one of Europe’s largest independent asset managers, via its U.S. subsidiary AZ US Holdings Inc., signed an agreement to acquire a 55% stake in Sanctuary Wealth Group, a leading US independent wealth management firm for financial advisors who seek to build and manage their own practices but want the all-encompassing support of an advanced platform to achieve their full potential.

Azimut, established in 1989 and headquartered in Milan, Italy, operates in 17 countries managing in excess of 57 billion euros (equivalent to almost 67 billion dollars) in total AUM. Azimut first entered the United States in 2015 with a greenfield initiative in Miami focused on the Latam-RIA space called AZ Apice, subsequently reinforced by another partnership with Genesis Investment Advisors. The U.S. has strategic importance for Azimut in the private markets segment as well where, through Azimut Alternative Capital Partners, it seeks to acquire minority stakes in mostly U.S.-based alternative asset managers providing permanent capital to grow and achieve their greatest business potential.

The deal with Sanctuary represents a significant milestone and a further demonstration of Azimut’s commitment to pursue its plan to expand into the broader U.S. financial industry. Sanctuary Wealth, founded in 2018 by Jim Dickson, currently has 7 billion dollars (equivalent to 6 billion euros) of billable AUM and further assets under advisement from institutional clients bringing the total to close to 12 billion dollars. Dickson is the visionary who led the development and launch of the innovative, hybrid RIA model and partnered independence network. Prior to Sanctuary, he spent 20+ years in senior leadership roles at Merrill Lynch.

Sanctuary has established itself as the leading platform for the next generation of wealth managers in the U.S., who are breaking away from traditional wirehouses and brokerage firms to own, operate and grow their own businesses. Through an ecosystem of partnered independence, advisors have the resources and services they need while enjoying the economies of scale afforded by larger traditional platforms. The Sanctuary team includes employees dedicated to transitions as well as ongoing operations support to ensure an optimal experience for the advisor, their clients and employees. Sanctuary also provides its partner firms the means to grow through strategic opportunities where they can acquire and roll up existing practices in partnership with Sanctuary.

The Azimut and Sanctuary partnership will focus on the development of a best in class network of breakaway advisory teams. Sanctuary will also continue to invest in the growth of its partner firms, and in strategic acquisitions of other RIAs and wirehouse practices across the U.S. The strategy and success of Sanctuary since inception has been exceptional. Their national community includes 41 partner firms, spans 17 states and employs more than 100 advisors serving over 7,000 households.

The wealth management industry in the US is in the midst of major change with as much as 2,4 trillion dollars of assets “on the move”. The initial target for SWG is the wirehouse breakaway advisors going independent, with an estimated 469 billion dollars of AUM. Secondly, Sanctuary will focus on retiring advisors with another1.6 trillion dollars of AUM. The last segment is the smaller (growth-challenged) independent RIAs who are looking for operational support and / or a transition plan, with another pool of 348 billion dollars of AUM. Custodians are also fostering the independence movement as it helps build their market share against traditional wirehouses. Custodians’ preferred growth partners are consolidators and aggregators versus individual RIAs.

Subject to the regulatory approval by the appropriate authorities, AZUS will acquire a 55% stake in Sanctuary through a reserved capital increase in order to finance a mutually agreed business plan. The remaining stake will continue to be in the hands of senior management as well as financial advisors. The agreement contemplates that Azimut and Sanctuary’s current management team will cooperate and grow the business in the US over the medium-long term, and provides for call/put option rights as well as a further investment in the business linked to certain achievements.

Jim Dickson, CEO of Sanctuary, comments “The changes currently underway in the wealth management industry due to a surge of retiring advisors and a massive intergenerational transfer of assets presents our firm with unprecedented opportunity. By partnering with Azimut, Sanctuary Wealth is well-positioned to capitalize on this once in a lifetime opportunity to grow and invest alongside our partner firms. We are most fortunate to have a strategic partner offering significant patient capital, whose independent and entrepreneurial culture aligns with our own to provide the right resources to accelerate the growth of our advanced platform in both size and scale.”

Pietro Giuliani, Chairman of Azimut Group, comments “Azimut’s DNA is made up of independence, entrepreneurship and value creation for both clients and shareholders. We found all these same values in Sanctuary and are thrilled to be partnering with such like-minded professionals. Not only is Sanctuary an extremely admired firm, but it is made of some of the best senior leaders, talents and financial advisors in the United States. We are committed to helping Jim and his team achieve their greatest business potential, leveraging our long-standing expertise in asset management, private markets and a global presence in more than 17 countries around the world. Thanks to this milestone transaction, Azimut is on the right path to create an integrated and successful business in the United States made up of a leading wealth management firm like Sanctuary, a unique and best in class private markets business like Azimut Alternative Capital Partners, and in the near future a top performing traditional asset management platform.”

NN Investment Partners Appoints Saúl Santamaría as Senior Business Development Manager

| For Beatriz Zúñiga | 0 Comentarios

saúl santamaria — Foto cedidaSaúl Santamaría, Senior Business Development Manager del equipo de distribución de US Offshore de NN IP. . NN IP ficha a Saúl Santamaría para el cargo de Senior Business Development Manager

NN Investment Partners (NN IP) has appointed Saúl Santamaría to the role of Senior Business Development Manager as part of the US Offshore Distribution Team, effective as of 12 October 2020. He will report to Iván Mascaró Guzmán, Director Business Development for Latin America and US Offshore, and will be based in The Hague, explained the asset manager in a press release.

In this new role, Santamaría will be responsible for building and maintaining strategic relationships with key wirehouses, independent broker dealers, registered investment advisors and regional private banks to support growing demand for core capabilities like sustainable investments. He will also help NN IP to promote new investment ideas of strong structural conviction for the long term. NN IP highlighted that his appointment emphasizes its commitment to expanding Americas Offshore business.

“I am thrilled to have Saúl working at NN IP as part of our US Offshore distribution team. Not only does he have ample experience in the US Offshore and Latam markets, but I identify a strong alignment with our commercial philosophy -promoting high conviction investment theses in the context of a transparent approach- and our drive to promote fresh and challenging ideas to the market”, said Mascaró. In his view, Santamaria’s “in-depth experience” in working with world-class asset managers will help in successfully expanding NN IP’s offering in the growing offshore market.

Meanwhile, Santamaría stated that he is “happy to join NN IP” and looks forward to contributing to the company’s development in the US Offshore market through active management and sustainable solutions. “I strongly believe NN IP’s investment philosophy offers a breath of fresh air that entices investors to think differently about how they can sustainably build their portfolios. I am proud to be part of that discussion”, he added.

Santamaría has 14 years of experience in the global asset management industry. He joins NN IP from Compass Group, where he was Head of US Intermediaries and responsible for leading the distribution efforts of Wellington Management funds for the US Offshore market.

He started his career in 2006 at Société Générale’s Risk Management department in Paris. In 2010 he joined Amundi as a sales manager and two years later he was appointed as Head of Distribution for Latin America, based in Santiago de Chile. In September 2014, Amundi opened its first office in Mexico City and appointed him as its Managing Director. In 2017, he moved to Miami with the Carmignac as a Business Development Manager, where he remained until 2019 when he joined Compass Group.