Luca Paolini (Pictet Asset Management): “We Are Overweighting European and Swiss Equities as well as Emerging Local Currency Debt”

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Luca Paolini Pictet AM_0
Luca Paolini, Pictet Asset Management. Luca Paolini, Pictet Asset Management

The markets have continued to show a high rate of volatility in recent weeks. The evolution of the pandemic has been a succession of bad news, with new Coronavirus cases and a loss of momentum in real time indicators. However, according to Luca Paolini, Chief Investment Strategist at Pictet Asset Management, investors continue to display optimistic tendencies based on several assumptions.

The first is that data points to a population that is better prepared to live with the pandemic in the event of a second wave of COVID-19. There is also greater optimism about the possibility of a vaccine by the end of the year, whereas only a few months ago the best forecasts predicted that it would not be available until mid-2021. The second is that the economy is in a recovery phase and if new containment measures were needed, they would be implemented in short periods of time and at the local level. The fourth is that fiscal and monetary stimuli will work in reviving the economy, and if they do not work, there will be new measures taken. Fifthly, the conflict between China and the United States is seen as rhetorical. Ignoring the voices that speak of a possible second cold war, investors believe that US elections and the vulnerability of growth in China will lead to a trade agreement between the two parties. For the bulk of investors, the crisis is temporary and so is the hit to corporate profitability.   

Caution on the part of Portfolio Managers

Investor optimism contrasts with the caution displayed by fund managers in a recent global survey conducted by Bank of America. The results of this survey showed that only 14% expected a V-shaped recovery, compared with 44% expecting a U-shaped recovery and 30% expecting a W-shaped recovery, but overall, most believe the recent recovery is a rally within a bear market, a response to fiscal performance that has been “too stimulative”. Over 70% of fund managers believe the market is overvalued, similar to the first quarter of 2000. On the other hand, 74% believe that US technology and growth stocks are a popular investment options in a market where US equities, commodities, health care and large technology stocks are unprecedently overweight, and energy, materials and UK equities have been heavily underweight. In addition, over the next 10 years, managers expect global equities to perform in the 3-4% range, which is well below the more than 10% seen over the last decade.   

Evolution of Daily Activity

Daily activity indicators have flattened out again. Bloomberg’s daily activity indicator, which at 100% marks a normal level of activity before the crisis, reached 30% in the second week of April, placing the main economies in a state of hibernation. In the last weeks of July, the main developed economies are at fairly acceptable levels of recovery. Japan, Germany and France lead the way by exceeding the 80% mark, Italy and Spain by more than 70%, and finally the United States, the United Kingdom, Canada and Sweden by less than 65%.  

It is interesting to see that this time the US equity market looks much worse off than the bulk of the European market. Only China has a daily indicator of activity close to 100. These data show that the recovery is still going on, but that the loss of momentum is significant because consumers still perceive a high level of uncertainty in their future. The confusion also comes from governments still trying to understand how they should act.

Market liquidity and valuations

The injection of money into the economy by central banks is twice the level of 2008. A large part of this liquidity remains in the financial markets, which is why there has been a huge disconnect between capital market data and the economy.

Overall, the trend could be said to be positive. Real interest rates are negative and central banks continue to inject liquidity into an economy that shows better signs of recovery than three months ago. But, if you restrict this analysis to recent months, momentum is accelerating at a time when, if you look at valuations, they are becoming somewhat challenging.

On a scale of 0 to 100, where 0 represents an expensive asset and 100 a cheap one, at the end of July, equity levels are at 38, bond levels at 32 and commodities at 66. Pictet AM’s valuation models show that, for the first time since September 2018, equities are expensive. The market however indicates that even with negative cash flows, investors are feeling pressure to put their money to work.

Benefits Reporting Season

While bond yields depend on inflation expectations, stock returns move in line with profits. Pictet AM’s models forecast a 30% – 40% drop in US corporate earnings, while the market consensus expects a smaller drop of 20% – 30%. There is a high concentration in the S&P 500 index, where growth stocks accounted for around 50% of total earnings last year. This high concentration means that earnings per share can diverge significantly from the real economy.

This recession is hitting the service sector harder than manufacturing. This recession is three times worse than the Global Financial Crisis, but the consensus expects earnings per share to fall to about the same level as they did in the 2008 crisis. Even so, there is a positive fact to highlight, 85% of companies are reporting data which is better than expected.

What is the best market to invest in right now?

The trend seen in the last three years, where the US has outperformed almost every market, is going to change dramatically, as the US market is now expensive. At present, it shows a high concentration in large technology firms that are beginning to be exposed to regulatory problems. In addition, we have to consider the political risk lurking the US with the approach its presidential elections and the effect that the pandemic is having on the country. For these reasons, the Pictet AM strategist believes that the investment universe should be expanded to other regions.

In this regard, European shares are trading at very low levels compared to the US, and their currency, the Euro, is cheap. The recently approved emergency fund in the European Union represents a change in the region, not only for the economy, but also in investors’ perception of the European Economic Union’s crisis management. This is why Pictet AM will overweight European equities.

They are also overweighting Swiss equities. The Swiss market is a well-performing market, relatively defensive in nature and overweighting two sectors, the healthcare sector and basic consumption.

In terms of asset allocation, Pictet AM will overweight consumer staples, from a neutral position, and reduce its exposure to the financial sector, believing that the time has come to be more cautious.

In fixed income, the environment is much more complex. Bond yields are at lows in virtually all developed markets. The 10-year US Treasury bond offers a return of close to 0.50 basis points. It’s difficult to rely solely on the Fed’s purchase programme, as it does not guarantee the investor a positive return. The alternative is emerging market debt. Markets that should be more vulnerable to the coronavirus crisis have been the best performing fixed income assets, thanks to the fact that most local currencies are at very low exchange rates. In particular, Pictet AM is very optimistic about bonds in China, which are trading at a record spread over US Treasury bonds.

Finally, gold is at expensive levels, but is expected to continue to rise in price due to purchases in gold reserves being made by central banks.

 

 

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.

Important notes

This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning.  Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future.  Past performance is not a guide to future performance.  The value of investments and the income from them can fall as well as rise and is not guaranteed.  You may not get back the amount originally invested. 

This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.

For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.

Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).

CFA Society Uruguay Signs an Alliance with Colchester Global Investors

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In line with its mission to promote the development of the highest standard of financial practices, the CFA Society in Uruguay has sealed an alliance with UK-based fund manager Colchester Global Investors, in order to strengthen its areas of enterprise, exchange knowledge and to work together on the various actions and activities to be developed in the country, they announced in a statement.

The institutions will hold conferences, events and training sessions so that those interested can acquire the broadest knowledge in the field and exchange information with the participation of local and worldwide experts who have excelled in this area.

“Since the formation of Society in the country in 2018, CFA Society Uruguay brings together a hundred investment professionals committed to the principles of the CFA Institute, linked to the promotion of the highest ethical standards, the promotion of financial education and professional excellence for the benefit of society as a whole,” said the CFA Society Uruguay.

With over $40 billion in assets under management, Colchester Global Investors focuses exclusively on the active management of global sovereign bonds and currencies. Headquartered in London, the company has offices in New York, Dubai, Singapore and Sydney with a client base that includes sovereign wealth funds, pension funds, funds of funds, private banks and discretionary mandates.

“Among the key aspects of focusing exclusively on sovereigns is the low correlation with managers that include credit strategies, simplicity due to the lack of complex instruments, and liquidity, especially in times of market stress. Colchester is a signatory to the United Nations Principles for Responsible Investment (UNPRI) and the Task Force on Climate-Related Financial Disclosure (TCFD),” Colchester said.

XP Launches Brazilian Fund that Invests in Moneda Asset Management’s Latam Corporate Credit Strategy

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Pixabay CC0 Public Domain. XP Inc y Moneda Asset Management firman un acuerdo de distribución de fondos en Brasil

XP Inc., a leading, technology-driven financial services platform, and Moneda Asset Managementone of the largest independent investment management firms in Latin America, announced a partnership to offer Brazilian-based investors access to offshore products via new local funds.

XP has launched the Moneda Latam Credit Advisory Feeder fund, a Brazilian domiciled fund dedicated to investing into the hedged (BRL) share class of the Latam Corporate Credit fund offered by Moneda Asset management in Luxembourg.

As interest rates continue to decline globally, the search for better yields has become a focus.  Specifically in Brazil, this decline has shifted the focus from a traditionally home bias investment approach, to one which focuses on searching beyond Brazil’s borders in order to improve the risk/return balance in portfolios. By dedicating local funds to investing in Moneda Asset management products, XP seeks to give investors enhanced access to investment strategies from an experienced investment manager with a compelling track record.

 Today, the majority of investments in Brazil are concentrated in local managers. XP’s strategy is to open a new avenue and bring the top managers in the world to the platform and expand investment options through local feeder funds. In this context, selecting Moneda Asset Management is aligned with XP’s strategy of partnering with top-tier managers in the world.

 “Starting this partnership with Moneda is a remarkable milestone for XP. Through an award-winning debt strategy uniquely managed by Moneda, we aim to provide Brazilians enhanced access to one of the best-in-class investment firms in Latin America. We are all very thrilled with this promising partnership.”, explains the Funds Specialist at XP, Fabiano Cintra. 

 Alfonso Duval, CEO at Moneda Asset Management stated that “we are excited to partner with XP to provide Brazilian investors with greater access to Moneda´s Credit expertise. This is a project that has been in the making for many years, and with the combination of the new macro environment, coupled with the growth of the asset class and the new investment demand, it is now the ideal time to launch this product for the Brazilian investor to take advantage of this opportunity”.

 Moneda has a globally recognized investment management expertise and XP has outstanding distribution capabilities, coupled with educational engagement that seeks to guide investors in intelligent diversification that makes sense in the current domestic and international scenarios.

 “This is extremely healthy for the development of the fund industry and very good for investors. And XP has used its size and innovative DNA to lead this front and improve this disproportionate domestic bias that we still see in Brazil”, says Leon Goldberg, partner at XP.

Lynk Launches Buyside Power Women Initiative

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Lynk Buyside Power Women featured image
Foto cedida. Lynk lanza Buyside Power Women Initiative

Lynk, a pioneer of the knowledge-as-a-service industry, announced the launch of Buyside Power Women, an editorial series that aims to increase visibility of female leaders and male allies in the investment management industry.

Peggy Choi, Founder and CEO of Lynk, said: “As a woman coming from the buyside myself, I have seen many women, despite being qualified for the roles, choose to opt out of a career on the buyside for reasons such as lifestyle or absence of sponsorship. Now, as a CEO, I strive to create an environment that is inclusive for all our team members, regardless of one’s background, and see driving diversity within the industries that we serve as part of Lynk’s mission. As you can see from the leaders in this Buyside Power Women series, there are many tangible ways for firms to help women take more calculated risks on a more even playing field.”     

With regular editorial articles and live events, Buyside Power Women features top industry leaders on the buyside from all regions to highlight how advocacy for diversity could influence future capital allocation. Among the leading voices featured are top executives from global firms including PIMCO, AIA, Schroders, BNY Mellon Investment Management alongside regional buyside firms.

Kimberley Stafford, Managing Director and Head of APAC of PIMCO, sees increasing the talent pool on the buyside as a top priority, we have been seeing a decline in terms of female MBA students opting to focus on finance…When we asked them about the reason why, the majority of them told us they just could not envision how they could integrate a career on the buyside and the personal life that they want. So one thing the buyside needs to do more is spend time demystifying how it is possible to have a fruitful personal life and career life on the buyside as this will help increase the talent pool.

Mark Konyn, CIO of AIA Group, an outspoken advocate for women empowerment on the buyside, said, “I’ve worked alongside many great women who contributed significantly and consistently over time. Yet, as I reflect back, have women fulfilled their potential at senior levels? Probably not. If you go back 20 years in Asia, you could say women representation was still nascent and needed time to develop, but that’s no longer an excuse in 2020.

Virginie Maisonneuve, Founding Partner and CEO of MGA Consulting, suggested, if financial firms are required to report on sustainability and ESG, and if regulators also ask for those reporting, companies across the globe will have to think more about sustainability and diversity. If we start measuring everything, the bigger picture will become clearer.”

 

Pictet Asset Management: Corona conundrum

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Luca Paolini Pictet AM

Markets have rallied sharply on unrelenting policy stimulus, but Covid-19 has yet to be defeated. Fears of a second wave and mounting political risks argue for investor caution. Below, Pictet Asset Management (Pictet AM) shares their views on Equities regions and sectors:

Europe shines but time to cut back on financials

Whether the vantage point is the economy, the political landscape or Covid-19, Europe appears to be in better shape than the US. Which is why Pictet AM retains an overweight position in European stocks. EU member states’ endorsement of the Franco-German led EUR 750 billion recovery fund last month and the ECB’s continued monetary stimulus put the European economy on a much firmer footing; Pictet AM has consequently raised their forecast for the region’s GDP growth for 2021 by 1 percentage point to 7 per cent.

Crucially for investors, Europe’s stock markets do not yet discount the region’s improving economic prospects. Particularly when compared to their US counterparts. At current levels, the gap in US and European price to book ratios (3.7 vs 1.7) implies American corporations’ return on equity will further outpace that of European firms, widening from a differential of 5 percentage points to over 10 percentage points. Such an outperformance looks highly unlikely.

US stocks are already very expensive in any case. For US equities to maintain their current price-earnings multiple of around 24, corporate profit margins would have to remain stable. That is a stretch, particularly when factoring in the US’s continued failure to contain Covid-19, the growing regulatory backlash against Silicon Valley and uncertainty surrounding the outcome of the November Presidential election. Mindful of these risks, Pictet AM remains neutral US stocks.

With an increase in consumer spending a feature of the recovery taking hold in parts of the world, Pictet AM is attracted to consumer staples stocks. The sector has failed to keep pace with the broader market rally, which has been led by cyclical stocks. As Fig.3 shows, consumer staples trade at just a 10 per cent premium to the broader global market – down from over 20 per cent in March and the 10-year average of 25 per cent. Consumer staples companies’ improving earnings growth suggests their stocks warrant a higher premium.

Pictet AM

To maintain a defensive tilt in their equity allocation, Pictet AM has reduced their weighting in financials to underweight. Although banks’ bad debt provisions resulting from pandemic-induced lockdowns have been largely in line with expectations, they remain acutely vulnerable to any setback to the smooth reopening of economies.

Moreover, dividend payments are unlikely to recover for the foreseeable future. Regulators across the world– including the ECB, the Fed and the UK’s Prudential Regulatory Authority – have moved aggressively to either cap bank dividend payments or temporarily suspend them. This greatly reduces the investment appeal of financial stocks.

 

Please click here for more information on Pictet AM’s Investment Outlook.

 

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.

Important notes

This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning.  Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future.  Past performance is not a guide to future performance.  The value of investments and the income from them can fall as well as rise and is not guaranteed.  You may not get back the amount originally invested. 

This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.

For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.

Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).

In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.

 

Short Selling: An Essential Tool for Responsible Investment

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The Alternative Investment Management Association (AIMA) and international law firm Simmons & Simmons have recently published a paper that examines how short selling can be used in the context of responsible investment. To do so, they have worked with some of the world’s leading alternative investment managers, revealed AIMA in a press release.

The research document describes how hedge fund firms can use their investment abilities to accomplish an important goal of responsible investment: protecting against undesired key risks such as climate risk. “Carbon footprinting” is one of the examples they used.

“By properly accounting for the carbon exposure of both their long and their short portfolios, alternative investment managers and their investors can gain crucial insights into how exposed their investments are to climate change and the attendant policy changes”, AIMA said. Short selling can thus be used to accomplish a key goal of responsible investment: protecting investors from ESG risks.

In their view, short selling can also be used to create positive impacts for the broader markets. Short selling campaigns are often triggered by ESG concerns such as questionable issuer governance, poor employee safety practices, environmental issues and even alleged human rights abuses. Alternative investment managers have a long and successful track record of discovering governance failures, as witnessed by the recent Wirecard scandal. They use this same expertise to expose environmental and social failings of issuers, creating more transparent, safer markets for investors around the world.

In that sense, AIMA CEO Jack Inglis commented that alternative investment managers have always been at the forefront of investment innovation. Today, they are using one of their defining abilities (short selling) to protect their investors from novel risks, and to make markets as a whole safer.

“We are happy to see this fact gain increasing recognition from investors and leading organisations such as the PRI, and we have no doubt that short selling will soon be seen not just as valuable for responsible investment, but essential”, he added.

Meanwhile, Darren Fox, Partner in Simmons & Simmons claimed to be “delighted” to have been able to assist AIMA in producing the Guide. “To dismiss short selling as not having a role to play in the context of ESG would be naïve. One only has to look at the recent events relating to Wirecard to realise that short selling has an important role to play within the ESG framework”, he stated.

Fox pointed out that AIMA has “a vital role” to play in fostering the debate on this very important issue and the new Guide should help to stimulate and move forward that debate.

Specialization and Diversification Drive Consolidation in Asset Management

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Despite the market downturn resulting from the ongoing COVID-19 pandemic, secular trends in the asset management market that made the environment ripe for consolidation during the past five years (fee compression, outflows from higher-cost active strategies, and product rationalization) are not likely to disappear any time soon, according to the latest Cerulli Edge “U.S. Asset and Wealth Management”, an overview by Cerulli Associates.

In order to combat fee compression, shrinking shelf space, and the rising cost of compliance due to stricter regulations, numerous subscale managers have joined forces. These subscale deals are aimed at strategic expansion into broader markets around the globe and consolidation/rationalization of product lineups to focus on top-performing strategies.

“In theory, these are the kinds of M&A deals that make sense on paper, but they can also serve as cautionary tales of the difficulties of melding operations within different firms with varying cultures,” comments Bing Waldert, managing director. According to him, mergers of this type typically lead to at least some level of reorganization and staffing reductions that run the risk of disrupting a business in the near term after a deal is finalized.

For newly created mega-firms, that there remains considerable potential for growing pains and uncertainty stemming from their efforts to increase scale through outside acquisitions. For Cerulli Associates, a clearer path to success may reside in another type of M&A deal: the strategic acquisition of smaller firms with strong brands and industry reputation.

“We have observed an increasing amount of M&A deals that primarily focus on the opportunistic acquisition by larger firms of specific capabilities and brands known for their specialization in a given sector, like alternative investments and environmental, social, and governance (ESG) offerings,” says David Fletcher, senior editor of the firm.

The Focus on Alternatives and ESG

Alternative investment capabilities are an attractive M&A target for many asset managers given investors’ increasing interest in uncorrelated, risk-adjusted allocations and these products’ relatively attractive revenue potential. Alongside the 74% of firms polled by Cerulli in 2020 citing the potential for increasing revenues as motivation for developing alternative investment capabilities, 59% point to business diversification as a chief driver.

According to Fletcher, the buy option is attractive to many firms that lack in-house expertise and seek quick speed to market. “Acquisition of firms with strong reputations in niche spaces makes sense for larger managers with the luxury of going the ‘buy’ route as opposed to building internally”, he says. Cerulli survey data suggests that, in the case of alternatives, there will be increased use of in-house teams and affiliates to build product lines in the near term as opposed to outsourcing to unaffiliated subadvisors.

In addition to the alternatives space, Cerulli has seen an increasing number of managers expanding via specialized firm acquisitions in the ESG-related product universe. Nearly one-quarter of firms polled are in the process of developing ESG capabilities during the next two years. For some firms, there will be significant cost to building these processes and staffing them. Therefore, as asset owners continue to place increased scrutiny on asset managers’ business practices and processes, Cerulli expects that more M&A activity related to ESG/responsible investing will occur in the near term.

“While pandemic-related uncertainty may impact deal flow in the short term, asset manager consolidation is likely to continue”, says Cerulli. They think that, in addition to monitoring how larger M&A transactions transform the companies involved in coming years, firms should pay attention to the smaller mergers that afford those with more diversified investment capabilities. “These deals could help asset managers broaden their existing product offerings while also expanding their product suites into specialty, niche areas where they may enhance their revenue streams”, they conclude.

Interaction Between Governments, Companies and Individuals Will Shape the Future of Responsible Investing Post-COVID-19

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Foto cedidaAdrie Heinsbroek, Principle Responsible Investment at NN IP. La interacción entre gobiernos, empresas y particulares en el mundo post-COVID-19 determinará el futuro de la inversión responsable

COVID-19 has disrupted every aspect of human life. This global threat has spurred us to reconsider priorities and heightened the importance of social justice and preservation of the planet. But if it is to be the catalyst that drives change towards a more sustainable world, what role will governments, companies and individuals be required to play? In a press release, NN Investment Partners identified new “unknowns” that responsible investors will increasingly need to take into account in their decision-making.

“Fundamental changes are already underway, as seen in the unprecedented fiscal and financial packages from governments, issuance of social bonds to fund healthcare and employment preservation projects, and companies cancelling dividends and share buybacks to focus on the welfare of their employees and other stakeholders”, says the asset manager. In its view, a second theme to emerge has been the increased urgency to shift to a lower carbon world. “It is already clear that corporate adaptability and responsibility helps build this resilience from an investment performance perspective”.

Adrie Heinsbroek, Principle Responsible Investment at NN IP pointed out that how a new “social contract” between governments, companies and individuals might play out raises many questions. “Investors and asset managers must assess how they should act upon these unknowns and be aware of how flexible they need to be if they are to adapt and tap into these corona-led trends”, he commented.

On 15 July 2020, Heinsbroek was joined by Joseph Stiglitz, Nobel Laureate and former World Bank chief economist, in a digital event to discuss how the actions and interactions of governments, companies and individuals will shape responsible investing in a post-Covid-19 world. This was the second event in NN IP’s UpsideDown series focusing on the world after corona.

Stiglitz said that COVID-19 has created many shocks but it has also accelerated changes that were already underway, especially around how we value economic and commercial success. “GDP, for example, is too simplistic a measure and ultimately misleading. A broader set of indicators are needed to accurately capture the value inherent in wellbeing and sustainability in a new multi-stakeholder world”, he added.

The transition towards a more balanced and inclusive economy is both dependent on and steers developments for three key groups: governments, companies and individuals; “and they form a triangle that is not just linked but also mutually dependent”, says NN IP. Differences between countries, cultures, economic status and type of government will also affect the speed and direction of change.

How will governments lead?

A major question for the asset manager is how interventionist will governments be in the next decade. In its view, the fiscal and monetary support packages enacted to combat the economic fallout from the COVID-19 crisis are “unprecedented”.

But will these packages and government policy be linked to the sustainability agenda, such as climate-change measures and carbon-reduction initiatives? Will governments take this opportunity to make financial support for companies conditional on tackling issues such as social inclusion? Will they intervene more assertively, using punishment and incentives to steer corporate behaviour? “They will also need to collaborate more internationally to meet climate targets and other sustainability goals”, adds NN IP.

A multi-stakeholder model

NN IP believes that within the triangle, companies have the most opportunity to propel change towards a more sustainable economy. The unknowns at a corporate level are driven by the trade-off between a “shareholder first” approach and a multi-stakeholder model. The value of social behaviour (looking after customers and employees rather than investors via dividends or share buybacks) is one of the most prominent developments to have come out of the pandemic.

Will this more sustainable value creation at corporate level become a more permanent trend and continue to be rewarded in the post COVID-19 world? Will companies discard practices that put shareholder interests above those of other stakeholders? If a multi-stakeholder perspective becomes the driver for value creation, the firm expects non-financial parameters to become a determining factor in assessing and predicting this. “Such a change will also affect the role that environmental, social and governance (ESG) factors play in assessing financial value”.

Individuals behaviour

The COVID-19 crisis has increased people’s awareness of climate and social issues and the consequences of their behaviour. But will this heightened awareness translate into new patterns of behaviour? Will preferences strengthen for more sustainable products and services, such as organic foods? Will the trends developed during the lockdown, such as healthier lifestyles and less flying, continue? Finally, will sustainability become a privilege just for those who can afford it, posing a threat to a more inclusive global society?

Heinsbroek concludes: “There will be many challenges ahead and differences to address, but there are also elements that connects us. One aspect that has become clear is that effectively assessing value involves taking a broader perspective. Looking beyond financial factors. This will become an increasingly dominant trend in how we measure both economic and societal progress, and as investors we have the means to positively influence it.”

NN IP Maintains Highest Score of A+ from the UN Principles for Responsible Investment

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Pixabay CC0 Public Domain. Santander AM entrega 200.000 euros a 25 ONG

The UN Principles for Responsible Investment (UN PRI) has recently awarded NN Investment Partners (NN IP) with the top score (A+) for its strategy and governance approach to responsible investing and environmental, social and governance (ESG) integration. The asset manager stated in a press release that these scores reflect the strength of their approach to responsible investing.

NN IP also received an A+ score on all the equity-related modules and for its external management selection and monitoring (Altis), and further improved its scores on the fixed income modules, reflected by A scores on all three modules.

 “We are proud to see that our commitment to responsible investing is again confirmed by the latest PRI assessment. The results reflect how we put our principles into practice by putting capital to work in the real economy to benefit society at large”, said Valentijn van Nieuwenhuijzen, Chief Investment Officer at NN IP.

In his view, the high scores and improved areas are the result of further increased focus within their combined efforts to drive this forward. “In addition to broadening the integration of ESG factors in the asset classes that we manage, we also advocate for responsible investing in the investment industry in general”, he stated.

Jeroen Bos, Head of Specialised Equity & Responsible Investing, said that it’s “great” to see that they score A+ on all equity modules and sees it as a reflection of their strong efforts to instigate change by engaging with the companies in which they are invested. “Examples include our steadfast ongoing drive to further strengthen the way we integrate engagement work in energy-related sectors and our work in collaborative initiatives such as Climate Action 100+”, he added.

Bos pointed out that the scores also reflect their E, S and G criteria integration in their investment processes. “Achieving the highest score is not where it stops. In the coming period, we will continue to introduce further enhancements to our ESG integration and engagement efforts”, he concluded.

NN IP has been a signatory to the UN PRI since 2008 and has been active in RI since the late 1990s. For the asset manager, their active involvement in this initiative demonstrates their ambition towards RI and underlines their shared responsibility to promote the further integration of ESG criteria and corporate governance in investment decisions for the benefit of society as a whole.

The PRI is the world’s leading proponent of responsible investment and is supported by the United Nations. It works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership practices.

Juan Pablo Galán Becomes Credicorp’s Country Head For Colombia and Carlos Coll Steps Up in Miami

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Annotation 2020-08-03 101321
Juan Pablo Galán. foto cedida

Credicorp has made changes to its management leadership this August. Juan Pablo Galán takes on the position of Country Head Colombia, while Luis Miguel González undertakes a new challenge as part of the Board of Directors of Credicorp Holding Colombia.

Carlos Coll (current COO of Credicorp Capital Advisors and Ultralat) will act as interim CEO of Ultralat in Miami.

It is expected that in a few months Felipe García, current Head of Capital Markets at the regional level, will additionally become Country Head of Credicorp Capital US (which includes the RIA -Credicorp Capital Advisors- and the Broker Dealer -Ultralat Capital Markets and Credicorp Capital Securities that are in the process of merging-).

According to a press release, under the leadership of Galán, Credicorp Holding Colombia, a Holding company of the Credicorp Group that is regulated by the Colombian Financial Superintendence, will take a new and more commercial approach, with the aim of promoting the development of its businesses and contributing to the fulfillment of the firm´s strategies in the country.

Eduardo Montero, CEO of Credicorp Capital said: “I welcome Juan Pablo to this new stage for the organization, congratulate him on this new role he is assuming and give him all the confidence in this endeavour.”

Galán has more than 25 years of experience in the financial sector, having held important roles as MD at Corredores Asociados, CEO of Alianza Valores and, for the last 4 years, as CEO of Ultralat in Miami. He has a BA from CESA (Colombia) with an MSc in Investment Banking and International Markets from the University of Reading – Henley Business School (England).