News archivos - Page 177 of 576

How Megatrends Redraw the Investment Landscape

Robert Lukeman Iceland Seljanlandsfoss Waterfall Unsplash — Pixabay CC0 Public DomainPhoto: Robert Lukeman. Photo: Robert Lukeman

Megatrends are a discrete group of powerful social demographic environmental and technological forces of change that are reshaping our world. Investors can’t afford to ignore them.

There can’t be many countries that worship the car as much as the US. Americans’ love affair with the open road has long been one of the nation’s defining features, romanticised in classic movies such as Thelma and Louise and Bonnie and Clyde. But there are signs that the chemistry is not as powerful as it used to be. Since the early 2000s, travelling by car has become a less popular pursuit. Having risen every year since the Second World War, driving among individuals in America has declined by some 10 per cent over the past decade.

“Megatrends have the capacity to redraw the investment landscape”

On average, people in the US now drive 500 fewer miles every year than they did in 2000, while less than 70 per cent of 19-yearolds now have driving licences, compared with around 90 per cent 20 years ago. The allure of the auto looks set to diminish further over the next several decades.

According to Barclays, US car sales could drop by some 40 per cent over the next 25 years. In time, there could be fewer than 100 million vehicles on US roads, compared with 250 million today.[1] It is a tectonic shift, but what is causing such disruption? At Pictet Asset Management, they can explain this transformation using a framework based on structural forces they call megatrends.

These trends are changing our world

Megatrends are a discrete group of powerful social, demographic, environmental and technological forces of change that are reshaping the world. They evolve independently of the economic cycle, and while they may develop in different ways and at a different pace, they each possess the capacity to redraw the investment and industrial landscape.

Using this framework as a vantage point, they find that the auto industry is being buffeted by three of the structural trends that form part of our model. The first of these is sustainability, or the increased importance that individuals, businesses and policymakers place on protecting the world’s environment and natural resources. As cars cause environmental damage, they are simultaneously subject to tighter regulations and losing their appeal among younger segments of the population.

Fig. 1 The megatrends transforming the world

Source: Pictet Asset Management

The second trend transforming the auto sector is technological development, or the unprecedented pace at which technology is now evolving. In the car industry, this trend manifests itself in a number of ways, most obviously via the development of self-driving and electric vehicles being developed by firms such as Tesla.

The third trend shaping the car industry is the growth of the network economy – the increased inter-connectedness of individuals and businesses that is resulting in the speedier transfer of goods and services from provider to receiver.

Some would describe this phenomenon as the sharing economy, and one company that has harnessed this trend to good effect is car-sharing service Uber. Technological progress, the world’s increased concern about the sustainability of our planet and the network economy are, however, just three of the many enduring trends that will have a profound effect on the interactions between individuals, organisations and the environment over the years and decades to come. There are many others (see Fig. 1).

How to analyse megatrends

What makes understanding and investigating megatrends especially important is the fact that all of these changes are unfolding at the same time. According to Rudolph Lohmeyer, consultant and director at the Global Business Policy Council of A.T. Kearney, a global management consulting firm, the rate of change the world is experiencing is unprecedented.

Fig. 2 – Interaction between Pictet Asset Management and its advisory boards

Source: Pictet Asset Management

At Pictet Asset Management, they have tackled this problem by working in collaboration with several megatrends experts, a distinguished group of industry practitioners and academics – each of whom have developed a deep understanding of the structural trends transforming our world. They don’t dictate which stocks we should hold in Pictet Asset Management’s portfolios. Rather, their role is to shed light on megatrend dynamics and how they might shape the prospects of the industries in which the investment managers invest on behalf of their clients.

Having managed thematic investments for more than 20 years, Pictet Asset Management has discovered that by focusing on megatrends, they have been able to help their clients develop a longer-term perspective.

This, according to clients, has not only proved invaluable during times of financial and economic uncertainty and change – it has also been a source of investment success.

[1] Source: Barclays

Important notes

This marketing material is issued by Pictet Asset Management (Europe) S.A.. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet or at Pictet Asset Management (Europe) S.A., 15, avenue J. F. Kennedy, L-1855 Luxembourg.

The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments or services.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.

The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested.

Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.

Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on assetmanagement.pictet in the “Resources” section of the footer.

This document is a marketing communication issued by Pictet Asset Management and is not in scope for any MiFID II/MiFIR requirements specifically related to investment research. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any products or services offered or distributed by Pictet Asset Management

Morningstar to Acquire Sustainalytics

| For Beatriz Zúñiga | 0 Comentarios

hands-3127297_1280 — Pixabay CC0 Public Domain. Morningstar se hace con el 100% de Sustainalytics

Morningstar has reached an agreement to acquire Sustainalytics, a globally recognized leader in environmental, social, and governance (ESG) ratings and research. Morningstar currently owns an approximate 40% ownership stake in the firm, first acquired in 2017, and will purchase the remaining approximate 60% of Sustainalytics shares upon closing of the transaction.

The transaction consideration includes a cash payment at closing of approximately EUR 55 million (subject to certain potential adjustments) and additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues. Based on the upfront consideration, Morningstar estimates the enterprise value of Sustainalytics to be EUR 170 million. The closing of the transaction is subject to customary closing conditions and is expected to occur early in the third quarter of 2020.

“Modern investors in public and private markets are demanding ESG data, research, ratings, and solutions in order to make informed, meaningful investing decisions. From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism. Whether assessing the durability of a company’s economic moat or the stability of its credit rating, this is the future of long-term investing,” said Morningstar Chief Executive Officer Kunal Kapoor. “By coming together, Morningstar and Sustainalytics will fast track our ability to put independent, sustainable investing analytics at every level – from a single security through to a portfolio view – in the hands of all investors. Morningstar helped democratize investing, and we will do even more to extend Sustainalytics’ mission of contributing to a more just and sustainable global economy.”

For more than 25 years, Sustainalytics has been ahead of the curve, recognizing the need to provide ESG solutions to investors, banks, and companies worldwide. The firm is widely known for its security-level ESG Risk Ratings – which are integrated into institutional investment processes and underpin numerous indexes and sustainable investment products – as well as serving an ever-increasing number of use cases across the emerging sustainable finance landscape. Sustainalytics offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries.

Since 2016, Morningstar and Sustainalytics have teamed up to supply investors around the world with new analytics, including: the industry’s first sustainability rating for funds, rooted in Sustainalytics’ company-level ESG ratings; a global sustainability index family; and a large span of sustainable portfolio analytics that includes carbon metrics and controversial product involvement data. With this acquisition, Morningstar plans to continue to invest in Sustainalytics’ existing business while also further integrating ESG data and insights across Morningstar’s existing research and solutions for all segments, including individual investors, advisors, private equity firms, asset managers and owners, plan sponsors, and credit issuers.

“Sustainalytics welcomes the opportunity to join the Morningstar family. Our collaboration over the past several years has helped to extend the understanding and use of ESG insights and strategies to a multitude of investors, advisors, asset owners and managers across the globe,” said Sustainalytics Chief Executive Officer Michael Jantzi. “This new ownership structure will amplify our ability to bring meaningful ESG insights, products, and services to the global investment community and to companies around the world. Importantly, I am thrilled that my colleagues and I are joining a firm with a belief in our mission and intent to help us further expand our reach.”

Dutch-domiciled Sustainalytics has a global business that includes more than 650 employees worldwide spanning 16 locations, and all are planned to join the Morningstar family under the existing Sustainalytics leadership team. Morningstar intends to fund the transaction with a mix of cash and debt. The transaction is expected to have minimal dilution to net income per share post-closing, excluding any impacts of purchase accounting and deal-related expenses, as the company expects to incur costs to integrate certain capabilities and fund growth opportunities.

In Bob Doll’s (Mostly New) Ten Predictions for 2020 Active Managers Still Win but Donald Trump Does Not

| For Gabriela Huerta | 0 Comentarios

Screen Shot 2020-04-21 at 10 — Bob Doll, Nuveen. Las nuevas predicciones de Bob Doll para 2020 mantienen a los gestores activos como ganadores, pero Trump pierde la elección

Last January, Bob Doll, Chief Equity Strategist at Nuveen made his 10 predictions for 2020 saying that after 2019 was a tough year to forecast (though he was mostly right, getting eight out of 10 correct) in 2020, the theme was “Uncertainties diminish, but markets struggle.” However, the coronavirus pandemic and resulting economic and market upheaval have since changed everything.

“In early March, consensus expectations for 2020 global GDP growth were +3%. Now they are -3%.1 A 6% swing would be unusual over a three-year time period. We just saw one in a month. We’re going to continue keeping track of (and scoring) our original predictions through the rest of 2020, but in the interest of providing investors with an updated and more relevant perspective, we’re also offering a mostly new list that speaks to what investors might expect from here.: Doll mentions.

In general, “the views for the rest of the year are predicated on our expectation that the coronavirus pandemic will peak in the second quarter, paving the way for a slow economic recovery in the second half of the year. We also think the massive policy stimulus should aid the recovery.”

Bob Doll’s (Mostly New) Ten Predictions for 2020 are:

The U.S. and world experience a sharp, but reasonably short recession with noticeable recovery before year-end.
All-time low yields move higher during the second half, with the 10-year Treasury closing the year above 1%.
Earnings collapse, but rise smartly by the fourth quarter.
Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years.
The dollar weakens as global growth strengthens in the second half.
Value and cyclicals outperform growth and defensive stocks in the second half.
Financials, technology and health care outperform utilities, energy and materials in the second half.
Active equity managers outperform their indexes for the first time in a decade.
The cold wars within the U.S. and between the U.S. and China continue.
The coronavirus recession and rise in unemployment cause Donald Trump to be a one-term president.

For the full version of Bob Doll’s (Mostly New) Ten Predictions for 2020 follow this link.

Peter Harrington-Howes: “At this Point, Portfolio Managers Should avoid Making Dramatic Changes in their Portfolio Allocation”

| For Meritxell Sedo | 0 Comentarios

Peter Natixis — Foto cedidaPhoto: Peter Harrington-Howes, Portfolio Consultant with the Solutions Group at Natixis Investment Managers. Photo: Peter Harrington-Howes, Portfolio Consultant with the Solutions Group at Natixis Investment Managers

According to Peter Harrington-Howes, Portfolio Consultant with the Solutions Group at Natixis Investment Managers, portfolio managers should avoid making dramatic changes in their portfolio allocation at this point. As a growing number of COVID-19 cases is spreading across the United States and Europe, the global market sentiment has been thrown into upheaval. During these uncertain times, portfolio managers could possibly obtain better results for their clients if they left their portfolios to stay the course, as de-risking or increasing risk positions to them may have an adverse effect on the recovery of the portfolio.

The virus outbreak is still far from having reached a global peak, the number of people affected by the disease in the United States, especially in New York, Italy or Spain are still substantial. The market sentiment is bearish, equity markets continue to experiment outflows, but credit outflows seem to have capitulated. So far, the markets have priced in a deep but short recession, however the global economy is far from showing signs of restarting.

The recovery could happen in many different shapes. Depending on the duration of the coronavirus outbreak, it may take the form of a U-shaped recovery – a deep but short global recession, being the base of the U a function of fiscal and monetary policy response and the time taken to contain the outbreak-, a W-shaped recovery -a global recession that sets in but massive fiscal and monetary response provides backdrop for a sharp recovery in risk assets, however risk appetite, consumer and business sentiment are slow to recover- or a L-shaped recovery – a global recession in which the demand shock and the lack of confidence lengthens the economic recovery. Although a possible V-shape recovery has been disregarded, it is still too early to identify which will be the final recovery shape that this crisis will take. Therefore, Harrington-Howes advises to evaluate how the portfolio is doing with its current allocation, rather than going risk on or risk off the portfolio as this could increase the unpredictability of the returns.

Historical comparison with previous market drawdowns and recoveries

Over the past 30 years, the S&P 500 index has experienced several drawdowns: the Operation Desert Storm in 1990, the Asian Financial Crisis in 1998, the Tech Bubble in the early 2000s, the Global Financial Crisis in 2008 – 2009, the Oil crisis in 2014-2016 and most recently the Coronavirus crisis together with the Saudi Arabia’s oil price war. By looking at the recovery path followed by the S&P 500 index after each crisis, it could be said that it follows a random pattern. Some of the recoveries have been quick, happening in a bit more than 51 days. Whether or not the coronavirus crisis takes a V-shape recovery will depend on the resurgence of cases in China, where the outbreak started first and some parts of the country have already resumed their normal activity.

Looking at the anatomy of the drawdown of the S&P 500 during the Global Financial Crisis and hoping that the Covid-19 crisis will not be tracing the previous one, Harrington-Howes explains that back in October 2007, at the very beginning of the crisis, the market plunged a 45%. Luckily, the market has not reached those levels during the current crisis, but it has been close, reaching a 33% drawdown from its peak in February.

Impact on Latin America & US Offshore moderate model portfolios

To evaluate the impact of the COVID-19 crisis on the model portfolios with a moderate risk profile in Latin America and US Offshore, the Portfolio and Consulting Group of Natixis Investment Managers created an index version of these portfolios.

The index version of the Latin American and US Offshore moderate portfolios is a collection of indexes with allocations that corresponds to the average allocations of 38 moderate profile model portfolios managed by financial advisers and wealth management companies in the United States and Latin America that Harrington-Howes and his team analyzed during the second semester of 2019 through their complementary Portfolio Clarity Service.

The main objective of this exercise is to get an idea of which assets are contributing to the returns of the portfolios and which assets have hurt them from a historical perspective. This index version invested 40.7% in equities (15.3% Global Equity, 9% Equity US growth, 8.9% Equity US value, 2.2% Equity Europe, 0.9% Equity Japan and 4.4% Equity Emerging Markets), 39.5% in fixed income (13% Global Aggregate (Hedged), 16.19% US Aggregate, 3.9% Global High Yield (Hedged), 0.7% US TIPS, 1.8% EM Dollar, 2.8% EM Local, 0.2% bank loans, 0.8% preferred securities, 0.2% convertible bonds), 8.9% in multi-assets (2.2% conservative multi-assets, 3.4% moderate multi-assets, 3.4% Aggressive multi-assets), 7.3% in liquid alternative assets, 2.6% in monetary assets and 1.1% in commodities.

Natixis IM

During the period between February 19^th and March 25^th, the index version of the model portfolio with a moderate profile of US Offshore and Latin America experienced a 14.8% drawdown, with the main detractors of performance being the positioning in Equity US value, with a loss of 29.3%, Multi-assets aggressive, with a drop of 28.1% and European equities with a decline of 23.5%. On the positive side, the contribution of 0.3% in returns for US TIPS and 0.2% in returns for monetary assets.

One of the things that Harrington-Howes considers important to know about the model portfolio is to have a look at the correlation of its assets. Over the last three years, there has been a negative correlation between the US Aggregate Bond and the S&P 500 indexes, but during the recent drawdown the correlation between these two indexes has increased. However, the correlation between the US Aggregate Bond index and other fixed income instruments (Treasuries, EM dollar bonds, EM local bonds and bank loans) have spread out, experiencing an increase in negative correlation in that space.

It is necessary to know how diversified safety assets within the model portfolio are. Assets that are more correlated tend to move in tandem, therefore it is important to identify them to have a better idea of whether there are enough sources of diversification among assets to mitigate risk in the portfolios.

Themes to watch

Both ESG and Min Vol strategies have been big topics of conversation among advisors and clients. Comparing the returns obtained from February 2017 to January 31^st of 2020 (3 years before) to those obtained from February 19^th to March 25^th (peak to drawdown in recent markets), both ESG and Min Volatility strategies have obtained better results that the broad indexes (MSCI World Index, MSCI US index and MSCI Emerging Markets).

Since the oil and gas industry is one of the most affected sectors during the current crisis and the ESG strategies mitigate their exposure to this industry, the ESG strategies have demonstrated this time that they are not only “feel good” strategies, as they have outperformed the market.

For more information on Solutions or Portfolio Clarity contact your relationship manager at Natixis.

Bjoern Jesch Joins DWS, Strengthening its Multi Asset Platform

| For Clara Suarez | 0 Comentarios

Captura de pantalla 2020-04-15 a las 17 — Bjoern Jesch, courtesy photo. Bjoern Jesch se une a DWS para reforzar el área Multi Asset

Bjoern Jesch will join DWS on July 1, 2020 as Global Head of Multi Asset & Solutions. He joins the firm from Credit Suisse, where he was Global Head of Investment Management within the International Wealth Management division. Bjoern will succeed Christian Hille, who has decided to leave DWS for personal reasons after 13 years with the firm.

Multi Asset & Solutions is one of DWS’ three targeted growth areas: With net inflows of EUR 7.2 billion, Multi Asset was a significant driver for the firm’s flow turnaround in 2019. Globally, Bjoern will be responsible for a team of 82 investment professionals and AuM of EUR 58 billion (as of 31 December 2019).

Stefan Kreuzkamp, DWS’ Chief Investment Officer and Co-Head of the Investment Group says: “We are very happy that Bjoern has decided to join DWS. He enjoys an excellent reputation across the asset management industry and the market as a top notch investor and thought-leader. Multi Asset & Solutions is a crucial part of our business, now more than ever. In a volatile market it can truly differentiate itself for investors“.

Bjoern Jesch adds: “In times of extremely low interest rates and simultaneously high levels of volatility Multi Asset is the differentiating investment strategy for one of the biggest fiduciary asset managers in the market. I look forward to tackling this challenge along with the outstanding investment team at DWS”.

Over the course of his career spanning three decades Bjoern has held senior positions at Union Investment, where he served as Chief Investment Officer and Head of Portfolio Management, Deutsche Bank and Citibank. At DWS, he will report to Stefan Kreuzkamp. He will be a member of DWS’ CIO Management Committee.

Feldman: “Gold Doesn’t Need a Crisis”

| For Gabriela Huerta | 0 Comentarios

Gold has been considered a safe haven for many years and whenever markets are faced with uncertainties, their numbers soar. Such is the case now with futures which on Tuesday April 14th are on track for a fourth straight session climb, gaining support from concerns about weakness in the global economy as well as in corporate quarterly results due to the cessation of business activity intended to stem the spread of COVID-19.

According to Steve Feldman, co-founder of Bullion International, “The way people feel and the narratives that they have gets in the way…”

As he mentioned last month during INTL FCStone’s Vision 20/20: Global Markets Outlook Conference, main narratives today include the idea that “this time is different; Strong stock market implies a strong economy; Low interest rates justify high P/E; Corporate stock buybacks support the market; and You should not fight the Fed. Meanwhile US debt and liabilities are at all time highs in a moment where US household debt is also massive.

It is the same on a global scale… “With global debt as a percentage of GDP near all time highs, there is no way this debt can be paid off.. So inflation is the only way out, besides default and so there will be inflation” Feldman warns.

If he could however change one narrative, that would be that “Gold doesn’t need a crisis.” To support this, he mentioned that the asset class has delivered positive returns over the long run,can be used as an inflation hedge, and has outperformed every single currency in 100 years.

In his opinion, gold is a better hedge against market dislocation than bonds and has no default risk, “so it is the best cash.” However he does warn that for short term investors, “if tomorrow coronavirus gets a vaccine the gold price will go down because that risk has an impact into the world.”

Brian Yoshida and Joe Abruzzo Join Santander US

| For Gabriela Huerta | 0 Comentarios

Screen Shot 2020-04-10 at 3 — Wikimedia CommonsPhoto: Hctr. Santander Bank, Summer Street, Boston

Santander Holdings USA, (Santander US) has hired Brian R. Yoshida as Chief Legal Officer, effective May 4, 2020, and Joe Abruzzo as Head of Commercial Banking for Santander Bank, effective June 1, 2020. Both Yoshida and Abruzzo will report to Tim Wennes, Santander US CEO and Country Head, and Santander Bank President and CEO, and will be members of the Santander US executive leadership team.

Yoshida will oversee all legal operations for Santander’s US businesses. He will lead the Santander US Legal Department and oversee legal risk management, and provide legal advice and support for Santander entities, businesses and functions across the United States. Yoshida will also oversee Santander US Government Relations and Public Policy, Regulatory Relations, the duties of the Corporate Secretary, and Governance functions.

Abruzzo will oversee all aspects of Commercial banking – including middle market, mid-corporate, ABL, government banking, treasury management, risk management, underwriting and portfolio management, and international solutions – “with a focus on continuing our growth in our geographical and vertical markets, while leveraging Santander’s global presence and capabilities.”

“I am pleased to welcome Brian and Joe to the Santander US team,” said Tim Wennes. “Brian will easily step in to lead our legal, policy and governance teams as we continue to strengthen our regulatory framework, deepen and improve customer relationships, increase profitability and enhance our culture. Joe brings deep expertise delivering growth across all aspects of commercial banking, and will lead initiatives to leverage the strength of Santander’s global resources with our personalized Commercial banking capabilities here in the US.”

Wennes continued, “These leaders bring a wealth of knowledge and experience to Santander and will complement our dynamic leadership team. Their strategic vision for Santander in the US will be of great value as we work to continue execute on our strategy of growing the Bank, leveraging the strengths of our US businesses, and providing outstanding service to our customers and communities.”

Yoshida joins Santander Bank after serving most recently as Senior Vice President and Senior Deputy General Counsel of M&T Bank Corporation. During his tenure at M&T, Yoshida specialized in general corporate matters, including mergers and acquisitions, securities, financial reporting, treasury/ALCO, bank regulatory, corporate governance and executive compensation. His experience at M&T also included overseeing litigation, labor and employment, corporate real estate, vendor contracts, commercial lending and leasing, wealth management, corporate trust, intellectual property and information security, and legal support for the Corporate Secretary’s Office, Investor and Shareholders Relations, Corporate Communications, the M&T Charitable Foundation and the M&T Political Action Committee.

Abruzzo joins Santander Bank from HSBC, where he has served in several key leadership roles including head of the large corporate and mid-market segments in Commercial Banking and, most recently, as CEO of HSBC Private Banking Americas and Chairman of the Board for HSBC Private Bank International. He also spent 26 years at JP Morgan Chase in executive positions in both Corporate and Investment Banking and Commercial Banking.

Performance that Doesn’t Have to Cost the Planet

| For Meritxell Sedo | 0 Comentarios

Sustainable investment not only protects the world for tomorrow’s generations. It can also provide superior returns for investors.

The move to safeguard the world’s natural resources will benefit companies that can provide solutions to the global environmental challenge.

With the Pictet-Global Environmental Opportunities (GEO) fund investors can capture investment opportunities from across the $2 trn environmental sector, a market which Pictet Asset Management expect to grow 6 per cent per year (1).

At a glance

Invest exclusively in companies solving global environmental challenges such as pollution control, water supply, renewable energy, waste management and sustainable agriculture. The fund is also a good option for those who don’t want to invest in sectors such as oil and gas or mining.
The fund invests in the world’s most environmentally-responsible public companies – those with a small environmental footprint and that are building products or services that have a positive impact on the environment.
Pictet Asset Management believes the fund could be a good alternative to traditional global equity funds for this portion of an investors’ portfolio, and for those who want to benefit the environment whilst investing.

Performance that does not have to cost the planet

Investors don’t necessarily have to compromise on performance if they want to invest sustainably. As leaders in both thematic and responsible investing, we combine the two to deliver strong investment performance for our clients, as well as sustainable growth for the planet.

PICTET-Global Environmental Opportunities FUND

Source: Pictet Asset Management. Data as of 31.12.2019. Performance is for the I USD share class, net of fees. Past performance is not a guide to the future.

How can investors measure the environmental benefits of their investments?

Once a niche activity, environmental investing is now moving into the mainstream. The problem investors face is that there is no universally accepted method for measuring a company’s environmental footprint. So how do you know if your fund is delivering the environmental benefits it promised?

Our distinctive process is based on a scientific, rule-based framework. The Planetary Boundaries model was developed in 2009 by a group including scientists from the Stockholm Resilience Centre and identifies nine of the most critical environmental dimensions that are essential to maintain a stable biosphere required for human development and prosperity. These include carbon emissions or climate change, fresh water, land use, biodiversity and others.

The team use this framework to identify companies with the strongest environmental credentials across their entire value chain, from the extraction of raw materials and manufacturing processes, through to distribution and transport, product use, disposal and recycling.

Demonstrable impact…

Using the Planetary Boundaries framework to compare Pictet Global Environmental Opportunities versus MSCI World Index

Source: Pictet Asset Management, NEOSIS, 30.06.2019

As the chart above shows, the fund achieves a significantly more positive environmental impact than that of a typical global equity index across all nine dimensions, particularly in climate change. For example, as shown above in the top left chart, carbon dioxide emissions of companies in our portfolio stand at 454 tonnes of CO2 equivalent per million dollar of annual revenue (tCO2 eq/mn$), compared with 1,948 tonnes for the MSCI World index.

What are the risks?

Past performance is not a guide to future performance. The value and income of an investment can fall as well as rise and you may not get back the amount originally invested.
The fund may be invested in emerging markets. Investments in emerging markets can potentially be of higher risk and volatility than those in developed markets.
Investments are made in assets that are denominated in foreign currency and are not hedged back to the base currency of the fund. Changes in exchange rates may therefore affect the value of the investments.

Notes:

⁽¹⁾Source: Pictet Asset Management 2018.

Read more on our GEO strategy

Important notes

The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments or services.

Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on assetmanagement.pictet in the “Resources” section of the footer.

Luca Paolini (Pictet Asset Management): “The US Job Market Is Deteriorating at a Rate 10 Time Faster Than in The Great Financial Crisis”

| For Meritxell Sedo | 0 Comentarios

According to Luca Paolini, Pictet Asset Management’s (Pictet AM) Chief Strategist, we are living in unprecedented times and this is consequently an unprecedented bear market. To put things in perspective, the cease of economic activity to prevent the spread of the coronavirus has already destroyed 6.6 million jobs in the US economy in the week ending on March 28^th. At the peak of the Great Financial Crisis there were 600.000 jobs destroyed, this means the US job market is deteriorating at a rate 10 times faster than in the 2008 -2009 period.

There is a general feeling that the market is overacting, that investors are panicking, but in Paolini’s view, the market is behaving rationally. The market reaction is aligned with the decline in growth experienced by the economy. Approximately, 35% of the world’s population is not allowed to work, an unprecedented territory in which markets are incredibly difficult to navigate.

The performance of different asset classes, measured from market’s peak to month’s end, has revealed some unexpected results. At some point in the sell-off, Global Equities (measured by the MSCI ACWI index) experienced a decline of 35%. Unpredictably, the equity markets that have done the best were Japan and China, with a drop of only 13.6% and 13.8%, respectively. These two markets are the ones that tend to suffer the most when there is a global recession. Conversely, the US stock market, a defensive market by nature, has not performed exceptionally well, suffering a 22.6% drop.

By carefully looking at Global Equity sectors, most of the traditional defensive sectors did well. Additionally, some sectors considered more cyclically, like IT or Mining, did not perform so badly considering the depth of the actual recession.

The comparison of this bear market with any of the previous ones is unfair because the nature of the shock is completely different. The decline in Global GDP, which is of epic proportions, could be potentially close to 20% for the first quarter. The market is already pricing this decline not only in the United States, but also globally.

The good news is that there are already unprecedented monetary and fiscal stimulus in place. The net liquidity injection implemented by G5 central banks is around 10% of nominal global GDP, while the sum of the actual and the announced global fiscal policy stimulus represents a 3.2% of GDP. Basically, the stimulus is 50% greater than that executed during the Great Financial Crisis. A large part of the stimulus is coming from the fiscal side, something that Paolini considers a correct stimulus, since it is not a financial crisis but rather a decline in economic growth.

When will the trough be reached?

This is a health crisis and will continue until the virus is under control, therefore, the key variable to consider is the global infection rate. It is also important to determine who has already passed the virus and now is immunized, as this could help governments to discern which people can return to work and resume normal lives.

The decline in earnings for American companies will be bad but not catastrophic. Pictet AM expects a 30% drop in United States profits, which is roughly the same decline that was experienced between 2008 and 2009.

“The data that will be critical here is the duration of the lockdown. An additional month of global lockdown represents roughly a 10% decrease in corporate earnings. But, for some companies, this drop may be vital. In terms of dividends, the annual growth in dividend per share is implicit in the price of the dividend future and the market is assessing a 35% decrease in dividends worldwide -a drop of 54% and 22% in Europe and United States, respectively”, said Paolini.

It is very difficult to determine when equity markets will hit their lowest point in this bear market. However, from a macroeconomic point of view, almost all the preconditions for a market trough have already been met. The missing elements for the bear market to finally bottom are perhaps more shocking numbers in the US economy, a steeper bond yield curve, and of course, an improvement in the rate of the coronavirus infection. When all these requirements are met, it will be time to return to equities strategically thinking for a five-year horizon, in which US stocks could yield a real return of 5% or 6%.

For now, Pictet AM maintains a cautious stance. Defensive sectors such as pharmaceuticals are overweight, with long positions in gold and Swiss francs. In the fixed income space, after the great widening of the spreads that have occurred, they closed the short position they held in investment grade bonds and decreased their exposure in high yield debt, as a potential and significant increase in default rates is expected.

Possible scenarios of recovery

One possible scenario is a V-shaped recovery in which the coronavirus outbreak will be over in the next 3 – 4 months. However, even in this optimistic scenario, there will be some long-term implications, as there are not many companies and sectors that have strong enough balance sheets to survive in an environment like this.

“Even the Fed has claimed that 25% of small-cap companies in the United States could go out of business if the situation continues for two more weeks. Conversely, there are some incredibly strong names in the tech sector, as the recession has been very favorable to technology, as more online services are consumed during the lockdown. In addition, technology companies have incredibly solid balance sheets”, explained Paolini.

The risk here is that some sectors such as the deep cyclicals (energy, banks or industrials), which normally tend to do well once the recession is over, will have received strong support from the government and the government will probably ask for something in return. A possible dilution of shareholders and nationalization is expected. Dividends, share buybacks and CEO compensation will be under scrutiny.

Finally, if the recovery is U or L-shaped, which Paolini believes is a very likely and fair assumption, investors will take the opportunity to buy very good names at a discount price. In this case, sectors like the pharmaceutical industry and other industries within quality growth will continue to perform well.

“Pharmaceutical stocks are not at very expensive levels, but there is also a risk that the government could impose restrictions if the situation worsens. Online services, internet providers, food producers and the retail sector are the most obvious winners in this bear market. There has already been a market move. However, it is not about choosing sectors, but how solid and resilient a company is. For now, we are maintaining a defensive bias. Depending on how the economic recovery turns out, we will look for deep cyclical or quality growth stocks. Hopefully, the health crisis can be overcome in a few weeks, rather than in the coming months. But it is too early to say”, concluded Paolini.

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.

Gundlach: “The Biggest Winner Out of All of This May Be the American Economy”

| For Gabriela Huerta | 0 Comentarios

Screen Shot 2020-04-06 at 1 — Jeffrey Gundlach. two sinks

The selloff caused by the COVID-19 outbreak has further to go, and U.S. financial markets are not likely to see a bottom until later in April, said DoubleLine Capital CEO Jeffrey Gundlach in a webcast meant to address the economic effects of the coronavirus pandemic.

During the webcast called “Tale of Two Sinks,” a reference to the 2008 financial crisis and the current one, as well as the “kitchen sink” approach to stimulus taken by fiscal policy makers and the Fed, Gundlach said the economy and financial markets will never be the same, and the worst is yet to come.

The so called new bond king believes the coronavirus sell-off is not over yet and the market will hit a more “enduring” bottom after taking out the March low. “I think we are going to get something that resembles that panicky feeling again during the month of April.”

He also said that the market was acting “somewhat dysfunctionally” and that banks’ projections of a “v-shaped” US economic recovery were highly optimistic. Instead, he said that this year’s market declines might resemble those from the 1929 stock market crash, where the financial markets held their low levels for nearly a year before worsening again.

“I don’t think it will be back to where it was prior for a long time, particularly on a real basis,” he said.

Gundlach argued that financial markets are behaving dysfunctionally, in part because of the ongoing affect of monetary and fiscal stimulus packages.

The Fed’s monetary stimulus is choosing “winners and losers” in fixed-income markets, which are not functioning as a safe haven in the current environment, but creating irrational disparities in performance between different asset classes, “and at some point “another sink” will be necessary to restore some rationality to financial markets,” said Gundlach.

But in time, he believes that “the U.S. economy may actually be in a “better place” as the recovery is likely to focus on a more resilient economy with more manufacturing and self-sufficiency in the U.S. and less emphasis on the American consumer,” Gundlach said.

“The biggest winner out of all of this may be the American economy, once we get past a rough patch,” he said.

Gundlach also said that the Fed’s monetary stimulus has already eclipsed all of its accommodative interest rate and quantitative easing polices used during the 2008-2009 global financial crisis and “Great Recession,” while Congress’s $2.2 trillion fiscal stimulus is equally unprecedented.