Insigneo Welcomes Industry Veteran Mariela Arana

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Mariela Arana, nueva directora de Operaciones y Tecnología en Insigneo
Wikimedia CommonsMariela Arana, foto cedida. Insigneo Welcomes Industry Veteran Mariela Arana

Mariela Arana joins Insigneo as Head of Operations and Technology while the company embarks on a growth strategy with a laser-focused plan on digitalizing operations to provide an enhanced client experience. 

Arana brings over a decade of experience in the financial industry along with a solutions-oriented mentality that will propel the successful implementation of key initiatives to automate workflows. She will be overseeing both the United States and Uruguay’s operations as well as the firm’s IT department.

With the client experience at the core, Insigneo has embarked on a journey of growth and expansion as it seeks to scale and automate their operations by leveraging state-of-the-art technology to be more efficient and continue to meet their clients’ needs in an increasingly digital landscape. These initiatives will streamline workflows, including the implementation of cutting-edge programs which will be spearheaded by Arana.

“We are excited to welcome Mariela to the Insigneo family and we are confident that with her experience and talent, coupled with her solutions-oriented mentality, she is the perfect addition to our team,” said Javier Rivero, Chief Operating Officer of Insigneo. “We are counting on her to bring a fresh perspective and the expertise to better our processes and enhance our client’s experience.”

An industry veteran, Arana brings extensive experience in project and time management with a profound focus on risk and compliance and third-party vendor management. Most recently, Arana served as Head of CPII Operations at Citi International Personal Bank and previously as an Investment Associate at Citi Private Bank. Arana started in the financial industry in 2005 when she joined Merrill Lynch.

“I am extremely excited to join such a passionate and energetic team,” Arana shared. “I believe in the power of communicating your purpose with passion and energy, keeping the team motivated and engaged to achieve a common goal. This is what I plan on bringing to my new Insigneo family.”

She graduated from Florida International University with a Bachelor of Business Administration and Finance, has completed Certified Financial Planning courses at the University of Miami and holds Series 7, 66, 9 and 10 in addition to a Life, Health & Variable Annuities License (215).

 

Anne Richards (Fidelity International): “The Shift that the Asset Management Industry Is Seeing Now Will Exclude a lot of Investors”

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During the celebration of the Fidelity International’s annual Media Forum in London, Anne Richards, CEO of the firm, shared her view on the challenges that the asset management industry will have to face in the next decade.

According to Richards, global regulations on pension funds and other long-term saving vehicles are directing the mass affluent investors to own public listed securities. Meanwhile, the amount of capital that has been allocated to private markets has increased and the returns in the private markets have been persistently higher than in the public listed markets.

“The number of public listed companies is falling around the world. Companies are increasingly looking to private markets to raise capital. Last year in the US, more money was raised in the private markets than it did in public listed markets. When I was the rookie on the desk, one of my tasks was to manually check the price of each holding that we owned across the business. The total number of listed companies that I had to check was 967 stocks. Today, the equivalent number is more than a third lower. On one hand, the regulators are pushing the mass affluent investors into funds that are typically concentrated in daily listed stocks, which is a market that is currently narrowing, and on the other hand, the asset management industry knows that the returns are higher in the private market. I think this is a deeply uncomfortable juxtaposition to have,” explained Richards. 

“The main benefit of democratization of capital was to allow people without a lot of money to get some access to capital markets. The shift that the asset management industry is seeing now will exclude a lot of investors from obtaining attractive capital returns. The returns in private markets are being only directed to those who have the capacity to get exposure to that type of capital, categorized as professional investors. This may cause eventually an inequality issue, which is the heart of much of the unrest and political divergences that the world is facing right now. We have to come together as industry and think about ways of making sure that we can continue to offer a whole range of investment opportunities, regardless of the investment amount”, she added. 

A shift towards more returns for society

Speaking about the responsibility that the asset management industry has over society, Richards mentioned the need to take into consideration not only the financial returns, but the long-term impact that every business has in the society.

“When you look after other people’s money, like the asset management industry does, you end up with an above average share of voice by collecting a lot of individual voices. Our business could make a meaningful difference on encouraging companies not take advantage of the work force or the environment, and to do things that are good for the broader society. Financials returns are important, but not enough. We need to think about the long-term impact of investments. This is important to us because our clients and employees are also asking for a responsible way of investment,” she said.

A family business

The fact that Fidelity Investments and Fidelity International are a family started business -the Johnson family owns a large part of the business, although there are other many shareholders and employees that are owners as well- makes the dynamic of the business very different.

“This characteristic gives Fidelity International a long multi-generational view. The mindset is not about maximizing the value of what we are doing today. Instead, the mindset is how you can build something better to handle it to the next generation, and that’s very special. It is a very refreshing mindset. In a listed company business, the decisions of the management are sometimes affected by the demands that the market imposes on the business and the volatility that can come from the pressure on quarterly earnings.

This is not to say that it does not matter to us running an efficient organization and taking care of the business that we inherited from the previous generation. But we do have an ability to take a through-cycle view of what we want to do and how we want to invest,” she stated.
Fidelity International has two distinctively separated business. Firstly, the investment management part of the business, where the firm engages directly with institutional clients, wholesale clients, private banks or larger financial institutions. And secondly, the platform business that can be used to help advisers to manage their part of the business.

“The dynamics of these two areas of the business are quite different. This gives us a good window on the landscape in the outside world and on what is wanting from us. This full capacity is very powerful and few of our competitors have it”, she mentioned.

Geographical spread

China is a massive market and opportunity. Population in China is aging and has more disposable income than the previous generations. Regulators and policy makers are starting to build the infrastructure to provide to each individual person the ability to have some sort of control over their financial future, as it has already happened in other countries around the world. China is about to build the first pillar to their pension system, but they still not have a third pillar of voluntary savings. 

“As for now, we have been in investing in China over 20 years and we have been competing in the ground field around 14 years. In order to build up our capabilities in China, we have been a lot more patient than our competitors. Partly, because we have always felt we needed to be in control of culture, and partly because of the investment environment that our teams are operating in. In 2017, we had the opportunity to obtain a wholly owned investment license in China, which only allows to do business with high net worth individuals, not with the mass affluent market,” she explained. 

Other strategic areas

Historically, Fidelity International tended to be known for its expertise and capabilities in both equities and fixed income. However, since the number of public listed companies is falling in many developed markets, Fidelity International considers very important to start building a broadest range of capabilities in the less liquid space of the investment universe. In that regard, the firm recently hired Andrew McCaffery, who will fill the newly created position of Chief Investment Officer for alternative assets.

“We want to build out our capabilities across the alternative investment space so that we can continue to offer innovative themes to our customer base as it evolves. So, it does not mean in anyway, that we are trenching our former heritage or our market expertise, particularly in the equity market and increasingly in the fixed income market, but that we need to enhance the offer the whole spectrum of capabilities”, she concluded. 

Aberdeen Standard Investments: “Some Of The Political Risks Which Plagued The Markets In 2018 Appear To Have Softened, At Least In The Short Term”

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Aberdeen Standard Investments: “Algunos riesgos políticos que plagaron los mercados en 2018 parecen haberse suavizado a corto plazo”
Pixabay CC0 Public Domain. Aberdeen Standard Investments: “Some Of The Political Risks Which Plagued The Markets In 2018 Appear To Have Softened, At Least In The Short Term”

Current global economic growth prospects remain subdued. However, according to Aberdeen Standard Investments (ASI), some of the political risks that plagued the economies and markets in 2018 seem to have eased, at least in the short term. This has been accompanied by the ‘dovish’ tone of the Fed, which has generated some relief for the markets and has been reflected in the asset prices’ moves.

Speaking to Funds Society, ASI claimed that its medium-term outlook for traditional asset classes (developed government bonds, corporate bonds and equities) remains intact: “We believe that they are facing a challenging return environment given current valuations.” Therefore, they feel “comfortable” with their relatively moderate exposure to equities and see attractive opportunities elsewhere.
Within traditional credit markets, however, they are somewhat concerned about the fact that the level of credit spreads on offer is not commensurate with the risk at this point in the cycle. They therefore have a negligible direct exposure to corporate credit and assure that they will “patiently” wait for a more attractive point to reinvest.

Likewise, they continue to see ABS as a good instrument for an “attractive risk-return trade off.”

The management company believes that local currency emerging market bonds are “the most attractive of the larger liquid asset classes” mainly due to the nominal and real yield they offer as compared to that of developed markets. This is supported by inexpensive currency valuations and “decent” underlying fundamentals.

Finally, they also see attractions across a broad range of niche alternative asset classes, such as litigation finances, healthcare royalties and aircraft leasing.

“Economics and politics are interconnected; they always have been and always will be,” claims ASI, before pointing out that, nevertheless, the nature of that connection “changes over time.” In that regard, the management company predicts that geopolitical uncertainty will continue to drive markets.

In particular, it sees a confrontation between Italy and the EU, a hard Brexit, and an escalation of the US-Iran conflict as increasingly likely.

The management company points out that future outlook analysis is a key part of its risk management approach, since it ensures that they look beyond simple quantitative measures of investment risk. In that regard, some scenarios that have been assessed include a trade war, the rapid increase in interest rates and a liquidity crisis.

According to ASI, their scenario analysis reinforces their focus on diversification through its multi-asset strategy – which includes products such as the Aberdeen Standard SICAV I – Diversified Income Fund – and, in addition, provides a useful basis for “challenging base case assumptions with respect to asset class correlations and individual market liquidity.”

The objective of this analysis is to consider how their funds could respond to different extreme scenarios, which include geopolitical (e.g. war in the Middle East), economic (e.g. China’s hard landing), political (e.g. protectionist policies), market (e.g. major US treasury sell-off) and environmental (e.g. cyberterrorism).

“Although a scenario analysis is a highly subjective exercise and there are no right answers, we believe that by taking the time to think through these scenarios we have a better sense of how our portfolios may perform in a range of market conditions and some of the key sensitivities around this,” says ASI.

CFP Professionals Have Another Nine Months to Comply with New Code of Ethics and Standards of Conduct

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Los CFPs tendrán nueve meses más para cumplir con el nuevo código de ética y normas
Wikimedia CommonsPhoto: PxHere CC0. CFP Professionals Have Another Nine Months to Comply with New Code of Ethics and Standards of Conduct

The Board of Directors of the Certified Financial Planner Board of Standards announced on Tuesday that it has set a date of June 30, 2020 when CFP professionals’ compliance with the new Code of Ethics and Standards of Conduct will be enforced.

The previously announced effective date of October 1, 2019 remains the same for the over 85,000 CFP professionals to understand and comply with the new rules. In setting a targeted enforcement date, the Board of Directors is providing CFP professionals additional time before compliance is enforced with the new Code and Standards.

“In order to best benefit the public, the Board wants CFP professionals to have time to adjust to the new Code and Standards. By setting this enforcement date, we are ensuring they have ample time to modify their policies, adapt systems and be in alignment with the new rules,” said Board Chair Susan John, CFP. “With these new standards, CFP professionals will be required to provide clients with fiduciary financial advice at all times.”

John specifically noted that none of the Code and Standards themselves had changed. This includes, what she called, the “iron clad” commitment of CFP Board to require CFP professionals – no matter their compensation method – to adhere to a fiduciary duty whenever delivering financial advice.

“Since the beginning of the nearly four-year process to review our standards, we said that CFP Board would not be led by what actions regulators take. But we won’t ignore them either,” John said.

“The Board, however, does believe that the alignment of the SEC’s enforcement date of Regulation Best Interest (Reg BI) is helpful to our CFP professionals in that there is significant overlap in the two sets of standards – with a notable exception that CFP professionals are required to act as a fiduciary whenever they are providing financial advice to clients.”

For conduct that occurs between October 1, 2019 and June 29, 2020, CFP Board will continue to enforce violations of the existing Standards of Professional Conduct. Starting June 30, 2020 and onward, CFP professionals will then be subject to potential disciplinary action for any violations of the new Code and Standards. Additionally, the exam starting with November 2019 exam will include material from the new Code and Standards.

“We appreciate the valuable input of CFP professionals, their firms, trade associations and membership organizations representing CFP® professionals in helping the Board come to this decision,” John said. “It is now time for all of us to pull together and comply with the new standards so that we can provide the public with the highest level of financial advice.”

A guide to the new standards can be found here.

The Approval of the Pension Reform in Brazil Opens the Door to Lower Rates and Foreign Inflows

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La aprobación de la reforma previsional en Brasil abre la vía para bajar los tipos y atraer flujos extranjeros
Wikimedia Commons. The Approval of the Pension Reform in Brazil Opens the Door to Lower Rates and Foreign Inflows

With the broad vote obtained in Congress, the pension reform in Brazil seems to have entered a safe path, opening the possibility of a reduction in interest rates and new reforms, says Luiz Ribeiro, CFA Managing Director Head of Latin American DWS Equities, in an exclusive interview to Funds Society.

Interest rate cuts

In the opinion of the expert, the fact that the reform was approved so widely is very positive because it implies that opposition congressmen voted in favor.
One of the most remarkable aspects of the reform is the volume of expected savings that, according to his estimates, could be around 850,000-900,000 million reais in ten years. Thus, Ribeiro believes that this important volume will allow the Brazilian Central Bank to reduce interest rates by 100 bp before the end of the year. “We expect the central bank to cut rates by 50 bp at its next meeting to 6% and another 50 bp in the next. This reduction will have a very positive impact on the equity markets “, Ribeiro points out.

Regarding the next steps in the parliamentary approval process, Ribeiro is confident and does not expect big surprises: “This first vote has been the most important, and we do not foresee that there will be problems in the Senate voting. It is a done deal and we hope that the reform will be voted on in the Senate at the end of August. “

Door opened for further reforms and foreign investors inflows

In relation to how much of these positive reforms have already been priced in, Ribeiro states that while the Sao Paolo stock exchange is trading at PER of 12.2 times above the 7-year historical average (11 times), there is potential for further upside as the market has not yet priced in the next reforms that will came into place after to the approval of the pension reform.”The next reform to be addressed will be the tax reform and the market seems to start to discounting it for next year.”

Ribeiro also highlights the fall in country risk premium, resulting in 5 yrs CDS levels similar to the ones Brazil was when its rating was investment grade. This lower perception of risk may drive foreign investors back to the Brazilian equity market, although Ribeiro believes that they will wait until the parliamentary process is in a more advanced state.

In this regard, he points out: “The recent inflows that we have seen in Brazilian stock market come from a change in the asset allocation of local funds from fixed income markets equities. I think this trend will continue, but we will begin to see foreign investors in the coming to the market in a few months. “

After this important step in Guedes economic agenda, the manager states that the main risks that may affect Brazil come from the external sector and are basically: “Increase tensions in the trade war or the situation in Italy.” Consequently, in their portfolios they overweight sectors linked to the domestic economy such as the consumer sector and certain smaller financial companies.

Vishal Hindocha (MFS IM): “The Active Management Skill Is Probably the Best Diversifying Asset that Investors Can Buy Today”

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The current US equity market cycle is the longest bullish market on record, with 9 and a half years of history, with a small correction in the fourth quarter of last year, but already back on track in the first semester of the year. In terms of compounded wealth, is the second highest market cycle on record, with a compounded return over 330%. According to Vishal Hindocha, Director of the Investment Solutions Group at MFS Investment Management, this is an enormous volume of return that probably will not be seen again going forward.

Valuations in equity market are telling investors that we are about to enter to a more recessionary environment. Observing the forward annualized returns based on historical Shiller P/E ratios for the S&P 500 Index for one, three, five and ten years, it could be stated that valuation will play a key role in future equity returns. 

“When the Shiller P/E ratio is less than 10, equity markets are cheap, and returns are pretty strong. But, when the Shiller P/E ratio is in a range greater than 40, then the forward annualized returns in equity markets are bearish from that point onward, particularly in in the five and ten-years return. Just think about the compounded impact of that in the client’s portfolios. The current Shiller P/E for the S&P 500 is around 32,5x. We are currently in the 30 to 40 times range, if the history is sort of guiding us, the 5 or 10-years returns expectations on equity are not looking attractive from this point onward,” explained Hindocha.

Valuations in bonds are also not promising. In bond markets, current yield to worst tends to be a good predictor of what returns should investors expect over the next five years. A starting yield to worst a little bit lower than 2% communicates that investors should expect a subsequent 5-year annualized return between 2% and 4% above the mentioned yield, which again is lower than expected returns in previous periods in history.

“Returns expectations of the most major asset classes are going to be lower going forward. In MFS IM, we think that alpha is going to need to play a much more important role in investors’ portfolios from today onward. The 100 or 200 bps that you can get from alpha are going to be disproportionally more valuable to investors than they have ever been in the past,” he added. 

Leverage in the system

Ten years after the global financial crisis and the level of corporate indebtedness is in fact higher than the pre-crisis levels. The net debt to EBITDA ratios of the MSCI World Index, the MSCI AC World Index and the S&P 500 are well above the 1.6 x level of 2008. 

“Leverage itself is not necessary a bad thing. But what it means is that investors need to be extremely careful about what they own. These higher levels of leverage can turn a good business into a stressed business very quickly. That’s the reason why selectivity is going to be much more important in the future. If the default cycle changes, leverage its going to hurt lower quality companies. The same trend repeats itself at the government level. Global government debt to GDP ratio is also generally higher than at the pre-crisis levels. Debt levels are continuing to climb again, and this fact, combined with a decline in the quality of the global corporate index and a decline in the liquidity, is embedding more risk into the system,” said Hindocha.

What can investors do in this environment?

In the last three decades, investing has become an increasingly complex puzzle. According to a model developed by Callan Associates in the US, 30 years ago, in 1989, to earn a 7.5% expected return, investors needed a portfolio that could be 75% invested in cash and 25% in US fixed income, only supporting a risk level of 3.1%.

15 years later, in 2004, to earn the same 7.5% expected return, investors needed to increase the complexity of the risk budget introducing new asset classes: 26% in large caps US equity, 6% in small caps, 18% in non-US equity and 50% in US fixed income, would nearly triple the portfolio volatility to 8.9%.

Fast forwarding to 2019, the pie chart is a lot of more complicated, the expected returns are the same, but now the risk level is six times higher than 30 years ago. Investors are now required to invest 96% of the portfolio in growth assets (34% large cap US equity, 8% small-mid caps, 24% non-US equity, 14% real estate and 16% private equity) and 4% in US fixed income to obtain a 7,5% expected return with a level of volatility of 18%.

“Investors, trustees and advisors are now beginning to question whether the amount of complexity added to the portfolios over the last 15 years has been paying off or if it has only increased the risk,” he argued.     

Does diversification work?   

In addition, there are clear evidences that diversification is not working as it used to. The paper “When diversification fails”, published by Sebastien Page and Robert A. Panariello in the Financial Analyst Journal in the third quarter of 2018, concludes that diversification seems to disappear when investors need it most. The paper distinguishes between the left tail scenario, where equity is performing extremely bad, and the right tail scenario, where equity is performing extremely well.

On the left tail, the correlation between equity and the major types of asset classes increase over 50%. The benefits of diversification, which are really resting on low correlation between the asset classes, disappear when investors really need them. If equities are performing negatively, all the other asset classes are also falling at the same time.

On the contrary, on the right tail, when equities are performing extremely well, suddenly, diversification works perfectly well. When investors would want unification, correlations remain below the 50% and, in some asset classes, it even becomes negative.

“Diversification is an important part of the tool kit. We just need to recognize the role that it plays and the types of market environments in which it may be more appropriate. Diversification should change the shape of the distribution, it should help on left tail environments, and potentially hold the portfolio a bit on the right tail environments.

Meanwhile, active management, if done correctly, can provide better than average outcomes. It can even change the skew of the return’s distribution. Investors should start viewing good quality active management as a good diversifying asset.

“Active management seems to be providing the trait that investors are expecting from alternative investments. It seems to be protecting investors when markets are down and to being able to keep up when equity markets are going upwards. The active management skill, particularly countercyclical skill, is probably the best diversifying asset that investors can buy today. We as active managers can play a powerful role to help protect client capital when they need it the most”, he concluded.
 

Mini-Bots: The New Italian Instrument That Causes Controversy In Europe

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Mini-BOTs: el nuevo instrumento italiano que genera polémica en Europa
Pixabay CC0 Public Domain. Mini-Bots: The New Italian Instrument That Causes Controversy In Europe

The Italian authorities are looking to launch the new mini-BOTs. What is this financial instrument? Why are European Central Bank (ECB) officials so upset by this monetary development?

Mini-BOTs are new Italian Government ‘I Owe You’ (IOU) issued in settlement for its outstanding expenditure contracted with the private sector, according to ASG Capital. These instruments will have legal tender status, can be exchanged between different private and public entities and used for payment of taxation. In sum, mini-BOTs would function as a local currency issued by the Italian government beyond the pale of the Euro system, outside the ECB’s monetary control.As ASG Capital points out in a recent analysis, naturally, European officials in Frankfurt and Brussels are not at all ‘amused’ by this monetary initiative coming from Rome. Faced with this new development, Jacques Sapir, French economist, describes how the ECB is standing between ‘a rock and a hard place’:

1. As it did with Greece, the ECB could apply funding pressure on the Italian banking sector for example, to make its government comply with Frankfurt’s monetary hegemony. However, there is a risk this policy could back fire. As Europe’s third largest economy and a fundamental keystone to the construction of the European project, Italy may use this kind of action as an excuse to extend a wider spread use of the mini-BOT, or ultimately leave the Union all together. In such circumstances, it is uncertain the Euro would even survive the exit of this important founding member.

2. On the other hand, the ECB could tolerate the issue of Mini BOTs as an exceptional monetary phenomenon. In this case, Frankfurt would be setting a precedent, which other nation member states may introduce in turn at some future date.

Ever since the launch of the Euro, Italy’s growth has been very weak. Its banking sector is subject to severe financial strain under the weight of significant non-performing loans. Rome has no choice but to do something….

If mini-BOTs are perceived as a potential ‘spanner in the works’ by successful northern member states, it could be considered as a cry for help from the Italian perspective. For the Eurozone to hold together and address its financial and economic imbalances, its banking sector needs to be cleaned up once and for all.

By moving pan Eurozone non-performing loans onto the ECB’s balance sheet for example, many of the region’s banking problems could be solved at the stroke of a ‘Quantitative Easing’ pen. This would be a far simpler way to manage the future of the single currency rather than watch a disorderly breakup of the Eurozone, because of the advent of the mini-BOT.

Aberdeen Standard Investments: “Our Multi-Asset Strategy Allows Us To Add Value Through Diversification”

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Aberdeen Standard Investments: “Nuestra estrategia multiactivos permite sumar valor a través de la diversificación”
Pixabay CC0 Public Domain. Aberdeen Standard Investments: “Our Multi-Asset Strategy Allows Us To Add Value Through Diversification”

Given the current valuations, investors in traditional asset classes face a challenging environment for medium-term returns and available profitability. In addition, the most likely scenario is that volatility and the periods of stress experienced by the market in 2018 will continue this year. This is the vision of Aberdeen Standard Investments (ASI), which, in this situation, is committed to a flexible multi-asset solution that “adds value” through diversification.

This strategy is structured through the Aberdeen Standard SICAV I – Diversified Income Fund, a fund that invests in emerging debt (27.5%), listed equity (20%), infrastructure (11.2%) property (9.2%), high yield bonds, loans and litigation, among other asset classes. “The breadth of this universe allows us to fully harness the benefits of diversification and provides a solid foundation for delivering the strategy’s objectives,” says Becky Nichols, Multi Asset Specialist of ASI, in an interview with Funds Society.
 

By not being tied to a specific index nor forced to hold investments that they regard unattractive, the fund allows for “unconstrained and flexible” asset allocation. And it’s that flexibility which allows them to “add value by rotating asset allocation”, increasing the exposure of those offering better returns and reducing or selling those that are less attractively valued. This also enables them to provide some downside protection in times of stress.

The fund’s approach is to seek fundamentally attractive long-term investments through exposure to a wide variety of products, as, while the attractiveness of an asset may vary depending on the moment of the market cycle, the attraction of diversification “persists.”

With this in mind, the management company uses five-year return and risk estimates, they then refine them with the fund’s specific holdings and, finally, combine them with the volatility and correlation estimates.

All this incorporates qualitative judgement that includes capturing prospective risks and pragmatic issues that the process cannot incorporate (such as liquidity risk) and assessment of niche opportunities. “At the end of the process, we have a basic vision of where we believe the world is going, the implications for investment returns for the broad range of assets, and the indicative portfolios that result to achieve the fund’s objective,” says Nichols.

Their core belief is that there are several asset classes with attractive return prospects, but different return drivers, so that by combining them, returns can be more attractive than those of an isolated asset class. “It’s a robust approach in differing market conditions,” she adds before pointing out that a key aspect of this philosophy is the asset manager’s ability to “identify and access a broad range of asset classes in a liquid form.”

All in all, it’s a multi-asset solution for long-term investors looking to obtain a high, but sustainable, annual return combined with capital growth. The objective is to obtain volatility well below that of equities and a return of 4.5% per annum, which was reached in 2018.

The portfolio is fully global, but they are currently finding opportunities in emerging market bonds in local currency, mainly due to the attractive nominal and real yields they offer compared to developed countries. This is supported by cheap valuations of currencies and “decent” underlying fundamentals.

According to Nichols, the overall economic outlook for emerging markets is positive, as most are growing at a solid although unspectacular pace and inflation is under control, which supports investors’ optimism. She maintains that one of the risks is that the Chinese economy “will slow down significantly in the coming years, which would generate stress for those emerging governments which are more China-exposed”.

Another potential source of risk is, in his opinion, Donald Trump’s administration and economic policy, due to both possible protectionist measures and the fact that his fiscal and migratory policies may result in a stronger dollar, which would lead to a depreciation of the emerging currency.

Monica Mavignier and Alessandro Merjam Join HSBC in Miami

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Monica Mavignier and Alessandro Merjam Join HSBC in Miami
Alessandro Merjam, photo Linkedin. Monica Mavignier and Alessandro Merjam Join HSBC in Miami

HSBC Private Banking continues to strengthen its team serving Latin American clients from the United States. As confirmed to Funds Society, Monica Mavignier and Alessandro Merjam have joined the team led by George Moscoso.

“We are strongly committed to our clients based in Brazil, one of our four core markets in Latin America. As a key part of our growth strategy, we are investing in this team and are excited to welcome Alessandro Merjam and Monica Mavignier. We are focused on adding talent and building the best team to serve ultra-high net worth individuals and family offices based in Brazil.”

Moscoso, who last April became the leader of HSBC Private Banking for Latin America and the Southeast of the US, is tasked with growing the bank in LatAm, focusing its efforts in their four main markets: Brazil, Mexico, Argentina and Chile, as well as the southeastern United States.

Since his appointment, he has hired Samir Ahmad to serve Mexican clients from the New York office, as well as Mavignier and Merjam to serve Brazilian clients from Miami.

According to Joe Abruzzo, Regional Head of HSBC Global Private Banking, Americas: “We have been investing in professionals with the unique talent to serve ultra-high net worth families from our core Latin American markets. Samir complements this team well and is a good example of the talent we will continue to add.”

Merjam comes from Itaú Private Bank in Miami and has more than 20 years of experience in asset management. Mavignier worked for a month at Morgan Stanley before joining HSBC, previously she was with Wells Fargo and has more than 10 years of experience in the asset management industry. Ahmad who before joining HSBC was at JPMorgan has more than 22 years of private banking and wealth management experience.

Katch Investment Group: A Rising Private Debt Boutique

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In the 10 years following the global financial crisis, the liquidity injections of major central banks have inflated traditional asset classes, particularly in the fixed income markets, thus decreasing the profitability of investors. Additionally, new regulations have reduced the willingness and ability of banks to lend to smaller businesses.

In response to those trends, Katch Investment Group, -a dynamic asset management boutique offering innovative tailor-made investment solutions-, focuses on short-term lending and financing opportunities within the private debt universe. In a constantly changing and challenging financial market environment, Katch Investment specializes in areas where capital supply is scarce that offer relatively high and stable returns for investors.

Who is Katch Investment Group?

The group combines in- depth financial market knowhow, asset management experience and strong analytical skills, with a deep understanding of the needs and tastes of private investors, particularly in Latin America. The group focuses on global opportunities, without any restriction, providing greater diversification and allowing greater potential to offer high returns.

The group is owned and managed by Laurent Jeanmart, Chairman, Stephane Prigent, Chief Executive Officer, and Pascal Rohner, Chief Investment Officer. All three hold the Chartered Financial Analyst accreditation, considered one of the most respected credentials within the financial industry.

As the chairman of the group, Laurent is responsible for the sourcing of new ideas, new business initiatives, due diligence of asset managers and the creation of strategic partnerships across the globe. Laurent is based in London, one of the most important financial centers in the world. He has more than 20 years of investment experience in alternative asset management. Laurent’s previous experiences include responsibilities at Fidelis Insurance Holdings Ltd., a London and Bermuda based insurance company where he was Group Chief Investment Officer managing $1.5 billion of assets. Previously, he was Global Head of Investment at Platinum Capital Management Ltd., a global asset management platform, where his responsibilities included overseeing the firm’s actively managed funds (hedge funds, equities, volatility, and commodities).

Stephane is the CEO of the group and therefore responsible for all day-to-day operations and the distribution. He has more than 20 years of experience in asset management in several locations around the world: Paris, Boston, NYC, London, and Panama City. He has worked in several banks, such as BNP Paribas, Lehman Brothers, State Street Capital, and Credit Andorra. His focus has been on the construction and management of portfolios for clients with a focus on alternative investments. In his previous experience at State Street London, Stephane was a Managing Director in his Global Head of Equity Sales Research position. He was a member of the European executive committee and oversaw 25 people located in New York City, London, and Hong Kong.

Finally, as the Chief Investment Officer, Pascal is responsible for the investment strategy, portfolio management, marketing and investment advisory for financial intermediaries. Pascal has more than 16 years of experience in financial market research, portfolio management, and investment advisory. He worked several years as a financial analyst, strategist and investment advisor for Credit Suisse in Zurich, New York and Panama. Before joining Katch Investment Group, he was the Chief Investment Officer of Credit Andorra and its Multi Family Office, Private Investment Management in Panama.

Pascal highlighted: “I have been working with private clients and advisors in Latina America for the last 7 years. Latin Americans tend to have a very conservative investment approach for their family savings, with a focus on wealth preservation and liquidity. However, they tend to take too much risk within their fixed income portfolios, because safe bonds don’t pay enough to cover inflation and the bankers’ commissions. And maybe they do not have enough time to analyze alternative solutions”.

“Speaking to institutional and private clients in the region, we noticed that there is a huge, unmet demand for relatively safe fixed income alternatives. That’s why we started to explore the whole investment universe to find conservative investment opportunities that can provide liquidity, income and stable returns, that are not correlated to traditional asset classes,” he added.

The backdrop

The investment environment is challenging around the globe, not only in Latin America. Equities are reaching the final phase of the bull market that is characterized by high volatility on the back of trade war and recession fears. And the safer fixed income areas, such as US Treasuries offer protection but little value after the recent drop in yields. Therefore, many investors and advisors have started to focus more on alternative asset classes, an area that has long been little explored by private investors, especially in Latin America.

The problem is that many alternative assets are structurally unattractive. Commercial Real Estate is challenged by a strong trend towards online shopping and the rise of the “sharing” economy with big disruptions coming from innovative companies such as Amazon and Airbnb. Commodities are negatively affected by the trends towards alternative sources of energy, car sharing and China’s transformation from an export- and infrastructure-driven economy towards high-tech and domestic consumption. Finally, many hedge funds still suffer from the lack of transparency, the high complexity and image problems due to investors’ bad experiences in the past. Also, the 7% drop of the HFRI Hedge Fund Index in 2018 illustrates that many hedge funds remain highly correlated to other liquid assets, such as bonds and equities that had a very bad performance too last year.

The good news is that there is a new, emerging asset class that offers the most attractive risk/reward profile for investors, that is called Private Debt. The asset class started to flourish after the Great Financial Crisis. New regulations have reduced the banks’ desire and capability to lend to the real economy, especially to smaller businesses. Instead, banks helped to inflate the government bond market in their effort to accumulate reserves and strengthen their capital base.

The banks’ retreat from the loan market has left a gap that private institutions, such as private equity firms and other asset managers, have been eager to bridge. They have filled the lending vacuum to provide crucial financing to the real economy – and particularly to small and medium-sized enterprises, the backbone of our economies. Newly created investment vehicles have attracted substantial interest from institutional investors hungry for yield.

Following the financial crisis, the massive monetary stimulus has inflated the price of liquid assets, especially in fixed income markets, depressing yields for investors. At the same time, the lack of capital provided to smaller companies has kept yields for smaller loans at elevated levels. Typically, private loans pay interest rates between 5% and 15% without leverage, based upon a floating base rate (LIBOR) with very low market volatility (standard deviations below 2%). In addition, strong collaterals, personal guarantees, and relatively low nominal amounts favor low delinquency.

In summary, private lending funds generate attractive and stable returns for investors, with low volatility and low correlation to traditional asset classes. Katch Investment Group identified these trends and decided to launch open-ended investment vehicles that invest in short-term lending and financing opportunities.