Foto cedida. In an Economic Slowdown, Improving the Credit Quality of Fixed Income Portfolios is Key
The pace of global growth is slowing and the financial community is divided between those who believe that it is the beginning of a recession and those who do not. Regardless of where you stand, for Malie Conway CIO Global Fixed Income of Allianz GI, the strategy to follow for fixed income portfolios at this time of uncertainty is clear: improve the credit quality of the portfolio, avoid idiosyncratic risk and be positioned at the 3-7 year range within the curve.
“In an environment where there is little visibility on the global outlook, you want as much visibility in the portfolio as possible” states Conway.
Risk is not rewarded
Thus, Conway explains that, in a global scenario of economic slowdown, “highly leveraged companies will not do well. If we look at the risk reward and risk adjusted return in leveraged loans or CCC companies, we really see that they do not compensate. So we are underweight in highly leveraged companies. Our theme is to upgrade the credit quality of our portfolio.”
Conway also stresses the importance of avoiding idiosyncratic risk and for this reason highlights the importance of robust credit analysis that identifies which sectors and industries do well in an environment of economic slowdown.
Positioning in the curve
The second decision to be made is positioning within the credit curve that is currently flat. “In our view there is no inflation; inflationary pressures are cyclical not structural in nature, so that keeps the long-end quite low and this is why the curve has flattened over the last year. In the end, we believe the economic fundamentals will win – growth has peaked and inflation is under control. We do not see any reason for the long-end to sell off, “states Conway.
However, they do not believe that investors are compensated for lending to companies within the credit curve, so they consider the 3-7 year range (belly of the curve) as the most interesting since “you get good carry from credit and you get very good yield relative to the wings of the curve”.
Allianz GI team believes that the Fed has stopped increasing interest rates at the right time compared to those who believe that the Fed is too late and, therefore, expect a more gradual slowdown, with growth below trend but they do not see an economic recession for the time being.
“But even so, if we are wrong and rates go down, the 3-7 year will do well, not as well as long-dated bonds, but still do very well. And if you have the highest credit quality, you will suffer a bit of a sell off, but not as much as lower-rated bonds, “says Conway.
Credit market outlook
As for the recent evolution of the corporate bond market, Conway acknowledges that the credit market was very expensive during most of 2018, “at best it was fair value,” adds Conway.
“In fact, we have the lowest beta to credit risk in our portfolio since March 2009. We are pretty neutral with respect to the market, with quite significant relative value views.” Specifically, she mentions that she prefers US financials versus European, short-term BB assets versus long-term BBBs and emerging market sovereign debt against peripheral Europe. “We are trying not to take directional trades, but we are focusing on as much relative value trades as possible; we think that directionality and beta is not where the most added value will be in 2019” concludes the expert.
Interest in FRN assets
Conway supervises a fund that invests in FRN assets that after just one year of life has already accumulated $540 million assets under management. Moreover, Conway emphasizes that since the Fed put on hold the prospect of further interest rate rises, the fund has raised $150 million. In Conway’s view, this is due to the fact that there are investors who are de-risking their portfolios: “some investors are re-risking, but others are saying this is a window of opportunity”. Thus, the manager explains that this fund is an excellent alternative to cash. From her point of view, if you are accumulating cash there are two options: “Either you buy money market funds at 2-2.5% which is good capital preservation or you invest in high yield or leveraged loans in which I think the market is over stretched and you are taking a lot of credit risk. Leveraged loans will yield 6-7% and this fund over time will yield 4% “, ” if you are not sure if there is going to be a recession, but are worried about the credit cycle, valuations and credit quality and do not want to give up too much yield, this is really a unique product, “concludes Conway.
At this point in the economic cycle and the market cycle, in the opinion of Robert M. Almeida, global investment strategist at MFS Investment Management, it is necessary to shift from an emphasis on performance to an emphasis on risk. According to the manager, in his presentation during the 2019 MFS Americas Advisor Investment Forum in Miami, the economic cycle of the last ten years has been characterized by being longer in length, but lower than the average growth magnitude. While the market cycle has been markedly higher than the average in magnitude of growth and certainly, it has also been longer in duration. These two premises are the starting point for understanding market expectations and valuations, as well as where to find alpha opportunities today.
Market Expectations
Universally, in all market sectors, a massive transition is being seen as technology is weakening the value proposition of companies at a hitherto unknown pace. This, Almeida said, is important because when a company stops producing or providing services in a competitive way, margins erode and stock prices tend to follow.
“From my point of view, there is only one important issue when valuing the price of an asset in the long term: free cash flows. And what do these cash flows depend on? It depends on the number of items and the price at which they are sold minus the cost of production. If a company cannot sell more items or the price of these items is decreasing because a competitor is doing something similar or cheaper, then current margin and free cash flow levels will erode. We try to avoid those companies that we think are overvalued, but not simply from the standpoint that market prices have risen by 300% in the last 10 years but because they have ceased to be useful to society and investor expectations of cash flows are too high. These companies have become dinosaurs, melting icebergs or cubes,” explained Almeida.
“By avoiding companies that suffer from the innovator’s dilemma, that close their eyes to the potential of technology and disruption, we create performance in the portfolio. In our industry we tend to think about creating alpha, but over the years, I believe that success in active management, like most aspects of life, comes not because of what you’ve done, but because of the mistakes you’ve been able to avoid,” he adds.
The manager then explained that we are facing a regime change, from a period with above-average returns driven by above-average margins, to a period with below-average returns, driven in turn by below-average margins. This translates into lower returns vs recent years or long-term averages.
In order to assess performance expectations over the next 10 years, MFS Investment Management uses an average reversal model with variables such as sales, pricing power, margins and valuations. In this model, the balanced global portfolio, with 60% equity and 40% fixed income allocation, yields an unsatisfactory return of 4%. This figure is difficult to explain for the pension plan community, advisors and trustees that make up the asset management industry.
The Level of Valuations
When examining the Shiller P/E ratio based on the average inflation-adjusted profits of the last 10 years, Almeida acknowledged that valuations do not usually predict returns, especially if the previous 12 months or 12 months ahead are taken into account, their level of prediction is almost nil.
However, an examination of the US Shiller P/E ratio shows that, at levels close to 30 times, this is the third highest Shiller ratio in US history. According to Almeida, this is due to the fact that, during this cycle, yields have exceeded the average, because margins have been above the average, but profit growth has remained below.
“To get out of the global financial crisis, companies laid off workers and refinanced their debt at lower interest rates, then saw the rehabilitation of the market structure. Then investment in fixed assets, consumer spending and the GDP of the economy should have improved, but they did not. I could talk about macroeconomic and political motives, but in my opinion, there is a simpler explanation, dematerialization,” Almeida explained.
The Effects of Dematerialization
As Almeida argued, advances in technology have allowed the world the opportunity to rent rather than own. “Companies that needed to increase their technological infrastructure to expand their business have rented it from Amazon, Google, Microsoft or Alibaba, instead of buying it. Instead of buying music, consumers have rented it from Spotify. Faced with the need to buy a car, consumers have used Uber’s services. And the same when buying a film, that consumers have chosen to rent it on Netflix. The shift from a property economy to a rental economy has had two fundamental consequences. The first is deflation of pricing power and the second has made the price of goods less expensive. From an accounting point of view it has been a shift from capital expenditures to operating expenses,” he added.
The asset management industry is reaching maturity. It currently manages close to 100 trillion dollars in investable assets, with a much higher positioning in risk assets than what was necessary a few years ago in order to obtain similar returns. 80% of these assets are managed by institutional investors: Sovereign funds, pension funds and mutual funds, while this percentage was only 35% 25 years ago. In addition, the asset management chain is now much longer, the proportion of investors purchasing direct stock is much smaller than in the past. These are some of the conclusions that Carol Geremia, President of MFS Investment Management and Head of the company’s Global Distribution Division, shared during the 2019 MFS Americas Advisor Investment Forum in Miami. She also spoke about the need to align asset managers’ and advisors’ interests with those of the investors, and about the dangers of a short-term mindset.
The Misalignment
The business is now highly intermediated by asset managers, advisors, consultants or institutional investors, but despite the professionalization of the industry, investors feel that there is a disconnect between their interests and those of their asset managers.
“I’m in contact with many investors from different markets at global level, from the large pension funds to sovereign funds, and with advisors. The market has matured and has become a global market which, as we hear daily on the news, is certainly facing a large number of threats. But I believe this is where we are losing sight of something important. Firstly, investors are not syncing with active management. The debate between passive and active management is certainly not very relevant and opportunities to talk with investors about the misalignment of interests are being lost. We have lost our bearings. What’s really important is the result in the long term, and yet, we have only measured the data in the short term, giving a false sense of comfort, when in reality, risks are increasing and the gap with responsible investment is widening,” explained Geremia.
“We need to change our tune and stop dealing independently with the importance of ESG factors and sustainability. It’s all connected, and linked to the future of investment management,” she added.
In that regard, Geremia argued that many opportunities are being lost due to a lack of communication and dialogue to avoid misalignment. But how did that happen? There are many different reasons and many parts of the industry are involved, starting with the market’s low interest rates. But perhaps the most obvious example of disconnection is the lack of alignment between asset managers’ time horizon and that of investors.
“Measured from peak to peak or valley to valley, the industry usually defines a complete market cycle as 3 or 5 years, but in fact, we can state that, after conducting several studies, it has been observed that this estimate is actually half of a market cycle. If we look at the last 100 years, a complete market cycle is defined in a range of between 7 and 10 years. Most investors usually say that a cycle is set at between 7 and 10 years, but their tolerance to below-index returns is set at 3 years.”
The dangers of a short-term mindset
In Carol Geremia’s opinion, the short-termism adopted by the markets is a terrifying issue for investors. In the past, an annual yield of around 7.5% could be obtained with a balanced fund. Currently, investors must take 7 times the same amount of risk in order to obtain that return, not to mention the complexity of the vehicles needed to obtain it.
“Because interest rates have been at very low levels for a long time, all investors have sought a higher return on riskier assets. But we have forgotten that when you take a risk, the best way to manage it is by understanding its time horizon. In conversations with clients, we talk about the need to have a long-term mindset, but nobody defines it correctly.”
Asset allocation
In the current environment where all players are undertaking more risk and adopting greater complexity in their investments, having a conversation with investors about the allocation of their assets is not an easy task. Thus, Geremia presented four baskets of risk. The first is the “bulk” beta basket, which includes the ETFs, the indexed funds, and factor investment funds, that is, passive investment. A second basket contains liquid alpha vehicles, which includes mutual funds and traditional active management. A third, with alpha illiquid vehicles, including private equity, investment in infrastructure, real estate and hedge funds. Finally, a fourth basket contains the ESG investment, with long-term responsible investment vehicles.
“Most investors tell me that the reason why they opt for passive versus active investment, apart from the price of commissions, is that they are not allowed the sufficient time required in order to obtain a good performance in the markets,” she said.
On the other hand, and in view of increasing diversification, investment in alternative assets has also increased enormously, but the expert from MFS reminds us to bear in mind that alternative assets are an illiquid alpha.
“Alternative assets are a way to extend the investment horizon, renouncing liquidity in return, which is why there is a yield premium. If these points are not discussed with investors there will be huge disappointment in the future, both for having renounced the superior returns of traditional active management, and for having underestimated the importance of liquidity,” she explained.
“Finally, it’s essential to have a conversation about sustainable investment with institutional investors. Clients will stop asking how much money has been obtained to ask how it has been obtained,” she concluded.
. Compensación, Propiedad y Organización, las razones principales tras las migraciones desde las wirehouses al modelo independiente
Bolton Global Capital feels confident that the migration of FA to Regionals and Independents will continue. Both their assets under management and revenue have been growing steadily while the market share of the four major Wire-houses has seen important decreases over the last 10 years. Ray Grenier, CEO of Bolton Global pointed out at the firm’s annual advisor conference in Miami that investors are more and more looking at the independent business model to the point that independent’s AUM are almost the same as those of major wire-houses.
During the conference, Greiner mentioned that Compensation, Ownership, and Organization are the main reasons why wirehouse migrations will continue. Given Bolton’s strong value proposition with a premium brand, customized solutions, global capabilities and higher compensation models, he is certain more and more FA will join their model where “everyday we have to win your business”.
The conference was held at the Four Seasons Hotel in Miami, where Bolton will be moving its Miami headquarters within in the next 12 months. The event included close to 100 advisor attendees with representation from Uruguay, Argentina, Brazil, Panama, New York, Florida, Texas, Massachusetts and Maine. Guests were treated to a lively economics discussion during the Portfolio Strategist Panel, which featured Claus te Wildt, Senior VP, Capital Markets Strategy, Fidelity Institutional Asset Management, Paresh Upadhyaya, Director of Currency Strategy, Amundi/Pioneer, Antonio Miranda, Head of Asset Management and CIO, Compass Group, Investec, Carlos Asilis, Co-Founder and CIO, Glovista Investments and moderator Oscar Isoba, Senior Vice President and Regional Head, Nuveen Investments.
Later in the afternoon, Sergio Alvarez-Mena, Partner, Jones Day outlined the regulatory, compliance and tax landscape. Matt Beals, Chief Operating Officer, Kathy Sargent, Managing Director of Transitions and Business Development at Bolton, and Sean Power, Customer Success Manager, Agreement Express reviewed several new products and technologies being rolled out by Bolton. These include an end-to-end e-signature and document management system, Envestnet’s SMA platform and Latam ConsultUs Research.
The evening ended with cocktails and hors d’oeuvres, followed by an elegant dinner at the Four Seasons.
On Friday, attendees enjoyed a breakfast event followed by technical sessions with Bolton Staff and the conference’s many sponsors.
Foto cedidaImage of the facilities at Streamsong Resort and Golf, in Florida, where the sixth edition of the Investments & Golf Summit organized by Funds Society was held. / Courtesy photo / Courtesy photo . Funds Society Investments & Golf Summit: Ideas on Global and Multi-Asset Fixed Income as a Source of Income
The sixth edition of the Investments & Golf Summit organized by Funds Society, and held at the Streamsong Resort and Golf, in Florida, left us with the best proposals of nine asset management companies in the field of equities, structured products and real estate, and also in fixed income and multi-asset funds.
Janus Henderson, RWC Partners, AXA IM, Thornburg IM, Participant Capital, Amundi, M&G, Allianz Global Investors and TwentyFour AM (Vontobel AM) were the participating management companies in an event which brought together over 50 fund selectors from the US Offshore market.
In the area of fixed income, Thornburg Investment Management and TwentyFour (Vontobel AM) took center stage. Danan Kirby, CFA, Portfolio Specialist at Thornburg Investment Management, spoke about the challenges faced by that particular asset and presented a flexible and multisector debt strategy. Among these challenges is the difficulty of predicting interest rates in an environment in which consensus seems to agree that rates are at very low levels and the cycle of increases has been “incredibly” slow, but in which investors should, nevertheless, avoid making comparisons with the past, since the path of these increases cannot be known. And experience shows that the market has been wrong many times. Also, among the challenges of investing in debt, the credit spreads, both in investment grade and in high yield, don’t compensate for risks taken and, in addition, they have improved after widening at first, following the Fed’s halt on the interest rate hikes cycle, due to low growth. What is real and what is not? The asset manager wonders.
Another challenge in fixed income is differentiation, since not all the names with a BBB rating, which makes up a large part of the investment grade universe, are the same: “Credits within the most defensive sectors with lower leverage should be better positioned while we approach the final phases of the credit cycle,” says the asset manager. And, as if that weren’t enough, global investors face a changing scenario in which they are forced to take more interest rate risks in so far as yields remain low. In this challenging environment, the asset manager proposes solutions: a flexible strategy with a relative value perspective to look for opportunities with a good risk / reward basis.
And this is the field of the Thornburg Strategic Income fund, focused on obtaining total returns through a portfolio which has the liberty to invest globally in all fixed income sectors, and which seeks a strong risk adjusted return by investing in the best relative value opportunities without benchmark restrictions. “When managing a scenario with volatility, investors need to incorporate a broader range of strategies that offer flexibility. A more complex global scenario and a greater frequency of risk off-risk on sentiment will create opportunities for flexible investors,” he adds. The asset manager explains that they are flexible and that they invest in bonds that offer attractive relative value as compared to the universe, have good fundamentals, and can add diversified exposure to risk. Currently, they invest in a variety of segments such as bank loans, common stocks, preferred stocks, foreign government bonds, domestic US treasury bonds, municipal bonds, investment grade and high yield (the highest positions) corporate debt, CMO, CMBS, Mortgage-pass through, agency bonds, ABS and liquidity.
The asset manager concludes that the market’s dynamic nature requires both experience and flexibility, and that a process of relative value provides opportunities to generate alpha, in all scenarios. “We only take risk where we are paid for it,” adds the expert, who explains that they do not use derivatives, use a bottom-up process, and analyze the capital structure of the companies in which they invest very carefully.
Global Fixed Income for Obtaining Income
TwentyFour AM, a boutique firm of the Vontobel AM group specializing in fixed income and working with Unicorn in the US Offshore market, also presented a global and multisector fixed income strategy for obtaining income (TwentyFour Strategic Income Strategy), the main focus of which is precisely to provide such income through the positive effect of diversification and a truly global investment. The idea is to provide an attractive level of income along with the opportunity for capital appreciation, although capital preservation is key. It’s benchmark agnostic, has high conviction (less than 200 individual positions) and seeks global relative value in the portfolio, with active risk management (duration and credit, but taking out currency) and that adds value with both asset selection, as well as with top-down proposals.
“Fixed income can work well with an active management perspective. If you like corporate bonds, there is a lot to choose from and through analysis you can find out where it’s most attractive to invest. With fixed income the benefits of active management can be proven,” explains David Norris, Head of the company’s US Credit team. Currently, around 30% of the portfolio has exposure to public debt (especially US debt, since it offers protection in a risk-off environment and also a decent return in an environment in which the macro vision indicates interest rate stability, with maturities of about five years) while the remaining 70% is in credit risk, mostly outside the US, with a lot of exposure in Europe and the United Kingdom (with names that pay more in the latter case due to the Brexit issue), but with shorter maturities, less than two years. “The cycle is getting old and although there is still value in credit it’s not like before, so we prefer not to take too much risk and therefore opt for short terms,” explains the asset manager. “It’s a reasonable environment for credit but we are cautious, and opportunities have been reduced compared to previous moments of the cycle,” he adds.
Banks weigh around a quarter of the portfolio, mainly due to the opportunities that the asset manager sees in Europe, with yields close to 7% with maturities of less than two years and a rating above BB. “The risk profile of banks is very attractive,” he says, and speaks of the large Spanish banks and some British that offer great value because they are not exposed to problem areas like Italy yet benefit from the premium provided by the Brexit issue. If analyzed with a global perspective, there are many areas that are attractive” he adds. As for emerging debt, they have some exposure, but this was reduced after the rally in recent months and only hold hard currency credit, since it’s in this segment that they show the greatest concerns. Also, as a risk, there is the possibility that commercial US banks do the tightening that the Fed doesn’t, causing the end of the credit cycle, although, theoretically, they don’t see any end of cycle signs in the US, nor of recession. In any case, they are vigilant, and the fund frequently shifts sectoral allocation if market prospects change.
Multi-assets: Winning Strategies
Also with a vision to generating income, but with a multi-asset perspective, Amundi Pioneer presented a solution for solving the income problem. “Traditional models of asset allocation oriented towards fixed income and equities can no longer produce the returns that investors need. Given the intervention of central banks, these figures will not return to historical levels. You have to find alternatives to debt in other assets in order to obtain more reasonable returns,” advised Howard Weiss, Portfolio Manager at Amundi Pioneer.
During the presentation he pointed out the attractiveness of Amundi Funds II-Pioneer Income Opportunities, originating in the US fund launched in 2012 aimed at obtaining income from a multi-asset perspective, as opposed to strategies, which tried to obtain income by focusing only on fixed income, because at that time it made sense (high-yield offered returns of 7%). But that compensation from the past has now disappeared: Over time, the spreads have been compressed, due to the continued interventions of central banks. Due to this lack of compensation, they have reduced their exposure to high yield in their strategy from over 44% in 2016, to around 13%. Equities offer a better value proposition for obtaining income: “We see conditions for the continuity of the economic expansion, for a longer cycle.” In order to create income from equities, and beyond dividends (in the case of these shares, they focus on the sustainability of the dividend, rather than on it’s being very high), they also opt for strategies such as equity linked notes. “Dividend strategies sometimes produce losses because cash flows are focused there, and the business deteriorates. We prefer to identify companies in difficulties, but that are in the process of rationalizing,” says the asset manager.
The strategy’s differential factor is the way in which the asset classes in which it invests are defined: At present, there are mortgage-backed securities, bank loans, emerging debt, US and international high yield, equity linked notes, bonds linked to events , MLPs, REITs (in Singapore and Europe…), emerging and developed world stock markets and hedging.
The objective of the strategy is to produce returns of around 4% and an appreciation of capital of 2%, so that annualized returns can reach 6%, although, even though it offers yearly income, capital appreciation will depend on the environment. “We only distribute what we produce, we will not consume capital,” says the asset manager.
Behavioral Finances
In multi-assets, M&G presented a strategy with a very differentiated approach: “There are two factors that move the market, fundamentals and economic beliefs, and these latter perceptions tend to change very quickly. In fact, sometimes the fundamentals don’t change, but the economic beliefs do,” explains Christophe Machu, Convertibles and Multi-Assets manager at the company. “Most of the time investors try to see where the benefits are going and try to make projections, but for this, you need better tools than those of your competitors and it’s difficult and arrogant to predict this data. That is why we focus much more on economic beliefs and their changes, that is, on investors’ perception,” he adds. Following these parameters, at the end of last year, for example, when the discussion wasn’t about whether a recession was coming or not (it will obviously come within the next two years, says the asset manager), but when it would come, they decided to take a contrarian vision and bet on shares, increasing their position, not because of the fundamentals but because of the change in the beliefs of the investors: it was a very good entry point, buying both US and foreign shares.
Thus, the strategy combines a framework of valuations with behavioral finances (episodes, events…), with tactical hedging, to establish its asset allocation and exploit irrational behaviors. As an example of the latter, explains the manager, volatility spikes tend to create opportunities for investment, helping long-term returns. One episode, he explains, has three characteristics: a rapid action on price, focusing on a single story, and presenting a price movement inconsistent with information flows: “It’s an opportunity where prices move for non-fundamental reasons,” explains the asset manager. In this way, without making predictions, and recognizing the importance of emotions, the strategy has managed to work well in different scenarios and market cycles: In optimism from 2000 to 2003, in the technology bubble, during which they cut back on equities and bet on bonds, in the subsequent crisis, and in the next period of compression of yields and recovery, in which they bet and benefited from the rally in all the assets… “We are now at a stage of compression in the risk premium of the shares, which means that the gap between the yield of the shares and the bonds is too wide,” says the manager.
With respect to their market vision, taking advantage of the pessimism of the end of last year, they increased equities, although they have subsequently reduced positions, due to the normalization of investor sentiment. “The last big change now has been the Fed, which has paralyzed rate hikes. If real rates remain at zero levels in the US, it will be good for emerging bonds, which have not moved much yet, and for stocks, especially outside the US. (in Asia, Japan and Europe). From a tactical perspective it is not as good as in December but from a strategic perspective it is.
The M&G Dynamic Allocation fund has an exposure of 41.8% to global equities, which means an overweight position, although it has been reduced and is centered outside the US. In fixed income, the bet focuses on emerging debt and is negative on public debt. “We prefer to take risk in stocks on credit,” assures the manager, who remembers that they are not stock pickers, and that they can make changes in asset allocation very quickly with index futures.
Courtesy photo. Amundi Pioneer: Trump Does Have a Path to Reelection
Donald Trump is facing a challenging re-election but is by no means out according to Paresh J. Upadhyaya from Amundi Pioneer.
Trump’s overall approval rating is stable, but at a net -11, is quite low. Meanwhile political betting sites are placing better odds in a democratic win. Despite all of that, Upadhyaya points out that there have been cases, like with Reagan in 83, where despite a negative nine point net approval rating, there was a win.
Moreover, he believes that “Trump’s low net approval rating does not mean loss, specially since there are many battleground states for 2020”. In his opinion, and considering that there are currently 10 states with less than 5 points difference, the bulk of the game will be decided in Arizona, Iowa, Wisconsin, Michigan and Pennsylvania.
“The most likely scenario is democratic house, republican senate” says Upadhyaya who thinks democrats have early edge to retaining House while GOP in Senate.
Path to reelection
According to a Pew Poll, the issues likely to dominate voter’s agendas in 2020 will be economy and healthcare, followed by education, while global trade comes in last.
“With a strong economy and low unemployment, Trump does have a path to reelection,” he mentions adding that using the Abramowitz Time for Change model with today’s numbers instead of waiting for Q2 2020, Trump would get 49.9% of the popular vote. Currently, “all the measures look fenomenal… I do not expect a recession next year but what the yield curve is telling us is that the economy will slow down.” However, “Trumps approval rating for jobs and economy is rock solid.“ So as long as the economy remains growing and jobs continue at good levels Upadhyaya believes he has a good chance to remain in power.
Without an opposition candidate in place yet, Upadhyaya also thinks that Trump will look to position himself as “the lesser of two evils. The election will become a race to the bottom even quicker than 2016.” He concludes.
Foto cedidaPanoramic view of the facilities at Streamsong Resort and Golf, in Florida, where the sixth edition of the Investments & Golf Summit organized by the Funds Society is being held. / Courtesy Photo. Funds Society's Investments & Golf Summit: Some Proposals for Investing in the Late Stage of the Cycle
Three equity strategies, two fixed income, two multi-asset, structured products, and real estate investments, completed the proposals of the nine asset managers participating in the sixth edition of the Investments & Golf Summit organized by Funds Society, which was held in the Streamsong Resort and Golf, in Florida, and was attended by over 50 US Offshore market fund selection professionals.
At the Investment Day, delegates had the opportunity to find out the visions of Janus Henderson, RWC Partners, AXA IM, Thornburg IM, Participant Capital, Amundi, M & G, Allianz Global Investors and TwentyFour AM (Vontobel AM), and their proposals and investment ideas to obtain returns in an environment marked by the threat of being close to the end of the cycle, although with uncertainties about when this time will come. In this article we inform you about five of those visions.
Precisely with the idea of increasing caution at a time when it is difficult to predict the end of the cycle, Janus Henderson presented its global equity strategy with a neutral market perspective, developed in the Janus Henderson Global Equity Market Neutral fund. Richard Brown, the entity’s Equity Team Manager, argued for the need to reduce risks while positioning oneself for enabling returns, in a late stage of an upward cycle of which its exact end cannot be predicted. “Neutral market structures can now be very useful in investors’ portfolios, at a time when, while we still don’t see a recession, there are some warning signs,” he said, presenting a strategy with a relatively short track record (from February 2017) but with good behavior and differentiation from its competition.
With regard to those warning signals that he observes, he indicated that we are only one month away from the greatest expansion in history and, once these levels have been reached, caution must be intensified, as well as the inversion of the curve, which helped to predict recessions in the past and now also provide a warning. China’s economic situation (with lower growth, higher debt and a reversal in its demography), or central banks’ policies, which have stopped normalization, and the thought of their lack of resources for fighting against the next potential crisis are some of the other red lights. But, despite all of the above, the investor cannot afford to be out of the market, when 2019 has been the S & P 500’s best start to the year of the post-crisis financial era, and bonds offer very low returns. So, according to the asset manager, part of the solution can be a neutral market strategy in equities, with low volatility – around 4% – and low correlation with the stock markets, the potential to create absolute returns and protection against falls in the turbulences and in which stock-picking strategies favor good fundamentals.
On their differentiation from the competition, Brown pointed out that the fund invests in 60-80 pair trades (ideas obtained through the proposals -both long and short- of different asset managers), with a strong diversification by geography (now the majority of the exposure is in North America and Europe, but without directional bets, that is, only because that’s where there are more winners and losers), themes, styles and sizes that helps to reduce the correlation with the market. “We can bet a stock against a sector or against an index, but most are stock versus stock,” he explains.
Risk management is embedded in the portfolio’s construction (so that each pair trade contributes to the risk equally) and has a gross exposure of around 250%, and 5% in net terms. Among the examples of their bets, the long on Balfour Beatty versus the short on Carillion (both UK construction firms); Palo Alto Networks versus FireEye (US cybersecurity companies) or Sabra Health Care against the short bet on Quality Care Properties (REITS).
Long-short in US stock market
RWC Partners, also with a long-short bet in equities, but this time in the US, and with a market exposure that has historically been around 20% (although it has more flexibility), presented the RWC US Absolute Alpha fund at the event, a fund which aims to offer investors a pure source of alpha, with a concentrated high conviction portfolio, “with real names, without ETFs or other structures, in the form of a traditional hedge fund and managed with a high conviction.” It’s a liquid and transparent structure of long-short US equities managed by a team exclusively focused on absolute return and that seeks to provide strong risk adjusted returns with significantly lower volatility than the S & P 500, and in which the selection of stocks by fundamentals determines the returns on both sides of the portfolio. Managers try to identify patterns of information that can be indicative of changes in the dynamics of a company or industry and actively manage the net and gross market exposure in order to protect capital and benefit from directional opportunities whenever possible.
Mike Corcell, the strategy’s manager for about 15 years, focuses on criteria such as valuations, returns and margins (ROIC above the cost of capital and strong cash generation in the long part and the opposite in the short), or on transparency (it invests in industries with regular data on its fundamentals and avoids leveraged financial companies with opaque balance sheets and health companies due to the regulatory issue) and favors industries with improvements in their pricing capacity or where supply and demand are below or above the historical patterns. “We try to obtain returns in the higher part of a digit, and we invest in traditional sectors such as consumption, industrial, technology and in large secular industries such as airlines. We have analyzed these areas for 15 years and obtained good returns; It may be boring, but we will not invest in something we don’t understand,” he explains.
Regarding the current market situation, he admits that, although he doesn’t see any signs of recession in the US, we are at a late stage in the economic cycle, so he expects the growth of profits and returns in shares to be more moderate, although he doesn’t see signs of inflation at a time when the Fed has stopped monetary normalization. “Despite the goldilocks scenario with monetary and fiscal stimuli, we are in a late phase of the cycle, after a very long economic and market expansion, and in general, we expect a somewhat harsher scenario, with higher valuations.” He explains that although opportunities can still be found, it’s harder to find ideas in some parts of the portfolio following the Fed’s halt, although he believes that, sooner or later, it will have to adjust its balance and raise rates, a situation that will allow alpha to be generated more easily and will enhance the differentiation between companies, something that has not happened in the last 10 years.
Thematic equity and digital disruption
Also committed to equity, but with a more thematic vision dissociated from the economic cycle and focused on the economy of the future and digital disruption, the AXA IM experts participated in the Funds Society event. Matthew Lovatt, Global Head of AXA IM’s Framlington Equities, presented the investment themes which they focus on to position themselves in a changing economy, and an investment model that adapts to the new times. “When we invest, our challenge is to analyze changes in the world, in people and in the way we use technology, something that happens very fast, which is why businesses must adapt as well, and that’s what we analyze, how companies react to change. And our investment models must also change,” he explains. Therefore, they do not worry about whether there is economic growth or how GDP evolves: “We aren’t worried about GDP, but about secular, long-term issues that happen independently of the cycle and which will even accelerate considerably in a potential recession,” like online consumption. “People live longer, have more demands, and have increased their wealth, changing their consumption patterns. Therefore, many things are changing, and that’s why the way we see the world has also changed;” hence the idea of creating products to capture this new growth.
On concrete issues, he pointed out the transition of societies (social mobility, basic needs and urbanization), aging and life changes (welfare, prevention, health technology…), connected consumption (e-commerce and fintech, software and the cloud, artificial intelligence…), automation (robotics, Internet of things, energy efficiency), and clean technologies (sustainable resources, clean energies…). “There are big issues that will have great effects on wealth, such as the changes of wealth in the world, in societies in transition like the Asian ones, where a great shift is taking place. We also live longer and have more time to consume and companies will have to think about how to reach these consumers. On the other hand, the impact of technology on consumption is dramatic, and also key to the implementation of this technology in industries, in automation… Clean technology is perhaps the most powerful change: how we capture energy, store it, and use it in, for example, electric vehicles, is key, because it changes the way we consume energy,” he adds.
On the other hand, they remain oblivious to investment themes of the “old economy”, which suffers from margin pressures, such as traditional manufacturing, the retail business, or the scarcity of resources, and which evolve worse in the markets than new economy themes. In fact, for this asset manager, even the traditional sectorial exposure is no longer relevant, and they analyze each sector under the criteria of one of their five investment themes, or of the old economy. “The biggest disruptive change will be in the financial sector’s old economy,” he says, for example in the insurers of large financial groups whose business will change. On the other hand, within the sector, he’s interested in business related to wealth management. The disruption will also be strong in the “old part” of the energy sector, he argues.
In this context, the management company has modified its investment process, adding a thematic filter and ranking companies for their exposure to the themes they are betting on; also with changes in its analysis structure (focusing on these themes and selecting the best ideas) and the construction of the portfolios, which normally include 40-60 names with a large exposure to the themes. The management company has several strategies focused on each of these themes (transition of societies, longevity, digital economy, fintech, robotech and clean economy), although its core strategy, which invests in these five trends, overweight on those that are consumption and aging connected, is AXA WF Framlington Evolving Trends. In the presentation, the asset manager also pointed out their digital economy strategy, based on the fact that 9% of retail sales are now produced online but that is just the beginning of a great trend that in fact offers much higher figures in countries such as China, United Kingdom, USA or India. Positions which stand out in that strategy are Zendesk or the Argentinian Globant.
Real estate: Projects in Miami
During the conference, there was also room for more alternative proposals, such as real estate, presented by Participant Capital, a subsidiary of RPC Holdings, with a 40 year track record and 2.5 billion dollars in real estate projects under management, which offers Individual investors and entities access to real estate projects under development directly from the developer at cost price. Claudio Izquierdo, Participant Capital’s Global Distribution Managing Director, presented future projects such as the Miami Worldcenter, in Downtown Miami, which includes hotel rooms, retail and residences, and is financed with equity, deposits and credits; Dania Beach, which includes studios for rent; or the Mimomar Lakes golf and beach club, with villas and condominiums. And he also talked about other recent ones like Paramount Miami Worldcenter, Paramount Fort Lauderdale, Paramount Bay or Estero Oaks. The expert projects a very positive outlook on the opportunities offered by a city like Miami, with over 100 million visitors and 12.5 million hotel rooms sold per year, second only to New York and Honolulu, that is, the third most successful US city.
For its development, the firm has institutional partners, institutional and traditional lenders, and offers investors (through different formats such as international funds in Cayman, ETPs listed in Vienna or US structures) annualized returns of between 14% and 16%, the result of a 7% dividend or coupon during construction and an additional part after the subsequent sale or rent.
Structured products or how to boost alpha
One of the day’s most innovative proposals came from Allianz Global Investors, an active management company working with different asset classes, which is growing strongly, especially in the alternative field, and which has just opened an office in Miami. Greg Tournant, CIO US Structured Products and Portfolio Manager at Allianz GI presented his strategy Allianz GI Structured Return, an alpha generator which can work together with different beta strategies (fixed income, equities, absolute return…). The investment philosophy has three objectives: to outperform the market under normal conditions, hedge against declines, and navigate within the widest possible range of stock exchange scenarios. The portfolio, UCITS with daily liquidity, pursues an objective of annual outperformance of 500 basis points and uses listed options (never OTC) as instruments on equity and volatility indices (S & P 500, Russell 2000, Nasdaq 100, VXX and VIX) , with short and long positions, with an expected correlation with stocks and bonds of 0.3 or less. In fact, it has a risk profile similar to that of fixed income, but without exposure to credit or duration. “The goal is to make money regardless of market conditions. We do not try to find out the market’s direction or its volatility,” explains Tournant, who adds the importance of risk management: “We are, primarily, risk managers, followed by returns.”
The strategy, which has a commission structure of 0-30% (zero management, and 30% on profitability, based entirely on the success achieved), except in some UCITS classes, bases its investment process on statistical analysis (with a historical analysis of the price movements of equity indices in a certain environment of volatility), but it’s not a 100% quantitative process: it is in two thirds, while for the rest the manager makes discretionary adjustments. Further on, three types of positions are constructed: range bound spreads, with short volatile positions designed to generate returns under normal market conditions; directional spreads, with long and short volatile positions to generate returns when equity indices rise or fall more than normal over a period of several weeks; and hedging positions, with long proposals in volatility, to protect the portfolio in the event of a market crash.
As explained by the portfolio manager, the best scenario for this portfolio is one of high volatility, although the idea is that it works in environments of all kinds and has low correlation with other assets in periods lasting several months, although short-term market distortions can cause correlations with equities. The greatest risk is related to market movements and volatility and is a scenario of low volatility and very rapid market movements. “The relationship between the market path and volatility is important for this strategy,” says Tournant.
Leading wealth advisors Steven Tenney, Joseph Powers, Helen Andreoli and Jack Piper announced that they have partnered with Dynasty Financial Partners to form an independent wealth management firm called Great Diamond Partners. All four advisors had previously worked at UBS.
Based in Portland, Maine, the firm has a total staff of seven professionals, including four financial advisors. Joining from UBS are the following professionals:
Mr. Tenney is the CEO and Founding Partner of Great Diamond Partners. Mr. Tenney has worked at UBS since 1993, most recently as Senior Vice President and Senior Portfolio Manager. He is a Certified Portfolio Manager™ and a Certified Exit Planning Advisor™ (CEPA®).
Joseph Powers leads the Financial Planning and Insurance Strategies focus for Great Diamond Partners. He worked at UBS as a Private Wealth Advisor since 2000. He is a Certified Financial Planner ™ (CFP®), a Chartered Life Underwriter (CLU) and a Certified Exit Planning Advisor (CEPA®)
Helen Andreoli is the Chief Financial Officer and a Founding Partner of Great Diamond Partners. A 20-year veteran of the financial services industry, having worked at Morgan Stanley, Merrill Lynch and UBS Financial Services, she is a Certified Financial Planner™ (CFP®).
As a Founding Partner of Great Diamond, Jack Piper works with individuals and families, helping them to craft a plan to reach their financial goals. He also works on the investment team in developing and managing client portfolios. Mr. Piper worked as a financial advisor at UBS Wealth Management for four years. Prior to that, he worked at Bainco International Investors in Boston, holding a variety of positions before ultimately serving as a portfolio strategist.
Great Diamond Partners is an independent wealth management firm based in Portland, Maine. The firm integrates disciplined investment consulting with personalized advanced planning, superior technology and a boutique client experience. Consistent with their focus on families, many of whom are or have been business owners, the firm has deep expertise with business transition planning. Great Diamond Partners helps owners prepare for and execute successful transitions, whether that is an intergenerational wealth transfer, outright business sale or other possible outcome. Great Diamond Partners’ advisors are Certified Exit Planning Advisors and Certified Financial Planners, all skills needed to execute a successful transition.
“We have always maintained that every element of what we do needs to be in our clients’ best interests. Now we recognize the unquestionable benefits to clients in working as an independent firm, and the Dynasty structure allows us to execute on our vision,” according to Mr. Tenney. “We will be able to provide an even better client experience due to vastly improved technology, advanced planning resources and tools and the fiduciary environment when making recommendations. Finally, the expanded resources are tremendous – everything from advanced planning software to investment banking, investment consulting and business management.”
Great Diamond Partners plans to expand their footprint by recruiting like-minded advisors who may be seeking to join an independent advisory firm.
“The breakaway movement is reaching a tipping point. Again and again, some of the best advisors in the industry are seeking true independence as the model that is best for their clients, their employees, and themselves. We are seeing veteran advisors with 20 plus years at their firms choosing to take the road to independence and this movement is accelerating,” said Shirl Penney, CEO of Dynasty Financial Partners. “Specific to Great Diamond Partners, they are deeply committed to our home state of Maine. As someone who was born and raised in Maine, I am particularly proud to partner with high-caliber advisors like Steve, Joe, Helen and Jack and their remarkable team, and we welcome them to our Network of independent advisors. I am excited to have one the largest and leading financial advisory teams in Maine on the Dynasty platform and look forward to partnering with them to grow their business.”
Great Diamond Partners has partnered with Dynasty Financial Partners to leverage Dynasty’s wealth management services, people, leading technology, and capital support. The firm will be using Dynasty’s award-winning integrated Core Services platform for independent advisors and using Dynasty’s turn-key asset management platform (TAMP). They will have access to leading technology, including Dynasty’s proprietary advisor desktop, in-house specialists, home office support, and will benefit from the firm’s significant scale in the industry.
Among its other resource partners, Great Diamond Partners has selected Schwab to provide custody services for its clients’ assets and Black Diamond for consolidated asset and performance reporting.
For more information, please visit www.greatdiamondpartners.com.
Foto cedidaAlan Muschott, courtesy photo. For Convertibles, Franklin Templeton Likes Technology, Health Care, and Consumer Discretionary Spending
With a clear long-term focus and very selective and active management, Alan Muschott manages the Franklin Global Convertibles fund, the largest strategy for active management of convertible bonds in the United States. In this interview with Funds Society, Muschott explains the assets’ advantages.
Why can convertibles work well in this market environment? What characteristics does this environment have that are positive for the asset?
In our view, convertibles can be attractive during various types of market environments, including rising markets, due to the potential asymmetric price relationship with the underlying common stock. Often called “balanced” convertibles, those with deltas (a measure of their equity sensitivity) near the middle of the range from 0.0 to 1.0 can participate more with an issuer’s equity upside than they do with the downside. These are the types of convertibles we prefer, as we feel this is the most appealing aspect of the asset class. We believe this ability to adapt to a myriad market conditions can make convertibles an attractive vehicle for increasing a portfolio’s level of diversification.
Why can convertibles work well in an environment of rate increases? Are you protected against the interest rate risk?
Amid expectations that US interest rate increases could accelerate, many fixed income investors in particular have asked for our view on the prospects for convertible securities. It’s an understandable concern as bonds tend to lose value when interest rates rise. In our research, during prior periods of rising interest rates, convertibles have historically performed better than 10-year US Treasuries. Therefore, in a rising-rate environment, we think convertibles can be a favorable place for fixed income investors to be. That said, it’s a bit incomplete to compare the performance of convertibles to other fixed income investments given their characteristics. Convertibles are a unique asset class, offering investors features associated with bonds and the growth potential of common stocks.
Convertibles are generally structured as a form of debt (bonds, debentures) or preferred shares with an embedded option that allows conversion into common shares under predetermined conditions. That embedded conversion option provides capital appreciation when the underlying common stock rises. In a rising-rate environment where interest rates are rising for the “right” reasons—for example, strong economic and corporate earnings growth—equities tend to perform well. If the underlying common stock in a convertible security rises with the market, the convertible should also increase in value because of the conversion option.
Historically, convertibles typically have exhibited a low correlation to fixed income and demonstrated imperfect correlation with stocks. This creates the potential for an investor to help enhance portfolio diversification, dampen volatility and improve a portfolio’s overall risk profile. Note, diversification does not guarantee profit nor protect against risk of loss.
What do you expect from the central banks? It seems that the measures for the monetary restriction have stopped… how do you value it?
Many central banks have tempered growth expectations in recent weeks in the midst of continued uncertainties stemming from geopolitical factors and other regional challenges which weigh on economic sentiment. Within the US, the Federal Reserve has also indicated a more patient approach to future rate hikes in the current subdued inflation environment.
We don’t manage our strategy based on expectations of monetary policy shifts or other macro variables. Instead we evaluate investments on the basis of the fundamentals of the companies themselves, their respective industry growth profiles and competitive positioning. Our focus is on identifying investments which we believe offer long-term prospects for capital appreciation; by investing in convertibles, we aim to capture an attractive amount of the equity upside while mitigating downside risk, thus generating compelling risk-adjusted returns over time.
Why is volatility good for convertibles? How does it help the behavior of the asset?
Since the US stock market selloff in the fourth quarter of 2018, many investors have asked us how convertible securities performed during the upheaval. Issued by companies looking to raise capital, these hybrid investments are generally structured as some form of debt or preferred shares with an embedded option that allows conversion into common shares under predetermined conditions.
According to our analysis, convertible securities generally outperformed their underlying stocks during the fourth quarter when the US equity market saw its steepest declines. That’s no surprise to us considering that convertibles have tended to perform well during periods of above-average market volatility. Since the beginning of 2019, as markets have moved higher, so have convertibles, broadly speaking, given their performance link to the underlying equity prices. During periods where the overall stock market is declining, the fixed income component in convertible securities tends to provide some protection against erosion of value. Conversely, when a company’s common stock rises, the convertible security should participate in the rise in value because of the conversion option. As long-term investors, our overall view on convertible securities doesn’t change from quarter to quarter or during periods of market volatility.
Now, is it better to invest in a protection component and less exposure in the equity component, or just the opposite?
Ultimately, orienting toward protection or equity should be driven by an investor’s needs in the context of their specific investment goals. It is fair to say that our Fund is oriented to the equity component. Our view is that a company’s underlying equity appreciation will drive returns in the convertible. Generally speaking, convertibles do not increase as rapidly in value as stocks during rising markets; nor does their downside protection equal that of bonds during market declines. However, historically they have delivered attractive long-term risk-adjusted returns compared with both stocks and bonds.
In the asset class, which markets do you favor by geographies, sectors…etc?
With a focus on balanced convertibles, those that tend to demonstrate asymmetric reward/risk profiles relative to other segments of the convertible bond market, our strategy seeks to participate in more of a company’s underlying equity price appreciation than depreciation. Interestingly, many balanced convertibles can be found in the North American market, in growth-oriented industries, and across market capitalizations.
The average life of a convertible security is about five years before it converts, and we often will hold a convertible to maturity, regardless of market gyrations in the interim. We spend a great deal of time on fundamental research, as we take a long-term approach to our investments. We seek to differentiate ourselves from others in the market through our security selection.
Key themes that we have identified for inclusion in our portfolio are related to secular growth in areas like technology, health care, and consumer discretionary spending. We see technology as increasingly becoming a non-discretionary expense for a wide range of companies and industries. In particular, we like certain convertible securities within themes like on-demand software. Many companies often lack the expertise, personnel and resources to develop this technology in-house, which creates opportunities for firms in the cloud computing and software-as-a-service areas.
Elsewhere we continue to see opportunities among companies showing high levels of innovation in the health care space. With accommodating regulators and novel new drug delivery methods and targets, we see a continuing wave of innovation in the health space. These are sectors that have performed well in the equity markets and which have, in turn, contributed to the returns we’ve generated within our Fund.
How is the market in terms of supply? Will there be new issues this year or is the relationship between supply and demand adjusted?
With a value of over US$300 billion at the end of 2018, the global convertible securities market is a sizeable player in the world’s capital markets. The United States accounts for over half that amount, followed by the Europe, Middle East, Africa (EMEA) and Asia-Pacific regions, respectively. Perhaps more important is the ample room for growth.
Following a peak in 2007, issuance declined through 2011 as companies took advantage of low yields, a high equity risk premium relative to credit spreads and strong flows into the credit markets to issue straight debt rather than convertibles. The perception was that raising capital through straight debt was relatively cheap, even when convertible securities were issued at slightly lower rates due to the added concern of share dilution. Companies were also hesitant to issue convertible securities as equity valuations were inexpensive relative to historical levels.
Over the last few years, more robust issuance trends have been driven by better equity market performance, a rise in interest rates and higher spreads. Thus far in 2019, we’ve seen solid issuance trends as well. We believe the factors that drive convertibles issuance, particularly those related to cost-effective financing (lower cost than straight debt; equity valuations at robust levels for many issues), can continue to support a healthy marketplace for convertibles.
What returns can be expected from the asset in 2019?
Our approach is long-term in nature and we typically hold our securities for much of their (on average) five-year maturities; thus we don’t generally make predictions of price returns over calendar year periods. Our outlook for equities continues to be positive. We believe earnings growth can support further price appreciation from today’s levels in a number of equity sectors.
We do believe it’s important to be selective. As a group, convertibles have historically presented an attractive risk/reward profile, but within the group there is considerable variation in the level of risk, sensitivity to movements in the underlying stock, and upside participation potential. Because of this, we believe active management is an important element within convertibles investing.
In your fund, what is the selection criteria that you follow? How many names do you invest in? What is the delta of the portfolio? Please comment on the main characteristics of the fund
The Franklin Convertible Securities Team have utilized convertible securities to various degrees across a number of strategies throughout the years. We seek to take advantage of the compelling, asymmetric risk/reward profile offered by balanced convertibles. Balanced convertibles are those securities that tend to offer greater upside participation than downside potential, leading to an asymmetric return profile.
As a global firm with deep experience across asset classes, styles, and regions, Franklin Templeton possesses a strong potential to develop what we believe to be unparalleled insights in the convertibles market. Equity and credit research analysts usually meet with company management, then build valuation models and form an opinion of an issuer regardless of whether they have outstanding convertibles. Our portfolio managers continuously monitor the convertibles market and new issuance trends. When the team sees a new company come to market, they are typically already familiar with these businesses, their equity potential, and credit metrics.
We seek to offer pure convertibles exposure. We don’t buy common stock, and in case of conversion, seek to sell equity in our portfolio as soon as an attractive exit point presents itself. One can expect our portfolio delta to fall in the range of balanced convertibles (0.4-0.8); we will typically have 60-80 issues within the Fund; our preference is to reasonably equal-weight our holdings so that each has an opportunity to have impact on portfolio performance. Our credit quality, market cap, regional and sector exposures will typically reflect what we see in the broader balanced convertibles universe; where we seek to differentiate ourselves and the portfolio’s returns is through security selection.
Wikimedia CommonsPhoto: 1971markus. Three US Cities, Amongst the Best Ones to Live In
If you’re looking to live in a place with affordable housing, ample work opportunities and a reasonably pleasant environment, it’s time to pack your bags and move to London.
According to a global survey conducted by Resonance, a consulting group, London is the best city to reside in 2019. That’s thanks to having all the things mentioned above and more.
But if you want to stay in the United States, you’ll be happy to know that three cities in this country were included in the top 10.
While Miami ranked 26th worldwide, New York City came in third. Chicago and San Francisco ranked seventh and tenth respectively.
To reach its conclusion, Resonance described the profile of 100 of the cities with the best performance in the world based on 23 different factors, including the affordability of housing and employment opportunities, the quality of the environment (both natural and artificial), the quality of institutions, diversity, economic prosperity and the quality of culture, gastronomy and nightlife.
The top 10 is made up of:
London, United Kingdom
Paris, France
New York, USA
Tokyo, Japan
Barcelona, Spain
Moscow, Russia
Chicago, USA
Singapore, Singapore
Dubai, UAE
San Francisco, USA
If you’re thinking about making a change, or just want some inspiration to travel, check out the full list here.
