Jack Bogle, Vanguard. One Year After His Passing, Jack Bogle’s Legacy is Still Strong
A first-of-its-kind opinion survey released by the Institute for the Fiduciary Standard reveals how much the trailblazing index fund entrepreneur and Vanguard founder, Jack Bogle, influenced investors.
Bogle’s investing principles and index funds are fixed in the American mind; his reputation stands alongside giants in American business.
The survey, designed to commemorate his passing on January 16, 2019, notes that:
Among business and finance leaders Warren Buffett, Bill Gates, Steve Jobs, Chuck Schwab, Michael Bloomberg and Mark Zuckerberg — and former Senator John McCain, the reputations of Bogle, Buffett and Gates are far on top with ratings of 51.7%, 51.3% and 51.0%. Bloomberg and Zuckerberg bring up the rear with ratings of 26% and 19%.
How is Jack Bogle remembered? “Investing in the entire market with low cost index funds is better than stock picking” and “Made investing understandable” are two top phrases that investors choose to describe him.
Investing for the long term and diversifying are two principles Bogle championed that are important to investors (57, 53%). Vanguard investors agree, more so (70, 64%).
A majority of the investing public reports being knowledgeable (somewhat, very, extremely) with index funds (59%); Vanguard investors are more familiar (75%).
The investing public rates Vanguard highly (41%) compared to Charles Schwab (32%) and Merrill Lynch (25%). Berkshire Hathaway rates at 47%. Vanguard investors rate Vanguard (73%) far above Berkshire Hathaway (43%), Charles Schwab (22%) and Merrill Lynch (16%).
Knut A. Rostad, president of the Institute for the Fiduciary Standard, said: “After exiting Vanguard, Jack Bogle spoke and wrote volumes on investing and serving investors first for 19 years. His voice resonated with many, including former President Bill Clinton, former Federal Reserve Board Chairman, Paul Volcker, and Warren Buffett. Scholars and regulators embrace his principles and applaud his investor advocacy. This survey shows that many ordinary investors do too.”
The survey was conducted by Rockland Dutton Research for the ‘Friends of Jack Bogle’, and polled 500 Vanguard investors and 500 non-Vanguard investors with $100,000 or more in investable assets.
Chip Roame, Tiburon Strategic Advisors chief and consultant to financial services executives notes, “I was particularly struck by the increased focus of 40% of general investors who recognize the value of minimizing costs as the number one driver of long-term performance. Among investors who knew Jack, it’s 67%. This is legacy impact.”
Jeff Rosen, President & CEO of the National Constitution Center says, “Jack Bogle was revered by so many who followed or worked with him. It’s wonderful to see how brightly his legacy shines among the millions of investors who also knew him. “Made investing understandable” is just one phrase that Americans associate with Jack. His calm and steady wisdom will continue to guide investors for generations to come.”
Neil Dwane, Global Strategist at Allianz Global Investors, courtesy photo. Neil Dwane (Allianz GI): “Los tipos bajos han provocado que la gente ahorre más e invierta menos”
The global economy will continue to slow in 2020, but the risk of a recession remains higher than priced into markets. This view is according to Neil Dwane, Global Strategist at Allianz Global Investors. Dwane sees several key factors shaping the market narrative in the year ahead, including the US-China trade war, the evolution of the economic cycle in the US and the positioning of central banks.
“Wehope China will continue the process of transforming its economy and that its contribution at the global level will continue to be supportive. There will also be good forces driving the global economy from Indonesia and India, which are going through a different phase of their economic cycles and are engaged in major structural reforms. Europe can also surprise positively if policymakers manage to move the European Union (EU) in the right direction,” he explains.
In the UK, Dwane sees Brexit as one of the more important issues facing the greater EU in the coming year. “In most scenarios, we expect the UK to leave the EU at the end of January. We will see some fiscal stimulus from the UK, which may reduce the chances of a recession. This may allow the UK to contribute to global growth, which did not happen in 2019.”
Keys to 2020
Dwane sees central banks remaining relevant next year, maintaining their accommodative stance. “We may see interest rate cuts at central banks around the world,” he says. They will continue to support the global economy, but he warns that the real debate will be “to what extent monetary policy will continue to be useful.”
That is why he considers the return of fiscal spending to be one of the key economic drivers in 2020. “Investors should decide whether or not fiscal spending made by governments will be supportive of economic growth. Fiscal stimulus can lengthen the cycle, but what will be relevant is the breadth and scope of the stimulus. One of the conclusions I draw for 2020 is that both the UK and the US would likely not cut their interest rates to negative levels if they were forced to fight an economic recession.”
In the US, Dwane points out that a key factor will be the next presidential election at the beginning of November, but caveats that we are at a somewhat uncertain starting point. “We won’t know what will happen between Democrats and Republicans until June 2020. We have several open fronts, the first of which is what happens with President Trump’s impeachment. Secondly, there is the ongoing trade war with China, which has become something of a geopolitical tool for both sides.”
Investment opportunities
Dwane believes that the way to navigate this market, marked by a long period of low rates, is for investors to accept that “if they don’t take risks, they won’t get satisfactory returns.” In his view, fixed income investors have to think a lot about how to position their portfolios because the underlying assets often offer very little return or have a lot of risk. “Fortunately, investors have become much more realistic with their expectations of return and risk,” he says.
Dwane sees select opportunities in the high-yield market but reminds investors that they have to be aware of the risk they face. Leaving aside the opportunities offered by US Treasuries, which are often used to hedge other risk exposures, he prefers US and Asian high yield. “In the case of Asian assets, it should be remembered that they are more sensitive to economic cyclicality, and for emerging markets, it is better to focus on countries that are carrying out structural reforms such as India or Indonesia. On the other hand, we are more cautious toward Brazil, Mexico and Chile.”
Looking ahead, Dwane believes that if investors want attractive returns, they will have to allocate some of their portfolios to equities. That’s why he says it’s time to consider thematic investments that capitalize on “any trend that will work globally in the future.” Mr. Dwane highlights investments linked to sustainability, climate change, infrastructure, renewable energy, technology, artificial intelligence (AI) and robotics, as well as specific trends related to consumption and the tastes of younger generations, particularly millennials.
Pixabay CC0 Public Domain. Amizut termina el año con el mejor resultado de su historia y eleva su objetivo para 2020
Based on the first preliminary results on the Group’s activities and the first forecasts on 2019, Azimut expects to close 2019 with the best consolidated net profit in the history of the Group, ranging between 360 and 370 million euros.
The cumulative dividends distributed to shareholders over the 5 years of the plan, including what will be proposed to the BoD convened for March 5, 2020, will be at least 7,8 euros per share. As a consequence, the average payout throughout the plan will be greater than 90%, well above the envisaged target, resulting in a cumulative average yield of 44%. With this latest result, all targets indicated in the 5 year business plan have been achieved for the third consecutive time since 2004.
In 2019 the Group recorded 4.600 million euros of Net Inflows, bringing total assets to exceed 59.000 million euros (vs. the 50.000 million euros plan and + 16% compared to the end of 2018). Furthermore, the target set for International AuM at the end of the plan has also been fully achieved and exceeded.
In fact, at the end of 2019, the AuM from non-domestic businesses reached 29% of Total, against the 15% budgeted in the plan. EBITDA from the international operations in 2019 is estimated to be between 50 and 55 million euros (ca. + 53% compared to 2018).
Thanks also to the above results, the Group estimates under normal market conditions, to achieve a net profit of at least 300 million euros in 2020, raising its initial range of 250-300 million euros indicated during the Investor Day of June 4, 2019. This positive delta is expected to be reached thanks to growth across all business lines: distribution in Italy, alternatives and International activities.
The alternatives project continues to progress well. After the success of the largest Italian event dedicated to private markets (Azimut Libera Impresa EXPO), net inflows on products launched in the last quarter of 2019 stands at c. 450 million euros, bringing the total AuM in the private markets space to exceed 1.000 million euros.
Pietro Giuliani, Chairman of the Group, comments: “In 2019 we generated a net weighted average performance to clients of c.+ 8.5%, above the Italian industry. There is no better way to celebrate Azimut’s 30 year anniversary: all targets of our latest five-year business plan have been successfully completed for the third consecutive time.
We expect 2019 to close with a net profit between 360 and 370 million euros, marking a new historical record for the Group. Also our share price closed 2019 with a record: + 128% performance during the year, making Azimut the best performing stock amongst FTSE MIB members. The trust we receive every day from customers and shareholders makes us confident to continue with the same pace also in 2020, and achieve a net profit of at least 300 million euros.
Our international business has seen another sharp increase in 2019, with AuM accounting for almost 30% of total assets and an expected EBITDA of 50 to 55 million euros. Lastly, we are satisfied with the launch of the first products in the private markets area, democratizing this asset class and allowing us in just a few months to exceed € 1 billion of AUM in this segment.”
Photo: Pxfuel. ¿Cómo pinta el 2020 para el sudeste asiático?
According to Sriyan Pietersz, Investment Strategist at Matthews Asia, looking at the 2020 Outlook for Southeast Asia, “the best environment would be moderate U.S. growth, a sideways U.S. market and a weaker U.S. dollar.”
In his opinion, global risk appetite is rising again. This comes following a developing U.S.—China trade truce, easing Brexit worries, expectations of a long pause by the U.S. Federal Reserve, a turn in the semiconductor cycle and a stabilizing Chinese renminbi. “The Fed’s pause, validating a “no recession” outlook, and the potential for a rise in emerging market (EM) growth and earnings relative to developed markets suggest the onset of a positive impetus for both EM equities and currencies.” He mentions.
Pietersz believes the main risks to the outlook are a reversal of progress in trade negotiations, a resurgence of recession fears in the U.S. economy and, importantly, the wild card of U.S. Democratic primaries in the first quarter of 2020 “that could affect risk perceptions negatively just as the global economy is lifting. This could affect a large swath of the U.S. equity market, especially the technology and banking sectors. A negative U.S. market likely would drag down global markets; we believe the best environment for EM and Asian equities is moderate U.S. growth, a sideways U.S. market and a weaker U.S. dollar”.
Within EM, he is convinced that Asia looks to be the biggest beneficiary of an easing trade conflict, a turn in the semiconductor cycle and a firming renminbi.
“Within Asia, we believe the more open and tech-oriented North Asian economies such as Japan, South Korea, Taiwan and China, may outperform as Southeast Asian markets in general are not as big a beneficiary of a U.S.—China trade resolution and have little tech exposure. While the just-concluded Phase One trade deal could improve the overall global trade climate, China’s commitments to increase agricultural and tech imports from the U.S. in the near term could divert some demand away from countries such as Vietnam, Malaysia, Singapore and Thailand. That said, the trend of global supply-chain relocation will likely continue on labor cost and geopolitical risk diversification considerations, and we believe this will benefit Southeast Asia and India in the medium term.”
On a per country outlook Pietersz says:
Vietnam should continue its secular uptrend, supported by continuing production relocation investment out of China. The start of a new political cycle in 2020 should also add renewed policy impetus, while the Euro-Vietnam free-trade agreement is likely to support export growth. An International Monetary Fund-supported revaluation of historical GDP by 25% will improve public debt and fiscal headroom, allowing increased public spending on infrastructure to support future growth. Adding to this economic tailwind, reforms such as passage of a new securities law and improving regulation on foreign-ownership limits, the upcoming launch of “Diamond ETFs” (funds that circumvent foreign-ownership limits, and help to address the issues of access to Vietnam’s stock market) and the improving prospects of Vietnamese banks should draw new money into a wider range of listed stocks. We believe these changes should also help to pave the way for Vietnam’s ultimate inclusion in the MSCI EM index. The moderate valuation for the Vietnam Ho Chi Minh Stock Index (VN-Index)—13.2x Bloomberg consensus 2020 price/earnings ratio—is supported by strong forecast earnings growth of 20%.
Singapore, as the chief beneficiary in Southeast Asia of an improved trade environment, will also likely receive a boost from a more expansionary budget as the government tilts toward a general election. In the equity market, earnings growth may have bottomed after multiple quarters of downgrades, and given FTSE Straits Times Index constituents’ exposure to global demand recovery, risk is biased to the upside. Valuations are inexpensive (Bloomberg consensus 2020 price/earnings ratio of 12.5x), trading near the 10-year average, and investor positioning is light, positioning the market to benefit from a recovery in investor interest. Shares of banks, technology, real estate and select crude palm oil (CPO) companies are well-positioned to outperform, in our view.THE PHILIPPINES
Among the rest, the Philippines should lead the pack as growth re-accelerates back into the 6% to 7% range and renewed impetus in credit growth fueled by interest rate and reserve requirement ratio (RRR) cuts drive interest rate-sensitive sectors such as banks and property. Infrastructure stocks and consumer durables should also benefit from a ramp up of President Duterte’s ‹Build, Build, Build’ program and the personal income tax cuts in last year’s tax reform package (and stable Overseas Filipino Worker flows). The Philippine stock market’s valuation, however, is trading well below its 10-year average of 18.8x (Bloomberg consensus 2020 price/earnings ratio of 15x), triggered by a potential shift in the regulatory environment with implications for sanctity of public contracts and banks’ asset quality. This has led to foreign fund outflows, and it is to be hoped that clarification of the issues by the government will allow the positive macro momentum to drive the market forward in 2020.
Malaysia is likely to continue to move sideways, despite having languished since the 2018 general election. Factors in its favor are its underowned status, a relatively undervalued MYR that will augment its heavy trade exposure, and a potential rise in oil prices as global trade and growth dynamics improve (Malaysia is the only net Asian oil exporter and higher oil will fund increased domestic stimulus). However, the slowdown in private consumption should offset near-term tailwinds from external demand. Further, rising political risk is leading to policy implementation paralysis, which may affect the outlook for an anticipated rise in infrastructure spending. The Malaysian ringgit is also among the currencies most exposed to potential volatility in the Chinese renminbi resulting from any setback in U.S.—China trade relations. Banks, tech and export plays are better-positioned sectors, in our view.
Indonesia has the benefit of value as it has given up all of its year-to-date gains in the recent (and traditional) new government-related sell-off. Bank stocks and diverse large caps have pulled back on recent pronouncements by the president and various cabinet members regarding the need for lower interest rates and energy prices. That said, the new government appears constructive and reform-oriented and committed to deliver on labor and omnibus laws within the first quarter of 2020. If achieved, we believe this would drive a re-rating of the market against a backdrop of a modest but steady improvement in growth in 2020, while laying the foundations for a pickup in foreign direct investment (FDI) in the medium term. Higher FDI, in turn, would improve stability of capital flows and allow Indonesia to pursue a more growth-oriented policy mix.
The Thai economy was not immune to the global economic slowdown and GDP growth has slowed sharply on the back of weak exports and delays in government spending. While fiscal activity and public infrastructure spending are expected to rise in 2020, the prospects for growth remain muted as private domestic demand will be constrained by a slowdown in housing construction and relatively high household debt levels, which will drag on personal consumption. Thailand, as a safe-haven play, is likely to underperform the region, lacking economic momentum and tech exposure. A large cyclical/value contingent led by the energy sector and select large banks, however, could outperform in a local-market context as excess domestic liquidity continues to flow into the capital markets. We see the Thai market as a defensive hedge against a reversal in U.S.—China trade relations or a sharp change in the U.S. outlook.
Compass Group just launched its first Brazilian local credit fund, managed by the local team from its Sao Paulo’s office, part of an integrated 50-strong investment professionals team across Latin America and the US.
Compass Group opened the Brazil office in 2018 and has been actively growing the local team whilst working on obtaining the local license to manage funds, granted in December of last year
As one of the largest asset managers in LatAm, with over USD 6b in AUM, Compass Group is bringing its regional credit expertise to the local market. This will be the first fund managed locally and the company has a strong pipeline planned for 2020. It will include other credit funds, domestic equity funds as well as feeder funds into offshore funds from global managers.
Compass Group has been investing in credit in Brazil for more than 20 years and this new experience sets a great and exciting challenge for the company
ALLVP's partners, courtesy photo. Antonia Rojas se une a ALLVP como su nueva partner
Antonia Rojas has joined ALLVP as its third partner. Antonia is the first partner addition to Fernando Lelo de Larrea and Federico Antoni’s firm since its founding. Given her experience as an entrepreneur and investor, Antonia will focus her investing and board seat participation in startups reinventing the cities or working on the future of human capital.
‘When we founded ALLVP, we envisioned creating an organization that would outlive us. As Latin American tech reaches new highs, it is the best time to expand our partnership with one of the best investors of her generation. Antonia shares our passion for impact, commitment with founders and vision for the future of our firm.’ commented Fernando Lelo de Larrea.
Antonia first started investing with the international real estate division at Deka Bank in Frankfurt. Soon after, her passion for impact led her to start an education company in Chile and study a masters in impact investing at Hult Business School in San Francisco. In 2017, just after turning 27, Antonia co-founded Manutara Ventures, a leading seed capital firm based in Santiago, Chile. In November 2018, her work took her to Sao Paulo for the Techcrunch Battlefield where she and Fernando shared the judging panel for promising startups.
Antonia explained, ‘I met Fernando in an event in Brazil. There were impressive speakers from all over the world, but Fernando was, for me, the most insightful and clear in its vision for technology in the region. A few weeks later I met Federico in Santiago. Meeting the investor behind the biggest tech company in the country, Cornershop, was a big deal. And I wasn’t disappointed. We bonded immediately. He became my mentor as I continued my investment career.’
‘Although we may have more experience, Antonia is smarter, more resourceful and brings a fresh perspective to our portfolio and investment practice. Together, our now multi-generational and diverse firm will become a better partner for Latin American founders. Together, we’ll be able to seize the amazing Latin American VC opportunity of this decade.’ added Federico Antoni.
ALLVP is in the process of deploying its new fund 3 in Mexico, Colombia, Chile and beyond.
Wellington Management became the 13th asset manager in having international mutual funds highlighted by the Mexican Pension Funds Association, the Amafore, as funds the Afores could invest in.
As the Amafore confirmed to Funds Society, there are already 60 funds from which Afores can choose from, for diversification purposes.
The Boston firm, whose distribution in LatAm and Mexico is in charge of Compass Group, had already been selected in 2014 to receive a commodity investment mandate, by the then called, Afore Banamex.
The current list of authorized managers consists of:
AllianceBernstein
Amundi
AXA
BlackRock
Franklin Templeton
Investec
Janus Henderson
Jupiter
Morgan Stanley
Natixis
Schroders
Vanguard
Wellington Investments
Founded in 1928, Wellington Management is one of the largest independent investment management firms in the world. It has more than 1.1 trillion dollars in assets under management and operations in more than 60 countries.
In Bob Doll’s view of 2020, active managers and Donald Trump will win. “Our view is a more mediocre view, with a lot of frustration,” he mentioned during his yearly outlook while recommending to “focus more on alfa, own more high quality value vs expensive growth, have diversification both in terms of asset clases and geography, raise quality of the cash flow character, and watch wage rate increases to monitor inflation.”
In 2019, the chief equity strategist at Nuveen, made his predictions saying it was a tough year to forecast but that he was leaning towards a bullish view on stocks. He was mostly right, getting eight out of 10 correct.
Here are his top 10 predictions for 2020:
The world avoids recession in 2020 as U.S. GDP grows over 2% and global GDP grows over 3%.
Inflation and the 10-year U.S. Treasury yield end the year above 2% as the Fed stays on hold through the election.
Earnings fall short of expectations, partially due to rising wage rates.
Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years.
Non-U.S. stocks outpace U.S. stocks as the dollar retreats.
Value and cyclicals outperform growth and defensive stocks.
Financials, technology and health care outperform utilities, real estate and consumer discretionary.
Active equity managers outperform their indexes for the first time in a decade.
The cold wars within the U.S. and between the U.S. and China continue.
The U.S. concludes a tumultuous political year with a status quo election.
For the full version of Bob Doll’s Ten Predictions for 2020 follow this link.
2019 has been a challenging year where our readers’ focus has been on how to better manage and diversify portfolios. This shows in the most read stories of the year, which have a tilt towards alternative investments and benchmarking. Our top 5 is comprised of:
The CERPI Boom in Mexico Should Continue in 2019 | This column by Arturo Hanono talks about a considerably new investment vehicle that allows global companies to co-invest along with the Mexican Pension Funds. It was published in February and took January’s numbers into consideration to present a rosy outlook for the asset class. Uncertainty in the country made both the amount of issues and the money invested to drop considerably this year, however CERPIs did outnumber CKDs, which was the author’s point in the most read piece of 2019.
We Currently Have a Robust M&A Market | This column by Michael Gabelli, from Gabelli Funds, also presented a positive outlook for 2019. It focused on specific deals and potential deals for the year.
Funds Society Presents its 2019 Asset Manager’s Guide NRI | The news about the release of our Asset Manager’s Guide NRI, a comprehensive list of asset management firms providing UCITS investment solutions to investment professionals in the wealth management non resident industry, was a very popular piece. It presents information on almost 60 international asset management firms who do business in the NRI market through their UCITS range of products, and their contacts.
RIA Leaders Are Becoming Younger, Average Age Goes From 52 to 49| A piece about research from TD Ameritrade Institutional which finds the leadership of registered investment advisor firms is passing the torch from the Baby Boomer to Gen X. The report found that the advisory community as a whole is getting younger, reversing a graying trend that had many advisors worried about the sustainability of the industry.
Frontier markets are often attractive to investors as they include countries or economies that are underdeveloped. In this Q&A, Matthews Asia Portfolio Manager Robert Harvey discusses his current views on investing in frontier markets.
What is the current outlook for frontier markets?
It’s important to remember that not all frontier markets are created equal. Some countries have better demographics, better positioning regionally or globally and better political systems, infrastructure and legal framework. A deficiency in any of these areas is a challenge, but opportunities arise when you see positive change. In my view, Asian frontier and smaller emerging markets overall have been out of favor for a while and valuations are now attractive, especially when compared with their growth potential.
When are frontier markets most attractive for investment?
Frontier markets are often attractive to investors as they include countries or economies that are underdeveloped. This means they have the potential to grow, although this potential often is not yet realized. Frontier markets are usually most attractive to invest in when they are most out of favor. Pessimism means you can often buy attractive shares in companies at low prices. When investors become pessimistic, when media reports are largely negative, that is the time to invest in my opinion.
What is the difference between frontier markets and emerging markets?
There is no real difference between the two. At a basic level they are definitions created by benchmark providers. If you compare Sri Lanka (a frontier market) with India (an emerging market), for example, you will see Sri Lanka is much more developed by most economic metrics. For 2018, India had per-capita income of approximately US$2,000, for instance, while Sri Lanka had per-capita income of around US$4,200. Broadly speaking, the definitions are a convenient suggestion or indication of how underdeveloped a country might be.
What is the typical profile of a frontier market investor?
Frontier markets offer huge potential, but it is a complex segment. Investors must have time on their side. Complexity in frontier markets comes from many areas: domestic politics, global commodity prices; domestic economies; foreign exchange movements and domestic business cycles. Their small relative size can also result in a magnified impact on stock prices by changes in investor sentiment. These markets are mostly not suitable for investors who have a shorter time horizon. I think frontier markets are also more suited to investors who are looking for low correlations against developed market indices and who are looking for lower overall volatility. That being said, the complexity of these markets requires a good active manager who understands these complex markets and can discover opportunities for investors.
What are the risks that frontier markets investors should assess before entering a market?
Risks include high oil prices that can materially impact emerging and frontier markets, but the impact differs by country. In the Middle East, high oil prices are a big positive and can help boost both the external accounts and the investment and spending within a country and the region. High oil prices are a negative for oil-importing countries such as Sri Lanka and Pakistan. High oil prices can result in higher import bills, a weaker currency and ultimately higher inflation and interest rates. Therefore, we believe investors should have a long-term time horizon and be prepared to endure volatility. Try not to invest when frontier markets are making news. Just because a market moves up or down, it is not a reason to sell it—only sell if the fundamentals change.
Can you share your investing strategy for frontier markets?
Our approach to emerging and frontier markets is no different than how we look at Asia’s developed markets. We use on-the-ground, bottom-up fundamental analysis to select stocks with a long-term time horizon, mainly focused on the growing consumer demand in these underdeveloped countries. We believe in on-the-ground research and meeting management teams face to face.
