Foto: ƝƖƇƠ ƬƖMΣ ™
. Los inversores prefieren los fondos de acciones que de bonos
Investors ended the year by favoring passively managed U.S. equity funds over actively managed funds by a record margin, placing an estimated $50.8 billion in passive funds in December. On the active side, investors pulled $23.0 billion out of U.S. equity funds during the month. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETFs by computing the change in shares outstanding.
Investors’ preferences have shifted to favoring stock funds over bond funds, amid growing optimism about the U.S. economy and continued rising interest rates and inflation. The overall inflows tally for U.S. stock funds hit its highest monthly total since April 2000, at $27.8 billion. Taxable bond funds saw overall net inflows of $14.6 billion in December.
December 2016 saw overall outflows from alternative strategies of $4.4 billion, with full-year outflows of $4.7 billion. This marked the worst showing for alternative funds since 2005 and is a significant reversal from 2015 when they took in $13.3 billion.
Morningstar Category trends for December showed bank-loan funds as a leading category with inflows of $6.0 billion on the active side and $1.4 billion for passive strategies, continuing a recent trend of growing interest in these funds.
Vanguard dominated the flows landscape in 2016. The firm took in $277.0 billion in total new money during the year, finishing at $3.4 trillion in long-term assets. American Funds saw $4.9 billion in active outflows during 2016, while Fidelity Investments offset some of the bleeding on the active side with $37.2 billion in passive inflows.
Among index-fund and exchange-traded funds, SPDR S&P 500 ETF took in the most assets at $14.3 billion for December 2016, followed by three Vanguard funds with offerings for U.S. stocks, international stocks, and U.S. bonds.
PIMCO Income, which has a Morningstar Analyst Rating of Silver, is the top active individual fund in terms of inflows; the fund took in $1.5 billion in December and $13.7 billion for 2016. Bronze-rated Franklin Federal Tax Free Income bucked the trend for outflows in December among active municipal-bond funds, seeing inflows of $1.4 billion.
CC-BY-SA-2.0, FlickrPhoto: Chad McDonald
. Snowden Lane Partners Welcomes Former Wells Fargo International Advisory Team to San Diego Office
Snowden Lane Partners, an independent, advisor-owned, wealth advisory firm dedicated to providing client-focused advice in a values-driven culture, announced that David Lautz and Francisco Malfavon, both internationally-focused advisors from Wells Fargo, have joined the firm’s San Diego office.
Lautz and Malfavon, each a Partner and Director, are forming the LEM Group and bring $125 million in client assets to Snowden Lane, increasing Snowden Lane’s total client assets to over $3 billion.
“David and Francisco bring extensive knowledge of Latin Americans’ financial planning needs, the kind that can only be had by their personal experience in Latin America and from several decades of working in the industry,” said Alison Murray Burkett, Partner, Managing Director and Head of Enterprise Development. “We look forward to their future contributions to making Snowden Lane a significant player in this global wealth management category.”
“The San Diego office continues to grow and thrive given increased demand for financial advisory services among international clients,” said Greg Franks, Managing Partner and Snowden Lane’s President. “This highly-skilled, globally-minded and well-regarded team will be a significant contributor to the Snowden Lane franchise, complementing the services we provide U.S. resident clients from our other offices, and we’re thrilled to bring David and Francisco on board.”
Added Snowden Lane Managing Partner and the firm’s CEO, Rob Mooney: “This is our first team from Wells Fargo and they represent our commitment to serving high-quality non-resident clients, and to leverage our team’s extensive international experience. As we’ve said before, global banks have left a gap in the cross-border business and talent like this puts Snowden Lane in an optimal position to fill that gap.”
Lautz has been a financial advisor for more than two decades specializing almost exclusively in working with Latin America-based clients. He previously held senior-level positions at Prudential Financial and Fidelity Investments. He worked at Wells Fargo Advisors where he most recently served as a vice president.
Malfavon was an assistant vice president at Wells Fargo Advisors International Group. He began his career at Wells Fargo Bank in 2003 where he served as a regional private banker developing international high net worth client relationships and subsequently became a financial advisor. His key focus areas are wealth and asset protection, trusts and estate planning, and asset management.
“We’re excited to join such a dynamic and universally qualified team to capture the opportunity that exists in the Latin American market,” said Lautz. “We intend to help Snowden Lane to continue to be a stand-out player in this important market.”
2017—China’s banks are increasingly exposed to policy and other risks, but a crisis is not imminent, S&P Global Ratings said in its report, “Is This The Year For A Chinese Banking Crisis?”
“A banking crisis is likely to be avoided yet again in 2017, in light of another year of GDP growth exceeding 6%, and a change in the credit mix to relieve asset quality. However, the current trajectory is not sustainable,” said S&P Global Ratings credit analyst Qiang Liao.
Credit growth in China has surpassed economic growth for several years running, a dynamic that is gradually depleting Chinese banks’ once-ample funding bases. While overall deposit levels still exceed outstanding credits, the banking sector’s funding and liquidity buffers are thinning.
In 2016, Chinese banks accelerated their lending to the public sector and households, as new loans to the riskier corporate sector slowed. This change in the debt mix has helped keep a lid on nonperforming loans as a proportion of the total. However overall economic leverage continues to rise, diminishing funding buffers and making banks more vulnerable to tail risks.
“Crisis or not, we maintain and re-emphasize our negative credit outlook on China’s banking sector,” said Liao.
“Tail risks for Chinese bank credit profiles include policy risks related to China’s exchange rate, shadow banking, local government debt and corporate bond defaults, a property market correction, and external shocks,” Liao added. There is wide divergence of credit quality within the banking sector.
“We believe public confidence in China’s smaller institutions is much lower than for the megabanks and national banks. It’s not yet apparent if the smaller banks could withstand a stress event, such as a run on deposits,” said Liao.
“Given that many of the smaller Chinese banks are still aggressively expanding credit, and may lack sophisticated risk management, they are more likely to be caught off guard if market conditions rapidly weaken,” Mr. Liao added.
The article notes that smaller Chinese banks are still aggressively expanding credit, but may lack the sophisticated risk management to cope should market conditions rapidly weaken.
CC-BY-SA-2.0, FlickrFoto: Craig Sunter. AXA IM: "Secular Stagnation is an Over-rated Concept"
Research & Investment Strategy of AXA Investment Managers team publishes its prospects for next year focusing not only in 2017, but choosing a theme and medium-term approach to examine the thesis of a secular stagnation, the normalization of economic growth and inflation. They review in turn the root causes of the lack of demand, the low productivity growth based on the absence of technical progress, the drivers of the saving gluts and the end of globalisation. Ultimately their conviction is that secular stagnation is an over-rated concept.
The global lack of demand is fading and can be addressed by an appropriate mix of monetary and fiscal policies. Monetary policy will never be the same as before the Global Financial Crisis: the extension of the tool box is there to last. Fiscal policy has to play its role where possible and this is particularly the case in the euro area, where some, but not all countries, have fiscal space.
In the medium term, the saving glut is set to resorb, while productivity will regain some strength and may even be boosted by the digital economy, especially if structural reforms provide a tailwind. They dispute the idea that technology is “everywhere but in the data” and believe the countries investing most heavily in the digital economy will benefit extensively.
Taking into account their growth estimates and modelling the term premium, AXA IM estimates that US long-term rates should return to 3.4% in the coming five years. This is certainly far from current levels, implying a multi-year normalisation that should radically affect asset allocations.
Given that previous episodes of rising rates have scarcely been smooth operations, they also take a deep dive into financial market stability analysis. The key ingredients of another financial crisis are mostly absent at the current juncture but certain elements may be a cause for concern, such as stretched fixed income valuations and constrained market liquidity.
BNY Mellon, a global leader in investment management and investment services, announced that Jeff McCarthy has joined the company in the newly-created role of Chief Executive Officer, Exchange Traded Funds, and will report to Frank LaSalla, Chief Executive Officer of BNY Mellon’s Global Structured Products and Alternative Investment Services business.
“Jeff brings extensive experience in global exchange traded funds platforms and trading markets,” said LaSalla. “His deep knowledge and track record of results in developing and delivering on trade revenue expansion strategies for ETF’s with a strong emphasis on delivering strong partnership solutions will play a critical role for BNY Mellon in serving a market that is likely to at least double in size over the next 10 years.”
In his role as CEO, Exchange Traded Funds, McCarthy will lead and execute the long-term strategy to drive growth in BNY Mellon’s ETF business. As part of this mandate, he will play a critical role in the successful enterprise-wide delivery of comprehensive ETF solutions to the marketplace, and work to further develop long-lasting partnerships for BNY Mellon in the ETF industry.
McCarthy joins from NASDAQ, where he was Vice President and Head of Exchange Traded Product Listings & Trading, having led the strategy and business execution of the Nasdaq Exchange Traded Product Listing (ETP) and Trading Market. Prior to his role with NASDAQ, McCarthy was Head of Global ETF Products and Co-Head of ETF Trading & Investor Services in Asia Pacific for Citigroup. Earlier in his career, McCarthy was Global ETF Product Head for Brown Brothers Harriman & Co., where he created the firm’s global ETF service model.
As an acknowledged thought leader on a wide range of ETF issues, including global trends, product construction, distribution and market development, McCarthy is frequently quoted by media on ETF topics and speaks regularly at industry conferences. He holds a BA in History and Business Studies from Providence College.
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. Raymond James Will Work With AxiomSL
AxiomSL, a risk data management and regulatory reporting technology for financial services firm, will provide an array of broker dealer (BD) and bank holding company (BHC) data aggregation and reporting solutions to Raymond James, the St. Petersburg, Fl.-based diversified financial services firm.
The partnership with AxiomSL grew out of a goal from Raymond James’ larger enterprise data strategy to automate the existing, largely manual processes and tactical functions which were straining under increasing regulatory reporting requirements.
The wide-ranging coverage will include Daily Net Capital (15c3-1) and Customer Reserve (15c3-3) calculations, along with TIC (Treasury International Capital) and FOCUS reports for the BD. In addition, the BHC will be integrating several reports for the Federal Reserve’s FR Y-9C, Call reports, and Basel Risk-Weighted Asset (RWA) calculations.
“As part of our larger goal of data management transformation, Raymond James was looking for a strategic technology partner that could help with a significant portion of our critical reporting,” says David Lesser, senior vice president of technology at Raymond James. “AxiomSL’s expertise working with complex, diversified institutions and ability to implement these solutions over a number of years was exactly what we were looking for.”
Alex Tsigutkin, CEO at AxiomSL adds: “Today, broker dealer firms like Raymond James are looking to reengineer their reporting function in their efforts to keep up with new prudential regulation demands and as part of broader institutional automation. We are very pleased to work with such a well-respected firm as Raymond James and look forward to providing these solutions for them in the years to come to meet new and evolving regulatory mandates.”
The AxiomSL change management platform enables firms to address quickly and seamlessly internal and external changes while achieving data lineage, risk aggregation, workflow automation, computation, validation and audit as well as disclosures in any format. Further, the AxiomSL’s visual business rules can be easily understood by users who do not have specialist-coding knowledge. These features give clients confidence in the automation of complex reporting business logic, data quality, governance and control in meeting stringent timeframes.
De izquierda a derecha, Jean-Luc Hivert y Laurent Jacquier Laforge. Fotos cedidas.. La Française Reorganises its Securities Fund Management Division
Over the last five years, La Française has experienced strong growth through its expansion and through the internationalisation of its expertise, thanks to its strategic partnerships that have allowed the group to strengthen its skills.
So as to create synergies between the various group affiliates and divisions, La Française has reorganized its Securities Fund Management Division.
Accordingly, under the leadership of Pascale Auclair, Global Head of Investments, Jean-Luc Hivert and Laurent Jacquier Laforge are heading the two divisions of expertise: “Fixed Income and Cross Asset” and “Equity”, respectively.
Jean-Luc Hivert, with nineteen years of asset management experience, becomes CIO Fixed Income & Cross Asset. He is responsible for €30 billion in assets under management and heads a team of twenty-six experts. Accordingly, he is entrusted with the Group’s Cross Asset management, discretionary portfolio management and targeted management, for which Odile Camblain-Le Mollé holds operational responsibility. Jean-Luc joined La Française des Placements in 2001. As Co-Head of Bond Management, Jean-Luc innovated and contributed to the launch of the fixed maturity fund concept, one of the key differentiation factors of La Française. He holds a specialised post-graduate diploma (DESS) in Finance from Université Paris VI (1996), a MIAGE (Computer science applied to business management) degree (1995) and a MASS (Applied mathematics and social sciences) degree from Université Paris XII (1993).
Laurent Jacquier Laforge, with more than thirty years of experience, becomes CIO Equities Global. He is responsible for the entire SRI Equity range offered by La Française, small caps management and the monitoring of partnerships, such IPCM, an extra-financial research firm, Alger and JK Capital Management. For several years, La Française has been building strategic partnerships with specialised foreign management companies. As group CIO Equities Global and in the interests of investors, Laurent Jacquier Laforge will identify potential collaborations on products and research synergies. Laurent joined La Française in 2014. Since then, he has transformed the range of funds offered by La Française Inflection Point by incorporating the philosophy of Strategically Aware Investing (SAI) which includes an additional responsible dimension and was developed by IPCM, the London research firm with which the group has established a strategic partnership. Laurent Jacquier Laforge holds a DESS-DEA postgraduate degree in Economics from Université Paris X in Nanterre. Laurent is a member of the SFAF (French Financial Analysts association).
CC-BY-SA-2.0, FlickrPhoto: Elite Fuegos Artificiales
. 2016, a Good Year for Hedge Funds
Markets closed 2016 on the right foot with the way cleared from the Italian wildcard. The post-Trump election rally extended to December, benefiting DM markets globally while EM markets lagged. The upbeat tone also echoed the global agreement to scale back oil production. The surge of Brent to $56 supported the US High Yield segment.
Meanwhile, and according to Lyxor AM´s monthly barometer, the fixed income space continued to witness the great divergence in monetary policies. The Fed hiked rates by 25 bps mid-month while the ECB delivered a dovish tapering: it extended the program until end-2017 but reduced monthly purchases. Yields spread between Treasuries and German Bunds hit record highs. That led to further strengthening of the USD vs. major currencies while gold sold-off.
“In 2017, we expect less monetary accommodation, more fiscal boost and more policy ruptures to support rising rates and inflation. That would result in greater asset prices dispersion and more fundamental pricing, especially in the US where the process is more advanced. These factors would benefit Macro managers. However, the strategy is likely to remain constrained by elevated political uncertainty, prompting funds to be either overly hedged or endure volatility in their returns. We maintain a slight overweight on the strategy but we expect rising fund performance differentiation.” said Jean-Baptiste Berthon, Senior Cross-Asset strategist at Lyxor Asset Management
The risk-on environment supported hedge funds, with the Lyxor Hedge Fund Index up 1%. Global Macro delivered strong returns thanks to their long on equity markets and USD crosses. On the flip side, L/S Equity funds lagged due to the underperformance of Neutral funds.
Global Macro funds continued to gain traction and confirmed their year-end recovery. Managers benefited from the strong rally in European equities past the Italian referendum, while the depreciation of the EUR and GBP against USD added to gains. Overall, Macro funds’ positions became more homogeneous in December. Most of them bet on the reflation trade in Europe (long equities, short bonds and short EUR), while playing out rising inflation in the US and a stronger dollar (long bonds and USD, but short equities). In that regard, the divergence that took place in the fixed income space proved costly for portfolios this month. Finally, funds caught up the swift jump in energy but the sell-off in gold was detrimental.
In December, CTAs regained a meaningful chunk of the lost ground. The negative correlation between equities and bonds was supportive for models as they slashed their long fixed income allocations and re- weighted equities. Long USD vs. EUR and GBP was also a strong driver of returns. The commodity bucket remained overall mixed, but their long stance on energy paid off.
Special Situations outperformed within Event Driven, supported by the year-end rally. Sector wise, they benefited from core investments in Basic Materials, Consumer Non-Cyclicals, Financials and Technologies. Merger Arbitrage funds benefited from spread compression across a number of deals. The completion of the LinkedIn/Microsoft deal on Dec 8th paid off. In aggregate, managers closed the year cautiously exposed, with sizeable exposure to Consumer Non–Cyclicals and Technology. Heading into 2017, higher US corporate activity would foster Event Driven. Prospects of deregulation in some industries, corporate tax cut and cash repatriation would offer fresh opportunities for the strategy.
L/S Credit Arbitrage enjoyed healthy returns and closed 2016 up 5.4% with a very low volatility. Credit markets were supportive, in particular in the High Yield segment. Additionally, fixed income funds delivered healthy returns as well. Relative value investors navigated well the rising bond yield environment.
L/S Equity strategy delivered poor returns in December, but this hides disparate returns across regions and styles. On one hand, the longest biased funds continued to extend gains this month, and closed the year up 4.5%. Long books were the main source of alpha, especially within the financial sector. Some variable biased with a value-tilt recorded strong results. On the other hand, Asian and European Market Neutral funds were hardest hit by sector rotation. Overall, L/S Equity funds dramatically increased their positions towards Cyclicals vs. Defensives. They moderately increased their net exposure to equities throughout the month.
CC-BY-SA-2.0, FlickrPhoto: Pedro Ribeiro Simões
. Investor’s Attention Shifts to Passive in European Equities
Very disappointing results of active European equity fund managers in 2016 may have caused an acceleration of the shift into passive solutions, says www.fundinfo.com.
Active European equity managers got wrong-footed on sector allocation in 2016, adds the website. As ifund revealed this week, only 8% of European equity managers outperformed the MSCI Europe NR net of retail fees and just 24% did so gross of fees.
This may have caused an acceleration of the shift into passive solutions: while one year ago active European equity funds accounted for about 75% of all document views this number has most recently collapsed to 54%. This shift was most pronounced within public channels for German investors but was also remarkable for Swiss, Italian and UK investorss.
Andrew Balls, courtesy photo. PIMCO Launches Global ESG Investment Platform
PIMCO, a leading global investment management firm, has launched a dedicated Environmental, Social and Governance (ESG) investment platform globally, offering a range of fixed income solutions to investors seeking attractive returns while making a positive social impact. As part of this effort, the PIMCO GIS Global Bond ESG Fund has been launched in EMEA.
PIMCO applies a robust framework across its ESG solutions, delivering maximum impact for investors. This framework includes three key elements: exclusion, evaluation and engagement. Companies with business practices that are misaligned with sustainability principles are excluded from PIMCO’s ESG portfolios. Companies are also evaluated on their ESG credentials and those with best-in-class ESG practices are favored in these solutions. Critically, the team engages collaboratively with companies, encouraging them to improve their ESG practices and influence long term change.
The newly launched PIMCO GIS Global Bond ESG Fund invests in a range of sovereign and investment grade corporate bonds from around the world. The fund aims to maximize total return whilst favoring issuers with best-in-class ESG practices and those that are working to improve them. The fund is managed by a team led by Andrew Balls, Managing Director and CIO of Global Fixed Income and Alex Struc, Portfolio Manager co-heading the ESG initiative at PIMCO.
In addition, PIMCO has enhanced two of its socially responsible funds in the U.S. to incorporate a wider range of ESG considerations into the investment process. These funds are managed by a team led by Scott Mather, Managing Director and CIO for US Core Strategies and Alex Struc.
Andrew Balls said: “For many investors, screening out undesirable investment categories isn’t enough anymore; they want to use their investments to promote change in the world. Our ESG platform provides the tools to do that without compromising on returns.”
Alex Struc said: “Historically, this type of strategy has been pursued by equity investors but we firmly believe that engagement as a debtholder is equally important. Across the vast fixed income universe, small change can have an enormous positive impact.”
