Fieldpoint Private Bolsters LatAm Strength

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Fieldpoint Private Bolsters LatAm Strength
Foto: Doug Kerr . Fieldpoint Private refuerza su negocio latinoamericano con la incorporación de Juan Castañeda

Fieldpoint Private, the wealth advisory and private banking firm serving ultra-high-net-worth families and institutions, has announced that Juan Castañeda has joined the firm as Managing Director and Senior Advisor. His practice is based in Fieldpoint Private’s New York City office.

Mr. Castañeda joins Fieldpoint following a decade with UBS, where he served in a series of positions on behalf of Latin American families and institutions. Most recently, he was Executive Director of Emerging Market Credit Sales and Head of Latin America. In that role he worked with family offices, banks and pension funds across a range of capital markets and structured lending services. Prior to that, Mr. Castañeda was Executive Director and Head of Latin America for UBS’s Global Relationship Banking unit, based in Sao Paolo, Brazil, and a director in that business unit’s New York office, developing institutional relationships across Mexico, Central America and the Caribbean.

Mr. Castañeda said he came to Fieldpoint because he was looking for a firm in which putting the client first is a matter of practice, rather than simply rhetoric. “I had grown concerned about conflicts of interest and perverse incentives in large, traditional firms,” said Mr. Castañeda, noting that Fieldpoint Private is unusual in that it is fully unconflicted, with no in-house investment products and a strict philosophy against revenue-sharing arrangements with money managers.

“My clients have always had to accept the reality that having investment assets with big banks means tolerating conflicts of interest, whether with in-house products or so-called ‘open architecture’ platforms that collect fees from money managers,” he added. “They have become so accustomed to this, frankly, that it takes them a little while to fully realize that it doesn’t have to be this way.”

Fieldpoint Private President and CEO Robert Matthews said that Mr. Castañeda’s Latin American clientele is feeling increasingly unwelcome at larger global banks. “Conflicts of interest are only part of this picture. More and more, the major global banks are creating hurdles for international clients who wish to do business with them, from shutting down advisor teams to asking clients directly to take their business elsewhere,” he said. “We welcome this business, and we’re so pleased that Juan has decided that Fieldpoint is the right home.”

The European Commission Wants to Align the Application of PRIIPs and MiFID II

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La Comisión Europea confirma el retraso de PRIIPs al 1 de enero de 2018
CC-BY-SA-2.0, FlickrPhoto: Antonio de la Mano, Flickr, Crative Commons.. The European Commission Wants to Align the Application of PRIIPs and MiFID II

The European Commission announced on November 9th  that it will take the necessary legal steps to postpone the PRIIPs Regulation for 12 months. The announcement aligns the dates of application of PRIIPs with MiFID II.

The European Fund and Asset Management Association (EFAMA) stated in a press release that they very much welcome the proposal by the Commission to delay the application date of the PRIIPs Regulation by 12 months.

In order to do so, the European Commission will publish its proposals in an amending draft Regulation, which must be quickly passed by Parliament and Council if the existing 31 December 2016 application date is to be successfully pushed back by one year.

“There is only one reason why we considered a delay absolutely essential, and this is because it is materially impossible and simply unrealistic for product manufacturers and distributors to meet the original 31 December 2016 deadline.”

A postponement therefore proved necessary and will now materialise in a more realistic timetable to comply with the Regulation.

They believe that this delay will allow companies to appropriately implement the new rules.

“Equally important is the fact that this postponement will also ensure more time is available for solutions to be found on the revised RTSs. Allowing past performance, and fixing the misleading methodology of transaction costs must absolutely be addressed. This remains a crucial part of ensuring the KIDs’ success.” EFAMA concluded.

 

Tikehau to Manage Lyxor’s European Senior Debt Funds

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Paris-based Tikehau Capital has agreed with Lyxor to manage Lyxor’s European senior debt funds.

Through the transaction, subject to regulatory approval, Tikehau will expand its leveraged loans & CLO business from €1.9bn in assets under management to €2.6bn, hence raising its total AUM to €9.8bn.

Tikehau Investment Management, the asset management branch of Tikehau Capital, will replace Lyxor UK, as investment manager of Lyxor’s four European senior debt funds, with a total of €700m in AUM.

It is understood Lyxor UK’s European senior debt operational team will join Tikehau IM in London and that Lyxor will remain the management company of these funds, providing second-level supervision of risks and valuation.

Mathieu Chabran, co-founder of Tikehau Capital and managing director of Tikehau IM commented: “We are delighted to have signed this agreement with Lyxor, which allows us to expand in the United Kingdom and to continue developing our expertise in leveraged loans and European credit markets.”

Lionel Paquin, CEO of Lyxor, said: “This agreement plays to Lyxor’s well-recognized strengths for working in partnership with external asset managers, a field in which we have a nearly 20-year track-record. By remaining the management company of the funds, Lyxor continues to accompany its clients. We are confident that Tikehau Capital, thanks to its well-regarded expertise in European debt markets, will greatly contribute to the quality and future development of this activity. Furthermore, fixed income investments, which benefit from our deeply-rooted innovation and risk management culture, remain an important focus for Lyxor.”

As of 30 September 2016, Tikehau Capital managed €8.7bn in assets.

Short-Term Market Volatility May Also Create Opportunities for Active Managers

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Donald Trump’s unexpected victory in the Nov. 8 US election rattled global financial markets, sending US Treasury and most European sovereign yields higher.  Initially U.S. stock futures and the dollar tumbled and havens such as gold and the Japanese yen were lifted, pairing movements after the President elect’s speech however, investors eventually embraced the result of the election, buying stocks and selling bonds.

On Wednesday the Dow Jones, led by a rally in financial and health-care firms, rose 257 points while the US 10 year Treasury yield, a price reference for almost everything in the world, rose to 2.07%, its highest level since January.

Pioneer’s CEO and Group CIO, Giordano Lombardo, comments: “While the US election outcome is a surprise, it is by no means a “black swan” event. Markets had been strangely complacent leading up to the election, which was highly reminiscent of the pre-Brexit build-up.” while Monica Defend, Head of Global Asset Allocation Research said they believe “Trump’s policy agenda – although still unclear – may be bearish for income-related investments and could lead to a steeper yield curve.”

Neuberger Berman notes that “A Trump administration is likely to be better for the traditional energy sector, and less damaging to the healthcare and financial sectors, than a Clinton Presidency. United government may also remove the partisan obstacles to meaningful infrastructure spending and corporate tax reform, particularly the issue of profit repatriation—although it’s useful to remember that Trump is far from popular among many traditional Republicans.”

Chris Iggo, CIO Fixed Income, AXA Investment Managers believes that “in the end a stronger US is good for the world economy.” He also believes that “if actions follow promises, and it is a big if, then the forces that have kept rates expectations down might work to revise them higher.”Iggo points out similarities between the Trump election campaign and Brexit like the ineffectiveness of the polls, the similarities in the underlying economic anxieties and frustrations at the ineffectiveness of the “elite”, official institutions and big business which took for of bigotry and the fact that the outcome delivers uncertainty on the economic outlook. “However, the big differences are that with Brexit, the outcome of the referendum created the prospect of a huge negative shock for the UK economy, while Trump’s win means a potential economic boom to the US. Secondly, the UK has largely lost control of its economic destiny for the time being while, assuming Trump has a modicum of support in Congress, the new President will be very much in control. He may not have an overwhelming popular mandate, but the Republican Party, of which he is now the leader, is in control of all parts of government.”

According to Ian Heslop, Head of Global Equities at Old Mutual, and Manager of  the Old Mutual North American Equity Fund: “Looking further ahead, several of Trump’s policies, for example his protectionism, his desire to scrap existing international trade deals, and to deport illegal immigrants, have the potential to contribute to longer-term market volatility; but others, for example his plans to slash taxes, including reducing the business rate from 35% to 15%, his plans to encourage repatriation of corporate profits held offshore, and to embark on massive infrastructure spending, could stimulate the US economy, lifting equities. Much is uncertain, not least because his campaign promises have been long on rhetoric and short on policy detail.”

EM selection – a lesson for Trump survival

According to Legg Mason, EMs were one of the most hit sectors following Trump’s victory, as his well-known protectionist views could hinder EM exports to the world’s largest economy. The Mexican peso was again the proxy for the inversely correlated Trump-EM trade, plunging to historic lows. Other export-dependent currencies, such as the South African rand and the Colombian peso, also fell. Despite this pessimism, some EM local bonds and currencies rose, a sign of how investors are increasingly differentiating within the asset class, which once traded almost as a bloc. Yields of India’s local bonds, for instance, fell, given the country’s lower ties with the US and on the back of its more domestically-focused economy. The Indian rupee was one of the few currencies to rise against the greenback. Eastern European local sovereign bond yields also fell, as the region is more dependent on Europe than on the US.

 

While the Mexican peso plunged 13% to lifetime lows, officials held back from taking action to support the currency and will not make a monetary decision until their meeting next week.

From a Mexican Equity point of view, Barclays recommends investors to not overreact. While the MXN has weakened, the Mexican Equity market is indicated to be down by about 1-2% in local currency terms. They believe that many of Trump’s reforms would likely encounter opposition in Congress and are likely to require compromises. In their view, mexican sectors that are likely to underperform are manufacturing, industrial real estate and low-end consumption. To the opposite they believe large cap financials, large cap consumer stocks (mainly staples), telecom and infrastructure stocks are likely to outperform on a relative basis to the Mexican benchmark index.

While uncertainty has increased in the wake of Trump’s victory, financial markets ultimately tend to reflect long-term fundamentals. However, the short-term market volatility may also create positive buying or selling opportunities for active managers.

Caution Going Into the Fourth Quarter

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Looking in the near term, Morgan Stanley Global Fixed Income continues to expect an environment of dampened interest-rate volatility, which means a good environment for carry. “We expect contrasting forces of slow but stable global growth but perhaps higher inflation expectations to keep long-end rates trading in a range with a slight upward bias.” They explain.

However, given ongoing policy reconsiderations at central banks and a predilection to believe global growth will be higher next year is wary of sharp curve steepening and thinks underweights in risk-free rates provide a good hedge to carry oriented strategies.

“We remain optimistic about the prospects for emerging markets (EM) fixed income for the remainder of the year as fundamentals, technicals and the macro environment remain supportive,” the firm states, adding that, the various factors both pushing and pulling investors into EM fixed income remain in place: Developed market yields remain very low, economic data in EM appears to have stabilized, fears of multiple Federal Reserve (Fed) rate hikes have subsided and concerns of a sharp slowdown in China have diminished. However, Morgan Stanley Global Fixed Income believes U.S. elections reflect a major event risk for some key EMs and the outlook for global trade.

“Accommodative policy and low global yields remain supportive of global credit, particularly U.S. credit, and we continue to believe the strong technical environment in global credit markets suggests a slow grind tighter into year-end. We remain cautious, however, as we enter the last quarter of 2016, and continue to watch for potential risks,” they conclude.

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

All information provided is for informational purposes only and should not be deemed as a recommendation. The information herein does not contend to address the financial objectives, situation or specific needs of any individual investor.

Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal.

Prior to making any investment decision, investors should carefully review the strategy’s/product’s relevant offering document. For the complete content and important disclosures, refer to the link above.

1614020 Exp. 10/11/2017

Trump’s Win And the Equity Markets

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The election results are a surprise to markets, say Hersh Cohen and Scott Glasser, Co-CIOs, ClearBridge Investments – a Legg Mason company.

“We believe it is too early to draw firm conclusions and prefer to see detailed policy proposals rather than relying upon campaign rhetoric. In our view, there are likely positive and negative implications for the U.S. economy and financial markets from a Trump presidency and a Republican Congress”.

The potential positives include tax reform, regulation and infrastructure investments. The co-CIOs have long advocated for tax reform and they believe a restructuring of the tax code for corporations and individuals – along with a more efficient vehicle to repatriate foreign cash – will be beneficial for economic growth and spending. They also expect a less stringent regulatory environment and “friendlier” oversight for consolidation (through mergers and acquisitions) to support market valuations. Finally, -they add- the country will benefit from strong fiscal policy to rebuild infrastructure. They view all of the aforementioned as market-friendly and stimulative to growth.

They also have some concerns including trade, monetary policy and the direction of interest rates. “Our biggest concern stems from commentary on trade and the potential impact of modifying existing treaties and agreements. We view potential restrictions on trade and any attempts to isolate or protect the U.S. from foreign trade as highly negative. In fact, this type of protectionism invokes memories of the 1930s when trade tariffs resulted in retaliation and caused the economy to eventually tumble into depression. While we do not expect this type of extremism, slower trade has the potential to mitigate some of the growth-oriented proposals”.

Lastly, monetary policy and interest rates remain a critical variable for both the markets and the economy generally, they note. “The proposed Trump policies are growth stimulative but also have the potential to push inflationary pressures back towards historical levels, thereby pushing up interest rates. While in the long run we believe this would eventually be healthy for savers and pensions and positive for spending, U.S. markets are very sensitive to changes in interest rates which have been excessively low for seven-plus years. Increased interest rate volatility would likely result in shorter-term market dislocations”.

They have had modest expectations for stocks for the last year and a half, primarily due to a combination of lackluster growth and elevated valuations, but believe sticking with a diversified approach across a portfolio that emphasizes companies with shareholder-friendly capital allocation policies is the prudent course as we enter a new presidential cycle.

The Markets are Red, While the House, Senate and Presidency Go Republican

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Markets around the world were in awe while the US election results were called on November 8th. At the end of the count, the House, the Senate and the Presidency were all red, and so were the markets. The Mexican peso, which throughout the campaign had been seen as a proxy for the President Elects prospects, sank to its lowest level in history, plunging over 13% having its biggest fall since the so-called Tequila Crisis, in 1994.

Throughout his campaign, Donald Trump proposed increasing import tariffs, scrapping regional and global trade deals, and blocking worker remittances to Mexico. According to Nuno Teixeira, Head of Institutional & Retail Solutions Investment and client solutions investment division at Natixis, Donald Trump’s program seems more positive for equities, “with his proposal to cut back the maximum corporation tax rate from 35% to 15%, but his ultra- protectionist stance would dent companies with the most international exposure.” However the market’s first reaction was a sell-off.

While policy uncertainty will no doubt taint the markets, Natixis believes industrials, defense and oil would benefit from a Trump Presidency. Gold, is also expected to gain. Meanwhile, healthcare might get a surge given Trump wants to call into question the universal healthcare program implemented by the 2010 Obamacare legislation.

Emerging Markets, with the exception of Russia are expected to suffer in the short term. However, “in reality, if Trump were to keep to his Mexico trade agreements campaign promises, he may find punitive trade measures counterproductive given Mexico is the US’s second largest export destination and trade between the US and Mexico is interlinked.” Said Olga Fedotova, Head of Emerging Market Credit Research at AXA IM. Trump himself said in his speech, that he would be working with other countries.

According to Marco Oviedo, Barclay‘s Mexico Chief Economist and a former Mexican President Advisor the peso could fall to 22 per dollar, from an original level of 18.35 right before the election results. During the days prior to the election, the peso posted a four-day rally while expectations of a Democratic win grew. Mexico’s Central Bank Governor Agustin Carstens and Finance Minister Jose Antonio Meade have prepared a contingency plan but they informed in Mexico that they will not raise rates out of schedule. The next raise is expected to happen next week at their policy meeting.

Asian Institutions Face Pressure to Lift Returns

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Many Asian institutions are struggling to meet their targeted portfolio returns or have recorded negative returns amid the global market turbulence since mid-2015. This has forced them to look beyond core asset classes for yield and search for more non-traditional strategies as they seek to boost returns and reduce fee expenses on their portfolios.

This is one of the key findings from global research and consulting firm Cerulli Associates‘ newly released Institutional Asset Management in Asia 2016 report. While the number of traditional mandate issuances from Asian institutions declined, the pace of alternative searches and use of other non-traditional avenues like smart beta strategies have markedly increased among asset owners in China, Korea, Hong Kong, and Taiwan.

Alternative allocations, in fact, gave institutions like Korea’s National Pension Fund and Korea Teachers Pension Fund the strongest returns on their respective investment portfolios last year. This has strengthened the resolve of many Korean institutions to beef up their alternative exposures, with some of them aiming to invest at least 20% of their portfolios in alternatives before 2020. Apart from the allure of alternative investments, the underperformance of active managers has also prompted Asian institutions to think more about passive products or smart beta products. In Taiwan, assets allocated by pension funds to smart beta strategies surged by 62.2% to US$10.9 billion, accounting for 31.9% of their total overseas mandates as of June 2016.

However, Asian institutions are unlikely to have full-scale expertise in these areas any time soon, and will have to rely on external managers. “This burgeoning demand for alternatives and passive products will provide more opportunities than ever to managers known for their strong alternative capabilities,” says Manuelita Contreras, an associate director with Cerulli, who led the report.

This certainly puts pressure on traditional asset managers. In Cerulli’s survey of institutional asset managers in Asia, they ranked competition from alternatives and passive products among their top five challenges over the next two years. Many traditional asset managers have even jumped on the alternative bandwagon and built their alternative capabilities.

The growing competition for assets from the usual institutional investors in the region has also prodded managers to find opportunities at smaller institutions, including private banks, smaller pension funds, benefit associations, and small and mid-sized insurers. “Nowhere is this more evident than in Korea, where a slew of them have poured money into overseas investments, with some having even leapfrogged from passive to alternative investments,” says Rui Ming Tay, an analyst with Cerulli, who co-led the report.

Andy Rothman: “The Chinese Debt Problem is Concentrated to Some Sectors and Standardization Will Not Be Traumatic”

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Andy Rothman: "The Chinese Debt Problem is Concentrated to Some Sectors and Standardization Will Not Be Traumatic"
CC-BY-SA-2.0, Flickr. Andy Rothman: "The Chinese Debt Problem is Concentrated to Some Sectors and Standardization Will Not Be Traumatic"

Many experts predict a dramatic story for China, claiming that an economic crisis or a hard landing of the Asian giant is just around the corner. But the reality is less dramatic: Although China faces many challenges, it is more likely to continue to account for about one-third of global growth than to be at the center of a collapse.

Speaking at Matthews Asia’s 2016 Investment Forum in San Francisco, Andy Rothman, investment strategist at the firm, explained that a misunderstanding of how much the economy has changed in recent years is what drives the extreme pessimism for China’s prospects.

“China’s growth deceleration is indeed a fact, but, How possible is a ‘hard landing’?” he queried. “From the media’s point of view, the story of China’s collapse is very appealing, and given the misunderstanding of its economy, it’s an argument that easily gains adherents,” he said.

“The average citizen in developed economies imagines China as an economy which is fully controlled by the state, with a very communist background, ghost towns, “zombie” companies, and a huge weight of exports and investment in its GDP. But the reality of China’s economy is more like this:

  1. 80% of employment in China is in private hands.
  2. All employment growth is generated by SMEs
  3. China has become a market for entrepreneurs
  4. It is headed for its fifth consecutive year in which services and consumption account for a larger part of its economy than manufactoring and construction.”

The rebalancing of the Chinese economy from investment to consumption implies lower growth, said the expert, “but we must not forget that last year China was responsible for 35% of the global economy’s growth and that, ultimately, what happens in China has a huge impact on the global economy and in most of the companies in which we invest, both inside and outside China. Therefore, it is important for investors to understand what is really happening there,” Rothman pointed out.

As an example of this transformation, the strategist mentioned the prevalence of private companies, and not of state-run enterprises, as is widely believed. Also, the services and consumption sectors already exceed manufacturing and construction.

Mistrust indata

It is true that when dealing with the macroeconomic data published by China, there is certain mistrust, which is very hard to overcome. For the Matthews Asia fund manager, skepticism is quite clear. “There are reports that growth in electricity consumption is much lower than the GDP growth data. And that is so. That does happen, but the same is true in the United States. Growth comes from companies and industry sectors which are much less electricity intensive, such as Alibaba,” he explained.

“Another thing which is also frequently mentioned is the drop in imports of raw materials, but that data is always reported in dollars, not volume. And the reality is that the price of raw materials has plummeted in recent years, so when looking at imports of raw materials in terms of volume (tonnes), the slowdown is far less dramatic,” he said.

Debt

“The debt problem is serious, but the risk of a hard landing or banking crisis is, in my view, low. The key reason for that is that the potential bad debts are corporate, not household debts, and were made at the direction of the state—by state-controlled banks to state-owned enterprises,” Rothman said. This provides the state with the ability to manage the timing and pace of recognition of nonperforming loans. It is also important to note, he points out, that the majority of potential bad debts are to state-owned firms, while the privately owned companies that employ the majority of the workforce and account for the majority of economic growth have been deleveraging. Additional positive factors are that China’s banking system is very liquid, and that the process of dealing with bad debts has begun.

A massive devaluation of the Renminbiis not expected

Last year, the Renminbi depreciated by about 6% against the dollar, while so far this year, it’s down by about 4%. “The Chinese currency is unlikely to depreciate, or appreciate by more than 5% per annum, and the direction will most probably vary depending on the strength of the dollar against the other world currencies. The reality is that China remains a competitive exporter, even though wages have grown on average 15% annually in recent years and the Renminbi has appreciated over 40% against the dollar from 2005 to 2015” Rothman, concluded.

Maitland Restructures its Institutional Client Team

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Maitland rediseña su equipo directivo para organizarlo por tipo de producto
CC-BY-SA-2.0, FlickrPhoto: Federico Mena Quintero . Maitland Restructures its Institutional Client Team

Maitland, a global advisory and fund administration firm, has announced a major organisational restructure of the leadership team of its institutional client services arm. The management team will now reflect the five fund services products on offer – Traditional Fund Services, Transfer Agency, Hedge Fund Services, Private Equity & Real Estate Fund Services and ManCo Services.

The move reflects Maitland’s impressive expansion over recent years, both in terms of size and geographical reach as well as breadth of internal expertise and talent. The product approach empowers each product head to drive all aspects of the delivery to clients, both in terms of day-to-day service as well as longer-term strategic alignment.

The entire institutional product offering will be led by Jim Clark, who joined Maitland in May 2014 from State Street and brings over thirty years of industry experience to the role. The TFS team will be led globally by Rob Leedham, with Guido Frederico leading the South African business. TA and HFS teams are led globally by Mark Bredell and Ben Pershick respectively while Bruce McGlogan will head up the PERE team as it builds on its current period of success in Europe and South Africa.

Steve Georgala, CEO of Maitland, said: “Maitland is a unique firm in terms of its product capability and breadth of services we are able to offer institutional clients. We are delighted to have a leadership team full of deep industry experience, with each member bringing substantial knowledge and expertise to their domain. Our focus is to stabilise the areas of Maitland that have enjoyed substantial growth recently, whilst continuing to actively grow products and regions where our offering is attracting considerable market interest. Given this, it made sense to restructure our organisation to reflect our client-centric approach, and to empower our business leaders to deliver the best service possible. These are exciting times for the company.”