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. La noche es más oscura justo antes del amanecer
The victory of Donald Trump in the U.S. presidential election has led to widespread market movements. After initial adverse movements, equities rallied and bond yields jumped as Trump’s initial statements reassured markets, calling for unity and pledging that he will be the “president of all Americans”.
In Lyxor AM‘s weekly commentary, the team notes that cyclical sectors have done better than defensive sectors (except health care stocks which have done well) as looser fiscal policy is expected to support economic activity. Coupled with the possibility that the Trump administration will implement protectionist trade policies, expectations of fiscal stimulus are leading to a sharp repricing of bond yields.
Philippe Ferreira, Director, Senior Cross-Asset Strategist at Lyxor Asset Management, points out that although they do not yet have comprehensive data on hedge fund performance covering the period since the U.S. election, their initial estimates suggest that:
Long term CTAs were down as losses on their long fixed income positions were only partially offset by gains on long equities, long USD and long energy in commodities.
Global Macro experienced a wide dispersion in returns. Some strategies that were long EM currencies (MXN in particular) experienced losses in the range of 2-3% over the recent days. Meanwhile, managers that were short duration in fixed income were up and some managers investing in equities were flat as gains on longs on European and Japanese indices were offset by losses on shorts on U.S. indices.
Within the L/S equity space the long biased managers benefitted from the market rally as well as from positions on health care stocks. EM L/S specialists are down in the order of 2% on the day of the election and are deleveraging quite aggressively.
Event Driven strategies marginally benefitted from their exposure to health care stocks but overall their lower net exposure ahead of the election prevented them from joining the market rally. Implications for the strategy are rather long term and could be positive to the extent that the march towards tougher regulations might be stopped.
L/S Credit and Fixed Income Arbitrage were resilient in front of higher bond yields. We estimate L/S Credit funds were down 8 to 15 bps on the day of the election.
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. Why Brexit Offers Opportunities for Private Equity
According to Christopher Moxon, Antoon Schneider, and Philippe Morel from BCG, the UK’s vote to exit the European Union is already leaving a mark on the country’s economic landscape. They believe that while the full timing and extent of the break are uncertain and may not be known for several months, many British companies are starting to reassess aspects of their business. Therefore, private equity firms will have to step up their due diligence and accept additional risk in UK investments. But the breakup also offers an opportunity for PE firms that have honed their capabilities in helping companies deal with change.
The company is certain PE firms have notable advantages over corporate acquirers and IPOs during periods of change since they combine abundant capital with a sense of urgency, yet their longer investment horizons allow them to acquire companies in uncertain times. “Whether the goal is operational efficiency, investment for growth, bolt-on acquisitions, or spinoffs, companies can generally move more aggressively under private equity than under corporate or independent ownership.”
Among sectors likely to be hit by Brexit, they identified four of particular interest to PE firms, as well as several secondary sectors. They chose them mostly because they think they present the greatest opportunities, but also because they illustrate the advantages that PE firms have in competing for these assets, especially in the short term. Most promising are companies that depend heavily on EU trade, workforces, or regulations.
For the BCG team Industrial Distribution, Private Medical Clinics and Laboratories, Aerospace Manufacturing, and Employment and Recruitment Services, will face substantial risks at this time of uncertainty and volatility. But PE firms, especially those focused on adding value to opera- tions, are well placed to help them succeed.
Other sectors of interest include Nonfood Retail, Agricultural Suppliers, Specialty Chemicals and Asset Management.
Regarding AM they mention that like other areas of financial services, “this sector could be hit hard by companies shifting activity from London to elsewhere in Europe. It was already slowing down before Brexit, and now many banks are withdrawing from the market. But with the Bank of England keeping interest rates around zero, investors will continue to seek asset managers that can offer higher returns. PE’s best opportunity here may be with niche asset management companies.”
You can read their complete article following this link.
Lombard International, a global leader in wealth structuring solutions for high-net-worth individuals, has appointed Andreas Meier as Head of Latin America. This appointment is the group’s ninth senior level hire since the global relaunch in September 2015 and highlights Lombard International’s continued commitment to servicing the Latin American market.
In this newly created role, Andreas, who will be based in Luxembourg, will report to Axel Hörger, CEO Europe and Ken Kilbane, Executive Vice President, Head of Global Distribution. Drawing on his 24 years of experience of working in the Latin American market, Andreas will be responsible for Lombard International’s business development for the region, combining the wealth structuring expertise and local knowledge of teams based in the USA and Europe.
According to a press release, this is a strategically important region for the Group and Andreas will be instrumental in growing new opportunities, both for the offshore market via key hubs in Miami and Switzerland, and in leading the sales and implementation strategy for the onshore market in the region. Andreas will take up his newly created role on the 1st January 2017.
“I’m delighted to welcome Andreas to the team. His knowledge of the LatAm market will prove invaluable as we continue to expand our proposition in this region,” commented Hörger. “The experience Andreas brings to the role will enable us to deliver best-in-class wealth structuring expertise that we have become synonymous with, not just for our Latin American clients but also for our clients globally.”
Andreas joins Lombard International from UBS Deutschland AG, where he was Head of Wealth Management for Latin America. As Managing Director and Member of the Management Committee Germany and Austria, he was responsible for leading advisor-teams with clients from 14 Latin American countries across all client segments. Andreas has held previous senior positions at UBS Group, including Head of Latin America Southern Cone, Head of Financial Intermediaries and Regional Head of Northern Germany Domestic.
“I am excited to be joining Lombard International and leading the LatAm team.” said Andreas. “This is a growing market, which I know well, where high-net-worth individuals and their families are looking for wealth solutions to support them through a complex and ever changing world.”
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. Santander Buys Back its AM Unit From Warburg Pincus and General Atlantic
After Santander and Unicredit decided not to merge its Asset Management branch with Pioneer Investments –which would have given them over 400 billion in assets under management, Santander has reached an agreement to buy back the 50% stake Warbug Pincus and General Atlantic bought back in 2013.
The deal, for an undisclosed amount, will give Santander full control of Santander Asset Management, which in 2013 was valued at 2.05 billion.
In a statement to Spain’s financial regulator, the CNMV, the spanish bank mentioned that, as part of the deal, the parties are considering a sale of Allfunds bank, confirming previous rumors. Santander, Warbug Pincus and General Atlantic, currently own 50% of the business, while Italian Intesa Sanpaolo holds the other 50% stake of Allfunds. Santander created Allfunds in 2000 to help financial institutions get access to so-called open architecture funds. Italian lender Intesa acquired a stake in 2004 as part of Allfunds’s international expansion. The company has offices in Spain, Italy, the U.K., Chile, Colombia, Dubai, Luxembourg and Switzerland andcould be valued at about 2 billion euros ($2.2 billion) and attract interest from private equity firms.
Allfunds reported profit of 69 million euros in 2015, up from 46.4 million euros a year earlier, according to the company’s financial report.
Santander Asset Management has over 170 billion euros in AUM and presence in 11 countries. Santander Asset Management has over 755 employees worldwide, of which around 220 are investment professionals. they expect that in 2018 this operation will give them a ROI above 20% and above 25% for 2019.
Tikehau Capital has completed the purchase of 80% of the capital of Ireit Global Group, the manager of Ireit Global.
Ireit Global is a real estate investment trust listed in Singapore investing directly and indirectly in a portfolio of real estate in Europe, used primarily for office purposes.
The current portfolio consists of five freehold properties in Germany valued at around €450m.
Tong Jinquan, founder of Shanghai Summit (Group) Co. and Lim Chap Huat, founder and executive chairman of the Soilbuild Group, remain shareholders of Ireit Global Group alongside Tikehau Capital.
Bruno de Pampelonne, president of Tikehau IM, will be appointed member of the Ireit Global Board of Directors.
De Pampelonne said: “We are very pleased with this transaction that will enable Tikehau Capital to significantly expand its pan European real-estate footprint and extend our reach toward Asian investors. Also, we are bringing Ireit our extensive Pan-European network combined with strong local operational expertise and existing pipeline of real estate transactions in Europe to accelerate the REIT’s growth. This acquisition further consolidates our position in Asia from Singapore, a hub where we have been operating from, for two years now. We are looking forward to further developing Ireit Global’s assets together with our new partners.”
Tikehau Capital’s AUM stood at €9.9bn as of 31 October 2016.
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. Michael O’Grady, to Become Northern Trust's New President
Northern Trust Corporation‘s Board of Directors elected Michael O’Grady as their next President of the Corporation, effective Jan. 1, 2017, reporting to Frederick H. Waddell, Chairman and Chief Executive Officer. O’Grady was also elected to the Board of Directors of Northern Trust Corporation, effective January 1, 2017.
“Mike has proven himself to be an exceptional leader, both internally and externally, and a highly regarded member of our executive management team,” Waddell said. “He has deep industry experience, a keen understanding of Northern Trust, and a strong track record of translating vision and strategy into execution.”
Until a successor is named, O’Grady will retain his current responsibilities as President, Corporate & Institutional Services (C&IS). Steve Fradkin, President, Wealth Management, and Steve Potter, President, Asset Management, will report to O’Grady effective January 1, 2017.
Prior to becoming President of C&IS in July 2014, O’Grady served as Executive Vice President and Chief Financial Officer. Before joining Northern Trust in 2011, O’Grady served as a Managing Director in the Financial Institutions Investment Banking Group at Bank of America Merrill Lynch. He joined Merrill Lynch in 1992 as an Associate. O’Grady worked for Price Waterhouse from 1987 to 1990. He graduated from the University of Notre Dame with a bachelor’s degree in Accountancy and received an MBA from Harvard Business School. He is a member of the boards of trustees of The Field Museum and the Museum of Contemporary Art Chicago, the Finance Council of the Archdiocese of Chicago, and the Board of Advisors of Catholic Charities.
CC-BY-SA-2.0, FlickrPhoto: Joe Le Merou. Muzinich's New Hires Prepare Two Fund Launches
Corporate debt specialist Muzinich & Co is to launch two new funds to be managed by Torben Ronberg, Stuart Fuller, Sam McGairl and Alex Woolrich, the loans team who recently joined from ECM Asset Management Limited, a Wells Fargo Asset Management company.
Ronberg and his team, who took up their posts this week, will now prioritise the launch of a new European senior secured loans vehicle, the Muzinich European Loans Fund. They are also putting the foundations in place for the launch of a multi-asset vehicle, the Muzinich Senior Secured Fund, which will have a broader investment mandate. This vehicle will primarily invest in senior secured loans and senior secured high yield bonds, combining the core strengths of the joining team with that of the established team at Muzinich.
Both funds will sit under Muzinich’s Irish-domiciled ICAV, which has been established as a Qualified Alternative Investment Fund. They will be aimed primarily at pension funds, insurance companies and other institutional investors.
George Muzinich, founder and Chairman of Muzinich, said: “We’re thrilled to welcome Torben and his team, who have worked together for over a decade and established an outstanding reputation in the industry.”
Ronberg said: “We have built a 10-year benchmark-beating track record, delivering strong single-digit annualised returns through senior secured loan strategies. We’re confident that this asset class can continue to deliver attractive risk-adjusted returns. We believe there’s growing interest in senior secured loans from pension funds and other institutional investors. Senior secured loans offer attractive all-in floating rate returns, so they provide some protection against interest rate rises.”
CC-BY-SA-2.0, FlickrPhoto: Mark Morgan. Frenzied M&A Activity to Support Event Driven
October was a supportive month for Global Macro funds, which almost erased their year to date losses in a single month. According to LyxorAM’s Cross Asset Research team, the top contributors to their stellar performance last month included a short duration stance in fixed income and long positions on the USD vs. EUR and GBP in FX. Meanwhile, for Macro managers investing in equities, their preference for European and Japanese equities vs. US equities also paid off in October.
With regards to Event-Driven, Lyxor noted that the strategy underperformed on the last week of October (-0.3%) and is down almost 1% last month. “It is not surprising to see the strategy in the red when 10-year Treasury yields jump 25 bps in a month, as it has historically been negatively correlated to bond yields. But most managers were fairly resilient despite the adverse market conditions.” They state.
Going forward, the team maintains their slight overweight stance on Event-Driven, with a continued preference for merger arbitrage players. “We believe that the strategy can cope with higher bond yields as its net exposure to both equities and bonds has continued to decrease lately. Managers have thus ample room to deploy capital as opportunities arise. And in that regard, Bloomberg data suggests that October was one of busiest months ever for global M&A activity.”
Announced M&A deals represented more than USD 470bn (applies to deals with a transaction value above USD 400m). US M&A activity represented 60% of the total, and the media sector has been the most active thanks to deals such as the USD 107bn proposed merger between AT&T and Time Warner. Yet, ahead of US elections most Event Driven managers stayed cautious and waiting for greater political clarity before deploying their capital. “The strategy is thus likely to be resilient if equity volatility continues to rise, which would lead to wider deal spreads and open the door for cash deployment.” They conclude.
Vanguard has cross-listed three U.S.-domiciled funds on the Global Market of the Mexican Stock Exchange.
The U.S. domiciled ETFs are:
The Vanguard Mortgage-Backed Securities ETF (VMBS)
The Vanguard International Dividend Appreciation ETF (VIGI)
The Vanguard International High Dividend Yield ETF (VYMI)
The cross-listing of U.S. domiciled ETFs in Mexico provides a strong product foundation for Vanguard, and a cost-efficient method of serving the Mexican market. The addition of these three products brings the total number of Vanguard ETFs registered on the Mexican Stock Exchange to 65, which you can see in the attached document.
Vanguard’s Heinz Volquarts noted that the three funds they cross-listed are not registered with the Comisión Nacional del Sistema de Ahorro para el Retiro (CONSAR). therefore the Mexican Pension Funds (afores) are not yet allowed to invest in them.
According to global research and consulting firm Cerulli Associates, retail asset growth has managed to outpace institutional asset growth on a one-, three-, five-, and ten-year basis, reaching more than $18 trillion as of year-end 2015.
“A low-yield environment and a rise in average life expectancy is making it difficult for defined benefit (DB) plans to achieve returns to fund liabilities,” explains Jennifer Muzerall, associate director at Cerulli. “In recent years, sponsors have offered lump sums or buyouts to reduce the number of participants in DB plans via pension risk transfers.”
Pension risk transfer options are one of several drivers bolstering retail asset growth since asset managers have begun to explore the delivery of a wider variety of products and strategies through retail intermediaries. “The growth of retail assets has also been driven by the convergence of institutional-like strategies in the retail marketplace, such as alternatives,” says Muzerall.
Cerulli recommends that firms should continue to invest in distribution professionals and educational programs to get advisors comfortable with using alternatives. “It is important to work with advisors to show them how using alternatives or increasing allocations may impact their investment portfolios,” explains Muzerall.
“Asset managers must build out robust key account teams to face off with members of investment research or due diligence teams,” states Muzerall. Top asset managers surveyed recognize a need to accommodate the increasing sophistication of buying groups emerging within the intermediary channels. “The institutional sales process is making its way into retail channels and asset managers are seeking out relationships with top registered investment advisors and due diligence groups from both broker/dealer (B/D) home offices and B/D mega teams,” says Muzerall.
Cerulli’s latest report, The State of U.S. Retail and Institutional Asset Management 2016: Business Planning for Growth Opportunities, provides a comprehensive overview of the aggregate U.S. asset management landscape, benefitting both U.S. asset managers and those seeking distribution opportunities in the U.S. It explores all distribution channels, client segments, and product vehicles, with a focus on the interaction between the retail and institutional marketplaces.
