Despite the downturn in China markets in the second half of 2015, Chinese fund management companies (FMCs) saw revenues and profits rising in 2015. Many FMCs saw double-digit and even triple-digit net profit growth during the year.
This is one of the key findings of a research initiative by Cerulli Associates entitled Asset Management in China 2016. This research initiative is divided into three parts: two quarterly strategic overview reports followed by our annual report scheduled for release in the third quarter of 2016. This key finding was presented in the second strategic overview, released this month.
Cerulli’s research shows that six FMCs reported net profits of more than RMB1 billion in 2015. China Asset Management was the most profitable with RMB1.41 billion in net profit, followed by ICBC Credit Suisse Asset Management with a net profit of RMB1.29 billion for 2015.
For the largest 20 managers in China, the average net profit margin was 30.4% in 2015 while the net profit yield–which measures how much managers earn in basis points for each renminbi they manage–was approximately 28.5 basis points. Fullgoal Fund Management showed the best net profit yield last year at 56.9 basis points.
Institutions continue to play a big part in growing FMCs revenues and profits. “Institutional investors are estimated to have contributed one-third of assets under management as at end-2015. We understand that they prefer one to-one segregated accounts because such accounts are more flexible in active management and in using leverage,” says Miao Hui, senior analyst with Cerulli who leads the China research initiative.
Institutional investors also welcome “customized mutual funds,” or funds launched for specific investors that meet the minimum number of subscribers, with lower leverage allowed. Still, it will be hard for FMCs to sustain 2015’s profit levels in 2016. “While institutional investors’ participation in capital markets is expected to grow in 2016, FMCs’ profits will be hard to maintain under current volatile market conditions,” Hui adds.
CC-BY-SA-2.0, FlickrPhoto: Nimalan Tharmalingam. London Remains the Top Leading Global Financial Centre
London, New York, Hong Kong, Singapore and Tokyo remain the five leading global financial centres according to the twentieth Global Financial Centres Index (GFCI 20). Published by Z/Yen in collaboration with the China Development Institute (CDI), the GFCI rates 87 financial centres. London is one point ahead of New York (on a scale of 1,000 points this is insignificant). Singapore is 42 points behind New York in third place. Tokyo, in fifth place, is 60 points behind New York.
The UK ‘Brexit’ referendum result is not reflected in the GFCI 20 results so far. GFCI 20 was calculated based on data collected up to the end of June 2016 – a few days after the referendum result on 24 June. Looking ahead to GFCI 21, assessments given to London in July and August are significantly down from previous levels. GFCI 21 may show some significant changes. London, New York, Singapore and Hong Kong remain the four leading global financial centres.
All North American centres except Calgary are up in the ratings. Calgary focuses on energy finance and the recent volatility in oil prices is likely to have caused a decline in Calgary’s rating. San Francisco and Boston are second and third in North America – reflecting the growing importance of FinTech. Chicago re-enters the GFCI top ten and Toronto, the leading Canadian centre, is now 13th having been eighth a year ago.
Western Europe remains a region in flux. Luxembourg and Dublin show strong rises in the ratings whilst Geneva and Amsterdam fall. Early indications following the Brexit referendum result are that decision-makers are looking around and considering Luxembourg and Dublin as potential locations if they need to leave the UK. Wealth management in Geneva may be suffering from increased transparency requirements of international regulators. Seven of the top ten Asia/Pacific centres see a fall in their ratings.
Some Eastern European and Central Asian centres prosper whilst others struggle. Warsaw, Tallinn and Riga are now the leaders in this region. Istanbul, Moscow, St Petersburg and Athens continue to languish. Turkey and Russia are both involved in armed conflict. Although geographically removed from the fighting, the financial centres in these countries are clearly affected by the uncertainty this creates.
Australasian centres are doing well. Three of the top five global centres are Asian. Hong Kong and Singapore had some small declines. Sydney and Melbourne both saw solid increases in their ratings.
Offshore financial centres are recovering lost ground. Jersey, Guernsey, the Isle of Man, the Cayman Islands, Bermuda, the British Virgin Islands, and are all up in the GFCI 20 ratings.
Middle Eastern centres decline. With the exception of Bahrain which saw a modest rise, all Middle Eastern centres were somewhat down although Dubai only fell by a single point remaining well ahead of other centres in the region.
Latin America down, Caribbean Up. Sao Paulo, Rio de Janeiro and Mexico continue to struggle. Trinidad & Tobago have entered the index for the first time in 71st place.
Mark Yeandle, Associate Director at the Z/Yen Group and the author of the GFCI, said “Changes in perceptions following the Brexit referendum are not yet reflected in the GFCI. However, early signs are that London could see a decline next time round. Which centres may gain from this is hard to predict.”
Fan Gang, CEO of the CDI, said “We are delighted to be working with Z/Yen Group in producing this index. It is a very exciting time for financial centres in China as Shanghai, Shenzhen and Beijing all rose in the GFCI ratings in GFCI 20. Dalian and Qingdao were also seen as performing well in recent editions. We anticipate that Chinese financial centres will rise rapidly in importance around the world.”
CC-BY-SA-2.0, FlickrPhotos: Florence Low. “You Cannot Invest in Asia Without Properly Knowing the Market.” Matthews Asia’s Message During its Annual Conference
Last 13th to 15th of September, Matthews Asia held its annual conference at the Palace Hotel in San Francisco. The sessions were attended by up to 120 delegates from Canada, the United States, and Latin America.
Delegates heard firsthand about the management company’s experience in long term investing in one of the world’s most dynamic economic regions, which contributes to more than a third of global GDP. This year, the company celebrates its 25th anniversary as one of the most specialized companies in the Asian market.
“Speaking directly with the CEOs, visiting the company, walking through their facilities…” for Paul Matthews, the firm’s founder, and Mark Headley, Chairman of the Board of Directors, that isthe key to the company’s 25 years in the region. “It is still essential to visit the companies in which we invest to get to know them properly,” Headley said during his speech, reminiscing about his first visit at an Asian factory.
“In 1993, Paul and I saw, in a Barings brochure, photos of a textile company, which pictured all its workers busy at their jobs. When we went to visit it, we discovered that their warehouses were completely empty” After a few twists and turns, they finally got someone to explain to them what was happening. The factory was waiting for machinery from Germany, and meanwhile its 3,000 employees could not work. “The fundamental conclusion of that trip was that you could not invest in Asia without personally visiting the companies,” said the Chairman of the Board.
During the two conference days, the company’s portfolio managers emphasized the idea that investing in Asia is a long distance race, and that the best way to ensure returns is by investing strategically, rather than tactically. Matthews Asia does not invest in countries or in certain sectors, but in companies. Their process is entirely bottom-up and the portfolios are constructed company by company.
Investing in China
With regards to China, Matthews’ experts stressed that despite the ‘bad press’ haunting the Asian giant, the reality is that there has just been a slowdown, rather than a collapse of the economy. In fact, the fund managers believe there is an opportunity to invest in companies, especially those related to the strength of domestic consumption in China.
Matthews is convinced that the debt problem in China is not higher than in other world economies, and is mainly composed of public debt. The fact that household debt is not substantial is, in their opinion, an advantage.
The highlight of the first day came from Andy Rothman, a veteran investment strategist and author of the Matthews Asia blog, Sinology. His mission: to destroy the myth of an unrestrained China.
“The average citizen in developed economies imagines China as an economy which is still totally controlled by the state, with a very communist background, ghost towns, “zombie “companies, and with exports and investment accounting for the most part of GDP. The reality of China’s economy is more like this: 80% of employment in China is in private hands, all employment growth is generated by SMEs, it is a market of entrepreneurs and, finally, we are in the fifth consecutive year in which services and consumptionaccount for a larger part of the economy that investment.”
Strategic vs. Tactical
The Matthews Asia Investment Forum also featured a presentation by portfolio managers, Robert Horrocks and Teresa Kong, who reminded the audience that there are not many purely tactical or purely strategic decisions, but that decisions within their company are much more strategic than tactical. This is why, for them, macro data is important but just up to a certain extent.
Matthews Asia defines itself as ‘macro-agnostic’, a description which caught the audience’s attention, and which refers to the fact that it places much more importance on choosing the right companies, than on choosing the right countries.
“Choosing the right company is even more important than choosing the right sector. In fact, issues like interest rates, currencies, and GDP growth, are all more tactical than strategic. When you invest with a 10-year horizon, macro parameters lose relevance,” Kong said during her presentation.
The event closed, until next year, with a visit to the company’s San Francisco office, providing delegates with the opportunity to have one-to-one meetings with fund portfolio managers.
CC-BY-SA-2.0, FlickrPhoto: greeblie
. Baby Boomers Are the Largest Users of ETFs
Despite the commonly held view that exchange traded funds (ETFs) are most popular with younger investors, a new whitepaper from Pershing, a BNY Mellon company, in conjunction with Beacon Strategies, finds that investors between the ages of 51-70 who work with advisors are, in fact, the largest users of ETFs, followed by those over the age of 71.
The report, The Evolving ETF: Using Exchange Traded Funds in Client Portfolios, surveyed more than 1,500 advisors in the U.S and around the globe. More than two-thirds of advisors who use ETFs intend to increase their usage over the next 12 months, while 55 percent said that more than half of their clients already have ETFs in their portfolios.
“The widespread assumption across the investment management industry is that the continued growth and popularity of ETFs is being driven by younger investors. However, advisors are telling us that this is not necessarily the case,” said Justin Fay, director of financial solutions for alternative investments and ETFs at Pershing.
“We found that ETF usage in portfolios is most prominent among the Baby Boomer and Greatest Generation populations, mainly because these investors have become increasingly aware of the cost efficiency and access to a variety of styles that ETFs may provide, which can help them achieve their financial goals,” he added.
Pershing and Beacon Strategies’ whitepaper revealed a number of other key findings, such as:
Advisors view ETFs as critical investments in client portfolios
Performance is the key criteria for choosing a specific ETF
Further education needed around ETFs
“ETFs can be a particularly attractive investment option for advisors, offering customizable solutions and potentially lower-cost access to markets, countries and sectors than many other comparable investment vehicles. While the RIA channel continues to dominate in terms of ETF use, we are seeing increased adoption across other channels, particularly independent broker-dealers who are implementing ETFs more frequently within portfolios, and this trend is expected to continue,” concluded Fay.
To obtain a copy of Pershing’s whitepaper, follow this link.
CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn. Cazenove Capital Management Acquires C. Hoare & Co's Wealth Management Business
Cazenove Capital Management, the UK wealth manager of Schroders, has reached an agreement with C. Hoare & Co. to acquire its wealth management business.
C. Hoare & Co. is a London-based private bank with a 300-year history of providing banking services to high net worth and ultra-high net worth clients. Over the last decade, it widened its service offering into wealth management and has developed a high-quality business with approximately 1,800 clients and £2.2 billion of discretionary assets under management at the end of June 2016.
Peter Harrison, Group Chief Executive at Schroders, said: “C. Hoare & Co.’s culture of client focus and exemplary client service are a strong fit with Schroders. This acquisition of its UK wealth management business grows our business in this area. I am confident that the relationship will create long-term value and benefits for clients, shareholders and employees.”
Andrew Ross, Chief Executive at Cazenove Capital Management, said: “We believe the combination of our two businesses will bring significant benefits and enhanced opportunities for our clients. The complementary fit between our two firms, the strong shared service culture, long-term thinking and established heritage of both businesses make this an ideal match.”
Alexander Hoare, Partner and Director at C. Hoare & Co., said: “We have chosen Cazenove Capital, the UK wealth manager of Schroders, because our firms share established heritages and similar cultures with the same dedication to customer service. We are very proud of the wealth management business that we have built over the last decade and we are keen for it to continue to flourish. We look forward to an ongoing relationship with Cazenove Capital.”
Financial terms of the transaction were not disclosed and it is expected to complete in the first quarter of 2017.
CC-BY-SA-2.0, FlickrPhoto: RIccardo Cambiassi. Claudia Ripley, Ingrid Tharasook and Fabrizio Palmucci Join Jupiter
Jupiter has appointed three product specialists to support its UK equity, Asia and GEM equity and Fixed Income and Multi-Asset teams. Reporting to Katharine Dryer, who heads the product specialist team at Jupiter, these new hires will provide additional support to some of our growing investment strategies and bring the recently-established product specialist team to full capacity. All three will have taken up their positions at Jupiter by the beginning of the fourth quarter of 2016.
Claudia Ripley joins Jupiter to work across all our UK equity funds, with a particular focus on those managed by Steve Davies and Ben Whitmore. She has nine years’ UK equity product experience, seven of which were spent as the Lead Retail Product Strategist on the BlackRock UK Active Equity Team.
Ingrid Tharasook joins from Coutts & Co.’s investment strategy team to cover Jupiter’s range of global emerging market equity funds. Her previous experience as a sector specialist in emerging market fixed income and Asian (and Japanese) equities will complement the management styles of Jason Pidcock and Ross Teverson as they build on recent momentum. A fluent Brazilian Portuguese and Thai speaker who has lived across four continents and has nine years’ investment experience, Ingrid brings a truly global perspective to her new role.
Fabrizio Palmucci joins the Fixed Income and Multi-Asset team to support recent growth in this area. Fabrizio spent five years developing the Pimco Source partnership as the Head of Fixed Income Product Management team at Source. Fluent in Italian, Spanish and French, Fabrizio will have a particularly strategic role to play in supporting our distribution teams as we increase our European footprint. His 14 years’ experience encompasses product management credit analysis and bond trading.
Katharine Dryer commented: “We are delighted to have attracted three talented professionals to these new roles. They will help us develop our communications with clients and enable our fund managers to stay focused on generating performance. The work of Alastair Irvine with the Jupiter Independent Funds team and Tommy Kristoffersen on Cedric de Fonclare’s team has demonstrated the value the product specialist role can provide as a key link between the investment and distribution teams. My congratulations go to all of the new recruits.”
Germany’s Oktoberfest is famous the world over for its traditional costumes and, most of all, its one-litre “Maß” mugs of beer. But have you thought about what beer can teach you about the world of finance and economics?
Hans-Jörg Naumer, Head of Global Capital Market Analysis and Thematic Research at Allianz Global Investors and his team prepared an infographic that compares the number of Okoberfest Maß that EUR 10 buys versus what that same money will have become if invested in German equities back in 1960. The result, Pint-sized economics!
“As our research shows, the equivalent of EUR 10 in 1960 would have been more than enough to buy an entire round for you and nine friends. But thanks to inflation, the price of a Maß has gone from 95 cents in 1960 to EUR 10.50 today – not even enough for one drink. Yet if you had skipped your drinks in 1960 and invested EUR 10 in German equities, you would now have EUR 395. That would buy you an inflation-busting 37 Maß at Oktoberfest. Prost!” Concludes Naumer.
Carlos Martinez . Carlos Martinez Joins Investment Placement Group’s Miami Office
Investment Placement Group (IPG), an Independent Broker Dealer and Registered Investment Advisor, recently announced that former Merrill Lynch advisor Carlos Martinez has joined the firm’s Miami, Florida office which is managed by Rocio Harb.
Martinez has over 20 years experience and through his 16 years at Merrill Lynch, he managed a 100 million dollar portfolio. “Making a decision to join a new firm is not to be taken lightly, taking in consideration what is best for my clients being the most important factor. After much consideration and due diligence, I determined that IPG is the best place for my clients and for me. They have highly skilled support teams and are focused on the needs of global investors” said Martinez.
“Carlos is true professional with a long track record of working with Latin American investors. He is a great addition to our team and we are happy to welcome Carlos to IPG” added Harb.
“Our goal has been to add experienced and highly qualified advisors in key locations, Carlos certainly fits the bill. We look of forward to his continued success at IPG”, said Gilbert Addeo, COO and Head of Business Development at IPG.
Joining Maurico Assael and Roberto Lizama, this is the third high profile hire of IPG in less than 10 days.
Foto: enki22
. Las firmas de real estate tienen perspectivas positivas, a pesar de la caída del volumen de ventas
The vast majority of real estate firms have an optimistic outlook for the future of the industry’s profitability and growth, according to the National Association of Realtors´ (NAR)2016 Profile of Real Estate Firms. Profitability expectations have declined from the 2015 survey, mainly due to inventory shortages and home-price growth, but real estate firms remain confident about their overall future profitability.
“For a second year in a row, a majority of real estate firms have a positive outlook on profitability, with 91 percent of all firms expecting their net income to increase or remain the same over the next year,” said NAR President Tom Salomone, broker-owner of Real Estate II, Inc. in Coral Springs, Florida. “Although there is an overwhelmingly positive outlook, low inventory and high prices have led to an overall decrease in real estate firm’s sales volume since last year’s report. High home prices are holding back first-time buyers and low inventory means fewer sales at a time of increased Realtor membership”.
In 2016, 64 percent of firms expect profitability (net income) from all real estate activities to increase in the next year, down from 68 percent in 2015. Sixty-seven percent of commercial real estate firms expect profitability to improve (down from 75 percent in 2015), as well as 70 percent of large firms with four or more offices expect profitability to improve (down from 79 percent in the previous year). Residential firms are a little less optimistic as 65 percent expect to see an increase in their net income.
Forty-three percent of real estate firms expect competition to increase in the next year from non-traditional firms, down from 45 percent in 2015. Forty-six percent of firms see competition from virtual firms increasing (up from 41 percent in 2015), while only 17 percent expect competition increasing from traditional brick-and-mortar firms.
The sense of competition has fueled more recruitment since the 2015 survey. Forty-seven percent of firms reported they are actively recruiting sales agents in 2016, up from 44 percent in 2015. This is more common with residential firms (51 percent) than commercial firms (32 percent) and more common among offices with four offices or more (88 percent) than firms with one office (39 percent).
When asked what they see as the biggest challenges in the next two years, firms cited profitability (49 percent), keeping up with technology (48 percent), maintaining sufficient inventory (48 percent) and recruiting younger agents (36 percent).
The NAR 2016 Profile of Real Estate Firms was based on an online survey sent in July 2016 to a national sample of 147,835 executives at real estate firms.
Andrew Formica, Chief Executive at Henderson. Henderson and Janus Capital will be Merging
A new giant will join the global asset management industry. The businesses of Henderson and Janus will be combined under Henderson, which will be renamed Janus Henderson Global Investors and will continue to be a Jersey incorporated company and tax resident in the UK. The combined group will be a leading global active asset manager with AUM of more than $320 billion dollars and a combined market capitalisation of approximately $6 billion dollars.
The merger will take place via a share exchange, with each share of Janus common stock exchanged for 4.7190 Henderson ordinary shares. Henderson and Janus shareholders are expected to own approximately 57% and 43% respectively of Janus Henderson Global Investors’ shares on closing, based on the current number of shares outstanding. The merger is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.
Henderson and Janus CEOs will lead Janus Henderson Global Investors together.
Andrew Formica, Chief Executive of Henderson, said “Henderson and Janus are well-aligned in terms of strategy, business mix and most importantly a culture of serving our clients by focusing on independent, active asset management. I look forward to working side-by-side with Dick, as we create a company with the scale to serve more clients globally, as well as the strength to meet their future needs and the growing demands of our industry.”
Dick Weil, Chief Executive Officer of Janus, said “This is a transformational combination for both organizations. Janus brings a strong platform in the US and Japanese markets, which is complemented by Henderson’s strength in the UK and European markets. The complementary nature of the two firms will facilitate a smooth integration and create an organization with an expanded client-facing team and product suite, greater financial strength, and enhanced talent, benefiting clients, shareholders and employees.”
According to a press release, the merger promises increased distribution strength and coverage in key markets, including the US, Europe, Australia, Japan and the UK, as well as a growing presence in the Asia-Pacific region, the Middle East and Latin America. The company will have approximately 2,300 employees, based in 29 locations around the world.
Henderson shares currently trade on the LSE and ASX, while Janus shares currently trade on the NYSE, after the merger the new company plans to have the NYSE as its primary listing.
Janus’ subsidiaries, INTECH and Perkins will be unaffected by the merger. INTECH CEO, Adrian Banner, will continue to report to the INTECH Board of Directors and Perkins CEO, Tom Perkins, will continue to report to the Perkins Board of Directors.
