CC-BY-SA-2.0, FlickrFoto: Chris Dlugosz. Por qué el euro ya no llegará a la paridad con el dólar
Over the recent weeks, the Federal Reserve has signaled its willingness to move ahead with a second rate hike. Such a move would follow the December 2015 decision to raise policy rates. Statements from Yellen and Fisher left opened the possibility of a rate hike as soon as September 21st, when the FOMC will meet next.
However, and according to Lyxor AM’s latest weekly brief, “the decision is not straightforward considering the disappointing US GDP growth figures in H1-16 and the associated falling labor productivity. Financial markets remain somewhat unconvinced but at the same time they cannot ignore the Fed guidance. As a result, short dated Treasury yields moved higher and the USD appreciated against major currencies.” Says a team headed by Jean-Baptiste Berthon, Senior Strategist and Jeanne Asseraf-Bitton, Global Head of Cross Asset Research.
Market movements related to the new Fed guidance had a differentiated impact on hedge fund strategies. CTAs underperformed last week as a result of their long fixed income and short USD positions. Meanwhile, Global Macro managers outperformed. They benefitted from their long USD positions, a stance they have maintained for some time on the back of the growth divergence thesis between the US and the rest of the world.
Contrasted views
Interestingly, most funds within each strategy share the same stance on the USD (i.e. most CTAs in our sample are short USD and most Global Macro are long USD). But there is a much wider disagreement across Global Macro managers on US fixed income. “The aggregate exposure of Macro managers on the asset class is close to zero, but at the fund level we see approximately half of the managers being long US bonds and another half being short. That reflects the conflicting signals on the US economy. A vibrant job market has fuelled household consumption but this is not reflected in GDP numbers.” They write.
Economic expansion was actually pulled back in H1-16 by declining capex as companies are not investing to expand production capacities. “All in all, we tend to be rather in favor of the CTA stance. We believe that the Fed is unlikely to move as soon as September. There are simply too many uncertainties regarding the strength of the US economy to act now. The Fed will probably err on the side of caution in our view and the USD upward pressure may abate, a support for CTAs over Macro funds.” Lyxor AM concludes.
CC-BY-SA-2.0, FlickrPhoto: Doug8888, Flickr, Creative Commons. Liquid Alternatives and Private Debt Likely to Benefit Most from Brexit
According to investment consultant bfinance, the list of asset classes benefitting through the Brexit is long with gold and govies being seen as safe havens. In their study “Brexit, One Month On-Working Through the Investment Implications” they stress that the US equity market also benefitted “to a certain extent” from a flight to quality from equity investors.
Overall, they believe that Brexit will probably have “a relatively mild impact on global equities and bonds, but to have a more direct impact on those asset classes within the UK,” the consultant estimates.
bfinance highlights that liquid alternatives and private debt are two asset classes which are likely to perform well in a Brexit landscape.
“Liquid alternatives will benefit from the increased dispersion associated with the greater uncertainty at both stock and sector level. Private debt, which includes corporate, real estate and infrastructure debt, is set to benefit from the relatively high yield, the reduced competition from banks and the resilience to a downturn in values and cashflows,” bfinance argues.
It specifies that this is particularly the case for more senior debt and less so for higher yield or mezzanine debt that has less of a cushion to protect loans from value declines.
Morningstar announced that its board of directors has appointed Kunal Kapoor, CFA, chief executive officer, effective Jan. 1, 2017. Kapoor, 41, who currently serves as president for Morningstar, has also been appointed to Morningstar’s board of directors.
Company founder Joe Mansueto will become executive chairman effective Jan. 1, 2017 and will continue to serve as chairman of the board. To limit the number of inside directors, Don Phillips has voluntarily opted to step down from the board, effective Dec. 31, 2016.
Joe Mansueto, chairman and chief executive officer of Morningstar, said, “I can’t think of a better person than Kunal to lead Morningstar as we head into the next stage of our company’s innovation and growth. He’s a Morningstar veteran who lives and breathes our mission of creating great products that help investors reach their financial goals.”
Kapoor originally joined Morningstar as a data analyst in 1997 and has been president of the company since October 2015. In his current role, he is responsible for product development and innovation, sales and marketing, and driving execution and accountability across the company. He previously served as head of global products and client solutions and has served in a variety of other leadership roles for Morningstar, including director of mutual fund analysis, director of business strategy for international operations, president and chief investment officer of Morningstar Investment Services, and head of Morningstar.com and the company’s data business.
As mentioned above, Don Phillips will step down from the board of directors, effective Dec. 31, 2016, and will be succeeded by Kapoor. He will continue in his role as a managing director for Morningstar, focusing on research innovation. Mansueto added, “Don has been an outstanding board member since we first formed a board in 1999, and his perspective on the industry is second to none. Don is a beloved leader in the Morningstar community, and I am grateful for his commitment to Morningstar’s success.”
London based boutique True Potential Investments has partnered with UBS Asset Management to launch five new multi-asset funds, in its wealth strategy fund range.
The five True Potential UBS Funds have fees of 0.60%, with a minimum investment of just £50 and include profiles such as Defensive, Cautious, Balanced, Growth and Aggressive.
Each fund will be actively managed within its risk banding to navigate changing markets, seeking to manage volatility and capitalise on opportunities for growth.
UBS is to provide investment expertise to sub-manage the funds.
Mark Henderson, senior partner at True Potential Investments, said: “We are excited to have partnered with UBS to build a fund range that can quickly adapt to the challenges and opportunities that global markets present. Our aim is to put clients first in every decision we make and we believe that long-term investing in multi-asset funds may put clients in a better position to reach their investment goals.
“By using the investment expertise, precision and heritage of UBS, alongside our philosophy of providing low-cost funds with low minimum investment amounts, we have produced a range of funds that adapt to the market, always seeking to get the best returns for investors.”
Richard Lloyd, head of Portfolio Management, Research & Risk, Investment Solutions at UBS Asset Management said: “The True Potential UBS fund range will be fully diversified across multiple asset classes, geographic regions, industries and currencies to enable us to capture opportunities from a wide range of sources.
“We will make use of a wide spectrum of investments including a range of ‘next generation’ smart beta passive funds. Our investment strategy uses agile, active asset allocation to target optimal performance in all market conditions.”
CC-BY-SA-2.0, FlickrPhoto: Susanita, Flickr, Creative Commons. Brexit will Fuel Fund Launches in Europe
According to Detlef Glow—Lipper’s Head of EMEA Research, and Christoph Karg—Content Management Funds EMEA at Thomson Reuters Lipper, at the end of Q2 2016, equity funds dominated the scene with a market share of 37% of the funds available for sale in Europe, followed by mixed-asset funds (28%), bond funds (21%), and money market funds (3%). The remaining 11% of “other” funds were real estate funds, commodity funds, guaranteed funds, and funds of hedge funds.
At the end of June 2016 there were 31,815 mutual funds registered for sale in Europe. For Q2 2016 a total of 689 funds (437 liquidations and 252 mergers) were withdrawn from the market, while only 463 new products were launched. However, the Thomson Reuters’ professionals expect that following the “Brexit” vote and its possible implications for fund distribution in Europe, “the number of products to rise over the course of the next two years. Investment managers based in the United Kingdom will ensure their access to the continental European market with the launch of products that are domiciled in the EU, while EU-based asset managers may start to launch funds that are domiciled in the U.K. The first scenario is expected to lead to an even higher dominance of Luxembourg and Ireland as international fund hubs in Europe, while the latter may drive up the number of products domiciled in the U.K.”
Additionally, they believe that market and fund-flow trends will impact the activity of the European fund promoters in one or another direction, “since these trends normally lead to the launch of new products or, contrarily, to the closure of existing products that have fallen out of favor with investors. With the increasing pressure on profitability, at least for bank-or insurance-owned asset managers, fund promoters will also further clean up their product ranges to become more efficient in an environment of increasing costs from the permanently increasing regulatory demands.”
For Q2, Luxembourg continued to dominate the fund market in Europe, hosting 9,109 funds, followed by France, where 4,452 funds were domiciled.
You can read the full report on the following link.
In many ways, 2016 has been the year of bonds, at least so far: Global aggregate bond markets have outperformed global equity markets year to date. That leaves many investors wondering if bonds still offer value, given their low yields.
According to Mark Kiesel, CIO Global Credit at PIMCO, though investors may need to get used to lower returns on bonds, this does not mean they should give up on them; “we believe there are still many bond market sectors and securities offering attractive return potential as well as diversification benefits. However, the current environment of lower bond yields means investors need to be more selective and also need to consider reducing interest rate risk. The U.S. corporate bond market continues to be one of the main areas offering much-needed yield, especially given our long-term outlook for continued global demand for income-producing assets – a tailwind likely to help support prices.”
The search for yield amid this appetite for income is complicated by the reality that almost $12 trillion in bonds in the Barclays Global Aggregate Index are now at negative yields, including more than 80% of Japanese and German government bonds.
As the European Central Bank and the Bank of Japan continue with ever-increasing unconventional policies, such as negative interest rates and large-scale asset purchases, local investors are faced with the challenge of finding income in a world of negative-yielding government bonds and low-yielding corporate bonds in their home markets. They are consequently looking further afield, and this has resulted in a wave of investment into U.S. corporate bonds, according to the expert.
“Even after this year’s rally, we believe investors can still seek potential yields of 3%–6% in the U.S. credit markets by investing in investment-grade and select high yield corporate bonds, bank loans and non-agency mortgages. Among major developed markets, Japan and Europe are barely growing, but the U.S. should be able to grow at roughly 2% over the coming year. Therefore, from a fundamental perspective, we are favoring the U.S. credit market, along with U.S. domestically-focused businesses.”
While they have reduced exposure to select credits in the U.S., they are maintaining overweights to U.S. credit across most portfolios. “We remain very constructive on housing and many consumer-related sectors, such as cable, telecom, healthcare and gaming. And even though there’s a lot of pressure on banks at the moment, U.S. bank bonds are actually very attractive. We also like energy: We added to our energy positions back in January near the market lows, and we still like pipelines at current levels.”
Kiesel believes that the positive outlook for the U.S. bodes well for credit assets in industries and sectors supported by high barriers to entry, above-trend growth and pricing power, in addition to companies with management teams that act in the best interest of bondholders. “With a large credit research and analytics team, we can still seek and find many companies with these characteristics – and these days, many of them are in the U.S.” He concludes.
CC-BY-SA-2.0, FlickrPhoto: Minwoo, Flickr, Creative Commons. Santander Will Also Pass Negative Interest Rates to its Institutional Clients
Banco Santander is supposedly joining other European lenders, like Deutsche Bank or BBVA in passing on the region’s negative interest rates to some of its financial institutional clients. According to Bloomberg, Spain’s biggest bank notified clients of its securities services unit that it will introduce a fee on their deposits.
At a time when the European Central Bank is charging banks on overnight deposits to encourage spending, the rate, is of -0.4%.
Spain’s second-largest bank, Banco Bilbao Vizcaya Argentaria, is charging between 0.15 and 0.25% since July.
Santander Securities Services has about 700 billion euros ($782 billion) in assets, according to its website.
Ludovic Colin . Ludovic Colin New Head of Global Flexible Investment at Vontobel AM's Fixed Income Boutique
As of 1 September, Ludovic Colin has been appointed Head of Global Flexible Investment team at Vontobel Asset Management’s Fixed Income boutique. The newly created team will be responsible for the management of the Vontobel Fund – Bond Global Aggregate and Vontobel Fund – Absolute Return Bond.
Ludovic Colin will take over as lead Portfolio Manager of the Absolute Return Bond strategies, with Jack Loudoun as deputy Portfolio Manager. Ludovic Colin joined Vontobel Asset Management in 2015 as senior Portfolio Manager. Prior to that, he was a Cross Asset Macro Specialist at Goldman Sachs and Portfolio Manager at Amundi in London. Jack Loudoun, who joined Vontobel Asset Management in 2015 as Portfolio Manager for the Absolute Return Bond strategies, has a long track record in managing absolute return bond strategies going back to 2002, mainly working for Invesco and Deutsche Asset & Wealth Management. Throughout his career, Jack has been responsible for global rates, credit and macro strategies.
“The new team will further broaden our well established flexible fixed-income capabilities, providing our clients with both total and absolute return offering”, said Hervé Hanoune, Head of Fixed Income at Vontobel Asset Management.
Vontobel’s Zurich-based Fixed Income boutique was established in 1988 and focuses on four actively managed product lines: Global & Swiss Bonds, Corporate Bonds, Emerging Markets Bonds and Global Flexible Bonds. The boutique is comprised of 24 investment professionals with an average of 15 years of investment experience. Vontobel’s bond experts share the belief that fundamental research, independent thinking and active portfolio management are the key to consistent outperformance.
During recent years, Vontobel has seen the assets under management of its fixed-income offering grow to CHF 25 billion. Besides the acquisition of TwentyFour Asset Management, one of the key drivers of this growth has been the inflows into the Flexible Bond funds of Vontobel Asset Management’s Zurich based Fixed Income boutique.
CC-BY-SA-2.0, FlickrPhoto: Roberto Trombetta. Multi-Asset Funds Fail to Keep Volatility-Busting Promise: Should They Consider Cutting Fees?
Multi-asset funds in Europe have not lived up to the sales pitch of providing a buffer against unsettled markets, according to the latest The Cerulli Edge – Global Edition, which advises managers of poorly performing funds within the asset class to consider cutting fees.
While Cerulli Associates, a global analytics firm, acknowledges that some multi-asset sectors are faring better than others, its evaluation of the overall performance of the asset class over the 12 months prior to July 2016 shows that, on average, returns have been negative.
In terms of asset-weighted average returns, none of the multi-asset sectors, as defined by Morningstar, were in positive territory during the review period. Cerulli notes that a number of the funds are highly correlated to the stock market, some by up to 90%, which, given market conditions, defeats the funds’ key objective of providing stability.
“The past 12 months have been tough for multi-asset managers. Overall, the asset class has failed its first real test–and investors are beginning to take note. While a single year is not enough to truly judge performance, it does serve as an indicator,” says Barbara Wall, Europe managing director at Cerulli.
Average multi-asset fund fees (ongoing charges) in the UK have dropped 16 basis points in the past two years. Cerulli believes that charges will continue to fall in both the UK and mainland Europe. “More managers may be forced to sacrifice part of their fees,” says Angelos Gousios, an associate director at Cerulli Associates.
He says the case for liquid alternative multi-asset funds sticking with existing charges on the basis that special skills are required no longer holds water. “Fund buyers will not hesitate to switch to less expensive alternatives if performance and risk targets are not met,” says Gousios.
Noting that cheaper, more innovative strategies such as smart beta multi-asset funds are on the increase, Gousios warns that managers “charging unjustifiable performance fees in both rising and falling markets are at risk of being marginalized.”
Despite Cerulli’s damning assessment, the firm is optimistic with regard to the longer term prospects for multiasset funds. “Tailwinds that will increase their exposure include defined contribution pension schemes in the UK. However, inflows are likely to be more concentrated from now on, with managers that fail to deliver falling by the wayside,” says Gousios.
CC-BY-SA-2.0, FlickrSonia García-Romero . Sonia García-Romero Joins Citi to Focus on LatAm's UHNWI
Citi Private Bank hired Sonia Garcia-Romero as Managing Director and Investment Counselor Team Leader, Latin America, ex-Mexico and Brazil. Garcia-Romero will work from the Miami office and report to Lisandro Chanlatte, Head of Investment Counselors for Latin America. In this capacity Garcia-Romero will be responsible for leading investment services for ultra-high net worth clients. She will also lead the Multi-Family Office business and will focus on increasing penetration of capital market solutions for the firm’s clients.
“Sonia has over 20 years of experience working in the financial industry and an impressive track record of devising innovative actionable investment solutions,” said Chanlatte.
Garcia-Romero joins Citi from J.P. Morgan Private Bank, where she served as the Market Manager and Investments Team Leader for the Andes, Central America and Caribbean region. Prior to J.P. Morgan Private Bank, she worked in the Investment Bank and on the Global Markets Treasury Liquidity and Repo desks for J.P. Morgan. She holds a Bachelor of Science from C.U.N.E.F (Universidad Complutense) in Madrid.
“The global platform and institutional capabilities are just a few reasons I am excited to be joining Citi Private Bank. I look forward to building on the success of the Latin American Investments team and continuing to provide our clients with sophisticated financial solutions,” said Garcia-Romero.
