Amid a global economic slowdown and waning growth prospects for Latin America, presidential politics in four countries -Argentina, Brazil, Chile, and Peru- have also greatly impacted the prospects of recovery, according to the latest research from global analytics firm Cerulli Associates.
These findings and more are from “Latin American Distribution Dynamics 2016: Keys to Gaining a Foothold in Increasingly Globalized Market”, a report developed in partnership between Cerulli and Latin Asset Management.
“In broad terms, the movements signal a return to free-market and investor-friendly policies, reversing a troubling trend toward populism, nationalism, and expansion of the welfare state,” explains Thomas V. Ciampi, founder and director of Latin Asset Management. “In fact, as of mid-2016, only Venezuela and minor players Ecuador and Bolivia were still proudly carrying the leftist torch, while the rest of Latin America had seemed to grow restless with that approach.”
“The asset management industries in Argentina, Brazil, Chile, and Peru-including the AFP private-pension businesses in Chile and Peru, the local mutual fund industries of the four countries, and for offshore asset gathering through the wealth management channel-all face consequences from the shifts in leadership and the attitudes of the public,” Ciampi adds.
“In the case of Argentina especially, the recent election of pro-market president Mauricio Macri boded well for a normalization of the local capital markets, but created uncertainty for cross-border firms that have raised tremendous amounts of assets via the offshore wealth channel,” Ciampi said, noting that the government was eager to launch an amnesty plan aimed a repatriating a portion of the USD 500 billion of Argentine-investor assetsheld abroad.
CC-BY-SA-2.0, FlickrPhoto: AFTAB, Flickr, Creative Commons. Vanguard Looks to Diversify into Active ETFs
Vanguard, the king of passive investing with over 70 index-based ETFs, has asked for exemptive relief for offering actively managed ETFs via an Securities and Exchange Commission filing.
Vanguard, with over 2.5 trillion in AUM, is known for its index-based funds, both mutual funds and ETFs. However, the new filing suggests the firm is looking to branch further into active management. Although there is no mention of an initial fund and in practice there is a long period of time between been granted exemptive relief and launching a new product, with this filing Vanguard joins a growing number of fund companies filing for actively managed ETFs.
Companies such as Fidelity, Eaton Vance, Precidian, and Davis Selected Advisers have looked into joining the active ETF wagon, which accounts for roughly 26.4 billion dollars of the 2.3 trillion ETF market.
The Vanguard filing notes: “Applicants believe that the ability to execute a transaction in ETF Shares at an intra-day trading price has, and will continue to be, a highly attractive feature to many investors. As has been previously discussed, this feature would be fully disclosed to investors, and the investors would trade in ETF Shares in reliance on the efficiency of the market. Although the portfolio of each Fund will be managed actively, Applicants do not believe such portfolio could be managed or manipulated to produce benefits for one group of purchasers or sellers to the detriment of others.”
CC-BY-SA-2.0, FlickrPhoto: Niamalan Tharmalingam. UK Investors’ Outflows Drive 900% Rise in Property Funds Trade
UK retail investors’ activity around property funds has risen by 900% following Brexit compared with the same period a year earlier, according to data from Rplan.co.uk.
The increase in trade was driven by outflows outweighing inflows by more than 12 times, according to the online investment platform’s analysis.
The research mirrors latest data released by the Investment Property Databank that shows UK property values fell by 2.4% in July.
Investor outflows from property funds via rplan.co.uk peaked in the third week following Brexit (commencing 4 July) but dropped sharply thereafter.
In the first weekend after Brexit, UK retail investors ditched property and UK equity funds and switched into global and Japan equities.
“Self-directed investors pulled out of property funds in droves following Brexit, which would have played a role in driving down commercial property prices,” said Stuart Dyer, Rplan.co.uk’s Chief Investment Officer. “But our data suggests that gating was actually quite effective – or rather, than things could have been much worse without the gating/pricing adjustments,” Dyer said.
Anke Sahlén and Daniel Kalczynski are now in charge of Deutsche Bank Wealth Management (WM) in Germany. As Co-Heads the 48 year-olds will pursue the goals of developing WM into the leading trusted expert advisor to wealthy clients and advancing Deutsche Bank’s market leadership in its home market.
Sahlén and Kalczynski have both spent many years at Deutsche Bank and in its Wealth Management. “The appointment of Anke and Daniel demonstrates continuity and stability – values to which wealthy clients attach great importance,” said Fabrizio Campelli, Global Head of Wealth Management. “I am pleased to appoint two recognised wealth management experts whose expertise and abilities complement one another.”
Sahlén and Kalczynski will also be responsible for Sal. Oppenheim and Deutsche Oppenheim Family Office AG and intensify cooperation with their colleagues in Deutsche Bank’s Private, Wealth & Corporate Clients division to ensure that wealthy clients have access to the best products and services within the bank.
Kalczynski joined Deutsche Bank in 1990. He has been managing WM Germany on an interim basis since April, in addition to his responsibility as Chief Operating Officer (COO) of WM Germany and prior to that of Asset & Wealth Management (AWM) Germany. His previous roles included Head of Sales Management and the Southern Region for WM Germany.
Sahlén started her career with Deutsche Bank in 1993 and has focused on advising wealthy clients both nationally and internationally ever since. She currently leads the WM team in Germany’s Eastern Region and is a member of the Management Board for that region.
CC-BY-SA-2.0, FlickrPhoto: David Mello
. US Investor Optimism had Rebounded Prior to Brexit
Prior to the British vote to exit the European Union, U.S. investor optimism had rebounded in the second quarter, following a rocky first quarter for the markets, according to the second quarter Wells Fargo/Gallup Investor and Retirement Optimism Index survey, conducted May 13-22 with 1,019 U.S. investors, who have a total of $10,000 or more in savings and investments.
The Optimism Index rose 22 points in the second quarter to +62, returning the index to the level seen in the last half of 2015, before it dipped to +40 in the first quarter of 2016.
Non-retired investors scored highest on the optimism index, with the index increasing 27 points to +68. The index rose 10 points to +45 among retirees. Most of the gains in the overall index result from investors’ increased optimism about the 12-month outlook for the stock market as well as about reaching their 12-month investment targets. Additional gains were seen in investor optimism about economic growth as well as maintaining or expanding their household income. There was no change in investor perceptions about unemployment, inflation or reaching their five-year investment goals.
In the minutes of the June meeting, we learned that despite a great deal of public commentary from Fed officials since the April meeting – including a statement from Chair Janet Yellen herself on 27 May that a rate hike could be appropriate “in the coming months” – many participants remained fixated on communication:
“Several participants expressed concern that the Committee’s communications had not been fully effective in informing the public how incoming information affected the Committee’s view of the economic outlook, its degree of confidence in the outlook, or the implications for the trajectory of monetary policy.”
That was a concern we also saw earlier this year, in the minutes of its April meeting, when the Federal Open Market Committee (FOMC) conveyed that:
“Some [FOMC] participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting, and they emphasized the importance of communicating clearly over the intermeeting period how the Committee intends to respond to economic and financial developments. … It was noted that communications could help the public understand how the Committee might respond to incoming data and developments over the upcoming intermeeting period. Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low.”
Which according to Richard Clarida, PIMCO’s global strategic advisor, it translates to: To value bonds, stocks and currencies, market participants need to understand how the Federal Reserve will react to incoming macro data and developments. In April, at least some members “expressed concern” that the market then didn’t understand the Fed’s reaction function and that more communication could help.
Coming clean on the reaction function Clarida believes that perhaps the problem is not inadequate communication, but rather the need for transparent communication that this Fed does not have a reaction function. “Or more precisely, perhaps the problem is that the FOMC has 16 individual reaction functions plus the reaction function of the chair, which she is either unwilling or unable to persuade the entire FOMC to adopt.” He beliebes that the minutes of the July Fed meeting released on Wednesday confirm this impression. They tell us that “some” voting members of the FOMC want to hike rates “soon,” and that a couple of participants – which can include nonvoting members – wanted to hike at the July meeting. However, at least a “couple” of members wanted to wait for “more evidence that inflation would rise to 2% on a sustained basis.” Noteworthy in this regard was the minutes’ discussion of core PCE inflation, the Fed’s preferred measure. Core PCE inflation is increasing at close to a 2% annual rate, “but it was noted that some of the increase likely reflected transitory effects that would be in part reversed during the second half of the year.” which claridas believes tell us that Fed “communications released in conjunction with the June FOMC meeting were interpreted by market participants as more accommodative than expected.”
“This is a Fed that continues to be mystified why it is misunderstood by market participants and observers. Right now, observers think a September policy rate hike is off the table. Chair Yellen will have her chance at Jackson Hole to put September in play. But after these minutes, “soon” does not look like September.” Claridas concludes.
CC-BY-SA-2.0, FlickrPhoto: Adrian Clark
. Kristin Snyder Named Co-Head of SEC’s Investment Adviser/Investment Company Examination Program
The Securities and Exchange Commission has announced that Kristin Snyder was named Co-National Associate Director of the Investment Adviser/Investment Company examination program in the Office of Compliance Inspections and Examinations (OCIE). She joins Co-National Associate Director Jane Jarcho who has led the program since August 20, 2013 and was named OCIE’s Deputy Director on February 3, 2016. Together, Jarcho and Snyder oversee more than 520 lawyers, accountants, and examiners responsible for inspections of SEC registered investment advisers and investment companies.
Snyder has been the Associate Regional Director for Examinations in the SEC’s San Francisco office since November 2011 and will continue in that role while also assuming this new leadership position in the national investment adviser/investment company program. She joined the SEC in 2003 and spent eight years as a Branch Chief and a Senior Counsel in the San Francisco office’s enforcement program.
“With Kristin’s experience in examinations and enforcement, she is well-positioned to develop and lead national initiatives in our investment adviser and investment company program that support OCIE’s mission to improve compliance, prevent fraud, monitor risk, and inform policy,” said OCIE Director Marc Wyatt.
Snyder said, “I am truly honored by this opportunity to lead OCIE’s IA/IC program with Jane. I look forward to expanding my role to work with our talented and dedicated colleagues throughout the country as we continue to develop and implement important national initiatives in the asset management industry.”
Prior to joining the SEC, Snyder practiced law at Sidley Austin Brown & Wood in San Francisco. She received her law degree from the University of California Hastings College of the Law and received her bachelor’s degree from the University of California at Davis.
OCIE conducts the SEC’s National Examination Program through examinations of SEC-registered investment advisers, investment companies, broker-dealers, self-regulatory organizations, clearing agencies, and transfer agents. It uses a risk-based approach to examinations to fulfill its mission to promote compliance with U.S. securities laws, prevent fraud, monitor risk, and inform SEC policy.
CC-BY-SA-2.0, FlickrFoto: Christos Tsoumplekas, Flickr, Creative Commons. Muzinich & Co. ficha a cuatro profesionales para ampliar sus capacidades en préstamos sindicados europeos
Corporate credit specialist Muzinich & Co. has announced that Torben Ronberg, Stuart Fuller, Sam McGairl and Alex Woolrich will be joining the firm.
These very talented investment professionals will focus on syndicated loans in Europe. “Their long-standing expertise complements our current activities in European publicly traded corporate bonds and European private debt”, says the firm in a comunication.
“This expansion of our team forms part of our global effort to invest across the capital structure and provide compelling investment opportunities for our investors”.
They will join from ECM Asset Management, a subsidiary of Wells Fargo.
CC-BY-SA-2.0, FlickrPhoto: d26b73. What We Have Learned from the 2Q Earnings Season?
According to the US National Bureau of Economic Research – the arbiter of US recession dating – the economic recession associated with the great financial crisis ended in June 2009. Since then, trailing 12-month S&P 500 operating earnings per share (EPS) have more than doubled, up 115% from under USD 54 to USD 116. Proportional to the US earnings recovery, the S&P 500 price index increased by nearly 130% in the seven-year period ending 30 June, dwarfing the market gains in non-US developed and emerging markets.
Ultimately, equity markets in the Eurozone, the UK, Japan, and emerging markets have lagged the US over the past several years, since earnings in these regions failed to keep up with the V-shaped US profit recovery.
But as UBS AM experts say, after three consecutive quarters of year-over-year earnings declines, it is reasonable for investors to question whether the profit cycle – and the US bull market – has run its course.
Mark Haefele, Global Chief Investment Officer Wealth Management, and Jeremy Zirin, Head of Investment Strategy Wealth Management Americas, say their research “suggests that the recent profit slump is nearing its end. Rebounding corporate profits should drive further US equity market gains again. The second-quarter earnings season has supported this view.” They we note the following:
“Less worse” is a good start. S&P 500 EPS fell by 6% in the first quarter, the worst year-over-year decline since 3Q09. The second quarter looks better. Aggregate EPS is on track to be flat to down 2%. We expect this sequential earnings improvement to continue in the second half of the year as earnings start to grow again as early as this quarter.
Excluding energy, there was no profit “recession.” Most of the damage to US corporate profits in recent quarters occurred due to the collapse in energy sector earnings, which fell by over 80% in 2Q to mark the sixth straight quarter of year-over-year declines of 50% or more. The silver lining is that: 1) energy earnings now make up just 2% of S&P 500 profits compared to 11% at the end of 2014; and 2) excluding energy, S&P 500 profits have actually only declined in a single quarter (1Q16, by just 1%). Ex-energy, US earnings were up 2–3% in the second quarter.
Big-cap technology, big earnings beats: Overall, 73% of S&P 500 companies by market cap beat consensus estimates by an aggregate 3.5%. Some 83% of tech stocks exceeded consensus by an average of 7.4%. Accelerating revenue growth for mega-cap internet software companies has been propelling technology (the largest S&P 500 sector) shares into the third quarter.
“The corporate profit cycle in the US has stalled over the past few quarters, largely due to collapsing energy prices. The combination of a reasonably healthy US economy and easier quarterly comparisons in the energy sector should cause US earnings to grow again in the quarters ahead.” They conclude.
CC-BY-SA-2.0, FlickrPhoto: Dying Regime. Desjardins Global Asset Management chooses Mirova for Delegated Management of a Green Bond Fund
Mirova, an asset management company dedicated to responsible investment, got selected by Desjardins Global Asset Management to provide delegated management of an international green bond fund, the Desjardins SocieTerra Environmental Bond Fund, for a total of 100 million Canadian dollars.
The Desjardins SocieTerra Environmental Bond Fund puts the Global Green Bond strategy managed by Mirova into action. This fund will receive the recognized expertise of Mirova’s bond specialist teams, which are leaders in the area of green bonds.
Like Mirova’s Global Green Bond strategy, the Desjardins SocieTerra Environmental Bond Fund will be steered with active management and conviction management. The fund’s main performance driver will be investment in debt securities that support the environmental and energy transition, described as green bonds by Mirova’s responsible investment research team. As such, the management approach will combine financial and non-financial tactics: specific analysis of each project financed, Environmental Social Governance (ESG) analysis of the issuer, and fundamental analysis to determine the bond’s financial attractiveness. The fund will try to benefit from different international economic cycles by diversifying in terms of geography, economic sector, and credit rating.
The Desjardins SocieTerra Environmental Bond fund will be managed by Christopher Wigley, with Marc Briand, co-manager and head of fixed-Income at Mirova who will particularly rely on Mirova’s responsible investment research team of 12 analysts.
Philippe Zaouati, CEO of Mirova, commented on the announcement: “We are proud to have received this management mandate from Desjardins Global Asset Management. It is proof that our expertise in green-bond management is recognized on the market. Additionally, this mandate is part of our international growth strategy at Mirova, a strategy that is clearly beginning to pay off.”
Michel Lessard, Vice President of Desjardins Global Asset Management added: “By financing tangible assets, green bonds fill direct, concrete needs: they enable issuers to diversify their investor base and investors to actively participate in financing the energy transition. We are delighted, alongside Mirova, to commit to this energy transition by launching the Desjardins SocieTerra Environmental Bond Fund, the first green bond fund on the Canadian market.”
