Take-up of foreign investment funds has trumped the lackluster mutual fund industry growth in Southeast Asia in 2015, Cerulli Associates found in its recently released report Asset Management in Southeast Asia 2016.
While year-on-year growth of mutual fund assets under management declined from 21.2% in 2012 to 6.4% in 2015, foreign equity fund assets in Thailand surged from THB111.1 billion (US$3.1 billion) in 2014 to THB226.2 billion in 2015. In Malaysia, wholesale feeder assets nearly quadrupled from MYR812.5 million (US$188.8 million) in 2014 to MYR3.1 billion in 2015, and private unit trust foreign exposure increased from 14.9% to 16.8% over the same period.
“Despite these spectacular growth rates, assets of foreign-invested feeders in Thailand and Malaysia have largely been concentrated in the hands of the larger players or among the few biggest funds,” said Manuelita Contreras, an associate director at Cerulli in Singapore. The US$1.5 billion feeder fund assets managed by J.P. Morgan Asset Management in Thailand and Malaysia, for example, mainly came from four of its funds: JPMorgan Global Healthcare Fund, JPMorgan Global Income Fund, JPMorgan ASEAN Equity Fund, and JPMorgan Asia Pacific Income Fund.
Meanwhile, in the Philippines, no less than 13 foreign-invested feeder funds and two funds of funds were launched as of end-2015 since feeder fund unit investment trust funds were first introduced in late 2013, while at least four Indonesian managers have launched foreign-invested Shariah-compliant funds as of April 2016.
“For foreign managers looking to engage third-party fund distributors in Southeast Asia, a long-term track record and global brand recognition will come in handy, though we understand that Thai managers are also open to appointing less well-known managers,” said Contreras. Southeast Asian managers also generally prefer to work with fund managers with an Asian presence and a shorter turnaround time.
Negative interest rates– though unsettling for many – can actually be an economic boon, according to a new study by National Center for Policy Analysis(NCPA) Senior Fellow David Ranson.
“Low interest rates are not in themselves bad for the economy. Indeed, the same can be said of high interest rates; financial markets cannot operate efficiently unless rates are in line with expected inflation and, at times, deflation,” says Ranson.
The study points to Switzerland as an example of naturally negative interest rates. “To their own surprise, the Swiss accomplished it by maintaining an exceptionally strong currency, now roughly at par with the dollar. Life went on,” writes Ranson. “The Swiss currency has long been one of the strongest anywhere, and inflation has been low and sometimes negative for years. It is negative right now, but it is mostly market forces that drove Swiss nominal interest rates below zero. Indeed, in these hitherto rare cases where prices are consistently on the decline, it is natural for nominal rates to be negative.”
While there are mental, cultural and institutional barriers to negative interest rates, there are no economic barriers to negative interest rates, adds Ranson. “However inconsistent it may seem at first, there is no inherent conflict between opposing the Fed’s former zero interest-rate policy and cautiously welcoming negative interest rates, in the event that deflationary conditions last.”
CC-BY-SA-2.0, FlickrFoto: Investopedia. ¿Qué debe hacer un centro financiero para evitar ser percibido como un paraíso fiscal?
What should a financial centre in danger of being perceived as a ‘tax haven’ do to manage the outpouring of potentially damaging headlines? The Global Financial Centres Index (GFCI) indicates that the ratings of these centres tend to rely largely on the perceptions of people involved in financial services. These perceptions are affected by press coverage and the work of the Organization for Economic Co-operation and Development (OECD) and other international bodies.
In GFCI 19, published in March 2016, the Caribbean centres of the British Virgin Islands, the Cayman Islands, Bermuda and the Bahamas all suffered significant declines in their ratings with Panama showing a larger decline than any of them. The British Crown dependencies of the Isle of Man and the Bailiwicks of Jersey and Guernsey had a similar experience with Gibraltar, Malta, Monaco and Liechtenstein completing the picture with downgrades of their own. Looking back over the last three years, almost without exception, all of the Caribbean centres and the Crown dependencies have moved in the same direction in the GFCI – moving up together and down together clearly affected by the feelings and perceptions of the industry at the time of the survey.
If this were not unfortunate enough, the recent scandal has undoubtedly led to the deepening of these negative perceptions. In the light of the recent adverse publicity as a result of the ‘Panama paper’ leaks, what should a financial centre, which is likely to be drawn into the debacle do? For Trinidad and Tobago, there are three obvious options:
Lie Low and stay under the radar – it is likely that many centres will decide that in the face of such a media storm, it is best to lie low and stay out of the news as much as possible. This is perhaps understandable and may be a viable short term strategy.
Protest – several centres proclaim their innocence. In the current climate these protests of “it’s not us!” do not gain much sympathy. Several of the centres protesting the loudest do not deserve much sympathy!
Differentiate – a valid longer term strategy is to become a different type of financial centre. Encourage finance for good purposes and make it much harder for money launderers and tax evaders to operate in your territory so that when the next wave of bad publicity arrives (as it surely must), you can genuinely hold up your hand and claim that you are different.
The newly formed financial centre of Trinidad and Tobago is being developed using global standards and best practices and will have a modern, principle based regulatory framework which will be supported by enforcement action against firms that breach the legislation and regulations. This model has already been used to successfully establish the Dubai International Financial Centre. The legislation for the Trinidad and Tobago IFC has been drafted and is awaiting approval by legislators.
CC-BY-SA-2.0, FlickrFoto: PublicDomainPictures / Pixabay. 2016, el año del oro
Financial markets are vulnerable to unpredictable events that shake the international geopolitical stage. The most recent example was the outcome of the UK referendum on European Union membership. As noted by the International Monetary Fund (IMF) in its Global Economic Prospects report, “the negotiations on post exit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increacing financial market volatility.”
This and other political uncertainties in the developed world, such as the outcome of the US presidential elections or the fact that Spain has been unsuccesful in defining its government, result in the need for diversification of portfolios. That is, lay investor’s eggs in several baskets and favor safe-haven assets.
2016 is on track to be the year of gold. In the first three months of the year, gold increased in value by 22%, resulting in its best quarter in 30 years. During this period, deposits of listed products invested in this metal reached 22 billion. Just in the week following the UK’s referendum, investors allocated $2.5 billion to ETPs with Gold exposure. While European equities have had a negative year. The heightened noise we see in the markets is likely to continue so adding a hedge such as gold, could dampen volatility.
Beside the temporary circumstances, there are a number of structural factors ensuring gold’s long-term price stability, such as the proliferation of bonds with negative performance as well as the pace of the US interest rates.
One of the most relevant funds in this area is the BGF BlackRock World Gold Fund. In order to maximize the total profits of their investors, this fund invests more than 70% of its total assets in shares of companies around the world whose main activity is the extraction of gold. The fund may also invest in shares of companies whose predominant economic activity is the mining of other
CC-BY-SA-2.0, FlickrPhoto: Jorge Gobbi
. Will Erdogan Overplay his Hand in Turkey?
The dramatic events of the failed coup in Turkey and its aftermath has weighed heavily on all of the country’s asset sectors – equity, debt and currency. For the Eaton Vance Global Income Team this is not an unreasonable reaction, given many uncertainties of the political landscape. A member of the Global Income team is visiting Ankara now to assess the situation.
Turkish President Recep Erdogan announced a three-month extension of the state of emergency, following days of rounding up thousands of perceived political adversaries in the military, police and universities. As the situation evolves, Eaton Vance’s team will be focusing on two broad issues:
The U.S./Turkey relationship. It was strained before the coup, and is under even more stress now. Planes involved in the coup flew from the NATO airbase in which the U.S. military operates, and Turkey subsequently cut the power to the facility. Turkey is also seeking extradition from the U.S. of Fethullah Gulen, an Islamic cleric accused by Erdogan of being behind the coup.
Possible fissures in Turkish society. The relevant factions in Turkish society can be broadly divided into Erdogan and his ruling AKP party; the opposition, dominated by secular Turks; and Gulenists – followers of the exiled cleric. Erdogan’s opposition came out against the coup, despite the misgivings many have about his authoritarian style of rule.
“Most believe the purge is the right course of action for now, and believe the Gulenists are the problem – society is not fractured on this issue. On the other hand, we hear estimates that some 50,000 people are affected by the purges, so the impact is widespread – a scenario in which Erdogan goes too far would be worrisome.” The team explains.
For the team, the bottom line is: Turkey’s reputation as a democracy capable of reasonable growth and holding to tight budgets is obviously overshadowed by the latest developments. “We believe the U.S./Turkey relationship will survive this episode because it continues to serve the interests of both countries. We are watching very carefully to see if Erdogan overplays his hand and threatens the cohesiveness in Turkish society that currently works in his favor.”
CC-BY-SA-2.0, FlickrPhoto: Ennor, Flickr, Creative Commons. Allianz Global Investors: Institutional Risk Management Strategies Need Urgent Overhaul
Institutional risk management strategies are in need of urgent overhaul, according to a study of institutional investors conducted by Allianz Global Investors.
Conducted in the first quarter of 2016, AllianzGI’s 2016 RiskMonitor asked 755 institutional investors about their attitudes to risk, portfolio construction and asset allocation. The firms surveyed represent over $26 trillion USD of assets under management in 23 countries across North America, Europe and Asia-Pacific.
The Risk Monitor report found that since the 2008 global financial crisis, risk management practices have changed very little. Pre-crisis, investors’ top three strategies were diversification by asset class (57%), geographic diversification (53%) or duration management (44%). Despite the fact that 62% of respondents admit these strategies didn’t provide adequate downside protection, their use has actually increased post-crisis, with 58% of investors reliant on diversification by asset class, 56% using geographic diversification and 54% embracing duration management.
As a result, two-thirds of institutions are calling for innovative new strategies to help balance risk-return trade-offs, provide greater downside protection and replace traditional approaches to risk management. In fact, 48% say their organization is willing to pay more if it means access to better risk management strategies and 54% say their organization has set aside additional resources to improve risk management.
Commenting on the findings, Neil Dwane, Global Strategist AllianzGI, said:
“Investors are facing a world where average market returns continue to be lower and volatility is higher. In this environment, fulfilling investment objectives will require taking risk and applying truly active portfolio management,which needs to go hand in hand with an adequate strategy for managing that risk. Unfortunately, our RiskMonitor results show that a considerable number of investors do not show much confidence in their ability to manage risks effectively in both up- and down markets.”
“Encouragingly, institutional investors do seem to recognize the need for more effective risk management solutions. However, it is time for asset managers to innovate and offer solutions and products that will help clients to navigate the low yield environment without exposing them to inappropriate levels of volatility. This can take different forms, but the next few months and years will certainly be a litmus test for the growing offering in sophisticated multi asset solutions.”
Main investment concerns and allocation trends
There are countless risks lurking on the horizon, but a few are on the top of many investors’ minds as they navigate the markets in 2016 and try to meet their return objectives. Globally, 42% of those surveyed say market volatility is their main investment concern. Add to that the other big concerns this year – low yields (24%) and uncertain monetary policy (16%) and there is little doubt that investors may be in for an even bumpier ride compared to the last few years.
In light of the choppy markets at the start of this year, 77% of investors are apprehensive about equity-market risk, citing it as the top threat to portfolio performance this year. Also high on the list of threats that those surveyed believe could derail the performance of portfolios were interest rate risk (75%), event risk (75%) and foreign-exchange risk (74%).
Despite the concerns around market turbulence and equity market risk by institutional investors, many have not been persuaded to take a wide-spread defensive attitude. Institutional investors report their primary investment goal for 2016 is to maximize their risk-adjusted returns. Further, their inclination towards equities suggests their risk appetite has not been completely dampened by the market volatility. In particular, with 29% and 28% respectively, US equities and European equities garner the top spots among the investments earmarked for long exposure again this year.
CC-BY-SA-2.0, FlickrHSBC Private Bank nombra a Joe Abruzzo director del negocio de Norteamérica - Foto cedida. HSBC Private Bank nombra a Joe Abruzzo director del negocio de Norteamérica
HSBC Private Bank today announced the appointment of Joe Abruzzo as Business Head of North America.
In this role, Abruzzo will be responsible for driving and executing HSBC’s strategy for private banking across North America, particularly in the US, a key market for HSBC Global Private Bank. He will also serve as a member of the HSBC Global Private Bank Executive Committee.
Based in New York, Abruzzo will report to Marlon Young, Regional Head of Global Private Banking, US & Latin America.
“This is an exciting time for Joe to join the Private Bank,” said Young. “We’re growing our business in the US and as we look to build on this momentum, Joe’s deep commercial and investment banking experience will help us to further capitalize on our strategy to be the Private Bank of choice to the owners and principals of HSBC’s corporate clients.”
With over 30 years in banking, Abruzzo most recently served as HSBC’s Head of US Large Corporate Banking. He joined HSBC in 2014 as Head of Northeast Corporate Banking and in early 2015 was named Co-Head of US Corporate Banking. Before that, he spent 26 years with JP Morgan Chase in various senior leader roles in Commercial and Corporate and Investment Banking.
Young added, “We continue to invest in our people, products and services in the US and I’m also personally delighted that we are able to develop local US talent within HSBC.”
CC-BY-SA-2.0, FlickrPrivate Equity Women’s Initiative busca incrementar la presencia de mujeres en el Private Equity - Foto facilitada por NAIC. NAIC presenta una Iniciativa para incrementar la presencia de mujeres en Private Equity
The National Association of Investment Companies (NAIC), the industry association for diverse-owned and emerging private equity firms and hedge funds, recently announced the commencement of the Private Equity Women’s Initiative to increase the number of women entering and advancing in the private equity industry.
A partnership between the NAIC and the American Investment Council (AIC) recognized that women are grossly underrepresented in the industry, making up just 10 percent of senior employee ranks in private equity. The difficulties women face in surmounting barriers into the industry is compounded by the challenge of effectively navigating their way towards senior level positions.
To achieve its objectives, the Private Equity Women’s Initiative will publish relevant research, as well as host educational forums, networking events and mentoring programs. A Working Committee comprised of 11 senior women from NAIC and AIC firms created the Initiative’s Guidelines and Best Practices, a framework for promoting recruitment and retention of women.
The Working Committee consists of: Kelly Williams (Chair), Senior Advisor, GCM Grosvenor; Maura Allen, Private Equity Fellowship and Program Manager, Robert Toigo Foundation; Lauren Dillard, Managing Director and Head of Investment Solutions, Carlyle Group; Daphne Dufresne, Managing Member, JBD Holdings; Martina Marshall Edwards, Former Director of Alumni & Alternative Investments Programs, SEO;Nia Gandy, Marketing Manager, GP Investments; Audra Paterna, Director of Human Resources, Silver Lake; JoAnn H. Price, Co-Founder/Managing Partner, Fairview Capital; Sarah Roth, Partner, The Riverside Company; Patricia Winton, Principal, Strategy and Human Capital, Arclight; Alisa A. Wood, Partner, KKR.
“We believe that the guidelines and best practices developed by the steering committee will provide meaningful tools to firms who are committed to improving gender balance,” says Kelly Williams, Chair of the Private Equity Women Investor Network and Chair of the Women’s Initiative Steering Committee. “I am very impressed by the efforts made by AIC and NAIC member firms to address this important issue.”
“NAIC is delighted that our collaboration with the AIC will positively contribute to more women having the opportunity to develop long, vibrant and rewarding careers in private equity because the industry worked to become more inclusive in our policies and practices,” says Robert L. Greene, President & CEO of the association. “We continue to believe that no group or demographic holds a license or monopoly on talent, rather talent is evenly distributed amongst all people!”
CC-BY-SA-2.0, FlickrPhoto: Brian Evans
. Robeco Opens a New Office in Singapore
Robeco has opened a new office in Singapore. This office will focus on credit research and strengthening Robeco’s service to their clients in the market and the broader Southeast Asia region.
According to a press release, “Singapore is a fast growing Asian fixed income hub, so by establishing a permanent presence in the market, Robeco is able to expand capabilities, leverage opportunities and further strengthen our fixed income infrastructure in the region.” Maurice Meijers, Client Portfolio Manager Fixed Income for the Asian markets, will be heading the Singapore office. In addition to Meijers, two credit analysts will also be based in Singapore.
Maurice Meijers said: “Singapore is uniquely positioned as a leading fixed income hub in Asia, with a strong outlook for future growth. Robeco’s pan-Asia business, which includes offices in many key Asian markets, allows us to gain access to local market knowledge and attract local talent. The opening of our Singapore office is another important addition to Robeco’s Asia footprint and will enable us to further expand our fixed income capability to leverage opportunities in the region.”
Nick Shaw, Head of Global Financial Institutions, said: “The Asia Pacific region leads the world in new wealth creation and Singapore has long-since established itself as a global private banking hub. The opening of a local Singapore office will allow us to better service our distribution partners and provide local support to institutional clients and consultants in the region.”
Robeco has had a presence in Asia Pacific since 2005 and it has been growing its footprints in the region with offices in Australia, China, Hong Kong, Japan, Korea and now Singapore. Hong Kong is home to their Asia Pacific equities investment team, and their new Singapore office will be an extension of their Rotterdam fixed income team. The expansion in Asia Pacific is a key part of their “strategy 2014-2018: accelerate growth”.
Foto: Esparta Palma
. Julius Baer mueve su cúpula para reforzar su enfoque hacia clientes y mercados
Julius Baer Group has announced an alignment of its organization, leading to a strengthened client orientation and increased efficiency. The new set-up will consist of the five Regions Switzerland, Europe (new), Emerging Markets (new), Latin America and Asia Pacific and will lead to changes within the Executive Board of Bank Julius Baer.
Furthermore, Philipp Rickenbacher has been appointed as new Head Advisory Solutions, and Nic Dreckmann as new Chief Operating Officer of the Bank and member of the Executive Board of the Bank as of 1 August 2016. All new positions are staffed from within the organization. Both the alignment of various markets within the new regional structure as well as the adjustments within the products and corporate functions area will not only benefit the clients but also lead to efficiency gains.
Boris F.J. Collardi, Chief Executive Officer, said: “The alignment of the front organization will enable a period of very strong growth of our Group. The changes, which are beneficial for our clients and ease the set-up of our regional structure, are a further step to confirming our position as the leading Swiss private banking group.”
Alignment of front organization
The regional set-up of Julius Baer will be aligned and reduced by one Region as of 1 September 2016.
Region Switzerland will be led by Gian A. Rossi. The Intermediaries business will be allocated to the new regional set-up and largely integrated into the Region Switzerland which includes the Global Custody business as well. Gian Rossi currently is Head Northern, Central and Eastern Europe. Barend Fruithof, Head Switzerland & Global Custody and Member of the Executive Board of the Bank, has decided to leave the Bank.
The new Region Europe (excluding Central/Eastern Europe, including Israel) will be run by Yves Robert-Charrue. He will further develop the European strategy mainly out of the new European hub Luxembourg following the recent acquisition of Commerzbank International S.A. Luxembourg. At present Yves Robert-Charrue is responsible for the Intermediaries business.
The newly established Region Emerging Markets will be led by Rémy A. Bersier. The Region’s strategy will be to further capture the vast growth opportunities in the attractive markets of Central/Eastern Europe/CIS, the Middle East, India and Africa. Rémy Bersier, who currently is Head Southern Europe, Middle East and Africa, will be based in Dubai.
Furthermore, following the launch of ‘Julius Baer – Your Wealth’, the Group’s new holistic approach to advise its clients, the division Investment Solutions Group will change its strategic roadmap to fully focus on delivering the client experience. Hence, it will be renamed Advisory Solutions and will come under the new leadership of Philipp Rickenbacher as of 1 August 2016. He is currently Head Structured Products and will be member of the Executive Board of the Bank as of the same date.
Changes on Group level
The new COO, Nic Dreckmann, will also be a member of the Executive Board of the Group as of 1 January 2017, replacing Greg Gatesman who will step down from the Executive Board of the Group by the end of the year. Additionally, Giovanni M.S. Flury, Member of the Executive Board of the Group, will retire.
