CC-BY-SA-2.0, FlickrPhoto: Hendrik Dacquin. European Equities Supported By Continued Earnings Recovery
Despite the bumpy start to the year in global equities, Investec has not changed its fundamental view for a recovery in European corporate earnings, and it remains cautiously optimistic about the outlook for European equities.
As Figure 1 indicates, expliains Ken Hsia, portfolio manager at Investec European Equity Fund, European companies have not seen the same recovery in their ROE as their US counterparts. And despite seeing a drop in the ROE of the MSCI Europe in recent months, largely due to declining returns from the resources sector, we believe they should continue to close the gap. “While increased instances of consolidation across some industries has helped to unlock cost synergies, merger & acquisition (M&A) activity in Europe has been slow compared to the US”, points out.
Furthermore, as a net consumer of oil, says, Europe is set to bene t from lower global commodity prices and this tailwind should help to support a gradual recovery in the European economy.
Those are current investment themes in the Investec European Equity Fund:
1. Global winners
Investing in Europe means investing in European expertise and not countries. Europe is home to many world class companies with strong competitive advantages, which we believe give them strength in any global economic environment.
Pernod Ricard SA – As the second largest spirits company in the world, they have strong market positions. This, coupled with the aspirational nature of its product portfolio, has led to strong returns.
2. Exposure to Europe and seeing less competition
Country reforms in recent years have provided a strong basis for stability in the region. We are seeing European exposed companies gaining more market share as consolidation across some industries has helped to unlock cost synergies.
Michelin – Second-largest tyre manufacturer in the world that is undergoing an ef ciency programme to boost returns. Additionally, demand for SUV tyres, which have better margins, is on the increase.
3. Knowing what to avoid
Investec constructs its portfolios from the bottom-up, as such we are able to selectively capture investment opportunities. This adaptable nature also means we are able to avoid challenged industries, enhancing the potential to outperform.
“While our bottom-up portfolio construction process allows us to avoid challenged industries. It also means we monitor good European companies that are becoming cheaper due to current market environments”, concludes Hsia.
CC-BY-SA-2.0, FlickrPhoto: 401(K) 2012
. SEC Approves IEX Proposal to Launch National Exchange
The Securities and Exchange Commission on Friday approved Investors’ Exchange LLC’s (IEX)application to register as a national securities exchange. At the same time, the Commission issued an updated interpretation that will require trading centers to honor automated securities prices that are subject to a small delay or “speed” bump when being accessed.
“Today’s actions promote competition and innovation, which our equity markets depend on to continue to deliver robust, efficient service to both retail and institutional investors,” said SEC Chair Mary Jo White. “A critical role of the Commission’s regulatory framework is to facilitate the ability of market participants to craft appropriate market-based initiatives, consistent with our mission to protect investors, maintain market integrity, and promote capital formation.”
IEX must satisfy certain standard conditions specified in the Commission’s order before it is able to begin the process of transitioning its operation to a national securities exchange, including participating in a variety of national market system plans and joining the Intermarket Surveillance Group.
The Commission’s interpretation applies to the Order Protection Rule under Regulation NMS, which protects the best priced automated quotations of certain trading centers by generally obligating other trading centers to honor those protected quotations and not execute trades at inferior prices. Under Regulation NMS, an automated quotation is one that, among other things, can be executed immediately and automatically against an incoming immediate-or-cancel order.
The Commission’s updated interpretation determined that a small delay will not prevent investors from accessing stock prices in a fair and efficient manner consistent with the goals of the Order Protection Rule. In doing so, the Commission interprets the term “immediate” under Rule 600(b)(3) of Regulation NMS as precluding any coding of automated systems or other type of intentional action that would delay access to a security price beyond a de minimisamount of time.
Additionally, Commission staff issued guidance concerning the duration of the de minimis intentional access delays. The staff guidance states that delays of less than one millisecond are at a de minimis level.
Within two years of the Commission’s interpretation, staff will conduct a study regarding the effects of any intentional access delays on market quality, including asset pricing and report back to the Commission with the results of any recommendations. Based on the results of that study, or earlier as it determines, the Commission will reassess whether further action is appropriate.
CC-BY-SA-2.0, FlickrPhoto: Steven Lilley
. Premia Global Advisors Named to 2016 Financial Times 300 Top Registered Investment Advisers
Premia Global Advisors has been named to the Financial Times 300 Top Registered Investment Advisers, as of June 16, 2016. The list recognizes top independent RIA firms from across the U.S. Premia Global Advisors is a member of Dynasty Financial Partners’ Network of Advisors.
This is the third annual FT 300 list, produced independently by the Financial Times Ltd. in collaboration with Ignites Research, a subsidiary of the FT that provides business intelligence on the investment management industry.
The “average” FT 300 firm has been in existence for 22 years and manages $2.6 billion in assets. The 300 top RIAs hail from 34 states and Washington, D.C.
More than 1,500 pre-screened RIA firms were invited to apply for consideration, based on their assets under management (AUM). Applicants that applied were then graded on six criteria: AUM; AUM growth rate; years in existence; advanced industry credentials of the firm’s advisors; online accessibility; and compliance records. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange for inclusion in the FT 300.
The FT 300 is one in a series of rankings of top advisers the FT produces in partnership with Ignites Research, including the FT 401 (DC retirement plan advisers) and the FT 400 (financial advisers from traditional broker-dealer firms).
According to the latest managed accounts research from global analytics firm Cerulli Associates, discretionary accounts will continue to exhibit strong growth.
“Clients are largely working with financial advisors because they want to delegate investment management,” comments Tom O’Shea, associate director at Cerulli. “In addition, advisors are looking to take over more of the discretion as it allows them to easily manage their books of business.”
In their latest annual report, U.S. Managed Accounts 2016: Leveraging Digital Advice to Maximize Scale, Cerulli analyzes the fee-based managed account marketplace, which has been a core research focus since the firm’s inception in the early 1990s. This report, in its fourteenth iteration, is the result of ongoing research and quarterly surveys of asset managers, broker/dealers, and third-party vendors, which captures more than 95% of industry assets.
“Many rep-as-portfolio-manager platforms and unified managed account platforms allow advisors to tie client accounts to portfolio models the advisor has created,” O’Shea explains. “In a discretionary arrangement, the advisor can quickly rebalance these accounts and swap out underperforming managers for new managers. In a client discretionary arrangement, where the client has the ultimate control, advisors need to get permission from the client before making changes to the portfolio.”
“If current trends in the managed account industry hold, discretionary accounts will reach $4 trillion by year-end 2019,” O’Shea adds.
“We believe Southern Europe has a significant recovery potential”, said François Gobron, fund manager of GIS European Equity Recovery, a Generali Investments‘ fund. “Clear signs point in that direction, including the economic growth in Spain and a rapidly rising employment in Italy. Furthermore, as companies in Southern Europe still trade at lower earnings multiples than their European peers, we believe their potential to outperform is meaningful. By leveraging our proven stock-picking skills, the fund will benefit from the re-rating of Southern European markets as soon as confidence in the macroeconomic environment is fully restored.”
More dynamic Southern European economies and supportive valuations at company level reinforce Generali Investments’ confidence in the recovery potential of Southern Europe and the investment theme underpinning the GIS European Equity Recovery fund, one of the few equity funds on the market specifically focused on this region.
The GIS European Equity Recovery fund invests mainly in equity securities issued by companies listed on Southern European markets. Spain, Italy, Portugal and Greece represent 99% of the total equity invested. The fund favors companies with strong operational leverage and large restructuring potential. The fund adopts a pure stock-picking investment process and selects companies based on the quality of their strategy and management. The shortlisted companies are valued through a Discounted Cash-Flow model combined with a recently introduced, proprietary and innovative Monte-Carlo model designed for highly uncertain environments. The fund invests in companies offering at least a 50% upside potential in terms of total return on a 3 to 5 years’ time horizon, leading to a low annual turnover ratio of 25%.
“Companies in Southern Europe still show higher upside potential relative to their European peers as the local financial markets have not fully recovered yet from the 2008 and 2011 crises and valuations remain lower on a relative basis”, added Gobron. For instance, the 11x median of the 2017 price-to-earnings ratio estimates of the fund’s portfolio compares with 15x for the Eurostoxx. The 1.0x median of the 2017 price-to-book value ratio estimates of the fund’s portfolio compares with 1.7x for the Eurostoxx. “We are therefore strongly convinced that the companies we decide to invest in after our careful strategic analysis have the potential to outperform peers on an operational basis going forward.” He concluded.
Recording the biggest single-tower real estate transaction in the Asia-Pacific, BlackRock agreed to sell the Asia Square Tower 1, a 43-story office building in Singapore, to the Qatar Investment Authority.
QIA will pay S$3.4 billion, or 2.5 billion dollars, for the Tower located along Marina View at Marina Bay, making this the largest-ever single-tower real estate deal in the Asia-Pacific region.
Amongst its more than 1.25 million square feet of net lettable area, the most prominent tenant in the building is Citigroup.
BlackRock was advised by real estate consultant firms JLL and CBRE. According to Seeking Alpha, the tower was on the market since last year after bids by a consortium of Norway’s sovereign wealth fund and CapitaLand, and rival bids by ARA Asset Management failed to clinch the deal.
CC-BY-SA-2.0, FlickrPhoto: KMR Photography. Old Mutual AM Acquires Majority Stake In Landmark Partners
Old Mutual Asset Management (OMAM) has reached an agreement to acquire a 60% equity interest in Landmark Partners, a global secondary private equity, real estate and real asset investment firm.
The cost of the transaction amounts to around $240m in cash with the potential for an additional payment based on the growth of the business through 2018. The deal is expected to close in the third quarter of 2016.
“The overall investment is expected to result in a purchase multiple of 8-10x economic net income generated by the Landmark transaction, prior to financing costs,” OMAM specified in a statement.
OMAM said it intends to fund the closing payment using available capacity on its existing revolving credit facility or may seek alternative sources of debt financing depending on market conditions.
The firm expects the transaction to be up to 12% accretive to 2017 ENI per share.
“Landmark is precisely the kind of industry leader with whom we seek to partner,” said Peter Bain, OMAM’s president and CEO.
“The depth and breadth of their management team are exemplary and we look forward to collaborating with them to grow their existing product set and further diversify their business into emerging secondary asset classes. Our global distribution team is excited about bringing Landmark into certain domestic channels as well as new markets outside the US”, points out Bain.
Founded in 1989, Landmark has completed over 500 transactions for a total amount of $15.5bn since its launch. The company has acquired interests in over 1,900 partnerships, managed by over 700 general partners. Landmark operates through locations in Boston, London, New York, and Simsbury, Connecticut.
CC-BY-SA-2.0, FlickrFoto: Moyan Brenn. Brexit: más que un riesgo, una incertidumbre
Over the recent weeks, hedge funds have remained broadly defensive in anticipation of key announcements in June that may disrupt market conditions. As such, explains Lyxor AM, they are definitely not adding risk to their portfolios.
The Brexit referendum is the most prominent event among the near term potential disruptors. In response, several European L/S Equity managers have decided to significantly downsize their exposure to UK assets ahead of the vote. Meanwhile, CTAs and Macro managers maintain large net short positions on the GBP/USD. At the end of May, point out the firm, CTAs added to their GBP/USD shorts while Macro managers slightly reduced their short positions on the currency pair.
According to the Lyxor AM team, head by Jeanne Asseraf-Bitton, Global Head of Cross Asset Research, the mid-June FOMC meeting and the associated summary of economic projections will also be closely monitored by managers amid signals that US economic activity accelerated in Q2. As a result of such near term uncertainties, the median equity beta of hedge funds on the Lyxor platform remained below 20% during the last week of May (see chart) and edged even lower for strategies such as CTAs, Global Macro and multistrategy.
With regards to recent performance, say Lyxor AM experts, the last week of May was supportive for every strategy, with Macro and L/S Equity funds outperforming. Macro managers benefitted from their equity exposures and from the USD rally. In the L/S Equity space, variable biased managers outperformed. It is interesting to note that L/S managers with a defensive bias made the most of the market environment in May as the value rally faded. However, CTAs continued their recent underperformance. In May the Lyxor CTA Broad index was down 2.3%.
“Going forward, we maintain the preference for strategies that limit exposure to market directionality (i.e. we prefer merger arbitrage to special situations as well as market neutral and variable biased L/S to long biased managers). We also remain overweight CTAs in the midterm though tactically we advise a neutral stance as the large build up of short GBP/USD positions would cause losses if the UK opts for remaining in the EU. Finally we are neutral on L/S Credit and overweight Fixed Income Arbitrage”, conclude the Lyxor AM team.
Asian managers have chosen multi-asset/balanced and income/dividend strategies as the top product strategies to promote to distributors in 2016.
According to a proprietary survey conducted for Cerulli’s Asian Distribution Dynamics 2016 report, asset managers from Hong Kong, China, and Taiwan will put the most effort toward marketing these strategies. In Singapore and India, asset managers give their strongest vote to plain-vanilla equity funds.
Notably, equity appetite went down in most Asian markets, with a greater preference for multi-asset/balanced funds.
In Hong Kong, Singapore, and Taiwan, asset managers have seen a rotation from high-yield bond funds two to three years ago to multi-asset, and most recently, dividend-paying funds. European and Japanese equity funds were most often mentioned during Cerulli’s research rotations earlier this year.
In a separate survey for Cerulli’s Asian Fund Selector 2016 report, results showed that the product strategies that fund selectors are looking for in 2016 broadly match what asset managers are promoting. European equities, Japanese equities, and multi-asset funds were the most favored investment strategies for selectors last year, and most believe the trend will continue in 2016.
As for liquid alternatives, Cerulli notes that asset managers are jumping on the bandwagon to either start or expand their liquid alternative offerings this year, due to an increasing use of liquid alternatives among global/regional banks as part of their discretionary portfolio offerings.
CC-BY-SA-2.0, FlickrFoto: PeterRosbjerg, Flickr, Creative Commons. Jupiter Asset Management entra en el mercado italiano de la mano de Matteo Dante Perruccio
Jupiter Asset Management, active asset manager with headquarters in London and offices in Continental Europe and Asia, announces its entry into the Italian market and the opening of a branch office in Milan. The announcement follows the appointment of Matteo Dante Perruccio as Executive Adviser supporting the development of Jupiter’s strategy in Italy.
Founded in 1985 as a specialist boutique with a strong investment-led culture, Jupiter Asset Management boasts a total of €49 billion assets under management (as at 31 December 2015). Over the past few years it has initiated a phase of internationalisation through expansion of its activities in Asia and several European countries, including Italy. Jupiter Asset Management offers multi-asset, equity, fixed income and absolute return investment solutions with a total currently of 16 funds registered for sales in Italy.
Matteo Dante Perruccio, Executive Adviser for Italy, said: “With a culture characterized by active fund management and an unconstrained approach to investments, Jupiter is well positioned to meet its objectives in Italy. I am convinced that the mix of values that differentiate Jupiter from its competitors and the strong performance track record of the funds available to Italian investors will be crucial in attracting Italian clients, contributing to the development of the company in the country”.
Matteo Dante Perruccio has already served for eight years as a non-executive Director of London-listed Jupiter Fund Management plc, and has 30 years’ experience in the asset management industry, including various roles in Pioneer Investments as Global Head of Distribution, Vice Chairman Pioneer Alternatives, CEO International and CEO of Pioneer Investment Management SgR.
