CC-BY-SA-2.0, FlickrPhoto: Carlescs79, Flickr, Creative Commons. Santander AM Expands Selection to Passive Strategies
The Research and Selection team of Santander Asset Management (SAM) has started covering passive vehicles, on the back of demand for these strategies.
The move will see the Spanish firm’s recommended list or “manager matrix” increase from about 300 to almost 400 strategies, of which about 80 names will come from the passive sphere.
“This move [including the passive sphere] makes sense, it’s something that we have been discussing for a while, and finally we decided to merge both, passive and active within the same research team. I think it makes total sense,” José Maria Martinez-Sanjuán, head of Manager Research and Selection at Santander Asset Management told InvestmentEurope. “The fact is that there’s more demand, so we have to respond from a research point of view,” he said.
The growth in the ETFs segment illustrates investors’ bullish demand for passive strategies. According to ETFGI, assets invested in ETFs/ETPs listed globally reached a record high of $3.1trn (€2.7trn) at the end of April 2016.
This compares to $2.9trn in 2015, and $1.5trn in 2011 — a growth of 106% over the last five years. “If you see the flows of the industry, you will see that ETFs are only growing. There’s also a new wave of smart beta coming now to the market, so we need to be aware of this and understand the market evolution,” he said.
Martinez-Sanjuán said fee reduction plays a key role on the growth for passive vehicles, along with the ability to implement more easily strategic allocations through a core-satellite portfolio. Following this trend, the team led by Martinez-Sanjuán has developed a research process for passives, and it has just started to cover these strategies. “The coverage of passive vehicles is not as time consuming as the active world, but I guess that covering both gives you the global picture of what is going on in the industry and it is a value added piece of information for the investors,” Martinez-Sanjuán said.
“This is to help our various clients, so we can have a global view of any strategy, active or passive,” he said. Early this month, it emerged that SAM made two new appointments within its selection team. Last month, Wee-Tsen Lee joined Santander from Barclays Wealth to be responsible for manager selection global & US equities. In addition, Pryesh Emrith was promoted within Santander in March, to be in charge of US & global fixed income and multi-asset.
The two new appointments are based in the group’s London headquarters and work for the Research and Selection team, which works within SAM’s Global Multi-Asset Solutions team and alongside Santander Bank.
SAM manages around €20bn as an asset manager, and a further €20bn are assets under advice. The firm advised a further €8bn for institutional clients.
. Pinebridge Investments Wins Key Industry Award From Institutional Investor Magazine
PineBridge Investments has been named Floating-Rate Bank Loan Fixed Income Manager of the Year at the Institutional Investor US Investment Management Awards. PineBridge received the award at a gala event on 19 May 2016 at the Mandarin Oriental Hotel in New York City.
Steven Oh, Global Head of Credit and Fixed Income said, “We are honored to receive this recognition from Institutional Investor, and proud of the value we have been able to deliver to our clients, through an experienced and stable team that has navigated market challenges through multiple economic cycles. ”
The Institutional Investor US Investment Management Awards, now in their seventh year, recognizes US institutional investors for their innovative strategies, fiduciary savvy, and impressive short and long-term returns, as well as US money managers in 39 asset classes and strategies that stood out in the eyes of the investor community for their exceptional performance, risk management, and service.
According to Institutional Investor, the winners were chosen from a short list of top-performing managers across a range of investment strategies identified by the magazine’s editorial and research teams in consultation with eVestment, a leading provider of institutional investment data analytics. Investment strategies were evaluated on such factors as one-, three-, and five-year performance, Sharpe ratio, information ratio, standard deviation and upside market capture. More than 1,000 leading US pension plans, foundations, endowments and other institutional investors were also surveyed and voted for the top-performing managers in each strategy over the past year.
PineBridge received the Global Balanced/Tactical Asset Allocation Manager of the Year Award in 2015.
For much of the last few months it has been difficult to have any conversation about the outlook for the UK, or indeed Europe, without discussing Brexit, says Mike Amey. Uncertainty over the outcome ‒ the PIMCO´s MD and Portfolio Manager continues to assign a 40% probability to the UK voting to leave the European Union (EU) ‒ has slowed economic activity, pressured UK bank assets, reduced liquidity in sterling-denominated corporate bonds and put sterling under pressure.
The one market that has not been overly affected is stocks, he says. Due to the multinational nature of many UK-listed companies, the Brexit vote is exerting two opposing influences on valuations: The uncertainty of the UK’s trade outlook is counterbalanced by the positive impact of sterling weakness on overseas earnings.
Although his base case is that the UK votes to remain, “we devote much time to thinking about the implications of a vote to leave. Of the two competing views on this ‒ that it will be a globally systemic event or that, while important for the UK, its impact on global markets will be contained ‒ we side with the latter. In part this is due to our belief that any negotiations would be long and drawn-out. For one thing, a vote to leave would likely trigger a leadership challenge within the Conservative party. Furthermore, the UK does not even have a trade department that could lead the negotiations. In short, these things would take time!”
Nonetheless, there will likely be material volatility leading up to and around the vote on 23 June, adds Mike Amey. How can investors position for this?
In his portfolios he has been looking to combine positions that may benefit if the UK remains in the EU with those that will mitigate downside risk if it votes to leave. These include:
Buying UK bank bonds: They view the recent underperformance of UK bank bonds as an opportunity, with the subordinated bonds of major UK banks now trading at yields of 8% and above. Whilst there will be mark-to-market volatility in the event of a vote to leave, they do not see a material risk of capital loss.
Maintaining exposure to UK duration: They also see good risk-reward characteristics in five- and 10-year gilts, with the market currently pricing in a 25% probability of a 25-basis-point rate cut this year. With inflation low, they see a very small probability of a hike in the next 12 months regardless of the outcome in June, and in the event the UK votes to leave the EU, they think it likely that the Bank of England would cut the official rate to zero, potentially boosting gilt prices.
Selling the British pound versus the U.S. dollar: For portfolios with less liquid UK assets, or with significant exposure to UK banks, they think the best way to hedge is by selling the pound relative to the dollar. In the event of a vote to leave, they consider a 10% devaluation of the pound against the dollar.
“Clearly the outcome of 23 June can’t be predicted with certainty. However, through a combination of strategies like these, we think portfolios can be structured to potentially benefit in the event that the UK remains in the EU and hedged in the event it takes the alternate path,” he concludes.
CC-BY-SA-2.0, FlickrPedro Coelho, vicepresidente de la gestora inmobiliaria portuguesa Square AM. Foto cedida. “En real estate, vamos a ver una recuperación de los mercados emergentes”
“The more interest rates stay on zero, the less people know where they should invest money in”, Pedro Coelho, Vice President at Portuguese Real Estate manager Square AM, says in an interview with Funds Society. And, he remembers, “Core Real Estate has given higher return on a historical basis”.
From your experience as a real estate fund manager, what of these two options has more potential in the current environment: direct investment in Real Estate or the investment via traded securities related to the sector?
It depends on the investor expertise and size. If it has expertise and size enough it should get profitable to invest directly. If it has not that expertise and have not so much money (or both) it should invest indirect.
How do the Square’s funds work: are they investing directly? How long have you been investing this way?
Each member of Square AM top management team has more then 25 years real estate experience investing directly. And it has invested successfully in excess 4 billion euros in Real Estate over the past 25 years in Portugal, Brazil, Russia and USA.
Are investors willing to capture the iliquidity Premium of the direct investments? Is this Premium high enough?
The more the premium is getting shorter the less investors stay to pay it.
Income… is one of the reasons that people mention when investing in Real Estate. Are you focusing on income in some or your products?
We have two different types of products: some distress assets funds to make restructuring of Bank balance sheet and we have a income Fund that has 330 M € unlevered. This Fund bet MSCI Index on income every year since 2006 and won the MSCI award as the highest Portuguese portfolio return over the last 5 years (3 of each as Iberian award).
What are the main reasons why people should invest now in the asset class? Are you seeing a increasing interest? Why?
The more interest rates stay on zero, the less people know where they should invest money in. Core Real Estate has given higher return on a historical basis.
Regarding the situation of the market, it seems the real estate market in Europe is not as cheap as it used to be after the crisis (2008-2010). Are you still seeing distressed opportunities in some markets in Europe? What about Spain and Portugal?
There are always distressed opportunities. In South Europe, Bank restructuring is still one of the main trends. In the other countries, although is not a huge problem as it was, due to economic dynamic is always a thing to deal with.
In Spain, in which sectors are the best opportunities? Are you concerned by the political situation?
I would say that for the moment being there a little “on hold” to see what happens after June elections. Although, if we see last results, it could be a good lesson for all politicans. Just a management governement, managing the previous budget and economy growing at 3,5%. Why do we need a true government?
And what about other markets in the world: where are you seeing the best opportunities?
I think we are going to assist at a main recovery from the emerging markets, as they suffered (and their currencies) big depreciation.
The market seems attractive in an low interest rate environment but… if the Fed starts to hike rates… What could be the impact in the asset class? Are you concerned about this?
We should always be concerned about it, but my own view is that we are not going to assist at a hike in FED rates…
In the last years we have seen liquidation and closes in some real estate funds in Spain. After the adjustment, are the remaining funds in a better situation? Could the sector face more problems in the future that could force more closes?
It always depends on the economy and on the management skills, but dynamics also occur in the other asset class like bond and equity funds.
CC-BY-SA-2.0, FlickrFoto: Ricardo Fernández. Hamilton Lane Believes it is an Exciting Time to Invest in Brazilian Private Equity
Hamilton Lane, a leading independent alternative investment management firm, opened its first Latin America office in Rio de Janeiro back in 2011, but they had already been operating with investors in the region since 1997. From this office, Ricardo Fernandez and his team recently closed USD 160 million on capital for the Hamilton Lane Global SMID Fund, a customized approach to private equity for South American Institutional investors. In his interview with Funds Society, Ricardo Fernandez talks about the successful closure of this fund and the private equity opportunities in Latin America.
Fernandez mentions that from their offices in Rio de Janeiro, they serve different institutional investors across the region, mostly corporate pension funds, private banks, and family offices, from Chile, Colombia, Peru and Central America. “Our firm works with local private equity funds, conducts operations with other managers, and also does co-investments. Our primary local investment started back in 1997, and we have been doing primary and secondary investments since then. These funds are normally targeted towards local institutional investors. On the co-investment side, Hamilton Lane acts as a General Partner by investing with other managers, facilitating their access to the investment and adding know-how to its investments.”
Amongst what they do with Latin American family offices, Hamilton Lane offers partnerships where “we provide them with our expertise in private markets and help set up their private equity investment programs and separate accounts.”
In his opinion, the current environment in Brazil, with a 3.8% contraction for 2015, “represents an exciting time to invest in private equity, as investors can take advantage of the good asset prices and benefit in the long term, looking at the next five to ten years. Some businesses and sectors continue to grow despite the current situation, but because of the lack of growth and financing alternatives, entrepreneurs don’t have a lot of options. Thus, they will look toward PE funds in order to get the financing they need to grow. In addition, valuations have come down and now there are attractive investment opportunities at the right multiple.” He concludes.
CC-BY-SA-2.0, FlickrPhoto: OTA Photos. Nikko Asset Management Launches Japan Focus Equity Strategy
Nikko Asset Management has launched a Luxembourg domiciled Japan Focus Equity UCITS fund managed by Yuki Watanabe.
The Japan Focus strategy aims to achieve long-term capital growth by investing in a portfolio of more than 30 stocks. The team takes an active investment approach based on thorough fundamental research, analysing long term structural trends and identifying companies that benefit from them.
The UCITS fund is based on an existing strategy domiciled in Japan, which has been managed by Watanabe since August 2012. As of 31 March, 2016, the fund has returned 26.15 per cent annually since September 2012 compared with an annualised 21.24 per cent rise in the TOPIX Total Return Index.
“Our Japan Focus fund has been launched in response to investor demand for specialist expertise in actively managed investments in Japan,” says Watanabe, Senior Fund Manager of the Nikko AM Japan Focus Fund. “We have strong relationships locally which provide our team with unique insights into the underlying companies, and the ability to tap into opportunities that may have otherwise been overlooked.”
The fund provides access to Nikko Asset Management’s proven investment team and market leading resources. The company has approximately 200 investment professionals operating in 11 countries, nine of which are based in Asia.
Christoph Riniker, Julius Baer’s Head of Strategy Research, and his investment team are currently underweighting the Spanish equity market based on the ongoing political uncertainty. As they are assuming that this situation is here to stay for some more time.
The potentially shortest Spanish legislature is bound to come to an end on the 26th of June of 2016, when Spain will elect a new parliament for the second time within six months. Since the politicians have failed to form a new government after the last general election in December 2015, King Felipe VI has dissolved the parliament and called for new elections. The situation after the new elections might not be better than before. Current polls suggest that the outcome will be very similar to the one in December 2015.
According to the most recent polls, the ruling PP might see an unchanged result and the PSOE a noticeable decline. Both new parties, Podemos-IU (recently merged) and Ciudadanos might get more seats in the parliament than after the previous general election in December 2015. However, only minor changes can be expected. Since no party will reach the absolute majority, coalitions will have to be formed. The same problem as in the recent months might therefore emerge but we remain confident that the politicians are aware of that they cannot fail again.
Potential coalitions to think about
On the basis of the above-mentioned expectations there are only a limited number of possible combinations. Expecting the PP to stay in the relative lead, the party might first get the opportunity to build a coalition. The most likely partner according to the political programs would be Ciudadanos. Political reforms already achieved my stay in place and taxes could be reduced while the Catalonian issue might remain a topic of conflict between the two parties.
Should a coalition between PSOE and P-IU be considered, the differences in the Catalonian question would also remain an issue here as the PSOE strongly opposes more authority for the north-eastern region. From an investor’s perspective (be it equities or fixed income) the former combination would be strongly preferred. In both cases the coalitions might not reach the absolute majority and therefore remain dependent on smaller regional parties in the parliament. Last but not least a grand coalition between PP and PSOE could be an option although a collaboration of the traditional antagonists seems impossible at first glance. The only argument therefore can only be external political pressure in order to avoid another failure. Not a promising outlook.
Foto: Steven Tyler PJs
. El 77% de los inversores HNW proviene de familias con ingresos moderados
The 2016 US Trust Insights on Wealth and Worth survey recently released found 10 common success traits that create a picture of modern day wealth in America.
“Perceptions of the wealthy in history and popular culture have been painted with a broad brush that doesn’t reflect the majority of financially successful people in society,” said Keith Banks, president of U.S. Trust. “The insights we’ve gained through extensive research over the years give us a more accurate portrait of the modern day wealthy. It’s an increasingly diverse group of men and women of all ages and backgrounds. Their advantage in life is not rare financial privilege but rather basic values, discipline and sense of potential shaped by family from an early age, which equipped them to make the most of every opportunity.”
Based on a nationwide survey of 684 high net worth (HNW) individuals with at least $3 million in investable assets, the 2016 U.S. Trust Insights on Wealth and Worth survey explores who the wealthy are, where they came from, how they built and are sustaining their wealth and what they want to do with it.
When asked what they themselves attribute most to their success, the top three responses were: Hard work, ambition and family upbringing. Through extensive analysis of survey findings, U.S. Trust found these similar characteristics about the wealthy:
They built wealth over time: 77 percent of those surveyed came from middle class or lower backgrounds, including 19 percent who grew up poor. They earned wealth over time, most of it through income from work and investing.
Basic, long-term approach to investing: 86 percent of HNW investors made their biggest investment gains through long-term buy and hold strategies, traditional stocks and bonds (89 percent) and a series of small wins (83 percent) versus taking big investment risks. Their use of more sophisticated investments grows as their wealth increases.
Opportunistically optimistic investors: More HNW investors are optimistic than pessimistic about investment returns over the next 12 months. Nearly three in five keep more than 10 percent of their investment portfolios in cash positions, including one in five with more than 25 percent in cash on hand. Their top reason for doing so is for opportunistic purposes, including being in a position to invest on a sudden market downturn or rising trend.
Use credit strategically: Nearly two-thirds consider credit as a means to strategically build their wealth. Four in five say they know when and how to use credit as financial advantage.
Make tax-conscious investment decisions: HNW investors know that real investment returns are really negative returns if they are gobbled up by taxes. Fifty-five percent agree investment decisions that factor in potential tax implications is better than pursuing higher returns regardless of the tax implications.
Invest in valuable tangible assets: 48 percent of HNW investors invest in tangible assets, such as farmland, investment real estate and timber properties that can produce income and grow over time with legacy value. One in five collects fine art, including one in three ultra high net worth art collectors who are now using art as an alternative asset class and a core part of their wealth structuring and philanthropic giving strategies.
Disciplined savers; opportunistic buyers: 81 percent of HNW investors say that investing to reach long-term goals is more important than funding current wants and needs. This disciplined approach to saving and investing was instilled at an early age and becomes easier with the financial freedom that wealth affords.
Advantage in life is family values and upbringing: Four in five wealthy people came from families where their parents encouraged them to pursue their own talents and interests, but set firm disciplinary boundaries and, for the most part, were tolerant of failures and mistakes along the way. The five family values most strongly stressed during their formative years were: Academic achievement, financial discipline, work participation, family loyalty and civic duty.
Strong family tradition of philanthropy: 65 percent say there is a strong tradition of philanthropy and giving back to society within their family.
Marriage is a life-long partnership: 86 percent of the wealthy surveyed are married or are in a long-term relationship. Most stayed married to the same person, avoiding the financial setback that divorce often creates. They tend to divide, rather than share, roles and responsibilities at home, including financial and non-financial contributions to family wealth, such as caretaking for children. Almost all discuss important goals and values about the use of money.
While the survey found common traits across all ages and wealth levels, U.S. Trust also found distinct generational differences suggesting the next generation of young, high net worth millennials is taking its own approach to building and managing wealth. The findings portray millennials are highly optimistic, opportunistic and knowledgeable investors, who are especially entrepreneurial and confident in their ability to improve their own circumstances while making the world a better place for themselves and others.
“It is noteworthy that while the survey uncovered several examples of generational differences, the one common thread that cut across all generations was the importance and impact of family values as key contributors to success,” said Chris Heilmann, chief fiduciary executive of U.S. Trust. “As such, today’s advisors should be mindful of that focus to engage in values based planning conversations with their clients.”
Photo: AndyCastro, Flickr, Creative Commons. Eastspring Investments to Become Master Agent of Vontobel AM in Taiwan
Vontobel Asset Management reaches next milestone in Asia: Eastspring Investments will become Master Agent and will sell its mutual funds in Taiwan.
In Taiwan, Eastspring Investments is one of the leading asset managers for retail investors, providing investment solutions across a range of asset classes including equities, fixed income, and multi asset.
The cooperation will broaden the access of Vontobel Asset Management to the retail market in Taiwan and provide Eastspring’s clients with the opportunity to invest in Vontobel’s active investment products.
“We are very pleased that Eastspring has chosen Vontobel Asset Management as a partner for retail distribution in Taiwan. We believe this cooperation agreement is a win-win for both sides, allowing Eastspring to service the financial needs of its clients by offering further investment opportunities. Vontobel Asset Management has a strong partner in Taiwan with deep market knowledge and experienced staff,” said Ulrich Behm, CEO of Vontobel Asset Management Asia Pacific.
“We are delighted to provide Taiwan retail investors with access to Vontobel Asset Management’s funds. More than 82 percent of Vontobel funds are ranked in the top quartiles within their respective peer groups,“ said Ms Loretta Ng, CEO of Eastspring Investments Taiwan.
Vontobel Asset Management is a globally active asset manager with a multi-boutique approach. Founded in 1988, Vontobel Asset Management comprises six investment boutiques: Quality Growth Equities, Global Thematic Investing, Fixed Income, TwentyFour, Multi Asset Class Investing and Harcourt focusing on alternatives. As of December 2015, client assets totalled approximately USD 100 bn.
Factors are broad, persistent drivers of returns that have been proven to add value to portfolios over decades, in accordance to research data from Dartmouth College. Factor strategies like smart beta capitalize on today’s advancements in data and technology to give all investors access to time-tested investment ideas, once only accessible to large institutions. As factor strategies continue to gather attention, some misconceptions have arisen. We highlight—and clearup—a few here today.
1. Factor strategies are stocks-only. False. Equity smart beta strategies like momentum, value, quality and minimum volatility are by far the most adopted factor strategies and often serve as the gateway to this type of investing. But it’s important to note that the concept extends beyond equities to other asset classes, such as bonds, commodities and currencies. As an example, fixed income factors are less well known but similarly aim to capitalize on market inefficiencies. Bond markets are largely driven by exposures to two macroeconomic risk factors: interest rate risk and credit risk. One way that bond factor strategies try to improve returns is by balancing those risks.
As investors look for more precise and sophisticated ways to meet their investment goals, we believe we will see more factor strategies in other asset classes, as well as in long/short and multi-asset formats.
2. Factor investing is unnecessary because my portfolio of stocks, bonds, commodities, hedge funds and real estate is well diversified. Maybe, maybe not. Oftentimes a portfolio is not as diversified as you might think. You may hold many different types of securities, sure, but those securities can be affected by the same risks. For example, growth risk figures prominently in public and private equities, high yield debt, some hedge funds and real estate. So as economic growth slows, a portfolio overly exposed to that particular factor will see its overall portfolio return lowering as a result, regardless of how diverse its holdings are across assets or regions.
Factor analysis can help investors look through asset class labels and understand underlying risk drivers. That way, you can truly diversify in seeking to improve the consistency of returns over time.
3. Factor investing is a passive investment strategy. Not really. At least we don’t look at it that way. Factor investing combines characteristics of both passive and active investing, and allows investors to retain many benefits of passive strategies while seeking improved returns or reduced risk. So to us, factor investing is both passive and active. While we think traditional passive, traditional active and factor strategies all have a place in a portfolio, it is not news that some of what active managers have delivered in the past can be found through lower-cost smart beta strategies.
