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Jérémie Fastnacht Joins Banque de Luxembourg as a Portfolio Manager

Jérémie Fastnacht has joined BLI – Banque de Luxembourg Investments as a portfolio manager. His main responsibility in this role will be to support Guy Wagner in managing the BL-Equities Dividend fund.

The 30-year-old Frenchman comes from Banque de Luxembourg, where he served for one and a half years as an analyst and equity portfolio manager in the Private Banking Investments department.

“Quality research is even more important in today’s market environment. We are therefore staying on our chosen path and – as we have done successfully with our BL-Equities Europe and BL-Equities America funds – have provided our fund manager with a co-manager,” said Guy Wagner. “With Jérémie we have selected an in-house candidate, especially as he knows the Bank, our investment philosophy, and shares our values.”

Jérémie Fastnacht added: “I am pleased to take on this new role on the equity fund team of BLI – Banque de Luxembourg Investments. Alongside Guy I will share responsibility for the Bank’s flagship funds, which is highly motivating.” Jérémie holds a master’s degree in Finance from Université Paris-Dauphine and completed a post-graduate program in Financial markets from SKEMA Business School / North Carolina State University. Jérémie began his career as an equity fund manager at BCEE Asset Management in Luxembourg in August 2012.

Why We Think Mexico Is a Standout in Latin America

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I recently traveled to Latin America and had the opportunity to visit and collaborate with a number of our team members based in the region, including Rodolfo Ramos Cevallos, who works out of our office in Mexico City. Oil prices have certainly had an impact on Latin American economies—for better or for worse—but it was clear to us that Mexico has many potential growth drivers, with reform efforts playing a key part. I’ve invited Rodolfo to talk more about the economic prospects in his home country.

Over the last two decades, Mexico has taken decisive steps to integrate with the global economy through trade agreements, so it can be affected by external factors such as slowing global growth. While 2015 was a challenging environment for investors—including those in Mexico—we think Mexico stands out from many other countries in Latin America, and as well as other emerging markets, for a number of reasons. Mexico has developed into a high-value-added exporting powerhouse to the United States. It has passed structural reforms geared to encourage competition and attract investments at a time when most countries are shying away from private investment and liberalization, and it has stable fiscal and macroeconomic management. Because of this differentiation, Mexico’s equity market has been able to outperform broader Latin America as well as emerging markets overall (as measured by MSCI indexes) in the last one-, three- and five-year periods.

Currently, we are seeing opportunities in the export sector, which has benefited from a weakening in the Mexican peso versus the US dollar over the past couple of years. The automotive industry is a good example; Mexico is the seventh-largest automobile manufacturer in the world and largest supplier of automobile parts to the United States. Production of light vehicles has been on the rise, expected to grow from 3.2 million units annually in 2014 to more than 5 million units by 2020. We are also seeing bargains in the mining sector. While the mining sector has been out of favor in recent years, we have been able to find cost-competitive companies in Mexico with solid balance sheets that appear well-positioned to potentially benefit when the cycle turns.

Within Mexico, we are also finding opportunities in the banking and financial services sectors and believe banks are likely to continue to grow as younger generations get more comfortable using credit than perhaps their parents or grandparents were. Overall loan penetration in Mexico currently stands among the lowest in all of Latin America, and we believe financial services companies should do well as new industries (namely energy and oil) get listed and monetized in the equity market.

Monetary Policy and the Peso

The Mexican peso is one of the most liquid currencies in the world and the most liquid in emerging markets, which is why it is widely used by market participants to hedge emerging market risk. A large derivatives market also drives currency prices. The peso has historically been correlated with oil prices due to Mexico’s oil assets and the government’s dependence on them for tax revenues. These dynamics pushed the peso to an all-time low versus the US dollar at the beginning of the year. The peso’s dismal performance has been a major area of frustration and concern for global investors, especially considering Mexico’s stable macroeconomic outlook. Mexico’s central bank, Bank of Mexico (or Banxico), has historically taken a hands-off approach to foreign exchange markets. However, this extreme volatility prompted Banxico to announce a surprise interest rate hike in February and to directly sell US dollars to banks (instead of its routine US dollar auctions) to bolster the currency. The Mexican peso reacted positively to these actions, but it currently remains undervalued, according to our calculations.

Monetary policy is very much coordinated between the US Federal Reserve and its Mexican counterpart, which should limit any adverse impacts from a tightening cycle in US monetary conditions. However, we believe any US tightening will be a slow and gradual process due to stubbornly low inflation in the United States, expected at a mere 1.3% for 2016, based on the current Bloomberg consensus forecast. We do not foresee a material impact on Mexico’s economy from a gradual increase in interest rates in the United States.

The Impact of Oil, and Reforms

While oil is meaningful to the Mexican government in terms of revenues, Mexico’s reliance on oil is considerably less than is commonly believed, as oil represents only about 10% of its exports. With the decline in oil prices and an increase in economic activity, oil’s importance in Mexico has been significantly reduced in the last couple of years, with income tax and value-added tax (VAT) picking up the slack. Oil’s contribution to the federal budget has dropped by half in the last couple of years from about 40% in 2008 to about 20% in 2015. Unfortunately, consumers have generally not seen lower prices at the pump yet, but with the liberalization of the oil sector that could change in the coming years.

Throughout Latin America, governments can no longer rely on high commodity prices to help them finance key programs and projects, particularly related to infrastructure. So I think reforms are going to be very important. Energy reform in Mexico has opened up the oil sector to private investment through different participation schemes. Previously, the state-owned enterprise Pemex was the only firm that was allowed to capitalize on oil resources. Now, the newly established National Hydrocarbons Commission has the authority to auction fields to private parties. The commission has conducted three auctions so far, and each was more successful than the previous one, with the most recent auction securing a 100% assignment rate. The onshore fields already auctioned have low costs and have been profitable even at currently low oil prices. In addition to these auctions, Pemex will be able to partner with specialized oil players to develop its existing resources. The government is currently working on the rules governing the Mexican equivalent of a US master limited partnership (MLP) that will be used to list energy assets from Pemex and private parties. We believe all of these developments will likely lead to an increase in foreign direct investment.

Telecommunications has been another key area of reform, which has encouraged competition with the creation of an independent regulator, among other things. Telecommunications prices have dramatically declined since the reform’s implementation, translating into a direct saving to consumers. Last year, tumbling telecommunications prices played a major role in inflation falling to a record low of 2.13% in 2015.

In sum, the Mexican economy has been improving in a number of areas. Consumption has been very strong, and the government has been very proactive in announcing cuts as well as relying much more on private investment to finance a number of planned projects. Short-term market jitters aside, the US economy still looks strong, which should help Mexico going forward and make it an attractive place to invest.

Column by Mark Mobius and Rodolfo Ramos Cevallos

M&G Investments Appoints Tristan Hanson To Its Multi-Asset Team

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M&G Investments ficha a Tristan Hanson para su equipo de multiactivos — Photo: Tristan Hanson . M&G Investments Appoints Tristan Hanson To Its Multi-Asset Team

M&G Investments, a leading international asset manager, today announces the appointment of Tristan Hanson as Fund Manager to its Multi-Asset team, starting on 21st March. Tristan will be responsible for developing the team’s absolute return proposition and will report to Dave Fishwick, Head of Multi-Asset.

Tristan has 15 years’ experience in asset management and joins M&G from Ashburton Investments, where he was Head of Asset Allocation with responsibility for global multi-asset funds. Prior to this, Tristan worked as a Strategist at JP Morgan Cazenove covering equities, fixed income and currencies.

Graham Mason, Chief Investment Officer at M&G Investments, says: “We are very pleased to welcome Tristan to our team. He has extensive experience across multi-asset strategies and will play a key role in broadening our capabilities around absolute return products. This will strengthen our Multi-Asset team and meet increasing demand from our clients.”

Over the past 15 years, M&G’s 16-strong Multi-Asset team has successfully developed a robust investment approach by combining valuation analysis and behavioural finance.

Is the U.S. Growth Slowdown Trending into a Recession?

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While the US Federal Reserve starts its two-day meeting, in which no rate hike is expected, Monica Defend, Head of Global Asset Allocation Research at Pioneer Investments writes that her outlook for the US economy for 2016 is for decent growth, driven by Personal Consumption, Government Consumption (finally back to contributing positively to growth after years of retrenchment) and Investments (particularly strong performance of Residential Investments, while Non-Residential Investments will face a difficult first part of the year).

She believes that “the probability of a U.S. recession this year is still limited and the resilience of our base case is confirmed against further stress on selected financial indicators. In particular, we expect the US consumer to be resilient and sustain growth on the back of a healthy labor market, improvements on the compensation profile, and still moderate inflation, which should support real income growth.”

Amongst the key insights that can be found on her latest publication titled “A US Recession is not on the Horizon” are:

Leading indicators seem to point to a tentative stabilization and improvement in growth of the US and sectors hit by the strong dollar and weak oil price.
They currently expect inflation to move gradually towards the Fed Target of 2%. Should the oil and commodity prices trend higher than they currently assume in our scenario, we may witness a higher than expected increase in inflation, still not priced in by the market.
On monetary policy, they believe that Fed will be on hold in March, and will manage market expectations carefully. “A move in March would been an unwelcome surprise for financial markets, but we see this risk very limited.”

To read Monica’s entire Update, follow this link.

Matthieu Duncan Becomes Natixis Asset Management CEO

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El grupo Natixis Global Asset Management nombra a Matthieu Duncan nuevo CEO de su gestora Natixis AM — CC-BY-SA-2.0, FlickrPhoto: Matthieu Duncan, new CEO of Natixis Asset Management. Matthieu Duncan Becomes Natixis Asset Management CEO

The Natixis Asset Management Board of Directors met today, chaired by Pierre Servant, to appoint Matthieu Duncan as Chief Executive Officer (CEO) of Natixis Asset Management following the resignation of Pascal Voisin. This new appointment will take effect on April 4, 2016. Until that date, Jean François Baralon, Natixis Asset Management’s Deputy CEO, will serve as interim CEO of Natixis Asset Management.

Matthieu Duncan will be looking to accelerate the international growth of Natixis Asset Management and to continue to integrate Natixis Asset Management within Natixis Global Asset Management’s global multi-affiliate business model.

The Board of Directors would like to thank Pascal Voisin for his role over the past eleven years leading Natixis Asset Management’s operational management. He brought new life to the company internationally and successfully contributed to the development of Natixis Global Asset Management’s multi-affiliate model by taking majority equity interests in H2O Asset Management and Dorval Asset Management and by using Natixis Asset Management’s expertise to create Seeyond and Mirova.

A dual French and US citizen, Matthieu Duncan completed his studies at the University of Texas (Austin) and the University of California (Santa Barbara). He began his career in the financial industry at Goldman Sachs, where he held various positions in the capital markets sector in Paris and London between 1990 and 2003. Since 2004, he has held various positions in the asset management area in London: Chief Investment Officer (CIO) Equities at Cambridge Place IM, Head of Business Strategy and member of the Board of Directors of Newton IM (a Bank of New York Mellon company), and Chief Operating Officer (COO) and member of the Board of Directors of Quilter Cheviot IM.

We Are All in This Together

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FIBA welcomed more than 1,300 people to its 16^th Annual Anti Money Laundering (AML) Compliance Conference held March 7^th to 9^th in Miami. Regulators, policy makers and financial leaders from 42 countries representing 330 financial institutions and corporations shared expertise on the evolving trends in the AML landscape with the intention of enhancing overall transparency across banking and non-banking institutions.

Among the highlights from this year’s program the recent corruption scandals involving FIFA, IAAF and ITF that have not only made news headlines, but have also called into question the level of risk assessment partnering financial institutions should be applying to sports or entertainment federations. These cases have highlighted the obvious intersection between sports and finance because without proper financing, sport federations would cease to exist, placing both parties at risk and in need of a practical solution. Increased scandals warrant an increased “know your customer’s customer” approach by banks to ensure they are proactively aware of any potential fraudulent behavior occurring among clients.

In a different session, an in depth conversation with FinCEN Director, Jennifer Shasky Calvery, shed light on how the organization works and what their goals include. Ultimately, they’re not looking to “jail anyone,” least of all compliance officers, but rather find mechanisms to collect information. The obligation of protecting the financial system from criminals and terrorists lies not just with the financial services industry, but also the regulators and law enforcement. “We all are in this together,” was the message.

Finally, a subject directly related to Miami was the theme of one of the key sessions of this edition of the conference. On March 1, 2016, FinCEN’s third and most recent GTO on Miami took effect. Issued by FinCEN, the GTO is not meant to be a regulatory solution for issues, but rather a tool to understand the source of fraud, which is particularly high in this region. Currently, 22% of US real estate purchases are via all-cash transactions. The GTO requires that title insurance companies identify the true owners of shell companies, in an effort to prevent the laundering of illicit proceeds.

“The opportunity to facilitate an open dialogue between regulators and banks in one room is incredibly fulfilling and truly moves the needle on our industry,” said FIBA CEO, David Schwartz. “Compliance responsibilities and regulations may differ from region-to-region in terms of what’s expected by regulators and what’s realistic for banks, however, the common goal is to find practical solutions that protect customers, institutions and the overall system. This was our most successful event yet, and we thank our sponsors, partners and speakers who helped make it possible.”

Global Equity Income: Where Are The Current Dividend Opportunities?

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CC-BY-SA-2.0, FlickrFoto: Thomas Leth-Olsen. Claves para entender el ciclo de crédito

Consistent dividend growth is generally a sign that a business is doing well and should provide investors with a degree of confidence. If dividends are rising steadily over time, said Alex Crooke, Head of Global Equity Income at Henderson, then a firm’s earnings, cashflow and capital should also be growing.

An indicator of sustainability

Payout ratios identify the percentage of corporate earnings that are paid as dividends and can be an indicator as to whether a company has the scope to maintain or increase dividends. The payout ratio, explains Crooke, can be influenced by a number of factors, such as the sector the company operates in and where the company is within its growth cycle. As the chart below shows, the level of current payout ratios varies considerably between countries and regions both at an absolute level and when compared to historical averages.

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“Although the payout ratio chart shows that opportunities exist for dividend increases in the emerging markets, the outlook for earnings and dividends remains uncertain and at present we are finding the most attractive stock opportunities for both capital and income growth in developed markets. Within the developed world, Japan and the US have the greatest potential to increase payout ratios, although from a relatively low base with both markets currently yielding just over 2%” points out the Head of Global Equity Income at Henderson.

An active approach is important

Conversely, payout ratios from certain markets, such as Australia and the UK, are above their long-term median. “Companies from these countries are distributing a greater percentage of corporate earnings to shareholders in the form of dividends than they have done historically. This leaves the potential for dividend cuts if a company is struggling to grow its earnings. One area of concern for income investors with exposure to UK and Australia is the number of large resource-related companies listed within these market indices”, said Crooke. Henderson believes that earnings, cashflow and ultimately dividends from these types of firms are likely to be impacted by recent commodity price falls.

Nevertheless, explains Crooke, the UK in particular has a deep-rooted dividend culture and outside of the challenging environment for the energy and resources sectors is home to a number of businesses that are delivering sustainable dividend growth. Our approach is to invest on a company-by-company basis using an actively-managed process that considers risks to both capital and income.

Seeking dividend growth

Recent market volatility has affected share prices globally. Despite this, Henderson believes attractive businesses with strong fundamentals and the potential for capital and dividend growth over the long term can be found across nearly all regions and countries.

“Within our 12-strong Global Equity Income Team we continue to seek companies with good dividend growth, and payout ratios that are moderate or low, which provides the potential for dividend increases. Typically, we avoid the highest-yielding stocks and focus on a diversified list of global companies that offer a sustainable dividend policy with yields between 2% and 6%”, concludes.

AXA IM Real Assets Launches a New Pan European Open Ended Real Estate Fund

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The open ended fund, AXA CoRE Europe has an initial investment capacity close to EUR 700 million and aims to build a highly diversified portfolio of Core European real estate assets, it has already raised over EUR 500 million from a range of European institutions.

AXA CoRE Europe will seek to provide institutional investors with long-term stable income through the acquisition of Core real estate assets across Europe, capitalizing on individual market dynamics and timing. Over the long term AXA IM – Real Assets aims to grow AXA CoRE Europe steadily into a flagship European fund with a target size of EUR 3 billion to EUR 5 billion.

AXA CoRE Europe was one of the club of investors which AXA IM – Real Assets put together and have agreed to acquire the France’s tallest tower, Tour First in Paris La Défense. This project is in-line with the Fund’s strategy to focus investments on Europe’s largest and most established and transparent markets – UK, Germany and France – while maintaining the ability to invest across the entire continent from Spain to Benelux and the Nordics or Switzerland. AXA CoRE Europe will target mainstream asset classes, primarily offices and retail, and primarily seek investments into well-located assets which have high building technical and sustainability specifications and are let to strong tenants on medium or long term leases. The Fund will also consider selective investments where it can enhance returns by improving occupancy rates and/ or through repositioning works and will also retain a flexibility of allocation which provides for the ability to manage real estate cycles over the long term.

The fund will leverage on the established capabilities of AXA IM – Real Assets to source and actively manage European Core assets in all sectors and geographies by utilizing its unrivalled network of over 300 asset management, deal sourcing and transaction professionals, as well as fund management professionals who are locally based in 10 offices and operating in 13 countries across Europe.

Regulatory Clarity Could Pave Way for Significant Increase in Active ETFs

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The number of actively managed exchange-traded funds (ETFs) is likely to increase significantly once the U.S. Securities & Exchange Commission rules on proposals designed to discourage high-frequency traders from stepping ahead of active managers, according to BNY Mellon‘s ETF Services group.

While traditional ETFs are highly transparent, this characteristic has been a detriment to some active managers who do not want every move studied by high-frequency traders seeking to front-run their transactions. The various proposals being considered by regulators would limit the transparency required for managers of active ETFs. However, many in the industry believe that investors are willing to give up a measure of transparency to access active management in a cost-effective vehicle.

Steve Cook, business executive, structured product services at BNY Mellon, said, “Uncertainty around which proposal will be adopted has slowed the launch of actively managed ETFs this year. However, once we have regulatory clarity, we expect a rebound in launches of actively managed ETFs. It will result in more options for investors, which is what everyone wants.”

Negative Rates, the Japanese Way

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The negative interest rate regime in Japan is likely to circumvent banks and target currency and market financing. According to Maxime Alimi, from Axa Investment Management, there are three main implications to this:

The Bank of Japan has room to cut further and is likely to use it;
Significant risks of financial market disruptions and
Financial repression for institutional investors.

In their view, “the BoJ played a role in the recent market correction as it sharpened the market’s pessimistic assessment of central banks’ potency to address sluggish growth and inflation.” Japanese banks have, and will continue to have, only a very small share of their reserves effectively taxed, unlike in Europe, plus “banks are very unlikely to pass on negative rates to their clients either through deposits or loans.”

What is the point, then, of cutting interest rates into negative territory? The team believes that the BoJ is counting on non-bank channels to support the economy and borrowing condition, which include:

Currency: lower policy interest rates still influence money market rates and therefore the relative carry of the yen compared to other currencies.
Sovereign yield curve: lower short-term interest rates spread to longer-term yields via the expectation channel.
Corporate bond yields: financing costs for corporates fall as a consequence of lower JGB yields as well as tighter spreads resulting from the search for yield.
Floating-rate bank loans: a large share of mortgages and corporate bank loans are floating and use interbank market rates as benchmarks.

They also believe that given “deposit interest rates have a floor at zero, largely removing the risk of cash withdrawals, the BoJ has a lot of room to cut interest rates below the current -0.1%. They have effectively made the case that ‘there is no floor.'” As well as that with negative rates, the risk of disruptions and illiquidity is high and that the burden of negative interest rates will be mostly borne by institutional investors, which have to invest in debt securities.

“The BoJ is “fighting a war” against deflation and has repeatedly proven its commitment since early 2013. But this war has to be short in order to be won. This was true with QE, it becomes even more true with negative rates. This will require not only monetary policy to be effective but the other pillars of Abe’s policies to come to fruition soon. Otherwise, not only will the benefits of this ‘shock-and-awe’ strategy fade away, but associated risks will mount. More than ever, the clock is ticking for Abenomics,” he concludes.