Sovereign wealth funds and central banks are emerging as large scale providers of collateral, providing a much needed boost in liquidity to the global financial system, according to a new study by BNY Mellon and the Official Monetary and Financial Institutions Forum (OMFIF).
The report, Crossing the Collateral Rubicon: A new territory of challenge and opportunity for sovereign institutions, notes the liquidity boost is coming at a welcome time when financial institutions face challenges from new regulations on risk mitigation and balance sheet management. Two dozen sovereign institutions with more than $2 trillion in assets under management took part in the study. Thirty-seven percent said they are in advanced stages of considering collateral trades or already implementing them. Sixty-six percent reported that enquiries from potential counterparties in the trades were increasing.
“Collateral is becoming the sole determinant of institutions’ ability to engage in financial transactions in the cash or derivatives markets,” said Hani Kablawi, chief executive officer of BNY Mellon’s Asset Servicing business in EMEA. “Since the financial crisis, new regulations have placed a premium on counterparties gaining access to high-quality collateral. Yet, central bank macroeconomic policies have reduced the supply of collateral. This has produced a great challenge for markets and a large-scale opportunity for official holders of these securities such as sovereign wealth funds.”
Quantitative easing programmes have resulted in central banks acquiring significant amounts of government securities, moving them away from traditional suppliers of liquidity such as banks and brokerage companies. These securities are among the most sought after for collateral trading. Governments that issue the highest-rated debt have had lower debt issuance in recent years, further constricting the supply, the report said.
“We now have a situation in which the lower-rated securities that cannot be used for collateral trading are circulating more freely than the higher-rated securities, which have been taken out of the markets,” Kablawi adds. “While the mismatch between demand and supply for credit is evident in the US and the UK, it has become particularly acute in continental Europe and has been a major factor behind the sluggish recovery. Sovereign institutions that provide collateral are playing an important part in overcoming these liquidity shortages and limiting market volatility.”
In turn, the falling oil price has helped to drive up demand for collateral from energy supplying nations. One chief risk officer for a Middle East sovereign fund who took part in the study said: “In the current environment of low oil prices, the liquidity framework becomes more important so investment activity can continue. We must make sure the liquidity profile is appropriate, prioritising liquidity over returns. In the future, maintaining the liquidity management framework is the key.”
You can read the full report in the following link.
CC-BY-SA-2.0, FlickrPhoto: Claudia Calich, fund manager at M&G Investments. M&G’s Claudia Calich to attend Miami Summit
Claudia Calich, fund manager at M&G Investments will outline her view on where to find pockets of value in emerging markets debt assets, when she takes part in the Funds Society Fund Selector Summit Miami 2016.
Currently, emerging market investors face uncertainty from factors such as slower economic growth in China, volatile oil prices and geopolitical risk. Calich suggests flexibility in strategies such as the M&G Emerging Markets Bond fund facilitate taking high conviction positions without being constrained by local or hard currency, or differences between government and corporate bonds.
Outlining the opportunities, Calish will also explain her currency and interest rate positioning.
Calich joined M&G in October 2013 as a specialist in emerging markets debt and was appointed fund manager of the M&G Emerging Markets Bond fund in December 2013. She was also appointed acting fund manager of the M&G Global Government Bond fund and acting deputy fund manager of the M&G Global Macro Bond fund in July 2015. Claudia has over 20 years of experience in emerging markets, most recently as a senior portfolio manager at Invesco in New York, with previous positions at Oppenheimer Funds, Fuji Bank, Standard & Poor’s and Reuters. Claudia graduated with a BA honours in economics from Susquehanna University in 1989 and holds an MA in international economics from the International University of Japan in Niigata.
Foto: Perspecsys Photos
. JP Morgan Asset Management lanza dos ETFs de renta variable con cobertura de divisa
J.P. Morgan Asset Management recently announced the expansion of its strategic beta suite with the launch of two new funds, JPMorgan Diversified Return Europe Currency Hedged Equity ETF (JPEH) and JPMorgan Diversified Return International Currency Hedged Equity (JPIH).
Both new funds offer a risk-managed approach to investing that can allow investors to capture most of the upside with a goal of providing less volatility in down markets. The ETFs diversify risk across sectors, while hedging FX exposure back to USD, providing investors with exposure to international equity markets with less risk.
JPEH tracks the FTSE Developed Europe Diversified Factor100% Hedged to USD Index and JPIH tracks the FTSE Developed ex-North America Diversified Factor 100% Hedged to USD Index which were thoughtfully constructed based on J.P. Morgan’s active insights and risk management expertise.
“As volatility and currency risk continue to worry investors, clients are increasingly turning to our strategic beta products for a new approach to address the drawbacks of market cap-weighted indices.” said Robert Deutsch, Global Head of ETFs for J.P. Morgan Asset Management. “We are thrilled to expand our investment capabilities with currency-hedged ETFs, complementing our existing strategies and offering clients more choices.”
“We are excited to be able to draw on our significant global index capability to design innovative new indexes to serve as the basis for ETFs provided by our global partners like J.P. Morgan,” said Ron Bundy, CEO of North America benchmarks for FTSE Russell.
With interest rates at an all-time low, investors are looking for alternatives to term deposits and traditional savings accounts. The fund of fund BL-Fund Selection 0-50 is suitable for those who want higher yields compared to a money-market investment while retaining the advantages of defensive investing. As the name indicates, the equity weighting of the fund cannot exceed 50%.
What are the aims of the fund?
To deliver stable and satisfactory long-term performance, to provide protection against volatile market conditions and to preserve capital in the medium term.
How is the fund managed?
The BL-Fund Selection 0-50 portfolio is both flexible and defensive. I invest in a selection of funds managed by internationally renowned fund managers with no regional, sector or currency restrictions. By investing in external funds, Banque de Luxembourg is able to focus on diversification and benefit from the expertise of good fund managers with solid management processes. No asset class is excluded; the portfolio can contain equities, bonds, commodities, alternative instruments and money-market investments in all currencies. The flexible allocation means I can invest up to 50% in equities. Generally speaking, however, the equity weighting does not exceed 25% of the portfolio. The risk index is 3 on a scale of 1-7.
What are the advantages?
This fund offers natural diversification in terms of both assets and strategies. It can form the basis of a comprehensive defensive wealth management approach.
Who is the target investor?
The BL-Fund Selection 0-50 fund is designed for careful investors who wish to benefit from active, non-benchmarked management that focuses on capital preservation over a 3-year period.
What type of assets does the fund invest in?
The portfolio consists of three main investment blocks: two traditional blocks and one ‘alternative’ block whose purpose is twofold.
Two traditional blocks: Equities, with a structural position in high-quality assets and segments that ‘outperform’ in the long term, with an emphasis on high-quality medium-value stocks. Bonds in niche segments, which generate higher returns than classic securities in today’s low-interest climate.
One ‘alternative’ block whose purpose is twofold: to generate regular returns, in all market conditions, that will offset low bond yields and to create neutral or negative correlation with riskier asset markets.
Photo: Enrique Chang. Janus Capital Names President, Head Of Investments
Janus Capital has promoted Enrique Chang to the position of president, head of Investments.
Chang took up his new duties on 1 April, overseeing Janus’ fundamental and macro fixed income teams, in addition to his existing leadership responsibilities of the Janus equity and asset allocation investment teams.
“The decision to promote Enrique to president, head of Investments, is reflective of his increased responsibility in now overseeing the majority of our Janus investment teams, as well as his significant contributions to the firm over the past two and a half years,” said Dick Weil, CEO of Janus Capital Group.
Chang will partner with CEO Dick Weil and president Bruce Koepfgen.
Janus Capital specified that Perkins Investment Management and Intech Investment Management will continue to report into their respective leadership teams and relevant boards.
Chang was previously CIO Equities and Asset Allocation. He joined Janus in September 2013 and was previously executive vice president and chief investment officer for American Century Investments, where he was responsible for the firm’s fixed income, quantitative equity, asset allocation, US value equity, US growth equity and global and non-US equity disciplines.
At end December 2015, Janus Capital’s AUM reached around $192.3bn (€169.2bn).
Schroders is continuing to strengthen its Fixed Income Global Multi-Sector team with the appointment of James Lindsay-Fynn who joins as a portfolio manager focusing on rates and currencies. James joins Schroders from Rogge Global Partners where he was a partner and a global macro portfolio manager specialising in interest rates and currencies for global portfolios.
During his six years at Rogge, James co-managed fixed income total return, global aggregate and government strategies. Other previous positions include absolute return portfolio manager at GAM, associate director at Evolution Securities, part of Investec Plc group of companies, and vice-president in fixed income at Bank of America Securities.
At Schroders, James will be joining the well-established Global Multi-Sector team in London and will report to Paul Grainger, Senior Portfolio Manager.
Philippe Lespinard, Co-Head of Fixed Income at Schroders said: “We are delighted to welcome James to our team. James has extensive investment experience and will further strengthen our investment proposition with his background of independent analysis and idea generation. James’ significant experience in the macro space will allow us to continue to grow this successful part of our business further.”
The Global Multi-Sector team is made up of six fund managers supported by eight fixed income analysts and strategist located across the globe.
Foto: byrev / Pixabay. Las ventas netas de fondos de inversión en 2015 fueron de casi 2 billones de euros
According to the latest international statistical release from the European Fund and Asset Management Association (EFAMA), which includes the worldwide investment fund industry results for the fourth quarter of 2015 and the whole year, investment fund assets worldwide increased 5.9% during the fourth quarter of 2015 to EUR 36.94 trillion at end 2015. The year asset growth reached 12%. In U.S. dollar terms, worldwide investment fund assets totaled USD 40.2 trillion at end 2015.
During the fourth quarter, all long-term funds (excluding money market funds) recorded net inflows, fueled by the strong quarter equity funds had. They attracted net inflows of EUR 174 billion, up from EUR 78 billion in the third quarter while bond and balanced funds registered net sales of 32 and 120 billion euros, up from the outflows of EUR 21 billion in the previous quarter.
Money market funds registered net inflows of EUR 215 billion during the fourth quarter.
Overall in 2015, worldwide investment funds attracted net sales of almost 2 trillion euros (1,969 billion), up from EUR 1,532 billion in 2014.
At the end of 2015, assets of equity funds represented 40 percent and bond funds represented 20 percent of all investment fund assets worldwide. Of the remaining assets money market funds represented 13 percent and the asset share of balanced/mixed funds was 18 percent.
The market share of the ten largest countries/regions in the world market were the United States (48.4%), Europe (33.2%), Australia (3.8%), Japan (3.3%), China (3.1%), Canada (2.9%), Brazil (2.8%), Rep. of Korea (0.9%), India (0.4%) and South Africa (0.4%).
You can access the full report in the following link.
. Santander México Hires Jorge Arturo Arce for its Global Corporate Banking Division
Grupo Financiero Santander México, (BMV: SANMEX; NYSE: BSMX) (“Santander México”), one of the leading financial groups in Mexico, announced that Jorge Arturo Arce Gama has been hired as Deputy General Director of Global Corporate Banking.
Executive President and CEO of Santander México, Héctor Grisi Checa, said, “Santander México is bolstering its leadership in corporate banking, and securing an executive of Jorge’s caliber underscores our commitment to this goal. We are attracting the best talent and forming the most powerful unit in this segment of banking in Mexico, a clear differentiator from our competitors.”
Jorge Arturo Arce Gama is an industry veteran, with more than 25 years of experience in investment and corporate banking. He most recently served as CEO and Chairman of the Board of Deutsche Bank México. He has worked at institutions including Citibank México and Deutsche Bank in New York with responsibility for Latin America. He has also been Vice President of the Mexican Banking Association (ABM for its initials in Spanish) and a member of the Business Coordinating Council.
Adam Butler, Michael Philbrick and Rodrigo Gordilloare the executive team behind ReSolve Asset Management and the authors of the new book, Adaptive Asset Allocation: Dynamic Global Portfolios to Profit in Good Timesand Bad.
In their new book, Butler, Philbrick and Rodrigo, argue that picking stocks can only get you so far…true portfolio diversification cannot be achieved by picking a set of securities within a single asset class.
Given the current difficult market conditions, the traditional means of portfolio management simply won’t help investors achieve their financial objective. Static stock and bond portfolios, strategic asset allocation, and buy-and-hold might work during certain market regimes, but if they didn’t get the job done over the last 15 years. ReSolve Asset management is expecting 20 more years of the same, investors have to make some real changes.
Adaptive Asset Allocation presents a framework that addresses these major challenges, emphasizing the importance of an agile, globally-diversified portfolio:
Scrutinizes the relationship between portfolio volatility and retirement income.
Details the historic divergence between economic reality and investor behavior.
Demonstrates a model for predicting long-term returns on the basis of current valuations.
Examines the difference between Strategic Asset Allocation, Tactical Asset Allocation, and Dynamic Asset Allocation.
Adopts an investment framework for stability, growth, and maximum income.
An optimized portfolio must be structured in a way that allows a quick response to changes in asset class risks and relationships, and the flexibility to continually adapt to market changes. To execute such an ambitious strategy, it is essential to have a strong grasp of foundational wealth management concepts, a reliable system of forecasting, and a clear understanding of the merits of individual investment methods.
“The portfolio management industry is undergoing a revolution analogous to the shift that occurred after Markowitz introduced his modern portfolio theory in 1967. Managers who embrace the new methods will increasingly dominate traditional managers, and those who fail to adapt will, inevitably, face extinction,” assert the authors.
Photo: David Leo Veksler. RBS Sells ETF Business To Chinese Asset Manager
Hong Kong based asset manager China Post has acquired the ETF offering of Royal Bank of Scotland, which consists of ten funds with combined assets of €360m.
China Post is the international asset management arm of China Post & Capital Fund Management. As a result of the acquisition, China Post will become the promoter and global distributor of the ETFs, formerly RBS’s ETFs listed in Frankfurt and Zurich.
Morover, the ETF’s will be seeded with additional capital to make them more attractive to institutional investors, they will also be cross-listed in Hong Kong.
The current fund range offers investors access to commodities, emerging market and frontier market equities, China Post aims to expand the offering with a new smart beta strategy offering investors access to Chinese equities.
Danny Dolan, managing director of China Post Global (UK), comments: “This acquisition demonstrates China Post Global’s long term commitment to the European region. Our aim is to differentiate ourselves through innovation. For example, while ETFs giving exposure to China and smart beta strategies already exist, no-one in Europe has yet combined the two.”
“Other differentiators for us include our access quotas to mainland Chinese securities, the strength of our parent companies and their distribution networks, and the strong financial engineering background of our team, which will help with product construction” he adds.
