According to the latest research from global analytics firm Cerulli Associates, the U.S. offshore channel accounts for more than half of the assets raised by cross-border managers in the Latin American region. These findings and more are from Latin American Asset-Gathering Strategies 2016: Cross-Border Distribution to High-Net-Worth and Pension Markets, a newly released report developed in partnership between
Cerulli and Latin Asset Management.
Cerulli and Latin Asset Management consider the wealth management market in Latin America to consist of three channels: The U.S. offshore, Latin American offshore, and Latin American onshore markets. The U.S. offshore market mainly consists of distributors based in financial hubs of South Florida (mostly Miami and Coral Gables), Texas (mostly Houston and San Antonio), New York, and Southern California (mostly San Diego).
“According to our estimates, the overall size of the three asset-gathering segments stands at US$ 105 billion, with the U.S. offshore segment accounting for more than half of the total at US$ 56 billion,” states Thomas V. Ciampi, founder and director of Latin Asset Management.
“A factor that differentiates the market in Latin America is the perceived risk of the home country, in terms of political risk, personal security, and stability of markets and currencies,” explains Ciampi. “For residents of countries who are passing through difficult times, or have volatile leadership unfriendly to foreign companies, such as Argentina or Venezuela, investors are of course eager to shelter their assets from the local banking system. In countries such as Mexico, Chile, Colombia, and (up until recently) Brazil, the wealthy may seek to have some of their savings offshore, but are still comfortable putting their money to work in the local economy or saving in locally domiciled financial instruments.”
Although the U.S. offshore market accounts for half of the assets under management, the Latin American offshore market is growing for a host of reasons. Among them are: sophisticated distribution tactics, enhanced technology offerings of product services, greater client trust in local advisors, and changes in the profile of the typical wealthy investor residing in the region.
Asset gathering from within Latin America has become more critical in recent years and this local growth has come at the expense of U.S. offshore booking centers such as South Florida, Texas, and New York. However, the importance of maintaining a presence in the U.S. offshore market should not be discounted. Asset managers should remain focused on serving clients in key locales such as Miami, which is bustling with activity.
Foto: Simon Cunningham
. Los inversores institucionales estadounidenses ampliarán sus posiciones en ETFs en 2016
U.S. institutions plan to increase their use of ETFs in 2016 according to a new report, “Institutional Investment in ETFs: Versatility Fuels Growth” from Greenwich Associates.
The study, which is in its fifth year and sponsored by BlackRock, found that institutions are increasingly using ETFs for longer-term, strategic allocations as well as cost-effective replacements for bonds and derivatives.
U.S. institutions currently represent approximately 36% of the total $2.1tn in U.S. ETF assets. All of the ETF users in the study invested in equity ETFs, with 36% planning to increase allocations in the year ahead and 35% of those planning to boost allocations by 10% or more. 35% of fixed income ETF users expect to increase allocations this year, and 36% plan to do so by 10% or more.
The firm found that approximately 43% of institutional users invest 10% or more of their overall portfolio in ETFs. Nearly 20% of non-ETF users are considering adding ETFs to their portfolios in the next year.
Matching the exposure needed was the most important factor when selecting an ETF as mentioned by 82% of interviewed investors. Other factors considered when selecting an ETF included liquidity/trading volume (76%), expense ratio (72%) and tracking error of the fund (68%).
The study identified five key trends driving ETF growth in the U.S. institutional market:Existing institutional users are finding new applications for ETFs in their portfolios, and a growing number are using ETFs as a primary vehicle to implement long-term strategies; Fixed income ETF use is expanding; Institutions are using ETFs alongside derivatives; Innovative ETF strategies and approaches are gaining traction among institutions; And Insurance companies are adopting ETFs as a means of investing both surplus and reserve assets
Daniel Gamba, Head of iShares U.S. institutional Business at BlackRock commented: “We expect 2016 will be another record year for the ETF industry, and we look forward to working with our clients as they use ETFs to help achieve their goals.”
Just over a month in his new post, Barclays’ CEO, Jes Staley, has taken an ax at the investment banking arm of the firm cutting around 1,200 jobs and pulling out of several Asian countries.
Barclays said the cutbacks form part of the 19,000 job cuts announced in May 2014 to refocus on the UK, the US and serving clients globally. A memo sent by Barclays’ investment banking chief executive, Tom King mentioned that the U.S. is “one of our two home market franchises, in the world’s largest single pool of capital, our leading U.S. business is another distinct competitive advantage for Barclays.”
The UK bank plans to pull out of countries like Australia, Taiwan, South Korea, Indonesia, Malaysia, Thailand, the Philippines, Brazil, and Russia, offering banking coverage for those countries from other locations.
Barclays plans to keep offices in Hong Kong, China, Japan, Singapore and India.
With increasing concern over China’s growth, investors are significantly less confident in the global economic outlook, according to the BofA Merrill Lynch Fund Manager Survey for January. Allocations to equities have fallen sharply, while cash holdings have risen.
A net 8% of fund managers see the global economy strengthening over the next 12 months, the survey’s lowest reading on this measure since 2012.
Despite this, just 12% believe a global recession will occur in the next 12 months.
Slowdown in China now stands out as the panel’s biggest “tail risk” by far.
More respondents now think global profits will decline over the next 12 months than increase, the first negative reading in over three years.
Over half of respondents expect no more than two Fed hikes in the next 12 months, up from 40% a month ago.
Long U.S. dollar remains the most crowded trade, but bullishness on the currency is waning.
Average cash balances are up to 5.4%, the third-highest reading since 2009. A net 38% of investors are now overweight cash.
Net overweights in equities have halved to a net 21% from December’s net 42%, while bond underweights have retreated.
Bearishness towards Global Emerging Markets equities has increased to a record level. Europe and Japan remain the most favored stock markets.
“Investors are not yet ‘max bearish’. They have yet to accept that we are already well into a normal, cyclical recession/bear market,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“Investors’ bullishness towards Europe remains intact, but conviction is rooted to the floor. The positioning gap between the most and least preferred sectors is the lowest in two years,” said James Barty, head of European equity strategy.
CC-BY-SA-2.0, FlickrPhoto: Achim Hepp
. LVMH, Catterton and Groupe Arnault Partner to Create a Global Consumer-Focused Private Equity Firm
Catterton, the leading consumer-focused private equity firm, LVMH, the world leader in high-quality products, and Groupe Arnault, the family holding company of Bernard Arnault, announced today that they have entered into an agreement to create L Catterton. The new partnership will combine Catterton’s existing North American and Latin American private equity operations with LVMH and Groupe Arnault’s existing European and Asian private equity and real estate operations, currently conducted under the L Capital and L Real Estate franchises. Under the terms of this agreement, L Catterton will be 60% owned by the partners of L Catterton and 40% jointly owned by LVMH and Groupe Arnault.
L Catterton will become the largest global consumer-focused investment firm with six distinct and complementary fund strategies focusing on consumer buyout and growth investments across North America, Europe, Asia and Latin America, in addition to prime commercial real estate globally. L Catterton, a firm with a 27-year history and more than 120 investment and operating professionals in 17 offices across five continents, expects to grow its assets under management to more than $12 billion after various successor funds are closed.
L Catterton’s headquarters will be in Greenwich, CT and London, with regional offices across Europe, Asia and Latin America and will be led by Global Co-CEOs J. Michael Chu and Scott A. Dahnke, currently Managing Partners at Catterton. Each fund will continue to be managed by its own dedicated team in their respective locations across Europe, Asia and the Americas.
“We are delighted to partner with Catterton and its team,” said Mr. Arnault, Chairman and CEO of LVMH and Groupe Arnault. ” Having been investors in Catterton’s funds since 1998, we have participated in its growth and success, evidenced by its strong track record and its distinctive culture. I would also like especially to thank Daniel Piette whose entrepreneurship and leadership have been instrumental in creating and developing the L Capital franchise over the past 15 years. I very much look forward to continuing to collaborate with him at LVMH.”
Mr. Chu said, “We look forward to benefitting from the strength and global reach of the team at L Capital and L Real Estate as we continue to seek out investment opportunities with significant growth potential.”
“The globalization of media and technology, combined with increasingly permeable geographic borders, is driving rapid consumer growth on an unprecedented global scale,” said Mr. Dahnke. The transaction is expected to close early in 2016, subject to customary regulatory and certain investor approvals.
According to the latest Investment Funds Industry Fact Sheet, released by the European Fund and Asset Management Association (EFAMA), the main developments in November 2015 can be summarized as follows:
Net sales of UCITS increased to EUR 55 billion, up from EUR 51 billion in October. The increase in UCITS net sales can be attributed to a rise in net inflows into money market funds.
Long-term UCITS (UCITS excluding money market funds) registered net sales of EUR 27 billion, down from EUR 28 billion in October.
Equity funds registered EUR 17 billion in net sales, down from EUR 19 billion in October.
Bond funds suffered from net outflows of EUR 2 billion, compared to net inflows of EUR 0.3 billion in October.
Multi-asset funds finished the quarter with net sales of EUR 10 billion, up from EUR 8 billion in October.
UCITS money market funds experienced an increase in net inflows to EUR 28 billion, from EUR 23 billion registered in October.
Total AIF registered net inflows of EUR 9.5 billion, down from EUR 12.5 billion in October.
Net assets of UCITS stood at EUR 8,430 billion at end November 2015, an increase of 2.5 percent during the month, while net assets of AIF increased 1.5 percent to stand at EUR 4,467 billion at month end. Overall, total net assets of the European investment fund industry increased 2.2 percent to stand at EUR 12,897 billion at end November 2015.
Bernard Delbecque, Director of Economics and Research at EFAMA, commented: “Net sales of UCITS remained sustained in November, which suggests that investors were still confident about economic outlook late last year.”
Nuveen Investments, announced early January that it has entered into an agreement with Incapital to acquire Incapital’s Unit Investment Trust (UIT or Unit Trust) platform.
Since early 2014, Nuveen Investments has partnered with Incapital to provide marketing and distribution support to several of Incapital’s Unit Trusts for which Nuveen’s boutique investment affiliates have also served as portfolio consultant.This transaction builds on that successful partnership.
The acquisition reinforces Nuveen Investments’ commitment to strengthening its growing leadership position in the retail marketplace by providing investors with access to the investment ideas of premier asset managers recognized for high-quality results in their distinct areas of investment expertise. According to a press release, Incapital’s Unit Trust platform is similar to Nuveen Investments’ multi-boutique model and “is consistent with the firm’s strategy of working with a variety of asset managers to bring highly differentiated and institutional-caliber investment capabilities to clients.” Going forward, Nuveen Investments will sponsor UITs that utilize the portfolio consultant services of unaffiliated asset managers, including those currently involved with Incapital UITs, while also developing new Unit Trust strategies leveraging the expertise of its seven investment affiliates and the capabilities of TIAA Asset Management.
Nuveen Investments will be acquiring Incapital’s Unit Trust distribution platform. Key Incapital personnel currently supporting the Unit Trust platform in the areas of sales, product development and management, marketing, IT and operations will join Nuveen Investments. Together with Nuveen Investments’ own recently enhanced Unit Trust sales and distribution team, the Nuveen Investments Unit Trust platform will have significant and dedicated resources to ensure continuity of coverage for existing broker-dealer and IBD relationships. The Unit Trust team will work closely with Nuveen Investments’ national accounts team to introduce and expand the use of Unit Trusts by dealers not presently doing UIT business with Incapital, yet looking for investment products to address their clients’ particular investment needs.
“We are pleased to formally bring together Nuveen and Incapital’s UIT teams to build on our excellent work together and enhance our ability to deliver quality investment solutions and service to our clients. We are also pleased to add the high-quality investment capabilities of Incapital’s portfolio consultant partners to the investment capabilities of Nuveen’s investment affiliates and TIAA Asset Management that will enable us to offer a compelling array of UIT portfolio strategies,” said William Adams IV, Nuveen Investments Senior Executive Vice President, Global Structured Products.
Inapital Chief Executive Officer John DesPrez added, “As we move forward to focus more sharply on our core business of providing risk-managed investment solutions, we are pleased to partner with Nuveen Investments to transition our dynamic UIT business to their team. Nuveen has been an outstanding partner in building our UIT platform and developing a strong and diversified array of strategies for the benefit of our shared clients. I am also extremely proud of the team we have built. They are experienced professionals with a proven record of success. I am happy for them, too, as they will be joining a firm respected throughout the industry.”
The transaction, while subject to customary closing conditions, is expected to close in the second quarter of 2016. Nuveen was advised by Wells Fargo Securities, LLC. Incapital was advised by Grail Partners. Terms of the transaction were not disclosed.
“We know that large amounts of money all over the world are kept “elsewhere”, or “other where”, and go untaxed as Taxpayers fall short of complying with their tax obligation in their home jurisdictions,” says Foodman CPA’s & Advisors. “We also know that FATCA was established to fight tax evasion from U.S.A. individuals and entities via the use of foreign accounts. FATCA has a long reach and a substantial sign-up sheet.”
However, the U.S.A. is not the only jurisdiction looking for tax evaders. Tax evasion is a global problem. FATCA has served as the catalyst in propelling the Organisation of Economic Cooperation & Development (OECD) to introduce the Common Reporting Standard (CRS). Net net, the CRS will facilitate the automatic exchange of tax information between non-U.S.A. countries, the firm explains. The OECD is known for its quest to promote tax cooperation and improve all forms of information exchange – on request, spontaneous and automatic. Currently, there are 61 signatories that belong to the elite Early Adopters Group, and a total of 94 jurisdictions that have made the commitment to exchange information.
“Under the single global Standard, jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions”. It consists of two components:
the CRS, which contains the reporting and due diligence rules to be imposed on financial institutions; and
the Model Competent Authority Agreement, which contains the detailed rules on the exchange of information.
The new Standard draws extensively on earlier work of the OECD in the area of automatic exchange of information. It incorporates progress made within the European Union, as well as global anti-money laundering standards, with the intergovernmental implementation of FATCA. CRS has been designed to prevent Taxpayer avoidance. It has three fundamental pillars:
The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income), account balances and sales proceeds from financial assets.
The financial institutions that are required to report under the CRS include banks, custodians, brokers, certain collective investment vehicles and certain insurance companies.
Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the Standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.
“It is clear that tax compliance is a global priority. Finding a place to hide is becoming increasingly difficult for those taxpayers that try to outsmart the authorities” says Foodman CPAs and Advisors. FATCA is already 5 years old, alive and kicking. Electronic files have already beenexchanged with the I.R.S. CRS has an implementation timetable of 2017 or 2018.
CC-BY-SA-2.0, FlickrPhoto: pedronchi
. Lazard Launches US Fundamental Alternative Fund
Lazard Asset Management announced the launch of the Lazard US Fundamental Alternative Fund. The Fund, which is UCITS compliant, is a liquid and diversified portfolio primarily focused on US securities, with the flexibility to invest across the whole market cap spectrum. Utilising bottom-up stock selection, the Fund seeks to take long positions in equities of companies believed to have strong and/ or improving financial productivity and attractive valuations, and short positions in companies with deteriorating fundamentals, unattractive valuations, or other qualities warranting a short position.
The Fund will be managed in New York by portfolio managers Dmitri Batsev and Jerry Liu, who leverage a dedicated and highly experienced US equity investment team. The team, which is made up of 23 investment professionals, has an average of 18 years of investment experience and 12 years at LAM.
“In our view it is financial productivity that ultimately drives the valuation of companies.” said Dmitri Batsev, portfolio manager of the Lazard US Fundamental Alternative Fund. “We believe that forward-looking fundamental analysis is key to valuing these opportunities, both when stocks rise and when stocks fall.”
Jerry Liu said: “Expanding the US opportunity set to both longs and shorts allows us to create a differentiated portfolio of investments, seeking to provide investors with strong down-market protection, up-market participation, and lower volatility than the overall market.”
The Lyxor Hedge Fund Index was down -0.7% in December. 3 out of 11 Lyxor Indices ended the month in positive territory. The Lyxor Merger Arbitrage Index (+1.5%), the Lyxor LS Equity Variable Bias Index (+1.1%), and the Lyxor CTA Short Term Index (+0%) were the best performers.
ECB and Fed related reversals in December. Disappointment following the ECB meeting and worsening concerns about credit and oil kept pressure on risky asset in early December. After the confirmed Fed’s rate hike, the bottoming in prices by mid-month paved the way for a year-end equity rally of small magnitude. It unfolded in low trading volumes and with scarce fundamental data. These intra-month reversals were overall detrimental to the performance of trend-followers and macro funds. By contrast, it supported the L/S Variable and Merger Arbitrage funds.
In retrospective, 2015 remained macro driven, dominated both by monetary policies and the shifts in deflation scares, themselves function of the stance regarding the Chinese transition and oil prices.
Hedge funds finished 2015 with marginally positive returns. Overall, they produced strong alpha relative to traditional assets until Q4. They lost about half of their advance during the rally, heavily dragged by the Special Situations’ underperformance.
In December, L/S Equity proved resilient after the ECB meeting and got boosted by a small year-end equity rally. Once again L/S Equity Variable funds proved very resilient during stress episodes. They had not rebuilt their net exposures. In particular, European funds refrained from playing the expectations building up ahead of the ECB meeting.
While the long bias funds felt the heat early December, they remarkably outperformed markets (which dropped nearly -5% post ECB). They were cautiously exposed, with higher allocations in the more resilient US markets. The bulk of their losses came from their sectors overweights.
Market Neutral endured minor losses after the ECB disappointment, but did not participated in the year-end rally, rather hit by unsettling sector rotations.
Merger Arbitrage thrived on higher deals spreads and completing acquisitions. Merger Arbitrage funds outperformed in December. They benefited from tightening spreads down from elevated levels. They also locked in P&L out of several acquisitions coming to their final stage, including BG vs. Royal Dutch Shell, Pace vs. Arris, and Altera vs. Intel deals.
There were a limited number of idiosyncratic events in the Special Situations space. Their returns tended to mirror that of broad markets: a detracting post-ECB correction, followed by a small upward trend after the Fed’s first hike.
Credit strategies suffered from the sell-off in HY markets, though by a smaller magnitude. Credit funds continued to produce strong alpha relative to their operating markets. The redemptions and gating in few US credit funds continued to feed concern among credit investors. Meanwhile E&P fundamentals steadily continued to deteriorate, in tandem with plunging oil prices. Credit funds remained cautiously positioned. They also benefitted from their allocations on European credit markets, which displayed better stability. The environment was calmer after mid-month.
The bulk of the December underperformance of CTAs LT models was endured in the aftermath of the ECB meeting. They suffered on their Euro crosses and in UK rates, as well as in their equity holdings (rebuilt back in October). Losses were partially offset by their short commodity exposures. Returns were mixed over the rest of the month, with offsetting gains and losses across markets.
Global Macro funds also suffered from the reversals unfolding over the month. As markets adjusted their positioning after the ECB meeting, Global Macro funds lost on their long USD crosses and US bonds, as well as on their equity exposures. Returns were flat over the rest of the month with, like for CTAs, offsetting gains across markets.
“The trading backdrop will probably remain similar to last year, with frequent rotations, hovering liquidity risk, erratic flows amid rich valuations, and markets overshooting fundamental changes. Within the hedge funds space, this is leading us to favor relative-value, tactical and macro styles.” says Jean-Baptiste Berthon, senior cross asset strategist at Lyxor AM.
