Foto: Hugo A. Quintero G.
. Turquoise Partners y REYL Finance lanzan un fondo de private equity para invertir en Irán
Turquoise Partners is launching an Iran-focused private equity fund in partnership with REYL Finance, REYL & Cie’s Dubai based entity.
The new fund will be broadly focused on the rise of the Iranian consumer and will include, but will not be limited to, consumer goods, pharmaceuticals and hospitality. It aims to raise $200m in the first six months of the year.
Rouzbeh Pirouz, Chairman of Turquoise Partners, said: “Iranian companies are in great need of investment which can drive operational and financial restructuring that will allow them to realize tremendous potential”.
Pasha Bakhtiar, Partner & CEO of REYL Finance, added: “We believe this venture provides an excellent opportunity for international investors looking to gain exposure to the Iranian growth story. Together we bring a robust, thorough and diligent understanding on how to invest in Iran under the new economic environment, and we are extremely excited to be the first private equity vehicle for an international investor base.”
Turquoise has been the only Iranian group that has been active in the private equity market prior to the removal of sanctions and only one day after their removal the announced the launch of the Turquoise Variable Capital Investment Fund, together with Charlemagne Capital.
REYL Group is an independent banking group with services in Wealth Management, Asset Management, Corporate & Family Governance, Corporate Advisory & Structuring and Asset Services.
. Julius Baer Announces Final Settlement with the U.S. Department of Justice Regarding its Legacy U.S. Cross-Border Business
Julius Baer announced that it has reached a final settlement with the DOJ in connection with its legacy U.S. cross-border private banking business. This settlement is the result of Julius Baer’s proactive and long-standing cooperation with the DOJ’s investigation. The two Julius Baer employees indicted in this context in 2011 have also taken an important step towards a resolution of their cases.
Julius Baer has entered into a Deferred Prosecution Agreement pursuant to which it will pay USD 547.25 million. In anticipation of the final resolution, the Group had already taken provisions in June and December 2015, totalling this amount, and booked them to its 2015 results.
In announcing the settlement, Daniel J. Sauter, Chairman of Julius Baer, commented: “Julius Baer’s ability to reach this final settlement with the U.S. Department of Justice is the result of its constructive dialogue and cooperation with U.S. authorities. I would like to thank all our employees, clients and shareholders for their ongoing trust and support.”
Boris F.J. Collardi, CEO of Julius Baer, added: “Being able to close this regrettable legacy issue is an important milestone for Julius Baer. The settlement ends a long period of uncertainty for us and all our stakeholders. This resolution allows us now to again fully focus on the future and our business activities.”
MUFG Investor Services, the global asset servicing group of Mitsubishi UFJ Financial Group, has reached an agreement with Neuberger Berman, one of the world’s leading private, employee-owned investment managers, to acquire its private equity fund administration business, Capital Analytics.
This deal brings MUFG Investor Services’ private equity and real estate assets under administration (AUA) to US$ 145 billion and total AUA to US$ 384 billion.
Junichi Okamoto, Group Head of Integrated Trust Assets Business Group, Deputy President, Mitsubishi UFJ Trust and Banking Corporation said: “This transaction represents the next step in our strategy to support MUFG Investor Services position as an industry-leading administrator. Incorporating Capital Analytics’ capabilities will enhance MUFG Investor Services’ proposition and will enable us to continue to provide a full market offering for both new and existing clients, whilst maintaining the highest quality of service. We welcome Capital Analytics to our growing business.”
John Sergides, Managing Director, Global Head, Business Development and Marketing, MUFG Investor Services, said: “This acquisition will add 150 staff with specialist private equity and real estate expertise, enhancing MUFG Investor Services’ comprehensive offering in the alternative investment space and ensuring that we are the ideal partner to support clients of all sizes and complexities, as they maximize the growth opportunities that arise for their business.”
Anthony Tutrone, Global Head of Alternatives at Neuberger Berman, commented, “We believe the new ownership will create greater opportunities for Capital Analytics given trends in the fund administration industry, while allowing them to continue providing the best-in-class services that we and our clients have come to rely upon. We are confident that MUFG Investor Services, with its commitment to investing in the franchise and people, is the right steward to take Capital Analytics through to the next stage in its evolution and we look forward to continuing our close partnership.”
MUFG Investor Services is acquiring all of Capital Analytics’ business, and intends to provide a seamless transition for its employees and clients. Neuberger Berman funds will continue to receive administrative services from Capital Analytics, however, no funds or investment professionals will transfer as part of the acquisition.
Terms of the deal are undisclosed. The transaction is expected to close in second quarter of 2016, subject to regulatory approvals and customary closing conditions.
Wikimedia CommonsPhoto: Wes Sparks, Head of Credit Strategies and Fixed Income at Schroders. Wes Sparks, of Schroders, Will Discuss High Yield Bond at the Funds Selector Summit 2016
Continuing volatility and elevated risk premiums mean that high yield bond returns in 2016 could be in the mid single-digit range; however, Wes Sparks, Head of US Credit Strategies and Fixed Income at Schroders, believes that the asset’s expected performance will continue to make it attractive in relation to many other fixed income alternatives.
Wes Sparks will be discussing this market’s expected performance at the second edition of the Fund Selector Summit on the 28th and 29th of April. The meeting, aimed at leading fund selectors and investors within the US-Offshore business, will be held at the Ritz-Carlton Key Biscayne.
The event, a joint venture between Open Door Media, owner of InvestmentEurope, and Funds Society, provides an opportunity to hear several management companies’ view on the industry’s current issues. During his presentation, Sparks will also give his views on global corporate debt market, on which he is an expert following 22 years in the industry.
Wes Sparks is based in New York, leading the US team responsible for all of Schroders’ investment-grade and high yield credit portfolios. He is the lead fund manager for Schroder ISF Global High Yield, a position he has held since the inception of the fund in 2004, and is additionally a co-manager for Schroder ISF Global Corporate Bond and various US Multi-Sector funds.
Sparks joined Schroders in 2000 from Aeltus Investment Management (1999 to 2000) and Trust Company of the West (1996 to 1999), where he worked as Vice President and Portfolio Manager with the corporate sector.
You will find all the information regarding the Fund Selector Summit Miami 2016, which is aimed at leading fund selectors and investors within the US-Offshore business, in this link.
Bennett Golub, Ph.D., Chief Risk Officer and Co-Founder of BlackRock, was bestowed the 2016 Lifetime Achievement Award by Risk magazine at Risk’s annual awards event in London. Risk forms the leading subscription service covering financial risk management, regulation and derivatives news and analysis.
“As a founding partner of BlackRock, Ben has played a critical role in the firm’s success,” said Duncan Wood, editor in chief of Risk. “He is a strong advocate of fund industry changes that have the potential to mitigate systemic liquidity risk, and a passionate supporter of risk management as a profession.”
“BlackRock was built around risk management — it’s been in our DNA from the start. Ben epitomizes our belief that understanding and managing risk is the cornerstone to responsibly investing our clients’ assets,” said Rob Kapito, President of BlackRock. “Over the years, Ben has played a critical role in developing BlackRock’s Risk and Quantitative Analysis capabilities and firm’s Aladdin platform. He has ensured that BlackRock remains true to its legacy, keeping risk management as a core piece of its fiduciary culture. It is with great pleasure that I congratulate my friend and colleague on this well-deserved recognition.”
In his capacity as Chief Risk Officer for BlackRock, Dr. Golub also serves as co-head of the Risk and Quantitative Analysis team (RQA). RQA provides independent top-down and bottom-up oversight to help identify investment, operational, technology and counterparty risks. RQA ensures portfolio risks are consistent across mandates, reflect current investment themes within particular strategies, and comply with client-specific risk guidelines. RQA also provides independent quantitative analysis as part of the groups value add. RQA leverages Aladdin, BlackRock’s centralized, industry-leading operating platform within BlackRock Solutions, integrating risk, investment and client management, to assess and process manager investment, market and liquidity risks. Dr. Golub was one of eight founders of BlackRock in 1988.
“I am honored to be recognized by Risk for my efforts to promote effective risk management techniques to meet the challenges faced by investors,” added Dr. Golub, who attended the awards program in London.
The corporate default rate is at its highest level since 2009. In its latest study on 30 November, Standard & Poor’s reported a sharp increase in the number of companies defaulting in 2015: 101 issuers reneged on their obligations. The last time the figure was so high was in 2009. The latest two companies failing to repay their debt are Uralsib, a Russian bank, and China Fishery, a global fish and seafood supplier. Among these hundred plus companies, only 21, i.e. one-fifth, are from emerging markets. Most are in Brazil and Russia. And the main sector concerned is oil and gas, says Jean-Philippe Donge, Head of Fixed Income at Banque de Luxembourg.
The latest news concerning Petrobras, Glencore, Valeant and VW has echoes of the crisis we saw in the 2000s on the corporate debt market. At that time, a number of companies were posting record debt levels which ended up causing them to default or engage in major debt restructuring: World- Com, Enron, General Motors and France Télécom to name a few. We might well wonder whether the situation is different this time round. “But if it isn’t, does this mean the corporate debt cycle is at tipping point? Are we about to see major debt restructurings?”, asks Donge. Let’s look at the history of the price of the Glencore 1.25% bond maturing in March 2021. In 2012, Glencore launched its acquisition of the Swiss mining company Xstrata. In 2013, it took over the Canadian trader Viterra and in 2015 embarked on a merger with Rio Tinto. The latter did not succeed.
Primary sector debts and bank loans
Many companies are now posting debt and liquidity levels equivalent to those of the telecoms sector in the early 2000s. You only have to look at the sharp increase in global issue volumes, says the expert. In 2014, these came to 3.5 trillion dollars compared to 2.1 trillion in 2008 (3). Weak growth and the resulting deflationary pressures have led to a fall in earnings. The first companies to be affected are linked to oil and mining.
In emerging markets, Brazil and Russia have the greatest number of struggling companies. Petroleo Brasileiro (Petrobras) and the Brazilian Development Bank (BNDES) are a microcosm of the type of problems encountered on the corporate debt market: meltdown in commodity prices at the same time as an increase in corporate debt. Petrobras is a semi-public Brazilian and integrated energy company. BNDES is the Brazilian government’s financial arm for funding various projects, ranging from agriculture to infrastructure, in Brazil and elsewhere but mainly in South America.
The quantitative easing programs being conducted in developed countries, in particular by the US Federal Reserve, led to massive financial inflows to emerging markets between 2008 and 2014. These flows encouraged an increase in bond issues and bank loans, for a total of nearly 7 trillion dollars, he adds.
The case of BNDES illustrates the position of the corporate sector in emerging markets. Last year, after a continuous increase in its loan portfolio and with assets of 330 billion dollars, it was on the point of overtaking the World Bank as the world’s second-biggest development bank after the China Development Bank. Unfortunately, it has suffered a sharp slowdown in activity this year, leading to a decline in disbursements. From January to October, the total amount of loans made by the bank came to around R$105 billion, which represents a drop of 28% compared to the amounts disbursed in the same period in 2014. From January to September, the bank’s net income came to R$6.6 billion, which is 10.3% below the level recorded in the same period in 2014, specifies Donge.
Are we heading for a corporate debt crisis?
Potential fears for the corporate debt market would seem to be justified. Debt levels are high. Earnings are down. Monetary policies have taken or will be taking a less accommodative turn (despite the recent pronouncements by the President of the ECB). In particular, the return to a cycle of rising US interest rates coupled with a relatively strong dollar are looming over the market. If this does not happen, it would mean that the economic situation is not improving. “Heavily indebted companies therefore find themselves between a rock and a hard place, especially those that operate in sectors most sensitive to economic cycles. For the next few months, it would be logical to expect them to have a decreasing capacity to pay down debt.” He concludes.
CC-BY-SA-2.0, FlickrPhoto: Stefan Krause, new Portfolio Manager at Schroders. Schroders Strengthens Convertible Bond Team with New Hire
Schroders is pleased to announce the hire of Stefan Krause in the role of Portfolio Manager in its convertible bond team based in Zurich. Stefan will work alongside Peter Reinmuth as co-manager of the Schroder ISF Global Conservative Convertible Bond.
Stefan joins Schroders from Man Investments (CH) AG where he was responsible for managing the Man Convertibles Europe Fund. Prior to joining Man in 2012, Stefan spent two years with Warburg Invest in Hamburg as a portfolio manager for European convertibles and almost five years with UBS in Zurich. Stefan holds a Master’s in Business Administration from the University of Zurich.
The hire coincides with the first anniversary of Schroder ISF Global Conservative Bond, in which the fund has achieved strong performance against the benchmark and peers, and continues to see positive inflows. The fund aims to provide capital protection and growth within volatile markets by investing in high quality convertibles with an average credit quality of investment grade at all times. The conservative approach emphasises protective elements of convertibles, focusing on above-average downside protection.
With a team of eight specialists, Schroders convertible bond team manages three dedicated investment strategies: global opportunistic, global conservative and Asian convertible bonds.
CC-BY-SA-2.0, FlickrPhoto: Helfrain. Japan Lowers Its Rates into Negative Territory: the Currency War Intensifies and Gives Wings to Short-Term Equities
In a surprise move, the Bank of Japan decided on Friday to join the ECB’s strategy and cut interest rates by 20 basis points, taking rates into negative territory at -0.1% (from the previous + 0.1%) for deposits of financial institutions at the central Japanese bank. The experts are divided: the news will help the markets and an economy with great export weight, but accentuates the currency war spiral to capture very modest overall growth and finally, the consequences may not be as promising.
The adoption of a negative rate helps the Bank of Japan to fight deflation by reducing financial costs, in an attempt to breathe some life into Abenomics, the government’s major plan to revive the economy. The Bank of Japan, which blames oil prices for persistently low inflation in the country, adds this new measure to its program of quantitative easing which involves the annual purchase of 80 trillion yen in assets.
In response, the yen fell sharply against the dollar and other reference currencies like the euro, fueling a currency war which though undeclared, continues to cause panic in the trading rooms of half the financial sector.
In the press conference following the decision, the Bank of Japan’s Governor, Haruhiko Kuroda, stated that he does not rule out expanding the quantitative easing program, which could even include further cuts to increase the dip into negative territory.
“As such this challenges our previous outlook and as a result we are stepping back from some of our long yen currency positions as we reassess the absolute and relative policy stances of developed market central banks,” explained Kevin Adams, Director of Fixed Income atHenderson Global Investors.
Meanwhile, despite the rise in stock markets and debt, Keith Wade, Chief Economist and Strategist at Schroders, believes that the decision is caused by weakness and increases the risk that China may retaliate by further depreciating its currency.“If so, we will have entered a new phase in the currency wars where countries fight over a limited amount of global growth, an outcome which does not bode well for risk assets,” Wade points out.
Equities and fixed income
For Simon Ward, Henderson’s Chief Economist, it is more likely that the move is interpreted by the market as a negative signal for economic prospects, and as evidence of “Bank of Japan’s desperation”. This, claims Ward, will cause the market to be more, rather than less, risk-averse.
In the short term, however, the Bank of Japan has become the investors’ best friend. Japanese stocks rose on Friday and analysts agree that they are likely to continue rising in the short term. Robeco’s portfolio of international equities, Robeco Investment Solutions, is overweight in Japan. “We will obviously continue with this strategy. Our position has been strengthened by the decision of the Bank of Japan,” says Leon Cornelissen, Chief Economist at the firm.
“We believe that the surprise announcement is likely to have an incrementally positive effect on the outlook for Japanese equities, as it tempers the recent concern around the drag of a stronger yen on earnings. We maintain the view that Japanese stocks could withstand a moderate appreciation of the yen,” explains the team at Investec’s multi-asset strategies.
Regarding fixed income, Anjulie Rusius, from the Retail Fixed Interest team at M & G, pointed out that the move by the Japanese central bankhas been supportive of Japanese government bonds, alongside those of other countrieswhich have also adopted negative rate regimes, in a movement which could be repeated in the medium term.
The global economy’s moderate growth is becoming increasingly fragile, largely due to the weakness of investments in the energy sector and slower growth in the Chinese economy. This is the view of Guy Wagner, Chief Investment Officer at Banque de Luxembourg, and his team, published in their monthly analysis, ‘Highlights.’
In the United States, there are mounting signs of industrial activity slackening due to the strength of the dollar and the weakness of investments in the energy sector. The increase in household purchasing power – fuelled by falling oil prices and the recent uptick in wages – is nonetheless keeping the US economy on a path to growth. In Europe, economic statistics are pointing in the right direction, although the pace of growth in absolute terms remains subdued. Japan’s economy is continuing to stagnate while economic growth is slowing in China. “The global economy’s ‘moderate growth’ is becoming increasingly fragile,” observes Guy Wagner.
Inflation is staying low due to the ongoing slump in oil prices. In the United States, inflation edged up from 0.2% in October to 0.5% in November. The Federal Reserve’s favourite indicator, the PCE (personal consumption expenditures) deflator, excluding energy and food, remained unchanged at 1.3%. In the eurozone, the inflation rate held steady in December. Core inflation, excluding energy and food, which Mario Draghi, President of the European Central Bank (ECB), recently said was a more representative measure of the cost of living, was unchanged at 0.9%. “While oil prices remain depressed, the ECB’s target inflation rate of 2% hardly seems realistic,” says the Luxembourg economist.
As expected, after seven years of a near-zero interest rate policy, the US Federal Reserve raised its key interest rate by 25 basis points. This was the first federal funds rate hike for nearly ten years. The monetary authorities have confirmed that any subsequent increases will be implemented slowly and gradually. In Europe, the ECB expanded the quantitative easing programme by extending the asset-purchase period from September 2016 to March 2017, by including regional and local government debt in the programme, and by further cutting its deposit rate. “If the inflation target is still not met, it is likely that additional QE (quantitative easing) measures will be introduced.”
Contrary to year-end tradition, equity markets performed poorly in December. Plummeting oil prices to below 40 dollars a barrel had a knock-on effect on equity markets out of a concern that the economic slowdown might worsen and that the financing capacity of lower-rated companies could suffer. According to Guy Wagner: “After a more volatile and less successful second half in 2015 and despite the lack of alternative investments, equities could suffer a difficult year in 2016 due to the slowdown in economic conditions, the sharp increase in share prices since 2009 and global geopolitical tensions.”
In December, the euro gained 3% against the dollar, with the euro/dollar exchange rate climbing from 1.06 to 1.09. The single currency’s rebound was prompted by investors’ disappointment over the scale of the ECB’s additional QE measures. Guy Wagner concludes: “If American and European monetary policies continue to diverge, the euro’s recent rebound is likely to be short-lived.”
Finding ways to counter the downward pressure on fees will be a focal point for asset managers across much of the world in 2016, according to the latest issue of The Cerulli Edge-Global Edition.
In assessing the outlook over the next 12 months for the asset management industry in Europe, the United States, Asia, and Latin America, Cerulli Associates, a global analytics firm, has identified a number of key threats and opportunities.
In Europe, the migration by insurance companies to unit-linked products represents an opportunity for asset managers, says Cerulli. The growing demand for multi-asset funds should also be exploited. Threats include the emerging trend by institutions to band together to make their own investments, thereby cutting costs by using fewer external managers or even completely dispensing with their services. Exchange-traded funds (ETFs) will continue to be a bugbear for active managers.
“In Europe, as with much of the world, the downward pressure on fees, fuelled by passives, the comparisons platforms enable, and regulators will not let up in 2016. Asset managers are responding–the move by veterans of active management into ETFs is an example. Other examples include, diversification and the acquisition/ creation of platforms and fintech capabilities,” said Barbara Wall, managing director of the Europe office of Cerulli Associates.
Europe accounts for just 18% of the world’s ETF market, compared with the U.S.’s 70% slice. Wall, however, believes that big change is afoot. “A few years ago, just a small number of Europeans would have known what ETF stood for–that is no longer the case, especially among the ranks of the mass affluent and those aspiring to that status. Prominent direct-to-consumer platforms such as Fidelity are offering ETFs from, for example, Vanguard, HSBC, and the iShare range, owned by BlackRock. Online wealth manager Nutmeg, though not a direct-to-consumer platform, is also helping to raise the profile of ETFs among retail investors.”
In the United States, Cerulli foresees fee pressure generating opportunities for managers that offer multi-asset and strategic beta products. Other major challenges cited by U.S. executives include the threat of passive investments, and the increased cost of revenue-sharing costs. The latter has U.S. asset managers looking at new pools of global assets to distribute abroad.
In Asia, Cerulli expects the spotlight to fall on passive products as institutions look for cost-effective solutions and regulators take steps to boost the appeal of ETFs for retail investors. Cross-border initiatives are likely to increase in 2016, offering investors diversified investment options and enabling managers to expand in other markets.
In Latin America, global managers will continue to be hampered by the knock-on effects of U.S. regulation, competition from other asset classes, and reduced flows due to unfavorable exchange rates and struggling economies. Global managers in the region are eyeing the private-equity craze sweeping the region, while separately a cottage industry of specialist distributors is promising to leverage their ties to local institutions to help global firms break into Latin pension space.
“In 2016, the clamor for reduced fees, greater transparency, and an end to ‘closet tracking’ will continue apace; competition will intensify; and institutions will be obliged to follow a road that will be a dead end for some asset managers,” said Wall. “All the while, activist investors will not let up; markets will continue to surprise; and rising costs will strain budgets. But there will be opportunities. To seize upon these, foresight, experience, and occasionally courage will be needed.”
