Foto: StephanPhotos, Flickr, Creative Commons. "Los bonos corporativos de emergentes con grado de inversión ofrecen más rentabilidad que los comparables de países desarrollados”
The interest rate reversal is a long time coming. The US Fed has pushed back a decision on a rate hike to December, citing the uncertain outlook for the global economy as reason, among others. At the same time the ECB president, Mario Draghi, has hinted at the fact that the ECB might expand its bond purchase programme considerably. This keeps the interest rates, both for government and for corporate bonds, at historically low levels. “In this environment it is difficult for many investors to achieve a satisfactory yield,” as Péter Varga, fund manager and specialist for emerging markets corporate bonds at Erste Asset Management, explains. “As alternative, we recommend investors to take a closer look at investment grade bonds from emerging markets issuers.”
Stimulus package in China and weak economy in Brazil
“We currently rate the situation of the emerging markets as mixed,” as Varga points out. The semi-annual figures of the corporate sector in the emerging markets were anything but convincing, but the stimulus package announced in China creates new opportunities. The government in Beijing announced that the equity portion for property purchases was to be cut. At the same time, a tax break will be granted for the purchase of a compact car. The situation in Brazil, on the other hand, remains difficult and diffuse in the foreseeable future. “We are critical of the country due to the political instability and the generally weaker economy,” as Varga explains. A careful selection of the right assets in the emerging markets is therefore key.
Erste Asset Management offers interested investors suitable access to this investment universe via its Espa Bond Emerging Markets Corporate IG fund, which was floated three years ago. The investment focus of this fund is on investment grade bonds from the emerging markets. The fund is eligible in accordance with the Austrian Insurance Supervisory Act and thus also interesting for a number of institutional clients. It is also hedged against currency fluctuations and commands a good rating.
“From our point of view there are numerous factors supporting an investment in investment grade emerging markets bonds,” as Varga points out. It is generally a fast growing, broadly diversified asset class with bonds from many well-known, internationally operating companies such as for example Alibaba from China, or Grupo Bimbo from Mexico. At the same time, the rising capital inflow ensures liquidity. Overall this asset class is dominated by real-economy companies. Industrials account for 57.1%, whereas for European investment grade bonds, this percentage is only 47.1%. “Another reason to invest, from our point of view, is also the structurally favourable, i.e. lower, valuation of emerging markets corporate bonds vis-à-vis the industrialised countries. In recent years, the spreads on investment grade companies from the emerging markets have been a stable 2-2.5% above those of corporate bonds from developed countries in spite of negative market phases,” highlights Varga.
Operating since 2007, Erste Asset Management has years of experience in the asset class of emerging markets corporate bonds. The company successfully combines local know-how with global strategies. Over the years, Erste Asset Management has recorded a constant inflow of assets and has received numerous national and international awards.
CC-BY-SA-2.0, FlickrPhoto: Ana Patricia Botín, Chairman of Banco Santander. World Travel & Tourism Council
. Santander Totta, Portugal ́s Second Private Bank After Banco Banif's Acquisition
With the aim of providing continuity to Banco Internacional de Funchal (Banif) and safeguarding the interest of its customers, the Bank of Portugal, the resolution authority, decided to award Banco Banif’s business to Banco Santander Totta, a subsidiary of Banco Santander. Following this decision, as of today, the businesses and branches of Banco Banif will become part of the Santander group.
The transaction will be carried out via the transfer of a large part (the commercial banking business) of Banif’s assets and liabilities to Santander Totta. Banco Santander Totta will pay EUR 150 million for Banco Banif’s assets and liabilities, which are transferred having been adequately provisioned. Meanwhile, other assets and liabilities remain in Banco Banif, which is responsible for any possible litigation resulting from its past activity, for their orderly liquidation or sale.
The acquisition of Banco Banif’s businesses positions Banco Santander Totta as Portugal’s second privately-held bank, after BCP-Milenium, with a 14.5% market share in loans and deposits. Banco Banif contributes 2.5 points in market share and has a network of 150 branches and 400,000 customers. Banco Banif is particularly important in the archipelagos of Madeira and the Azores, where it has very high market shares.
Ana Botín, chairman of Banco Santander, said today: “The acquisition of Banco Banif is another example of Banco Santander ́s commitment to Portugal, one of the group ́s main countries. We are fully committed to the economic development of Portugal and make available all our capacity to help people and businesses prosper in the communities where we operate.”
This transaction has an immaterial impact on the Santander group’s capital and a slightly positive impact on profit as of year one.
CC-BY-SA-2.0, FlickrPhoto: Andy Morffew
. Old Mutual Global Investors Brings Emerging Market Debt Fund in House
Old Mutual Global Investors, part of Old Mutual Wealth, has announced that John Peta, Head of Emerging Market Debt, will take over as fund manager on the US$168 million Old Mutual Emerging Market Debt Fund, effective from 21 January 2016, subject to regulatory approval.
The Fund, which is currently sub-advised by Stone Harbor Investment Partners LP is a sub-fund of the Dublin domiciled Old Mutual Global Investors Series. Its objective, to achieve asset growth through investment in a well-diversified portfolio of fixed and variable rate debt securities issued in emerging markets, will remain unchanged.
OMGI believes investors in the fund will benefit from John’s wealth of emerging market debt investment experience. He joined the business in March 2015 and has managed the US$115 million Old Mutual Local Currency Emerging Market Debt Fund since April 2015. He started his career in fixed income in 1987 and has spent 18 years specialising in emerging market debt investing.
OMGI has also proposed a change to the investment policy of both the Old Mutual Emerging Market Debt Fund and the Old Mutual Local Currency Emerging Market Debt Fund. This change, which will be effective 21 January 2016, subject to regulatory and shareholder approval, will allow the manager to increase the use of derivatives.
John Peta comments: “I look forward to taking on the management of the Old Mutual Emerging Market Debt Fund and identifying areas for growth opportunities. As we move into 2016, I believe emerging market debt will be an appealing investment for those looking to benefit from attractive yields across various regions, including Asia, Latin America and the Middle East”
Warren Tonkinson, Managing Director, Old Mutual Global Investors comments: “John Peta has a great deal of experience managing emerging market debt funds, which investors in the Old Mutual Emerging Market Debt fund are set to benefit from. By increasing his flexibility to use derivatives, John will have greater freedom in his portfolio management style; something we believe will deliver additional client value.
“I’d like to take the opportunity to thank Stone Harbor for their support in managing the fund until now.”
CC-BY-SA-2.0, FlickrJosé Antonio Llorente, de Llorente & Cuenca; Erich de la Fuente, fundador de EDF Communications, y Alejandro Romero, de Llorente & Cuenca. Foto: Business Wire. Llorente & Cuenca compra el 70% de la firma de Miami EDF Communications
Greenberg Traurig, advised Llorente & Cuenca, the leading reputation, communication and public affairs management consultancy in Spain, Portugal and Latin America, in the 70 percent acquisition of EDF Communications, a Miami-based strategic communications and public affairs firm.
Under the terms of the agreement, EDF Communications will be integrated into Llorente & Cuenca’s Miami operations. EDF Communications, which has been operating in the U.S. and Latin America for more than a decade, has a presence in Mexico, Colombia, Argentina, Chile, Brazil and Costa Rica. The employees of EDF Communications in Latin America will also be integrated into the Llorente & Cuenca operations in their respective countries. Following the acquisition, Erich de la Fuente, founder of EDF Communications, will become partner and CEO of Llorente & Cuenca’s Miami-based U.S. operations.
This is the fourth acquisition Llorente & Cuenca has finalized since last June, when it announced the incorporation of French private equity firm MBO with the intention of implementing an expansion plan to grow its presence in existing markets. This acquisition is the first of its kind in the U.S. and further strengthens Llorente & Cuenca’s position in the U.S. and Latin American markets, creating added-value for clients who will benefit from a significantly enhanced service portfolio, and a network of 11 offices across the Latin American region.
The Greenberg Traurig team was led by Antonio Peña, a shareholder in the firm’s Latin American and Iberian Practice and the Miami Corporate and Securities Practice. He represents a significant number of Spanish companies investing in the United States and Latin America.
Marco Pirondini, Head of Equities – US at Pioneer Investments.. "Earnings Are Forecasted to Grow Double Digits, Measured in Euros, and Should Be Very Supportive of Equity Valuations in 2016"
Marco Pirondini, Head of Equities – US at Pioneer Investments, discuss with Funds Society, in this interview, his outlook for 2016.
In the current environment, do you consider the premium offered by equity markets attractive? Is it worth investing in this asset class rather than in bonds or cash?
We think that equities are fairly valued on an absolute basis but are attractive relative to other asset classes such as bonds, which are for the most part overvalued. In other words, equity risk premium are high by historical standards and this tend to correlate with future long term returns. For this reason, we like the long-term outlook for equities better than bonds.
Double digits returns have been seen last years… do you expect this trend to be continued or must investors lower their expectations on global equities?
We expect that equities could continue to offer double-digit returns measured in euros. That is partly because of improving earnings and partly because the euro should continue to depreciate. With respect to earnings, we think earnings globally will grow modestly next year despite headwinds from lower commodity prices and weak industrial demand as consumers continue to spend. Earnings are forecasted to grow double digits, measured in euros, and should be very supportive of equity valuations in 2016.
Divergent monetary policies in the U.S. and Europe will likely result in continued depreciation of the euro vs. the dollar, which will benefit European investors in U.S. and global equities, as the U.S. is the largest portion within global equity asset allocations.
We have also started to notice higher volatility levels, is it likely to see this trend on the coming year or you expect the opposite?
Volatility has increased in the last few months but is still relatively low by historical standards. We do not expect volatility to change significantly. If volatility does increase, we would view declines as a buying opportunity as we believe we are in a secular bull market for equities.
What are the main risks for the asset class: the Chinese transition, rate hikes by the FED…? How might these factors affect?
On top of the usual geopolitical risks, which include terrorism, the civil war and dislocation in Syria, and instability in some emerging market countries, a credit crisis generated by low commodity prices is probably the most imminent risk. While we believe there will be severe credit issues with companies in or exposed to the energy industry, we do not believe this will result in a global credit crisis, which would negatively impact equities as well as bonds.
Alternatively, we believe one of the risks investors have been most concerned about, a FED increase rate hike, will be a positive for U.S. equities, as equities usually rise in the first year of a rate increase. In particular, owning high quality companies with strong fundamentals is usually to best way to invest in a rising rate environment as they are typically growing and have strong enough fundamentals to cope with the unexpected.
Talking about regions, what are your winner bets? Which ones are properly valuated and offer the best opportunities?
We think that Japan is the most interesting region. It offers a unique combination of low valuations and improving earnings driven by better corporate governance. We also think the while the U.S. is fairly valued overall, there are opportunities to own world class health care and financial services companies at attractive valuations relative to international peers.
Is this a good moment to invest in the emerging markets?
We believe emerging markets are still risky because many of the countries have accumulated substantial amounts of dollar debt in the last few years. The emerging markets picture remains extremely varied. We expected modest growth in some countries supported by a pick-up in demand from developed markets and by some stabilization in countries that experienced strong contractions in 2015.
Is the long bull market cycle in US equities set to continue and if so, why?
Well definitely it has been a very long bull cycle. In the last 100 years this is the longest period of market expansion without a 20% correction, so that’s a very very high bar. A correction is possible, someone would say even likely, though it’s very difficult to see in the markets the reasons why we should have that correction. We haven’t seen excesses in valuations, we haven’t seen excesses in investments, the bullishness of investors towards equities is not particularly high…. So it’s very difficult to see what could cause a correction. What I can say is that every time the market in the US has passed its previous peak – and this has happened in 2013 in the US – it was the beginning of a very long bull cycle with some big corrections in them, but usually cycles that lasted 15 – 20 years. Honestly, I think that we may have corrections but the bull cycle in the US is going to last for a long time.
On a sector basis then, where do you see the main opportunities for US equity investors over the next twelve months?
When we look at 2016, we see opportunities in sectors where the US market has companies that are global leaders but are also exposed to some very powerful long-term trends like innovation, and like the ageing population in developed markets. In particular, we like companies in the technology sector, companies in the pharmaceuticals sector, I would say more established larger cap companies – in general we prefer large cap to small cap in the US in 2016. But we also see other opportunities, for example in financials. Financials has been a sector that has underperformed for many years, since the financial crisis really, and we think that 2016 could surprise a little with interest rates going up, we think that more financial companies could actually improve their earnings and start to pay some dividends and this will probably help their performance. Generally speaking though, we tend to prefer stable growth companies over value investments.
Today’s independent advisory firms are no longer solely driven by the talent of their founders and investment teams. Instead, they are growing enterprises focused on the talents of employees across multiple roles and disciplines, according to the 2015 InvestmentNews Compensation & Staffing Study, sponsored by Pershing. The study found that firms achieving the highest levels of performance are putting the attraction of top talent, motivation of employees and implementation of well-thought out plans near the top of their list of priorities.
According to the report, industry growth is changing the nature of firms. Advisor ownership used to define independence; however, today employee advisors now outnumber owner-advisors. This change amplifies the importance of developing career tracks, a workplace culture, nurturing talent and determining competitive positioning. As much as growth has created opportunity and brought a wave of hires, it does not seem to have affected compensation for most positions in the last two years. Salaries for employee advisors and other key positions remain virtually unchanged. The cumulative effect of growth has doubled the size of the typical firm in the industry over the last five years. The year 2014 brought 13.5% growth in revenues.
“Recruiting top talent and delivering exceptional services to your client is critical to success in today’s advisory landscape,” says Ben Harrison, managing director and head of business development and relationship management at Pershing Advisor Solutions. “Whether your firm is a super ensemble or a small RIA, implementing a business management strategy is fundamental. We are personally invested in helping our clients succeed and have uncovered key insights in this study to help them better engage investors, attract top talent and run their business more effectively.”
The report identified the following trends as drivers of the business management strategies of the most successful firms:
Growth and Prosperity
Firms of different sizes significantly differ in their approach to finding new clients. The largest firms turn to branding and marketing, while smaller firms rely on referrals and networking.
Employee advisors outnumber owners: Owners are no longer the only advisors that manage client relationships. Super ensembles have been building their employee teams for many years, and smaller ensembles and enterprise ensembles are now also following suit.
Size becoming a decisive advantage: Super ensembles and large firms hold the advantage in their ability to attract top talent and the largest client relationships. Because of their size, they have a more prominent presence in the marketplace and are typically located in the largest markets where there is also a proliferation of wealthy potential clients.
Salaries remain unchanged: While there has been a new wave of advisory hires, it has not translated into salary growth. Instead, the growth in compensation has been in the form of incentives rather than salaries.
Building a growth engine: Many advisors are focusing on the clients who will offer the most value and pay for the firm’s service offering.
Allianz GlobalInvestors (AllianzGI) announced the appointment of Irshaad Ahmad as head of institutional Europe. Based in London, he will assume business development and client servicing responsibility for all AllianzGI’s institutional clients in Europe and spearhead the company’s strategy to further develop its institutional business in key regional markets.
Ahmad, who will report to Tobias C. Pross, head of EMEA, will also chair the European Institutional Executive Committee and become a member of the European Executive Committee.
Commenting on the appointment, Tobias C. Pross said: “I am delighted that, in Irshaad, we have found a senior executive who combines extensive experience with a strong entrepreneurial mindset. I am certain that Irshaad will help further strengthen our institutional business across our key markets, driving best practice in client-centric advisory and service delivery throughout Europe.”
He joins AllianzGI from AXA Investment Managers, where he was head of UK & Nordics and CEO UK since 2011, leading retail and institutional sales as well as client service teams.
Foto: Steve Jurvetson. Barclays vende una unidad de índices a Bloomberg
Last Wednesday British bank Barclays agreed to sell its indexing business built around former Lehman Brothers benchmarks to US based Bloomberg for close to 781 million US dollars (520 million pounds).
The move comes as Chief Executive Officer Jes Staley speeds up non-core disposals and will give Barclays a 480 million-pound gain.
Barclays Risk Analytics and Index Solutions Ltd. (BRAIS) incorporates Barclays’ benchmark indices, including the Barclays Aggregate family of indices. The transaction includes the sale of relevant intellectual property in relation to the POINT portfolio analytics tool. Barclays has agreed to continue to operate POINT for 18 months post completion in order to help clients transition to other providers, including Bloomberg’s PORT product. Barclays will retain its quantitative investment strategy index business, with calculation and maintenance of its strategy indices outsourced to Bloomberg.
Completion is subject to various conditions, including anti-trust approval, and is expected to occur by mid-2016.
Jes Staley, Barclays Group CEO, said: “We are pleased to partner closely with Bloomberg upon completion of the transaction, including maintaining a co-branding arrangement on the benchmark indices for an initial term of five years. This transaction is further evidence of the good work we are doing in managing down our Non-Core assets so that shareholders can feel the full benefit of ownership of Barclays’ well-performing Core businesses.”
Back in 2008 Barclays combined their indices offering with those of Lehman Brothers Holdings Inc.’s North American unit to create BRAIS.
Foto: Katie Mollon
. Las pymes estadounidenses presentan una oportunidad en renta variable
In today’s landscape, where the economies and markets are more linked together, and the “new normal is going to hit investment” with “very modest returns,” investing in smaller companies can give an added edge.
According to Chris D. Wallis, CEO, CIO and Senior Portfolio Manager – Equity Investments at Vaughan Nelson Investment Management (part of Natixis Global Asset Management), when looking to invest in small and mid sized companies, “you get better information than from large caps, since the structure of larger ones is so vast that it is hard to realize exactly how they are making money” The investment professional also mentions that in the “small and mid cap space it is easier to pick up the phone and have access to the CEO or CFO.”
Another point Wallis makes is that large cap companies can be over diversified, so many times you are gaining exposure to different areas you don’t necessarily are interested in. The same comes to avoiding the pitfall of a strong dollar affecting the company’s balance sheet. Today’s large caps often have sales abroad and thus the higher dollar hurts their numbers.
According to Wallis, sectors are not going to work; “We don’t see anything that stands out in asset classes or sectors, it is no longer about buying energy or healthcare, but on a specific company.” In order to do that, the expert recommends screening for minimum levels of profitability and maximum levels of valuation but then “you need to turn to your database and understand subtle changes and how they are going to impact companies,” which requires specialized industry and market knowledge.
In general terms, and given that companies are highly exposed to tightening credit, he recommends checking “what does the balance sheet look like and when do they have to refinance debt; do they have the sufficient cash flow to refinance the debt? and, are their customers able to get funds to keep up the sales?”
One thing to note, is that Wallis believes that globally, the next five years will look completely different than any period we have seen in the last 50 -100 years. For the very first time, we have seen liquidity tighten; high yield spreads have increased, and access to credit has declined without the economy or personal income accelerating or inflation picking up. “The economies and markets are more linked together, the US was the first to fall and come out of the crisis then Europe followed, and now China. The policy choices that we made have exhausted the limits, we have gone to zero interest rates and I wouldn’t be surprised if we needed negative interest rates.” So, with mid single-digit returns in equity, low single-digit returns in fixed income and zero returns from cash, which translate into very modest returns, saving rates need to go up and as an investor, you need to differentiate yourself from the market.
The Erste WWF Stock Environment Fund invests globally in companies in the environmental sector. It was first launched in 2001 as Stock Umwelt. Clemens Klein is fund manager with Erste Asset Management.
Mr. Klein, what was the goal in setting up Erste WWF Stock Environment Fund?
The basic idea is to invest in companies that contribute to environmental protection with their products or services. Our goal was to take into account the effects of global mega-trends such as population growth, urbanisation, and the growing middle class in growing regions such as Asia and Africa.
What are the effects of these trends?
These trends lead to an increase in energy demand and demand for scarce resources, higher emissions of greenhouse gases, and an increase in the volume of waste. With our topics “renewable energy”, “energy efficiency”, “water”, “mobility”, and “recycling”, we focus on those areas where solutions for these developments are available.
What strategy do you pursue in these funds?
We are strongly focused on small and medium-sized companies with interesting products or technologies. We hold them over extended periods of time in order to benefit from long-term trends. One example is Shimano, a producer of bicycle components, which we first bought for our fund in 2003. To date the company has recorded a price increase of the factor of ten.
Can you invest in any sector?
No, the fund invests only in companies whose products and services come with a benefit for the environment. Companies involved in nuclear power, the oil, coal, gas, or mining industry, or the automotive and aviation industry are not investable.
Are there certain topics in your investable universe that are promising?
We can see potential especially in renewable energies. Although clean forms of energy are crucial for climate protection, wind and solar power currently make up less than 2% of global power generation. This share will be growing to 30%-50% by 2050. We also regard companies as attractive that operate in energy storage and energy efficiency. Energy that you don’t consume doesn’t have to be produced at a high financial and environmental cost. The relevance of alternative propulsion systems such as electric or hydrogen-powered cars will drastically increase as well.
