Following ECB regulatory approval, Franco-German financial services group Oddo&Cie is set to take over private banking and asset management group BHF Kleinwort Benson Group.
The ECB’s approval is conditional to the implementation by the Oddo Group of a capital increase of €100m and to the fact that the Group joins the German guarantee funds deposit.
The capital increase has already been approved by Oddo&Cie shareholders, the group is now awaiting the final confirmation from the German guarantee funds deposit (Prüfungsverband Deutscher Banken) is under process, as well as the approval of the prospectus by the Belgian Financial Services and Markets Authority (FSMA).
Philippe Oddo, managing-partner of Oddo & Cie, said: “The green light from the European Central Bank is an important milestone in our project of acquiring the BHF Kleinwort Benson Group and thus of giving rise to a unique Franco-German group.”
2015 has been a year of acquisitions for Oddo, starting with the takeover of Seydler in Janaury followed up by the acquisition of fomer BNY Mellon boutique Meriten.
The acquisition of BHF Kleinwort Benson, which currently manages about €58.5 billion in assets would provide a significant boost to the group’s assets under management.
Foto: Dennisilekeller, Flickr, Creative Commons. Julius Baer compra la entidad de banca privada de Commerzbank en Luxemburgo
Julius Baer has announced that it has agreed to acquire Commerzbank International SA Luxembourg, a well-established and fully-licensed private banking franchise with close to EUR 3 billion assets under management, from Commerzbank AG. This transaction will significantly strengthen Julius Baer’s position in the Luxembourg financial centre.
CISAL’s client assets are booked on a Temenos T24 banking platform. CISAL’s staff includes a highly experienced IT team with relevant expertise of the Temenos T24 technology. As announced earlier this year, Julius Baer has selected Temenos as its partner for the planning of its core banking platform renewal project. The total consideration is approximately EUR 68 million, assuming EUR 25 million of regulatory capital is transferred as part of the transaction. Total restructuring and integration costs are expected to amount to approximately EUR 20 million.
Closing of the transaction is expected to take place in the summer of 2016, subject to regulatory approvals and following the unbundling of the local IT platform. After closing, Julius Baer’s Luxembourg-based business will manage total assets of around CHF 5 billion on a pro forma basis. The transaction will be accretive to adjusted earnings immediately following closing.
Boris F.J. Collardi, CEO of Julius Baer, commented: “The acquisition of a fully-licensed bank in Luxembourg as well as the Temenos-based booking centre and the related IT expertise provide us with important strategic flexibility for our European businesses. Furthermore, it strengthens the implementation of our global banking platform project by aligning Europe with our Swiss and Asian platform strategy, thus reducing the execution risk.”
Gian A. Rossi, Region Head Northern, Central and Eastern Europe, added: “The acquired entity is a pure private banking business with a stable base of European clients and hence fits very well with Julius Baer’s business approach and strategy. We are pleased to add significant scale to our local franchise in the important international financial centre of Luxembourg and look forward to leveraging the business opportunities provided by the full bank licence.”
Foto: Neetalparekh. AXA IM lanza una SICAV en Luxemburgo para inversiones verdes
AXA Investment Managers (AXA IM) recently launched the AXA WF Planet Bonds fund, a green bonds fund that aims to support clients’ transition to a low carbon economy by providing investors with access to the growing global green bonds market.
Commenting on the launch, Andrea Rossi, CEO of AXA Investment Managers, said: “As long-term investors we recognize the threat of climate change and the need to mitigate the potential impact on the global economy… We are also able to support clients’ transition to a low carbon economy, for example, through offering investment in green bonds.”
The AXA WF Planet Bonds fund invests in both pure green bonds and bond issuers with a high environmental impact with the aim of ensuring sufficient diversification and liquidity. AXA IM’s Global Rates team in collaboration with the Responsible Investment (RI) team runs it.
Olivier Vietti, Lead Fund Manager of the AXA WF Planet Bonds fund, commented: “We feel the bond market is a natural vehicle to support energy efficiency, renewable energy and other projects related to climate change, as bonds can provide a direct and transparent way for investors to invest in low carbon solutions. This fund aims to offer an attractive yield meaning responsible investors do not have to ‘give up’ yield, relative to the wider fixed income universe, when investing to make a positive environmental impact.”
A key attribute of the Fund is its highly robust investment selection process, which is also flexible and unconstrained from a benchmark to avoid any bias from following an index. In the selection process issuers in the eligible investment universe are ranked according to AXA IM’s internal ESG (environment, social and governance) assessment process to determine which issuers have high environmental conviction and therefore present a solid case for green investment. The Fund aims to be well diversified and offer an attractive yield and risk vs return profile by focusing on yield enhancement and investing in investment grade and high yield issuers.
Matt Christensen, Head of Responsible Investment at AXA IM, commented: “This solution also offers the possibility for investors to be aware of the type of projects that will be financed through their investment, including wind farms, green commercial buildings, public transport solutions and waste water systems.”
Jerome Broustra, Head of Global Rates at AXA IM, added: “AXA IM has been active in the green bonds sector since 2012 and we have already invested EUR 1 billion globally in this market segment. Despite its massive growth over the last year, this market is still relatively small and we want to support its development.”
The AXA WF Planet Bonds fund is a Luxembourg-domiciled SICAV. The Fund has both retail and institutional share classes and is registered for distribution in France, the Netherlands, Sweden, Finland, Norway, Denmark, Austria, Belgium, Germany, Italy, Spain and the UK.
Schroders announced the launch of Schroder ISF EURO Credit Absolute Return, managed by Patrick Vogel and the European credit team. The fund aims to provide a positive annual return throughout the market cycle and uses the same investment process that has delivered first quartile performance across four credit strategies.
The strategy combines traditional top-downviews with the credit team’s innovative themes based credit process, which identifies global trends and applies in-depth business model analysis to determine which issuers will benefit and which are vulnerable to these trends.
The credit team currently manage EUR 8 billion on behalf of clients around the world and has delivered 5.1% per annum in the flagship investment grade strategy over 3 years. The fund managementteam are part of an integrated fixed income platform of over 100 investment specialists based across the globe.
EFAMA welcomes the debate on retail financial services launched by the European Commission’s Green Paper on retail financial services.
EFAMA believes it is crucial to continue working to rebuild confidence in financial markets. Investors’ interests must remain at the heart of the project for a Capital Market Union. Only with their confidence, is this or any project that seeks to deepen the single market for retail financial services likely to succeed.
EFAMA very much supports the promotion of financial literacy and investor educationat EU and national levels. Better informed and educated investors can better assess the choices and the products available to them.
EFAMA has strongly supported recent regulatory pieces such as MiFID II and PRIIPs as they go far in setting further transparency and strict disclosure rules. These are considerable improvements within the regulatory environment. In line with this, EFAMA fully agree that consumers need to be able to compare products to make an effective choice.
In the drive towards more single market, EFAMA fully backs the Commission in its much welcomed objective to facilitate the cross-border provision of retail financial services such as investment funds. Indeed, as the Green Paper points out, some remaining obstacles stem from an inconsistent enforcement of EU legislation across the EU. These gold plating practices at national level need to be addressed.
Finally, EFAMA wholeheartedly supports the creation of a single market for personal pensions, and the development of a Pan-European personal pension products (PEPP) in line with the ongoing work that EIOPA is undertaking and the objectives of the Commission in its CMU Action Plan. The current fragmentation of the market makes economies of scaleimpossible to achieve and limits the choice of pension products and pension providers. A Pan-European personal product would provide more options and better returns for savers and retail investors.
Ashburton Investments, the asset management business of FirstRand Group, is buying Atlantic Asset Management, a South African independent firm specialized in fixed income investments, according to information published by Investment Europe.
Effective 1 January 2016, the deal will add to Ashburton’s existing fixed income business, adding Atlantic’s expertise in social impact investments. The Atlantic fund range will be rebranded and incorporated into Ashburton Investments, but the mandates and teams will remain in place.
Atlantic CIO, Arno Lawrenz, will be appointed head of fixed income portfolio management at Ashburton. Heather Jackson, CEO of Atlantic Specialised Finance, will work with the alternatives experts within Ashburton.
Boshoff Grobler, CEO of Ashburton Investments, said: “Atlantic has some of South Africa’s best expertise in the traditional fixed income and money market space, as well as being pioneers in social impact investing. We believe their entrepreneurial spirit and their investment philosophy is a perfect match for ours and that our combined experience consolidates Ashburton’s ability to offer clients a stand apart fixed income offering.”
The acquisition will also help position Ashburton favorably in respect of what it sees as an ongoing shift in asset allocation by institutional investors. Grobler said that assets such as South African unlisted credit represent a high quality opportunity, in which institutional investors are under invested. Grobler added that Ashburton Investments was now very well placed for the ongoing shift in asset allocation by institutional investors.
Foto: Juergen Trautmann, Flickr, Creative Commons. Irlanda implementa ELTIF, la regulación europea de los fondos de largo plazo
Finance Minister Michael Noonan has announced that Ireland has adopted the Eltif regulation.
Eltif application forms are available from the Central Bank of Ireland and it has confirmed that it is ready to accept Eltif applications.
Commenting on European Long-term Investment Funds, Pat Lardner, Chief Executive of Irish Funds, said: “Eltifs represent a key component of the European Commission’s initiative on Capital Markets Union (CMU) and aim to promote cross-border long-term investment in projects such as infrastructure, sustainable energy and new technologies.
“As a leading centre for cross-border Alternative Investment Funds (AIFs), Ireland is well-positioned as a location to domicile, manage and service Eltifs. Ireland already has significant experience in the long-term investment space with a range of infrastructure, green and real asset investment funds established here.”
Irish Funds responded to the ESMA consultation on Regulatory Technical Standards for Eltifs in October and will propose enhancements to the Eltif framework in its submission to the European Commission Call for Evidence on the EU Regulatory Framework for Financial Services.
Irish Funds continues to engage with the Central Bank on matters relating to Eltif implementation and has a dedicated Eltif Working Group of industry experts.
Regulation (EU) 2015/760 on European long-term investment funds took effect on 9 December 2015.
Photo: Alex Crooke heads Henderson’s Global Equity Income team. QE in Europe and Japan Set to Benefit Higher Dividend Yielding Stocks
Alex Crooke heads Henderson’s Global Equity Income team, which consists of twelve professionals with an average industry experience of 16 years. In his case, he has been managing income generating strategies since 1997. In an interview with Funds Society, Crooke explains: “high dividend yielding stocks are not a fad, they have played an important role in the market for decades. Dividends are a very powerful strategy when investing in equities.”
In fact, over time, dividends are responsible for a highly significant proportion of the total returns on global stock markets. In 2014, listed companies worldwide paid more than $1 trillion in dividends. They are also a good indicator of corporate health. In recent years, payouts of listed companies have continued to grow. The Henderson Global Equity Income team believes that this trend will continue as fundamentals in markets lagging the economic cycle, such as Europe, improve.
“Our strategy is truly global,” says Crooke. The universe includes Asia and emerging markets, and stocks of all market capitalizations. “Right now we find better yield in Europe and Asia than in the United States, as well as better dividends among large-cap companies, compared to small and mid caps. Essentially, we have a yield of 3.4%.”
In a world where interest rates are at historically low levels, a dividend culture is warranted, especially in those areas of the world where aging populations lead to increased demand for income-generating assets.
High and Rising Dividends
“Ours is a bottom-up investment process. The portfolio is constructed from a global universe of companies, which generate good dividend yields. In addition, we have found that companies that raise their dividend tend to perform better overall.”
Crooke’s team looks closely at companies that deliver good dividends, with a focus on analyzing whether they are able to increase cash flows over the next two or three years. “At the end of the day, a dividend is cash leaving the company, therefore, in order to have a dividend, there must be good cash generation.”
During the investment process, the Global Equity Income team examines several factors, including balance sheet strength, capex needs, and cash generation, but without losing sight of the macroeconomic framework. An example of this is what’s happened with oil companies over the past year, “the macro environment suggested that the price per barrel could not be maintained above US$100 for a long period of time, but even at that price, we saw that many companies within the industry were financing dividend distributions with debt, instead of cash flow; they were handing out the results of future projects. For us, that was a warning sign indicating that it was best to steer clear of these companies, even though their dividend was high. “
A UCITS Strategy for a Three-Year Old UK Domiciled Fund
Alongside Andrew Jones and Ben Lofthouse, Alex Crooke manages the Luxembourg-domiciled SICAV strategy, which launched a year and a half ago as a mirror version of the existing Global Equity Income Strategy, domiciled in the UK. The launch of the UCITS Luxembourg version was driven by the low interest rate environment, which has seen increasing demand in Europe and Asia, as well as interest for such products in the US Offshore and Latin America market.
Overall, Henderson manages approximately US$15 billion in both regional and global Equity Income Strategies. Henderson began investing in income at the global level in 2006, and manages US$3.5 billion in its global dividend strategy domiciled in the United States, and about US$1 billion in the strategy domiciled in the UK.
QE in Europe and Japan should Act as Catalyst for Higher Dividend Yielding Stocks
This strategy, which has the MSCI World Total Return Index as its benchmark, typically has between 50 and 80 companies in the portfolio. “The United States represent 30% of the portfolio, an underweight position,” explains Crooke. This positioning is more the result of valuation rather than one of dividend growth. “Since the United States launched its QE program, the popularity of stocks offering a good dividend yield increased, raising the price of securities in both equities and fixed income.” Henderson’s Global Equity Income team, however, does see some interesting American companies, such as mature technology names like Microsoft and Cisco, which have “a good payout combined with strong cash flow generation.” Another sector in which they are beginning to focus is that of US banks “which we think will be in a position to start paying better dividends.”
But it is in Japan and Europe where Crooke sees the greatest opportunities. “The QE program is in its infancy, thus, the same rationale which pushed money in the US towards dividend stocks should also operate in Europe and Japan.”
The average forecast yield of the companies which form the strategy is 3.8%, with an estimated dividend growth of 5 to 10%. “In the UK, for example, we see interest rates at levels below the average yield of the equity market; this is the situation throughout most developed world markets, except the United States. Now is the time to reconcile this difference.”
The team’s outlook for emerging markets is very cautious. The strategy’s allocation is less than 5%, although exposure is also gained through certain developed market companies with emerging market business streams.
Restructuring Companies, a Recurring Theme in the Strategy
Around a third of the stocks included in the portfolio are undergoing some form of restructuring. “Companies that have gone through a process of change to improve their fundamentals tend to behave well regardless of the economic cycle. Since we are not very positive about the global macroeconomic outlook, we focus on these types of businesses as well as companies in sectors uncorrelated with the economic cycle, such as pharmaceuticals or insurance.”
A recurring concern when investing in dividends is to avoid “value traps”. Some high-yielding equities can be more risky than their lower-yielding counterparts, particularly after a period of strong market performance when equity price rises push yields down. The high-yielding companies that are left can be structurally-challenged businesses or companies with high payout ratios that may not be sustainable. Crooke says that it is essential to analyse the sustainability of a company’s ability to pay income.”We avoid investing in companies whose dividend policy is vulnerable to regulatory changes, the interest rate environment, declines in commodity prices, etc”.
Does High Yield Debt Investment Compete with Dividends?
Crooke points out that investing in high yield bonds is currently not as attractive an option. “If you want high yields from fixed income, you have to look to heavily indebted companies. Those with a good credit rating don’t offer such attractive yields. In Europe, for example, 55% of companies offer better yields through dividends than through debt issues.”
Furthermore, if inflation returns, the risk of rising rates is still there, and it may damage the performance of a fixed-income portfolio. “If you’re counting on a gradual reflation of the economy, we believe that it’s much better to be in equities than in fixed income,” says Crooke.
Photo: Jackietl, Flickr, Creative Commons. BME Joins the Sustainable Stock Exchanges (SSE) Initiative to Promote Sustainable Capital Markets
BME has announced that it has partnered with the United Nations Sustainable Stock Exchanges (SSE) initiative to raise awareness on environmental, social and corporate governance issues, and to spread sustainable business practices.
The UN SSE initiative was launched by UN Secretary-General Ban Ki-Moon in 2009, and offers a learning platform for exploring how exchanges—together with investors, regulators and listed companies—can encourage sustainable investments and enhance corporate transparency. The SSE is convened by the UN Conference on Trade and Development (UNCTAD), the UN Global Compact, the UN Environment Program’s Finance Initiative (UNEP FI), and the Principles for Responsible Investment (PRI).
In a letter to UN Secretary General Ban Ki-moon, BME committed to working with investors, companies and regulators to promote long term sustainable investment and improved environmental, social and corporate governance (ESG) disclosure and performance among companies listed on its markets.
The Chairman of BME, Antonio Zoido, said: “We are proud to join the SSE Initiative and partner with the UN and our industry to support best practices in corporate governance and transparency related to corporate sustainability and help advance this cause globally. Being part of the Sustainable Stock Exchange initiative demonstrates our commitment to adopting sustainable business practices and encouraging our stakeholders to do the same”.
Alternative Investment Fund Managers Directive (AIFMD) headaches are causing some non-EU fund managers to forgo European investors, according to the latest issue of The Cerulli Edge-Europe Edition.
Cerulli Associates, the global analytics firm, says the hurdles and uncertainty linked to the financial directive are proving too troublesome for some managers. The chief operating officer of one hedge fund told Cerulli that U.S. and Asian managers are ignoring Europe, concentrating greater marketing efforts instead on domestic investors.
“At the crux of the debate is the question of whether the financial rewards outweigh the compliance costs,” says Barbara Wall, Europe research director at Cerulli, noting that the cost of becoming AIFMD compliant is estimated at between US$300,000 (€278,000) and US$1 million.
The directive subjects fully compliant AIFMs to a number of obligations, most notably the appointment of a depositary bank, restrictions around remuneration and additional risk oversight requirements. In return, full-scope AIFMs can in theory distribute funds to institutional investors across the EU without impediment.
The situation for EU managers of non-EU funds and non-EU managers of non-EU funds is, however, more complicated. While Guernsey, Jersey and Switzerland have been cleared by the European Securities and Markets Authority (ESMA) to use the AIFMD passport, the U.S., Hong Kong and Singapore have been told that more analysis is needed before a ruling can be made. “The delay is cause for concern. A speedy decision is needed–however, we are not hopeful of one,” says Wall, noting that the huge regulatory divergences between the EU and the U.S., particularly around the definition of an accredited investor, is an obstacle to equivalence that will not be easily resolved.
David Walker, director of European institutional research at Cerulli, adds it is a cause for concern if Europe’s growing web of regulation affecting alternatives managers means U.S. and Asian managers simply ignore European investors. “European allocators could effectively be denied some very talented managers, and returns they badly need in Europe’s low-interest rate, low-returns environment,” says Walker.
Managers without passporting rights can use the National Private Placement Regimes (NPPR). However, a lack of uniformity across the EU with regard to interpretation of NPPR is creating confusion, points out Cerulli. It notes that differences between countries on AIFMD regulatory reporting rules have resulted in some non-EU managers marketing into just a handful of jurisdictions, while others are moving onshore or launching UCITS. Also, there is no certainty as to how long NPPR will exist.
“Alternatives managers depending on reverse solicitation rely on being ‘found’ and then pursued by prospective clients–a fairly tall order–whereas regulation-compliant rival managers will be able actively to promote the benefits of their strategies, which does seem a rather easier path to sales,” says Walker.
