Photo: Arek Olek. Navigating The Storm: In Risk Budgeting and Alpha We Trust
The Lyxor Hedge Fund Index was down -2.7% in August. 1 out of 12 Lyxor Indices ended the month in positive territory. The Lyxor Convertible Arbitrage Index (+3.3%), the Lyxor L/S Equity Variable Bias Index (-0.7%), and the Lyxor L/S Equity Market Neutral Index (-1.1%) were the best performers.
The deflation and growth scares, which built up over the summer, accelerated following the CNY devaluation. They morphed into a vicious cycle in the last week of August. With volatility reaching 55 and equities plunging by the hour, Monday 24 will from now on count among the major stress episodes used as reference. The bulk of the Lyxor Hedge Fund index was endured during that week. Event Driven funds were the main losers. Return dispersion was elevated. Losses in some heavy-weight funds hid decent performances among macro traders (CTAs and Global Macro). A milder pressure on credit and govies supported credit and fixed income arbitrage strategies. The L/S Equity space proved resilient apart from Asian and US long bias managers.
“Beyond a possible near-term rally, we expect moderate and riskier returns from traditional assets. Thus, we continue to strengthen our focus on hedge funds’ relative value approaches.” says Jean-Marc Stenger, Chief Investment Officer for Alternative Investments at Lyxor AM.
To the notable exception of Asian and US long bias funds, the L/S Equity strategy was remarkably resilient. Most funds had steadily reduced their net exposures over the summer, cautiously positioned ahead of the sudden end-of-August debacle. In Europe, Variable bias managers implemented efficient hedging strategies, with an increased number of single shorts. European managers, which generally missed the reflation trade early this year, regained all the lost ground over the summer. They even outperformed market neutral strategies. In contrast, Lyxor Asian managers suffered in August, down -2% in aggregate. Their dramatic cut in net exposure since June (-10%) limited the damages. US Long Bias also took a major hit, losing most of their beta.
Event Driven funds were the main losers, with a severe plunge across the board. The aggregate Event Driven performance was close to flat before the last week of the month. Until then, some losses were recorded in China and Resources related exposures. They were offset by positive earnings releases in few large corporate situations and by the favorable closing of several M&A deals. The last week of August unsettled both merger spreads and the pricing of corporate situations, including activist positions. Special Situation underperformed Merger Arbitrage funds, even adjusted from their market beta. The sudden widening of deal spreads and the depressed valuation levels of corporate situations will probably open a phase of recovery going forward.
The Lyxor L/S Credit Arbitrage index was only down -1.5%. The market turmoil infected credit markets but less than equities. Spreads had already meaningfully widened over the recent months. This kept managers on a very cautious footing, positioned on high quality and high grade issues, with increased diversification. As dispersion returned in the space, short opportunities also emerged – and not only in the energy segment. In particular weakening cross credit correlations provided fixed income arbitrage funds with greater relative value opportunities. The alpha produced by Credit strategies alleviated the adverse beta contribution.
High dispersion among CTAs in August. CTAs were up nearly +1% before the last week of August. With their long bond and USD positions along with their short commodities exposures, they were well hedged against the various risks being priced in. In particular: a slower global growth, a slower Fed normalization and the Chinese ripple effects on EM countries and resources. During the last week, a majority of funds remained reasonably resilient. However some heavy weight funds were substantially hurt on their remaining long equity holdings and on some of their long USD crosses. ST models outperformed thanks to a faster portfolio repositioning. We observe that, in aggregate, LT models cut their about 30% net equity exposure down to less than 10% over that week.
Heterogeneous returns among Global Macro, with losses in heavy weights. Until the last week of August the strategy remained resilient, with a slightly positive MTD return. While cautiously exposed to risky assets, their hedges had little efficiency in the sell- off. They were essentially hit in their equity and long USD positions, with limited cushion from bonds or safe havens. However, losses in large macro funds actually hide a more heterogeneous and favorable picture. After the sell-off, Lyxor Global Macro funds were on average 10% net long on equities (from 15% early August), with more than half of their equity positions in Europe. They continue to play commodities mostly in relative value. Overall they remain long USD, especially against EUR and GBP.
CC-BY-SA-2.0, FlickrPhoto: Heribert pohl. Misperceptions of Thailand
Nikko Asset Management has launched a Luxemburg domiciled Asia ex-Japan Equity UCITS fund. The fund is managed by Nikko Asset Management’s experienced Asia ex-Japan equities team headed by Peter Sartori and Eng Teck Tan as lead portfolio managers. Its active Asia ex-Japan equity strategy has been managed by the team since 2006.
The Asia ex-Japan strategy aims to achieve long-term capital growth by investing in a portfolio of 40- 60 mid- to large-cap stocks issued by companies in the Asia ex-Japan region. The team takes an active investment approach based on thorough fundamental research, taking advantage of mispricings in Asian equities.
The fund provides access to Nikko Asset Management’s proven Asia ex-Japan team and market leading resources in Asian fund management. The company has approximately 200 investment professionals operating in 11 countries, nine of which are based in Asia.
This latest fund launch builds on the success of Nikko Asset Management’s launch of the Global Equity and Global Multi Asset UCITS earlier this year. The firm continues to expand its range of UCITS funds for sophisticated global investors, providing access to a broad range of exposures across developed and emerging markets.
“We have launched the fund in response to investor demand for specialist expertise in actively managed investments in Asia ex-Japan,” Sartori commented. “The need for a highly skilled active fund management team with on-the-ground resources, and experience in different market conditions is increasing.”
“Our experienced Asia ex-Japan team has worked closely together since 1999, and they have a proven track record of long term outperformance through the different market cycles across Asia. This expertise is invaluable in delivering alpha in the fast evolving Asian markets.”
Nikko Asset Management will launch further UCITS funds later in 2015 to meet investors’ demands for access to specialist investment strategies.
Courtesy photo.. Hartwig Kos Joins SYZ Asset Management as Co-Head of the Multi-Asset Team
SYZ Asset Management, the institutional asset management division of the SYZ Group, has announced the appointment of Hartwig Kos as Co-Head of the Multi-Asset team. Hartwig Kos will co-manage the team with Fabrizio Quirighetti and also serve as Vice-CIO of SYZ Asset Management. He will take up his position on 15 October 2015.
Based in London, Hartwig Kos will contribute with his specific skills and experience in active allocation strategies to the team of 7 people in place and will take over the management of the OYSTER Multi-Asset Diversified fund as lead manager. For their part, Fabrizio Quirighetti and his team in Geneva will manage the OYSTER Multi-Asset Absolute Return EUR and OYSTER Absolute Return GBP and Fixed Income strategies.
Before joining SYZ Asset Management, Hartwig was a Director in the Global Multi Asset Group at Baring Asset Management, where he was responsible for managing the Baring Euro Dynamic Asset Allocation Fund. He was also the Co-Manager of the Baring Dynamic Emerging Market Fund. Moreover, Hartwig was a member of the Strategic Policy Group at Barings, the firm’s asset allocation committee. Hartwig holds a Ph.D. in Finance from Cass Business School in London and a degree in Economics and Business Administration from the University of Basel, Switzerland. Hartwig is also a CFA® charterholder.
The London office is one of SYZ Asset Management’s clusters of excellence and notably houses the European equities fund management and research team. An office was opened in Edinburgh in November 2014 to include additional European fund management and research capabilities and an expanded sales team.
Commenting on the appointment, Katia Coudray, CEO of SYZ Asset Management, said: “I am pleased to have hired Hartwig Kos. He is an investment professional who is highly respected by his peers and his renowned experience in active allocation management adds value to our fund management team.”
Hartwig Kos added: “SYZ Asset Management has an excellent reputation and a convincing track record in the competitive field of multi-asset management. I am delighted to be a part of this team and join a Group with a strong investment culture and a human dimension.”
OppenheimerFunds announced a strategic partnership in which Apollo Credit Management, which is an affiliate of Apollo Global Management, LLC, will serve as sub-sub-advisor to the Oppenheimer Global Strategic Income Fund (GSIF).
“As a progressive money manager, OppenheimerFunds consistently strives to add value for our clients. Apollo Credit Management offers a wide range of alternative investment credit strategies that complement our strong in-house fixed income capabilities, which will help us continue to deliver a very compelling offering,” said Art Steinmetz, Chairman, CEO and President of OppenheimerFunds.
“Continuing the fund’s history of innovation, we wanted a quality partner in terms of performance, investment team and most importantly, one that shares our cultural viewpoint on serving investors first. We are launching our relationship via our marquee fixed income product, and will explore other potential initiatives over time.”
“We are delighted to partner with OppenheimerFunds on this innovative approach to provide their investors with access to Apollo’s flagship liquid alternative credit solution. These credit exposures, which have historically only been available to Apollo’s institutional investors, offer significant yield advantages and diversification to the individual investor,” said Marc Rowan, co-founder and senior managing director of Apollo.
“Similar to Apollo, OppenheimerFunds is focused on delivering investment excellence to its clients, and we look forward to a long and prosperous partnership with such a high-caliber institution.”
Global Strategic Income Fundis dedicated to providing current income from diversified sources of fixed income investments while maintaining low overall volatility relative to the multi-sector fixed income category. GSIF utilizes the complete set of OppenheimerFunds’ taxable fixed income capabilities, and the new partnership will help the Fund access non-traditional fixed income market opportunities – including structured credit, middle-market loans, direct real estate investments and insurance-linked securities – to improve yield and overall risk-adjusted performance, diversify the fund to minimize volatility, and advance the firm’s history of innovation.
“Our partnership with Apollo Credit Management is very exciting as it gives us access to different areas of the credit markets that can provide low-correlated, diversified sources of high income for our fund shareholders,” said Michael Mata, portfolio manager of GSIF at OppenheimerFunds. “Our shareholders will receive the benefits of our scale and service without paying extra to reach these non-traditional asset classes.”
Photo: Moyan Brenn. Advisors May Not be Allocating Enough Effort to Target Millenials
New data released by Hartford Funds suggests that there is significant opportunity for financial advisors to better engage their young clients. Survey results uncovered that most advisors report not proactively pursuing the ‘Millennial’ generation as potential clients, despite identifying as prospects the individuals that fall into that category. Findings also revealed that advisors expect client risk aversion to nearly double in the next 12 months, continuing an upward trend.
When asked how much they focus on attracting Millennial clients, 56 percent of advisors said “less than other age groups” or “not at all.” However, 70 percent reported that they target clients in their late-twenties and early- to mid-thirties. Further, the majority (63 percent) of financial advisors who say they’re not targeting Millennials at all are also pursuing prospects in this age group.
“The term ‘Millennial’ has become a buzzword in financial services, being discussed constantly by financial firms and advisors. However, our survey suggests a disconnect when it comes to understanding who falls into this Millennial category,” said Bill McManus, Director of Strategic Markets at Hartford Funds. “In an attempt to filter noise, many advisors might be missing valuable insights for attracting their younger client targets.”
When asked about retirement, 71 percent of financial advisors plan to work for at least 16 more years, and 53 percent plan to work for more than 20 years. Despite the desire to continue offering financial advice beyond 2030, these advisors overwhelmingly are not focused on attracting Millennial clients. More than half of advisors who plan to work for more than 15 more years target Millennials less than any other age group or not at all. Similarly, 51 percent of advisors who plan to work for more than 20 years are also targeting Millennials less than any other age group or not at all.
“When factoring in career longevity, there is even greater concern that many advisors aren’t intentionally engaging Millennial clients. Advisors who plan to work for at least two more decades need to thoughtfully engage their younger clients in order to grow along with their needs,” McManus continued. “Millennials will reach critical planning milestones in the coming ten years and require support in navigating the market and reaching their goals.”
When discussing client risk aversion, advisors expect a significant rise in the coming 12 months. Continuing a steady upward trajectory, 57 percent of financial advisors expect clients to become more risk averse in the next 12 months, up 22 percent from 2014 (35 percent) and up 40 percent from 2013 (17 percent).
“Because advisors foresee greater risk aversion among clients in the coming months, they are in the unique position to help maintain focus on the bigger picture and minimize clients’ tendencies to make emotionally-driven investment decisions,” McManus added. “Particularly as the market and investors anticipate a rise in interest rates, it will be critical for advisors to help clients manage through potential market adjustments.” The data underscores that the majority of financial advisors (57 percent) place market volatility at the forefront of the issues that keep them up at night; interest rates follows in second (51 percent) and international turmoil and its impact on markets follows in third (46 percent). Financial advisors appear to be unanimously less concerned by clients’ anxiety about saving and investing (42 percent), while only 32 percent of financial advisors are worried about attracting the next generation of clients. Concerns about inflation come in last, with only nine percent of financial advisors noting this as an area of worry.
For its third annual Advisor Anxiety Survey, executed by Hartford Funds during June of 2015, Hartford Funds spoke with more than 100 financial advisors about their anxieties as well as attitudes and practices regarding Millennial clients, individuals born roughly between 1980 and 2000.
Robeco Group and RobecoSAM have announced that they have been awarded A+ scores by the United Nations-supported Principles for Responsible Investment (UN PRI) for their overarching approach to responsible investment. Of the 681 investment managers that are signatories of the UNPRI, only 16% received A+ scores for their overarching approach. Robeco has been a signatory of the UNPRI since 2006, RobecoSAM since 2007.
Roderick Munsters, CEO of Robeco: “I am delighted that Robeco has achieved A+ scores for all the different modules assessed by the UN PRI. It is testimony to our approach to Sustainability Investing; we were one of the first larger asset managers to make Sustainability Investing a strategic priority over a decade ago, and today Sustainability Investing is one of the strategic pillars of our 2014-2018 strategy. The high scores we have been awarded for all the modules confirm our leadership in Sustainability Investing across all asset classes. I’m convinced that the importance of sustainability investing will continue to increase and that our expertise in this area will continue to benefit our clients and us.”
Michael Baldinger, CEO of RobecoSAM: “We are proud to have been awarded such outstanding scores by the UN PRI. RobecoSAM has shaped the Sustainability Investing landscape over the past 20 years and these strong results reflect our unwavering conviction that financial analysis without ESG integration is incomplete. Our focus over the last two decades has helped us develop A+-rated knowledge, tools and best practices which are of benefit to both current and future clients. “
Although RobecoSAM’s scores are partly reflected in Robeco’s group score, the company was also assessed separately since it is a UN PRI signatory in its own right.
Photo: ben
. Most Latino Business Owners Expect to Pass Business on to a Family Member
According to a new study by Massachusetts Mutual Life Insurance Company (MassMutual), research from the2015 MassMutual Business Owner Perspectives Study revealed that 80 percent of Latino respondents expect to pass their businesses on to a family member – most often a child. However, 37 percent of those individuals said their chosen successor may not even know about this succession plan.
For Latino business owners, the aspiration to live the American Dream is no different, but the definition of success may be broader, encompassing their ability to care for and support extended families, friends, and their communities. The study reported they feel a strong sense of responsibility to their families and communities but tend to lack financial confidence and knowledge to put plans in place to ensure they can continue to provide for them.
“Latino entrepreneurs are strongly interconnected with their businesses, community and families,” said Dr. Chris Mendoza, Latino Markets Director, MassMutual. “Without the proper financial knowledge and preparation, Latino business owners are inhibited from fully realizing and protecting their dreams.”
Latino-owned businesses are growing at double the national rate, according to the U.S. Census, are generally younger and more likely to take community into account when making business decisions.
Only half of the Latino business owners surveyed have a formalized plan in place (a buy-sell agreement) to protect themselves for an untimely death; even fewer have a buy-sell agreement in place for disability; Protecting the business (35 percent) and family (37 percent) are the primary motivators for having these plans in place, yet an unforeseen illness or injury could jeopardize their ability to meet that goal.
While Latino business owners are ahead of their general population peers, when it comes to succession planning (49 percent of Latinos vs. 41 percent of the general population have a succession plan), only about half of the Latino business owners surveyed have any type of succession plan in place; Eighty percent said they will pass the business on to a family member – most often a child. However, 37 percent of those individuals said their chosen successor may not even know he/she is the successor (significantly higher than 23 percent of the general population).
Forty percent don’t have any retirement savings plan outside of their businesses and either plan to continue receiving income from the business post-retirement or will use the proceeds from the sale of the business to fund their retirement; Latino business owners are significantly more likely than the general population to say they plan to retire but haven’t given it much thought, and few (only 12 percent) say they plan to retire in the next five years, driven by the younger average age of Latino business owners; They are more likely to leave the business to a family member or relative (80 percent vs. 65 percent of the general population) and much less likely to sell the business to a key employee (9 percent vs. 14 percent of the general population).
Foto: ChristianFraustoBernal. Deutsche AWM ficha a Pascal Landrove como managing director y SRM de su negocio de banca privada en México
Deutsche Asset & Wealth Management (Deutsche AWM) has announced that Pascal Landrove has joined the Bank as a Managing Director and Senior Relationship Manager for Mexico. Based in Geneva, Landrove reports locally to Matthias Musch, Head of Wealth Management, Latin America within Switzerland and directly to Felipe Godard, Head of Wealth Management, Latin America.
“We have been focused on strategically building out our Private Bank in Latin America, and believe Pascal will play a significant role in expanding our business in Mexico,” said Godard. “His deep, local relationships and extensive experience will help grow Deutsche’s Wealth Management platform’s market share in the region.”
Landrove has over 15 years of wealth management experience, and joins the Bank from Lombard Oddier, where he spent seven years as a Managing Director and Relationship Manager, covering Mexico. Prior to Lombard, Landrove spent over a decade at UBS, where he spent most of his tenure covering Latin America as a Relationship Manager and Desk Head for Mexico.
Over the past year, Deutsche AWM has expanded their private banking presence in several key markets including Latin America, the West Coast, Texas, and Miami. Earlier this year, Dessy Arteaga joined the Bank as a Senior Relationship Manager, Santiago Trigo joined as the Head of Central America, Andean and Southern Cone regions, and most recently, Francesca Boschini joined as an International Wealth Planner with a focus on Latin America.
Other private bank hires have included Lee Hutter, who was appointed Head of the US Western region last September, and Mark Laroe, who was hired to start the Dallas Private Banking office. In addition, Deutsche AWM hired private banking teams in New York, Chicago and Los Angeles throughout 2014.
Foto cedidaPhoto: geographie, Flickr, Creative Commons. Sareb Senior Executive Joins DebtX in Europe
DebtX, the largest marketplace for loans, has announced that Luis Martin, a Spanish banking executive with more than 25 years of financial services experience, has joined DebtX as a Senior Advisor in Europe.
Martin, a recognized leader in the Spanish banking and real estate community, will work with institutions to reposition their balance sheet and reduce non-performing loans. Most recently, Martin was a Member of the Board and the Head of Transactions at SAREB, Spain’s national bad bank. In that role, he had direct responsibility for over $30 billion of loan sales and executed most of the largest loan sales in Spain over the past two years.
“Luis Martin is a highly respected banking and real estate executive who brings extensive knowledge of the Spanish market, its key players, and the loan sale process,”said DebtX Managing Director Gifford West, head of DebtX’s international operations. “Luis deepens the DebtX team and expands its ability to serve financial institutions throughout Europe, where DebtX has been valuing and executing loan sales for the past eleven years.”
Previous to joining Sareb, Martin was Chairman and CEO of BNP Paribas’s real estate consulting firm in Spain. In this role, he had direct responsibilities on the servicing and property management of more than 7,000 residential units and 500,000 square meters of commercial properties. He participated in many real estate investment transactions exceeding more than €500 million and asset management responsibilities over more than €400 million through BNPP Real Estate Investment Management.
“As we enter the next phase of bank restructuring, Spanish banks will examine all of their non-performing and non-core positions with the goal of maximizing proceeds,” Martin said. “DebtX is best positioned to establish an efficient market for these loans and create liquidity and transparency for Spanish banks. Once these banks have removed these assets from their balance sheets, they will be positioned to originate more loans and drive the Spanish economy.”
DebtX is the largest secondary commercial and residential loan trading platform in Europe and the United States. DebtX works with banks and governments to create liquid markets for commercial and residential loans. Buyers of loans sold at DebtX include institutional investors around the world.
deVere Group, one of the world’s largest independent financial advisory organizations, has named Peter Hobbs as its Chairman. Mr Hobbs joined deVere Group’s Board of Directors in June 2013 in a non-executive role. He was previously a former director of Generali International and Generali Pan Europe and ultimately responsible for the Generali Group’s strategic innovation programs and developments in more than 60 countries worldwide.
Effective immediately in his new position, his primary focus will be working with Nigel Green, deVere Group’s founder and chief executive, and Beverley Yeomans, the Chief Operating Officer, to effectively guide, review and further develop the Group’s global strategy and business plans.
Of the appointment, CEO Nigel Green, comments: “In a stellar international financial services industry career, Peter has enjoyed a long list of key accomplishments and, clearly, he has an abundance of top level experience. He has a robust record in managing and leading organizations, a thorough regulatory understanding of the sector and, through his role as a non-executive director, a strong empathy with our culture and commitment to serving clients. We’re thrilled he has decided to take on the role of deVere Group chairman.”
Commenting on his Chairmanship, Peter Hobbs affirms: “deVere Group has grown substantially over the last few years to become one of the largest financial advisory companies of its kind. Since joining the Board I have seen the organisation’s management adapt and take advantage of the challenges and opportunities companies of its size and type face in respect of both the market and regulatory challenges.
New sources of business and revenues through organic growth, including the examination of the value chain, and acquisitions of brands like Acuma and Workplace Solutions are bringing greater diversity, and the Group will further capitalise on the exciting business opportunities that will present themselves over the coming years. Many challenges remain, but with the prudent deployment of future capital, linked to a disciplined approach to corporate governance and marketing initiatives, I would expect the Group to continue its successful upward curve.”
