Photo: Trey Raatcliff, Flickr, Creative Commons. Renminbi Devaluation: The Impact, Country by Country
China has devaluated its currency, Renminbi. Theses moves shows China is using both domestic (fiscal, monetary) and external (currency) levers to support growth. CNY depreciation will have a negative impact on commodities (given China is the largest consumer) and commodity exporting countries -Indonesia, Malaysia-. If this leads to further easing from other countries, it will be positive for equities, says Mirae Asset.
Impact in China
PBOC’s weakening of CNY may lead to further depreciation, which might not be all negative. “Historically, we have seen currency adjustment as a beneficial tool to boost exports and therefore economic growth”.
However, the risks of currency wars remain. China is in a strong position to defend its currency thanks to it’s large FX reserves and low offshore borrowing. Rather than looking at USD/CNY, China might prevent further appreciation of REER. Emerging Asia constitutes about 20% of China’s total trade, with Europe and Japan accounting for around 40%, according to the experts.
Even if China does want to reverse the appreciation of CNY vs other Asian currencies, it would imply a ~10% depreciation in CNY. On various models, RMB is around 10% overvalued on an average of various frameworks.
“Overall, for the financial sector, we are entering into a lower growth environment, with the asset quality cycle turning and a not-so-conducive operating backdrop. As a result, we maintain an Underweight the financial sector. In such an environment we prefer countries where monetary easing will have the ability to deliver a boost to domestic demand and those with low credit penetration (India, Indonesia, Philippines). Apart from these countries, we continue to like Chinese life insurance companies where protection gap is significant and the industry is showing signs of turnaround for the past 18 months”, says Mirae Asset.
Negative for exporters and ASEAN countries
However on a broader macro perspective, it is negative for exporters to China (or countries with close linkages with China) like Korea, Taiwan, Hong Kong and Singapore. ASEAN may be impacted due to second order effects with their currencies depreciation and reducing the scope of interest rate cuts as currencies remains under pressure.
Regarding the US rate hike, “on the flip side, it might possibly lead to a postponement of US rate hikes, as strong USD and disinflation- ary impulse due to actions of various central banks (CN, EU, JP) might impact the conditions within the US. Furthermore, the notion of substantial real weakness in China (which the FX move indirectly signals) is, in itself, not inmaterial”.
Mirae Asset also analyses the impact of the devaluation in Renminbi, sector by sector:
A new survey of financial services professionals conducted by Cipperman Compliance Services (CCS) reveals that asset managers, broker-dealers, and other firms are embracing compliance as a core function of their business, with an equal number of respondents reporting that they now spend as much on compliance as they do their legal counsel.
The second annual “C-Suite Survey”, drawn on responses from 180 leaders tasked with compliance in the financial services industry, finds that although a greater number of firms have formed compliance committees and conducted reviews of their compliance programs in the past year, only18% allocate more than the industry-benchmark 5% of revenues to such activities.
As regulatory scrutiny of the industry continues, client pressures have driven an industry-wide march toward adopting formal compliance procedures.
Eighty-one percent of respondents are “concerned” or “very concerned” by the Securities and Exchange Commission’s practice of naming and prosecuting individuals. Moreover, 70% of respondents also report that prospective clients have asked to review compliance policies or interview compliance personnel, suggesting that compliance is now seen as an integral part of a desirable financial firm.
“Gaining the trust of clients is essential in asset management,” said CCS Managing Principal Todd Cipperman. “A manager’s ability to demonstrate a strong compliance program is a big factor in landing asset management business from institutional and individual investors.”
Accordingly, firms have taken concrete steps to formalize their compliance procedures. Sixty-three percent of asset managers indicate they have a compliance committee at their firm, rising from 48% reporting the same in 2014. Moreover, 88% of all respondents report that they have conducted a compliance review in the last year, as opposed to the 67% who answered as such in 2014.
“Firms are choosing to vest these duties with committees and individuals whose sole responsibility is compliance, as opposed to wearing multiple hats, which has proven to be the most effective means of maintaining a culture of compliance,” said Cipperman. “Truly dedicated compliance personnel reduce conflicts of interest, stay on top of the shifting regulatory landscape, and ensure compliance doesn’t take a backseat to other business functions.”
Resources Don’t Match Commitment
Even as firms report dedicating personnel to compliance, they have yet to fully devote the appropriate amount of resources to their programs. Just more than half of respondents, 53%, report spending between 0 and 5% of their total revenues on compliance.
Alarmingly, a significant number of respondents (who are charged with compliance activities at their firms) were unaware of how much they spend altogether. Twenty-nine percent of asset managers, 35% of broker-dealers, 14% of alternative managers, and 31% of wealth managers could not identify what they spend on compliance.
“These figures show, as they did last year, that it is much easier to talk the compliance talk then walk the walk,” noted CCS Managing Director Jason Ewasko.“Firms should spend a minimum of 5% of revenues or two basis points of assets under management on compliance in order to have an effective program. Less than that and they are putting their businesses, and in extreme cases their personal finances, at risk.”
Outsourcing Compliance Function Grows in Appeal
On the heels of recent acknowledgements by the SEC of outsourced compliance activities and court rulings validating the practice, the C-Suite Survey found that the industry has rapidly adopted the practice. Fifty-seven percent of all respondents say they outsource some or all of their compliance function, a rise from the 24% who outsourced in 2014. Leading the trend of firms embracing outsourcing are broker-dealers at 65% and alternative managers at 68%.
Foto: Luis, Flickr, Creative Commons. Los fondos monetarios captan 77.000 millones de dólares en julio ante la incertidumbre en el mercado
Global assets under management did not move significantly in July and stood at $35.9 trillion USD at the end of the month. Estimated net inflows amounted to $114.9 billion USD, while market movements in the reporting month delivered an $86.7 billion USD loss. In terms of market share, the trend continues to favour Equity Funds (+0.2 %) over Bond Funds (-0.2%) and Money Market funds (+0.1%), according to Lipper Thomson Reuters figures.
All asset types posted negative average returns, with Commodity Funds taking the biggest hit (-8.7 %) due to a further drop in energy prices after settling the Iran deal and a significant decline in precious metal prices. A further depreciating Euro versus US Dollar (-0.8%) had an additional impact on Lipper’s USD calculated fund market statistics.
Regardless of negative average returns, nearly all asset types except Bond and Commodity funds could profit from net inflows. Leading the way was Money Market Funds with $77.7 billion USD inflows, indicating some money being put aside because of uncertain market outlook, followed by Equity Funds with $29.5 billion USD. Bond Funds lost $0.6 billion USD and Commodity Funds some $1.7 billion USD, due to outflows.
Apart from the two big Money Market Classifications US Dollar ($41.0bn) and Euro ($29.5bn), the Equity Global ex US ($17.0bn), Equity Japan ($9.4bn), and Equity Europe funds with $7.1 billion USD estimated net inflows were able to attract the greatest interest from investors. As was the case in June, the Equity US fund classification had to accept redemptions, this time amounting to $7.3 billion USD which marked this the worst classification for fund flows in the top 50 Lipper Global Classifications league.
“The outlook for the securities market does not give a clear indication where it is heading. On the one hand it is anticipated that the FED will raise interest rates this year but, on the other, this seems unlikely as US macroeconomic data shows little signs of significant improvement. Cheap money (from borrowing at low rates) isn’t finding its way into the real economy, as investors prefer to stay on the sidelines, accepting lower interest rates for less risk in fixed income markets”, Otto Christian Kober, Lipper’s Global Head of Methodology and author of the report, comments.
“The situation is not much different in Europe. It doesn’t look like the ECB will raise interest rates any time soon, due to highly-indebted southern European countries. For Europe as a whole, the money continues to flow into Equity markets, with notable movement into Money Markets as well.”
Photo: YoTuT
. Nikko AM Appoints Sumi Trust as Fund Administrator
Sumi Trust Global Asset Services has won a mandate from Nikko AM Global Cayman, a subsidiary of Nikko Asset Management, to serve as their fund administrator and provide a full range of fund administration and asset support services.
SuMi Trust will provide fund administration services to Nikko Asset Management’s Japanese-domiciled and off-shore fund structures which will be launched in the future. Nikko Asset Management has entrusted six new funds, in addition to six existing funds from other administrators, to Sumi Ttust.
The funds, which are all Cayman-domiciled, together account for $2.7bn (€2.4bn) in AUM, with each following a dedicated investment strategy. These strategies include global and regional equities, currencies, fixed income and natural resources securities.
Nikko Asset Management, which holds assets under management of $161.9bn (€146.5bn) as of March 2015, is one of Asia’s largest, oldest and most respected asset management firms. Nikko Asset Management is part of Sumitomo Mitsui Trust Bank, which owns Sumi Trust Global Asset Services.
Nikko Asset Management’s decision demonstrates the benefits of the cross-integration of services between complementary business units within the SMTB group. Meanwhile, this recognition by the asset management firm underscores Sumi Trust’s ability to service funds trading a large number of different asset classes.
Hiromitsu Tanaka, CEO of Sumi Trust Ireland, commented: “With a track record of more than 25 years of providing fund administration support for both regulated and off shore fund structures, we’re very proud that Nikko Asset Management decided to entrust a greater share of their assets to Sumi Trust.
“Our fund administration business in Ireland has enjoyed tremendous success over the past year in attracting business from independent asset managers that are looking to launch new products and replace their administration partner in response to the increasing demands of the global financial services industry.”
Citi has hired Stephen Roti as Managing Director and Global Head of Corporate Equity Derivatives (CED). In this position, Mr. Roti will be responsible for the overall strategy for originating high value added CED transactions and will lead the marketing and education efforts with business partners in Investment Banking, Capital Markets Origination, and Citi Private Bank. He will be based in New York and report to James Boyle, Global Head of Equity Derivatives, Tyler Dickson, Global Head of Capital Markets Origination and Andres Recoder, Global Head of Corporate Sales and Client Solutions.
Mr. Roti brings more than 20 years of structuring and origination of equity related products to Citi including equity derivatives, convertibles, and hybrid securities. He will join the Bank from Nomura where he was Head of Equity Capital Markets for the Americas. Before Nomura, he served at Barclays Investment Bank, where he was Global Head of Equity Linked Origination in New York.
“We are extremely pleased to have Stephen on board,” said Boyle. “He has extensive industry experience and a proven track record that will have an immediate, positive impact on our franchise.”
“This hire complements our existing team well and underscores our commitment to the sector,” said Derek Bandeen, Global Head of Equities. “As our platform evolves, we will continue to invest in the business and expand our services globally.”
Mr. Roti earned a JD from Yale Law School and a BA in Economics and Japan Studies from Macalester College.
Investors remain open to risk despite market jitters around crises such as China and Greece, according to the findings of the latest Risk Rotation Index by NN Investment Partners.
The research revealed that 28.3% of the panel of global institutional fund managers surveyed said that they had increased their appetite for risk over the previous six months compared to 18.3% who said that their appetite had decreased, leaving overall net risk appetite at +10%.
However, in spite of this confidence, investors have growing concerns over a potential Eurozone crisis, with 49% of respondents citing it as a ‘significant’ threat to their portfolios – up from 35% in the previous quarter – while one in eight (13%) view it as a ‘very significant’ threat.
Valentijn van Nieuwenhuijzen, Head of Strategy, Multi-Asset at NN Investment Partners, says: “A Eurozone crisis was viewed as significant threat by almost half (49%) of investors who appear to be approaching the current situation with both caution and confidence.
“Greece may have jolted markets but the Eurozone survived. The Chinese crisis – we think we can call it a crisis by now – is creating serious problems for the commodity exporters and the countries that sell the most capital goods to China.”
“Despite market jitters investors still have confidence in the market and retain some optimism with the recent pick-up in growth in the US and Japan. As we are back in calmer waters (at least temporarily), we upgraded equities from neutral to a small overweight which was our stance before Greece and China spoiled the party.”
Away from the Eurozone, other potential dangers such as a black swan event (24%) and a Chinese slowdown (21%) were also named by investors as events of which they were wary.
As well as indicating a preference for risk amongst investors, the research also hinted at growing stability within investors’ portfolios. Indeed, more than half (53%) of the panel stated that they had not adjusted their risk profile over previous six months – the highest proportion since the index was launched in 2013.
In order to mitigate potential risk over the coming months, investors appear to be most in favour of using multi-asset (74%) and equity strategies (56%). When broken down there is little difference in preference between balanced and total return multi-asset strategies – 37.3% vs. 36.3% – meaning that individually both strategies are more favoured amongst investors than illiquid assets such as private equity and mortgages (26%), hedge funds (22%) and high dividend (18%).
Van Nieuwenhuijzen continues: “In the current investment climate there are a great number of pockets of opportunity for investors – but also a great number of potential pitfalls. It is therefore important for investors to deploy the right strategy to ensure yield whilst simultaneously mitigating market turbulence. Indeed, our survey reveals that 46% of investors have diversified their portfolios to manage risk over the past year, and we believe that multi-asset strategies such as balanced or total return funds provide investors with the exposure to risk that provide them with a steady yield stream – even in an uncertain economic landscape.”
When looking at the asset classes most favoured in terms of risk versus return over the coming three months, investors stated a preference for equities (34%), followed by real estate (17%) and government bonds (14%). The most favourable geographical regions in terms of risk versus return were the US (46%), Japan (38%) and the Eurozone (29%).
Photo: Natesh Ramasamy
. Deutsche Bank Group Announces The Sale of Its India Asset Management Business
Deutsche Bank Group announced that it has entered into an agreement to sell its India asset management business to Pramerica Asset Managers Pvt. Ltd., subject to customary closing conditions and regulatory approvals.
Pramerica Asset Managers is the asset management business in India of Pramerica Investment Management (PIM), whose multi-manager asset management businesses collectively rank among the top 10 institutional money managers in the world, according to Pensions & Investments. The sale is a continuation of Deutsche Asset & Wealth Management’s global initiative to further focus its business on developing and strengthening its regional centres of investment excellence, with the ultimate aim of delivering consistently superior performance to clients across all asset classes and investment strategies.
Ravi Raju, Head of Deutsche Asset & Wealth Management, Asia Pacific, said: “Deutsche Bank Group’s asset management business was established in 2003, and is now the second largest foreign asset manager in India. We have built a strong brand with a well respected investment and coverage team. This solid foundation will be passed on to Pramerica, which is an internationally respected asset manager with broad product capabilities and expertise. We are confident that with Pramerica’s global footprint and track record of integrating and working with local partners in key markets, the business will continue to perform well following the integration. We are committed to working with Pramerica to ensure a smooth transition for clients, staff and other stakeholders.”
Ravneet Gill, Chief Executive Officer, Deutsche Bank Group India said: “The divestment of our asset management business is in line with our strategy of focusing on our core businesses where we can achieve a leadership position. Deutsche Bank Group’s overall India franchise has posted strong financial results, and we remain absolutely committed to further investment and development of our business here given that India is strategically important to the bank’s global growth aspirations.”
Glen Baptist, Chief Executive Officer of Pramerica International Investments, said, “The strong track record of Deutsche Bank Group’s asset management business in India, its talented leadership team, and deep relationships with institutional clients and distribution partners, perfectly complement the sales, investment and product capabilities of our existing business. When the transaction is completed, we will have the scale and platform necessary to make our investment strategies available to clients across India and put us within sight of the top 10 asset management businesses. We are confident that the combined business, and our new joint venture with DHFL, will enable us to achieve our strategic priority of building an industry-leading India asset management business.”
Pramerica’s new JV with DHFL, which will benefit from DHFL’s 30 years of financial services experience in India when the transaction is completed, will be renamed DHFL Pramerica Asset Managers upon regulatory approval.
Deutsche Asset Management established its business in India in 2003 and today has INR 20,720 crore (EUR 2.9 billion) average assets under management (as of quarter Apr-Jun 2015), making it the second-largest 100% foreign-owned asset manager in India.
Over the last decade, the firm has built a strong investment performance track record. Its product portfolio spans debt and equity schemes; domestic and offshore funds.
Deutsche Asset Management (India) is the Mutual Fund business of Deutsche Asset & Wealth Management in India.
Foto: Victor Camilo, Flickr, Creative Commons. Peter Röhrenbach: nuevo responsable de Real Estate de UBS Global AM para Benelux, Francia, Iberia y países nórdicos
UBS Global Asset Management has appointed Peter Röhrenbach as its regional head of Benelux, France, Iberia and the Nordics for its global real estate business, according to Investment Europe. Röhrenbach will leave its role of head of Iberia with immediate effect but will continue to be based in Madrid.
He will oversee and support the acquisitions and dispositions as well as asset management activity in the region in addition to defining the long-term strategic priorities for these markets.
Röhrenbach will retain his Senior Investment Advisor role for a key pan-European institutional investment mandate, according to the publication.
Röhrenbach has joined UBS in 2003 where he set up the Iberian property business currently managing assets exceeding €700m. Prior to joining UBS, he worked for Lend Lease as head of Real Estate Investments and Eurohypo AG as head of Iberia (Spain and Portugal).
Jesus Silva Gallardo: New Head of Iberia
Röhrenbach will be replaced by Jesus Silva Gallardo as head of Iberia. Gallardo was working as head of Asset Management for the Iberian Peninsula.
Foto: Robert Sheie
. OMGI lanza un fondo de rentas y bolsa global para el mercado offshore y cierra su homólogo onshore
Old Mutual Global Investors has confirmed that the offshore Old Mutual Global Equity Income Fund, managed by Ian Heslop, Amadeo Alentorn and Mike Servent has now launched. The Fund is a sub-fund of the Dublin domiciled Old Mutual Global Investors Series plc umbrella fund.
According to the company, the fund has been developed in response to client demand for an income-generating product managed by the award winning Old Mutual Global Investors Global Equity Team. The Fund is designed to service Old Mutual Global Investors’ UK and offshore client base and targets a total return through a combination of income and capital growth, with a monthly income targeted at 30% above that of the benchmark (MSCI All Countries World Index).
OMGI has also confirmed that its$60.75m (£38.8m) onshore Old Mutual Global Equity Income Fund will be closing on 15 September 2015, subject to regulatory approval. This fund was sub-advised by O’Shaughnessy Asset Management.
In a press release, OMGI informs that this onshore fund has seen a gradual decline in assets over the last few years. Given the small size of this fund and the associated operating costs, they believe that it is no longer in the best interest of clients to continue running this fund and that investors will be best served by having their proceeds returned in order for them to reinvest in other products.
Warren Tonkinson, Managing Director at Old Mutual Global Investors, comments: “We’ve experienced a high level of client demand for an offshore global equity income fund managed by Ian Heslop and his team. We are delighted that this fund is now live and will become a core part of our global fund range, available to both UK and offshore investors.
“We believe our decision to close the onshore Old Mutual Global Equity Income Fund is in the best interest of investors. Clients have been informed of our decision to close this fund and of the options available to them. We would like to thank O’Shaughnessy for their management of the fund.”
Photo: Mark Moz
. Citi Sales Alternative Investor Services Business for $425 million
Citigroup announced that it has reached a definitive agreement to sell itsAlternative Investor Services business, which comprises Hedge Fund Services and Private Equity Fund Services, to SS&C Technologies Holdings for $425 million.
The entire operations of this business, including approximately 1,500 employees, will be transferred to SS&C upon closing.
This transaction is a positive outcome for Alternative Investor Services, including its employees and clients. As a result of this deal, Alternative Investor Services will become part of a known leader in financial services with a demonstrated track record of delivering high-quality products and services to its clients.
The deal is expected to close in the first quarter of 2016, and is subject to regulatory approvals and other customary closing conditions.
