Photo: Giuseppe Milo. Man GLG Launches European Mid-Cap Strategy for Moni Sternbach
Man GLG, the discretionary investment management business of Man Group, is pleased to announce the launch of a new UCITS compliant fund, Man GLG European Mid-Cap Equity Alternative fund.
The Fund will be domiciled in Ireland and managed by GLG Partners LP. The portfolio manager is Moni Sternbach, who joined Man GLG from Cheyne Capital in January 2015. It will seek to provide attractive risk-adjusted returns through both long and short investments primarily in European securities with a market capitalisation of €500m to €10bn.
Moni Sternbach, a mid-cap specialist, joined Man GLG after almost three years as lead manager of the Cheyne European Mid Cap Long/Short strategies. Prior to Cheyne, Sternbach was head of European smaller companies at Gartmore Investment Management, where he worked from 2002 to 2011.
The Fund will seek to deliver returns through stock selection and active portfolio management driven by meeting management teams and undertaking rigorous research. Research forms the bedrock of the investment process, and will leverage the expertise within the GLG business.
Man GLG’s co-CEO Teun Johnston said: “Moni is a very experienced portfolio manager who has been investing in this segment of the European market since 2002. We believe that his expertise, combined with our robust infrastructure, will create a compelling proposition at a time when the asset class has become more inefficient and the wide dispersion of returns has created opportunities for stock pickers.”
Moni Sternbach said: “The new strategy fits very well within the Man GLG investment framework and offers significant synergies with the European stock picking team and its sector specialists. We believe the European mid-cap equity market segment has become an increasingly compelling asset class for stock pickers due to poor and worsening sell-side analyst coverage, which provides the potential for us to generate attractive risk-adjusted returns for investors.”
When liquidity in a market dries up, it can contribute to financial disruptions such as the Flash Crash of 2010, when the Dow Jones dropped almost 1,000 points in a matter of minutes.
Traditional thinking has been that natural market forces create enough liquidity to keep markets moving, but an interesting tactic some European companies use caught the attention of Dr. Hendrik Bessembinder, an A. Blaine Huntsman Chaired Presidential Professor in the David Eccles School of Business Finance Department at the University of Utah.
In some European countries, companies will hire what’s called a Designated Market Maker to improve liquidity. Bessembinder detailed his findings in the paper he co-wrote, “Market Making Contracts, Firm Value, and the IPO Decision,” which has been accepted for publication in the Journal of Finance.
“We sat down to do some mathematical modeling of the economics of these markets, and found that indeed there is reason to think that competitive market forces don’t provide as much liquidity as the markets actually need and could benefit from,” Bessembinder said. “In other words, a contract where somebody is hired to improve liquidity can make sense and improve a company’s value by more than what the designated market makers need to be paid.”
Congress is working to improve liquidity through a pilot program that will increase the tick size of certain small stocks from a penny to a nickel to see if that will increase liquidity. The goal of the pilot program is to encourage IPOs.
“Our model and our study actually lead us to be skeptical that this will be an effective mechanism for enhancing IPOs. In fact, our model says that a designated market contract which is intended to decrease the bid-ask spread can enhance IPOs by improving liquidity and encouraging investors to pay more for shares in an IPO,” Bessembinder said. “The U.S. Securities and Exchange Commission is going to implement the pilot program where they widen the bid-ask spread. So, it will be of great interest to see if this in fact improves the liquidity of the stocks.”
Bessembinder thinks DMMs could work in U.S. stock markets, but FINRA Rule 5250 expressly prohibits the use of DMMs.
“We actually think that the situation would be improved if the FINRA rule would be repealed to allow firms to have designated market makers in order to improve liquidity,” Bessembinder said.
Uncertainty about the timing of a U.S. Federal Reserve rate hike continues to intensify. But, warns a leading global analyst at one of the world’s largest financial advisory organizations, investors should start preparing now for when the inevitable rise comes – and there are three key approaches to consider.
The warning from Tom Elliott, International Investment Strategist at deVere Group, follows Minneapolis Fed PresidentNarayana Kocherlakotaon Tuesday setting out his case for waiting until the second half of 2016 to start raising interest rates. This is contrary to the opinion of most Fed Policymakers, including the Fed Chair Janet Yellen, who believes that rates will need to start rising this year.
Mr Elliott explains: “Currently, the situation regarding when the Fed might move away from its zero rates policy of the last six years, is as clear as mud. However, when, finally, the Fed does start to raise interest rates the impact on capital markets could be severe. Therefore, investors who are, understandably, uncertain, should start preparing for this. I would advise investors to consider three steps.”
He continues: “First,find a multi-asset benchmark that you trust will deliver solid risk-adjusted returns throughout the business cycle. It maybe a 60 per cent global equity, 40 per cent global fixed income portfolio or a variation of that. Having such a benchmark should be a part of your long-term investment strategy.”
“Second,refuse to take active positions in what looks like a difficult investment environment. Hog the benchmark. Sitting on the fence is better than being caught on the wrong side of a central bank decision. Rebalance quarterly, forcing yourself to cash in winners and to buy losers. This discipline will protect you from rash decision making during periods of market volatility.
“Third, wait until the Fed has begun tightening monetary policy before returning to active bets.”
Mr Elliott adds: “Finally, if the need to take active positions is too strong to resist, I do think that Europe, excluding the UK, and Japan will continue to outperform. Europe, because of improved economic growth and the weak euro; and Japan because of rapidly improving corporate governance that is resulting in dividend and return on equity growth. It could be worth considering balancing this position with an underweight in U.S. large cap and emerging equities.”
Photo: Institution for Money, Technology and Financial inclusion. EM Growth to Bottom Out in Second Half, NN Investment Partners Says
After five years of growth adjustment, the risks within the emerging markets start to look more balanced, according to Maarten-Jan Bakkum, Senior Emerging Market Strategist at NN Investment Partners (former ING IM)
Global headwinds and obstacles to growth remain, but are not getting worse. Without an accident in China, emerging market growth should bottom in Q3 or Q4. China demand slowdown is structural and continues to put pressure on the emerging markets in terms of trade, but a correction in the housing market is slowing and monetary easing has started. US monetary policy normalisation continues to put pressure on EM capital flows, but ECB QE has refuelled the global search for yield. In this context, EM central banks see room to cut interest rates.
Maarten-Jan Bakkum, Senior Emerging Market Strategist at NN IP, said: “Rapid leverage growth has created macro imbalances and system vulnerabilities, pushing policy makers into action in some countries, including: Indonesia, South Africa and Brazil. Policymakers in Indonesia in particular, stood out. Reducing macro imbalances within the country with the central bank remaining relatively prudent and president Joko Widodo’s government removing fuel subsidies and thereby creating fiscal room for infrastructure investments.”
Also, South Africa has shown better growth momentum, strong earnings growth, improving terms of trade, and the government has shown more fiscal discipline.
Bakkum continues: “Other areas that are currently showing promise, include Mexico. Mexico is one of the few markets with a positive growth momentum. Its large exposure to the US and low sensitivity to China are key positive factors making this an overweight for us.”
ING IM believes that strong earnings momentum and solid capital inflows are the main reasons to like the Philippines at the moment. Reforms and more policy discipline continue to have a positive impact on growth prospects of India, where the lower oil price helps too. Also, better economic governance and lower political risk have helped Egypt’s growth to recover to pre-2011 levels.
Easier financial conditions can compensate temporarily for the lack of structural change but EM currencies remain vulnerable. More depreciation is likely to be needed to enforce the reforms that reduce macro imbalances and create engines of future growth.
Over 30 professional investors attended Aberdeen Asset Management’s presentation on Asian Equities in Miami. Aberdeen AM: "It is Becoming Important to Reconsider the Fact of Not Having any Exposure to Japanese Equities"
Over 30 professional investors attended Aberdeen Asset Management’s presentation on Asian Equities in Miami last month. Adrian Lim, CFA and senior investment manager for the management company, shared his views on the effect of US rates and the evolution of the US dollar over Asian equity assets, as well as the impact of falling oil prices and the effectiveness of reforms. During the event, the management company submitted its equity strategies for the Asia Pacific region and Japan. Following the presentation, attendees enjoyed a cocktail on the terrace of one of the most emblematic buildings in Downtown Miami, the heart of its financial center.
China vs Hong Kong
Aberdeen AM is known as a stock picking management company. Therefore, Lim maintains that “quality is the first thing we look for when selecting an asset.” One example that epitomizes this philosophy is that Aberdeen’s Asia Pacific strategy portfolio has a debt to equity ratio that is half of that recorded by its benchmark. As well as focusing on asset quality, Aberdeen looks for companies with attractive valuations to create concentrated portfolios (the Asia Pacific strategy portfolio currently has about 55 assets), in which stability is the main priority. “Of the Top 10 holdings on our portfolio, six have been in the portfolio for over 10 years,” Lim points out.
In this strategy, which does not include Japan, Aberdeen now has an overall weight in China and Hong Kong similar to its benchmark. Separately, however, exposure to Hong Kong is higher than the index, while exposure to continental China is lower. Lim again stressed the importance of quality when selecting stocks: “Chinese companies are generally of lower quality, Chinese rule of law is less strict, and there has been cheap access to capital in China for many years, and therefore companies have not had to focus too much on getting a good return on their business; they have become very large, but really not too profitable.”
Citing a Korean cellular phone manufacturer as an example, with very strong exposure in the cell phone market in China, Lim also adds that “it is not necessary to invest in shares listed in China to access Chinese domestic consumption.”
A Look at the Japanese Market
When talking about Japan, Lim says that “talking to an investor who has spent 20 years investing in Japan, and who, fed up with not profiting from their investment, most likely left the market at the beginning of this last rally, is not the same as talking to someone who has been investing in Japan only during the last three years, and who, therefore, has had a much better experience.”
Can we believe that it will be different this time? According to Lim, Shinzo Abe has been in power longer than most recent governments. “His commitment to introduce inflation in the economy is tremendous, and even if its not very popular with the Japanese population, he has managed to get reelected and to push a number of reforms, although he still has a long way to go.” In any case, as pointed out by the Senior Investment Manager, “it is becoming important to reconsider the fact of not having any exposure to Japanese equities.”
Even though the environment in Japan is currently more positive, we mustn’t forget that we are talking about an economy whose growth remains weak, and so “we choose exporter stocks such large tobacco or automotive manufacturers, whose behavior does not depend on domestic consumption, or companies selling components and materials to Japanese companies whose final market is an exporter, so that ultimately the demand comes from outside,” says Lim.
In terms of valuation, Lim points out that we have to take into consideration that we are talking about a developed market with high multiples, although not as high as those in Europe or the US.
India, an Emerging Market in its Purest Form
When talking about India, Lim explains that it is the purest example of an emerging market in the region. “It’s a challenging market, but at the same time, very subjective, with much ‘noise’ for the investor,” he says. According to Lim, the Modi government has been the best for the country in recent years, but you cannot ignore the fact that the Indian economy is slowing down, “and Modi cannot do much to prevent it; we cannot expect Modi to work an economic miracle for the whole of India such as the one he orchestrated in the state of Gujarat, of which he was governor before being elected as Prime Minister.” In such a market, it is particularly important to be a good stock picker: “If in Japan we are more inclined towards exporting assets, stock selection in India is purely directed towards the domestic consumer market,” says Lim.
CC-BY-SA-2.0, FlickrFoto: Moyan Brenn. Amanda Augustine se incorpora al equipo de análisis de BBVA Compass
Amanda Augustine has joined the BBVA Compass economic research team, led by the chief economist Nathaniel Karp. The bank’s six-member research team analyzes the U.S.economy and Federal Reserve monetary policy. The economic research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates.
Before joining the bank, Augustine worked as a project manager at consulting firm American World Services Corp. in Washington, D.C., focusing on the health care sector.
“We are pleased to have Amanda join us as her expertise on health care will add depth on a topic that’s so important to our economy,” said Nathaniel Karp, chief economist for BBVA Compass.
Augustine earned her MBA from the IESE Business School in Barcelona, Spain, and a bachelor’s degree in business administration and Spanish from American University in Washington, D.C.
Photo: Bert Kaufmann. Global ETP Flows of $36.1bn in March Ensured that 2015 Began With the Best Opening Quarter on Record
Global ETFs gathered $36.1bn in March to lift Q1 flows to $97.2bn, nearly triple the total from Q1 2014. The figures came largely from investor demand for non- U.S. equities, whereas the all-time high of $138.0bn from Q4 2014 was concentrated in U.S. equities. This demonstrates the ability of the ETP industry to respond quickly to changing market conditions while maintaining strong growth. Only one other quarter outside of the past two has ever topped asset gathering of $100bn, showed BlackRock ETP Research.
March was driven by accelerating non-U.S. developed markets equity flows of $32.6bn, nearly as much as the prior two months combined. Year-to-date flows of $71.0bn have almost reached the full-year total from 2014, spurred on by attractive valuations in Europe and Japan relative to the U.S. The divergence of increasingly accommodative ECB and Bank of Japan monetary policy with that of the Fed has also been a key factor.
Flows for Europe and Japan, as well as broad developed markets (EAFE), have benefitted significantly from currency-hedged equity funds, which had a record month gathering $13.4bn. This trend is expected to persist. The consensus is the U.S. dollar is in the midst of a strengthening cycle and these cycles have historically lasted for six to seven years.
Europe equity established a new monthly high of $14.8bn. While pan-European equities led with $13.4bn, German equities added $1.4bn and have already captured $4.8bn year-to-date.
“Investors recognized attractive valuations in European equities following the announcement of the European Central Bank’s ambitious quantitative easing program, adding $36.5bn into pan-European ETFs in Q1. European-listed ETFs are close to reaching $500bn in assets, as investors from Europe, Asia and Latin America added $34.2bn of new flows in Q1, the best quarter ever for the European ETF industry”, said Amy Belew, global head of ETP research at BlackRock.
Japan equity brought in $8.3bn, the second highest monthly total ever. Flows were diversified across Japan-, U.S.- and Europe-listed funds. Japanese stocks retain upside even as the Nikkei 225 index approaches its highest level in 15 years. Corporate governance reforms have shown progress and pensions have announced further reallocation of assets to equities.
U.S. equity flows improved by $6.2bn in March, helped by the Fed indicating after its March meeting that though rates may soon rise, the pace could be slower than previously expected. It was the second consecutive month of inflows, but year-to-date redemptions are still ($8.4bn) due to the impact of large cap weakness during January.
Emerging markets equity outflows resumed, hitting ($7.3bn) after stabilizing briefly in February. Broad EM equity and China equity redemptions overwhelmed a thirteenth consecutive month of India equity inflows.
Fixed income flows stayed ahead of record pace for the year, but slowed to $4.3bn in March. Appetite for European fixed income remained healthy as the ECB began the bond buying program announced in January. Flows totaled $3.6bn across sovereign as well as high yield and investment grade corporate bonds.
U.S. fixed income, however, had modest outflows of ($0.2bn). Investment grade corporate and broad U.S. funds each gathered $1.1bn, but high yield corporate momentum from recent months stalled and U.S. Treasuries experienced outflows of ($3.2bn).
Photo: Jeff Belmonte. Worldwide Investment Fund Assets Reach All-Time High at EUR 28 Trillion in Q4
The European Fund and Asset Management Association (EFAMA), has released its latest international statistical release containing the worldwide investment fund industry results for the fourth quarter of 2014 and the whole year 2014.
Investment fund assets worldwide stood at a new all-time high of EUR 28.29 trillion at end 2014, reflecting growth of 3.9 percent during the fourth quarter and 18.9 percent since end 2013. In U.S. dollar terms, worldwide investment fund assets totalled US$ 34.35 trillion at end 2014
Worldwide net cash inflows increased in the fourth quarter to EUR 335 billion, up from EUR 290 billion in the third quarter, thanks to strong net inflows to worldwide money market funds.
Long-term funds (all funds excluding money market funds) recorded net inflows of EUR 220 billion during the fourth quarter, slightly down from the EUR 223 billion registered in the previous quarter.
Equity funds attracted net inflows of EUR 44 billion, up from EUR 24 billion in the third quarter.
Bond funds posted reduced net inflows of EUR 63 billion, down from EUR 79 billion in the previous quarter.
Balanced funds also registered reduced net sales of EUR 52 billion, down from EUR 72 billion in the third quarter.
Coincidently, long-term funds registered net inflows of EUR 68 billion in both the United States and Europe during the fourth quarter.
Money market funds registered net inflows of EUR 115 billion during the fourth quarter, compared to EUR 67 billion in the third quarter of 2014. This result is largely attributable to positive net sales recorded in the United States of EUR 98 billion, whereas Europe registered net outflows during the quarter of EUR 10 billion.
Overall in 2014, worldwide investment funds attracted net sales of EUR 1,169 billion, up from EUR 848 billion in 2013. Worldwide long-term funds registered net inflows of EUR 1,015 billion in 2014, as all categories of funds registered net inflows during the year. The United States recorded net inflows into long-term funds of EUR 302 billion, with Europe registering net inflows of EUR 471 billion.
At the end of 2014, assets of equity funds represented 40 percent and bond funds represented 22 percent of all investment fund assets worldwide. Of the remaining assets money market funds represented 13 percent and the asset share of balanced/mixed funds was 12 percent.
The market share of the ten largest countries/regions in the world market were the United States (51.2%), Europe (28.2%), Australia (4.7%), Brazil (4.4%), Canada (3.7%), Japan (3.1%), China (2.1%), Rep. of Korea (1.0%), South Africa (0.5%) and India (0.4%).
Carlos Fuenmayor - Foto cedida. BancTrust abre mesa de trading en Reino Unido
BancTrust has annunced that its London-based subsidiary, BancTrust Securities (Europe), has received a Variation of Permissions notice from the Financial Conduct Authority to enable it to commence secondary trading. The firm will now be dealing as principal for Asset Managers and Financial Institutions mainly based in Europe and the Middle East interested in investing in Emerging Markets Fixed Income.
Carlos Fuenmayor, CEO of BancTrust & Co., stated: “I’m honored to say that our London office has now been granted permission to operate its trading desk and offer true market color as well as execution. Our specialists in Emerging Markets provide unequaled coverage as well as exceptional investment opportunities.”
RobecoSAM, the investment specialist focused exclusively on Sustainability Investing (SI), announced the launch of its impact investing offering. RobecoSAM’s Environmental Impact Monitoring tool is the first of a broad suite of impact investing solutions to be released by the Company. The platform will leverage RobecoSAM’s expertise in SI including its proprietary corporate sustainability database, and will cater to institutional investors seeking both societal and financial returns on their investments.
RobecoSAM’s Environmental Impact Monitoring tool enables investors to quantify, communicate and optimize the environmental impacts of their listed equity and corporate bond portfolios. It measures the impact of investors’ portfolios on a series of tangible environmental indicators and indicates the magnitude of their portfolios’ environmental impact per invested dollar. The key quantitative indicators screened for are: greenhouse gas (GHG) emissions, energy consumption, water use and waste generation. The data can subsequently be used to enable investors to make better informed decisions on how to optimize their portfolios in order to maximize the positive or limit the negative environmental impacts of their investments.
Michael Baldinger, CEO, RobecoSAM: “The launch of our impact investing platform reflects RobecoSAM’s commitment to SI and is a response to investors’ increasing interest in investing with social and environmental improvement in mind. With 20 years’ experience in sustainability investing, no one is better positioned to bring a comprehensive impact investing platform to the market than RobecoSAM.”
Daniel Wild, Head of SI Research & Development, RobecoSAM: “Our Environmental Impact Monitoring tool draws on RobecoSAM’s deep sustainability investing expertise and unique corporate sustainability database to measure the environmental impact per invested dollar of investors’ portfolios. We use this information to optimize investors’ listed equity and corporate bond portfolios and achieve positive environmental impact without compromising financial returns.”
Environmental Impact Monitoring Leverages RobecoSAM’s SI Expertise
The Environmental Impact Monitoring tool uses the data collected from RobecoSAM’s Corporate Sustainability Assessment (CSA) and long-standing experience in analyzing financially relevant environmental data. Based on its CSA, an annual ESG analysis of more than 2,900 listed companies, RobecoSAM has compiled one of the world’s most comprehensive sustainability databases. RobecoSAM’s proprietary research and sustainability insight, gained through its direct contact with companies, serve as the foundation for measuring and monitoring the impacts of listed equity and corporate bond portfolios.
