The U.S. Department of Labor Will Require Retirement Advisors to Put Their Clients’ Best Interests Before Their Own Profits

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The U.S. Department of Labor Will Require Retirement Advisors to Put Their Clients' Best Interests Before Their Own Profits
CC-BY-SA-2.0, FlickrFoto: smlp.co.uk . El Departamento de Trabajo de Estados Unidos obligará a los asesores a primar los intereses de sus clientes

The U.S. Department of Labor has released a proposed rule that will protect 401(k) and IRA investors by mitigating the effect of conflicts of interest in the retirement investment marketplace. A White House Council of Economic Advisors analysis found that these conflicts of interest result in annual losses of about 1 percentage point for affected investors — or about $17 billion per year in total.

Retirement advisors–including brokers, registered investment advisors (RIAs), bankers, insurance agents and lawyers among others- will be required to put their clients’ best interests before their own profits. Those who wish to receive payments from companies selling products they recommend and forms of compensation that create conflicts of interest will need to rely on one of several proposed prohibited transaction exemptions.

“This boils down to a very simple concept: if someone is paid to give you retirement investment advice, that person should be working in your best interest,” said Secretary of Labor Thomas E. Perez. “As commonsense as this may be, laws to protect consumers and ensure that financial advisors are giving the best advice in a complex market have not kept pace. Our proposed rule would change that. Under the proposed rule, retirement advisors can be paid in various ways, as long as they are willing to put their customers’ best interest first.”

The proposal would expand the number of persons who are subject to fiduciary best interest standards when they provide retirement investment advice and would require enter into a contract with their customers in which they commit to fundamental standards of impartial conduct. These include giving advice that is in the customer’s best interest and making truthful statements about investments and their compensation.

The landscape has dramatically changed in the last 40 years. The share of working Americans covered by traditional pension plans— which offer a guaranteed income stream in retirement— has fallen sharply. Today, most workers participating in a retirement plan at work are covered by a defined contribution plan, such as a 401(k). Importantly, the income available in retirement from a defined contribution plan depends on both the amount initially saved and the return on those savings. Collectively, more than 40 million American families have savings of more than $7 trillion in Individual Retirement Accounts (IRAs). More than 75 million families have an employer-based retirement plan; own an IRA, or both.

Russ Oxley Arrives at Old Mutual Global Investors

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Old Mutual Global Investors crea uno de los equipos de renta fija más potentes de la industria con la incorporación de Russ Oxley
CC-BY-SA-2.0, FlickrRuss Oxley, Head of Fixed Income Absolute Return. Russ Oxley Arrives at Old Mutual Global Investors

Old Mutual Global Investors is delighted to announce that Russ Oxley has joined the company as Head of Fixed Income Absolute Return.

Reporting to Julian Ide, CEO, Russ will manage a team which consists of Huw Davies, Joshua Heming, Adam Purzitsky, Paul Shanta and Jin Wong. A core focus will be preparing for the autumn 2015 launch and future management of a new suite of Absolute Return Government Bond products (subject to regulatory approval). Old Mutual Global Investors will also open an office in Edinburgh to continue the team’s existing dual location arrangement.

Russ Oxley comments: “I am delighted to join a business that offers an opportunity to deliver innovative and creative products. I am also excited to re-connect with my team. Together, we have an exciting future ahead of us as we execute our ambitious plans and launch a series of products that we believe will meet the needs of our global client base in absolute return and Liability Driven Investment (LDI).”

The Fixed Income Absolute Return team joins Old Mutual Global Investors from Standard Life Investment, having previously worked for Ignis Asset Management. They are highly regarded as being one of the leading Absolute Return Teams in the UK investment management industry.

Old Mutual Global Investors believes that the team’s proven capabilities greatly complement those currently available within its existing nine-strong Fixed Income team. By adding the team’s expertise across interest rates and relative/absolute return investing to the existing highly regarded team, Old Mutual Global Investors has created one of the asset management industry’s most powerful fixed income operations.

Julian Ide, CEO of Old Mutual Global Investors, comments: “This is a very exciting development for Old Mutual Global Investors. Russ and his team are an excellent strategic and cultural fit and an exciting and dynamic addition to Old Mutual Global Investors. The team has generated strong alpha, which has resulted in strong asset growth. In addition to the over £4bn assets in the Ignis Absolute Return Government Bond fund*, the team managed substantial assets in a combination of LDI and other rates mandates.

“The synergies of both of our fixed income teams working together will be powerful. The enhanced Fixed Income team structure now provides opportunities for us to harness the wealth of experience that currently exists in this combined team.  This appointment also signifies ambitious plans to expand our share of the absolute return market and develop LDI solutions for our client base.”

Old Mutual Global Investors remains focused on developing an investment-centric business model centred upon delivering positive outcomes for its global client base. The business now has strength and depth across all of its investment teams and a global platform to support customers in key parts of the world.

BancTrust and the Argentinian Broker Global Trading Desk Announce a Joint Venture

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BancTrust and the Argentinian Broker Global Trading Desk Announce a Joint Venture
CC-BY-SA-2.0, FlickrFoto: Roger Schultz . BancTrust y el broker argentino Global Trading Desk anuncian una joint venture

BancTrust & Co. and the Argentinean Global Trading Desk, S.A. (GTD) have signed a strategic Joint Venture to expand the investment bank’s local presence throughout the Americas.

Among the Joint Venture’s highlights is its market Research Products built specifically for the region, as well as its Fixed Income trading platform, which is the “heart” of the services offered to local banks and asset managers.

“I’m honored to say that GTD Argentina has entered into an agreement with BancTrust & Co. with the purpose of better serving clients in the region through our offices in Buenos Aires,” states Alejandro Bueno, CEO of GTD Argentina.
 
Carlos Fuenmayor -Founder, Chairman & CEO of BancTrust & Co. Holdings- affirms “I’m excited about this new partnership with Mr. Bueno and his team at GTD that will allow us to offer local expertise to our investor base interested in the Southern Cone, while continuing to build upon our global reach.” 

BancTrust & Co. is a boutique investment banking group dedicated to the Emerging Markets specializing in Latin America. The firm offers Capital Markets, Sales & Trading, Market Strategy and Asset Management products and services through various entities located across The Americas and Europe. As a group of companies, the firm facilitates global market transactions to a diverse client base that includes corporate treasuries, financial institutions, asset managers, and governments and its entities.

Global Trading Desk offers voice-electronic brokerage for financial products and commodities, for both OTC markets and derivatives and real time data over the products negotiated in wholesale. The firm combines experience and technology to generate simple and efficient negotiation processes that help reduce the risks associated to them.

BNY Mellon Investment Boutique Sees Ways to Develop More Environmentally-Friendly Portfolios

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Investors can help reduce their exposure to heavy emitters of greenhouse gasses and fulfil their fiduciary objectives by adapting a green beta investment approach, according to a white paper from Mellon Capital Management.

“Generating a return on capital that meets a benchmark set by institutional investors, while reducing the carbon intensity in a portfolio requires a more nuanced approach than simply eliminating or underweighting business sectors that are heavy carbon emitters,” said Karen Q. Wong, managing director and head of equity portfolio management at Mellon Capital and co-author of the report.

The Mellon Capital paper, Green Beta: Carbon Efficient Investing, notes that investors can take steps to make their portfolios more environmentally friendly even if they retain their exposure to the carbon-intensive sectors of the stock markets. The key, according to Mellon Capital, is to underweight the companies within those sectors that have the highest carbon intensity.

Carbon intensity measures the amount of carbon emitted per unit of revenue. Utilities and energy and materials companies account for more than 75 percent of the overall carbon emissions intensity of the Russell 3000 index, yet just over 16 percent of the  index composition, the report said.

“One potential pitfall in pursuit of reducing carbon emissions exposure is to significantly underweight these three sectors, which can introduce unintended sector tilts,” said Wong. “We think it’s better to underweight companies within these sectors that have higher carbon intensity. We would maintain exposure to the sectors as a whole by overweighting companies within the same sectors that are taking a more proactive approach to reducing their carbon emissions.”

The report notes that a truly robust strategy goes beyond the sector level and neutralizes exposures at the industry level. This is particularly important when considering a sector as diverse as consumer discretionary, where an unintended bias can be created between the auto (heavier emissions) and apparel industries (lower emissions), according to the report. Many high carbon intensity companies tend to have lower volatility, larger market capitalizations, relatively high yields and tend to be oriented toward value instead of growth, according to Mellon Capital.

“It’s important to compensate for these exposures if such companies are underweighted to achieve lower carbon exposure,” said William Cazalet, managing director and global investment strategist at Mellon Capital and co-author of the report. “Also, portfolio managers must guard against introducing different types of risks into the management of the portfolio that could occur by lowering exposure to companies with these characteristics.”

BNY Mellon offers a wide range of products and services that help investors meet their return/risk goals, while considering the environmental, social and governance impact of their investments.

Santander AM Reaches €12.4 Billion in Assets in its Range of Profiled Funds

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La gama de fondos perfilados de Santander Asset Management duplica activos superando los 12.000 millones de euros
Foto: Petar Milošević (Own work). Santander AM Reaches €12.4 Billion in Assets in its Range of Profiled Funds

Santander Asset Management (SAM), a global company dedicated to managing assets internationally and 50% owned by Banco Santander and 50% by Warburg Pincus and General Atlantic, has attracted a total of 6.169 billion euros to its range of profiled funds, which are aimed at customers in the Banco Santander Select and private banking segments, representing 99% growth, in the last twelve months. As such, assets managed in these products were around 12.388 billion euros by the end of February while the number of Bank customers holding exceeded 220,000.

Profiled funds include Select, which combines the bulk of assets in this range of funds, along with private banking profiled funds in Spain (Santander PB Portfolio), Portugal (Santander Private), Chile (Santander Private Banking) and Mexico (Santander Elite). The Select range of funds, which has already been exported to eight countries, is a global investment solution aimed at adapting to both different market environments and each local customer’s risk profile. Select profiled funds invest in a very broad universe of assets, selected through  suitable asset allocation, providing access to the best domestic and international asset managers and allowing for dynamic investment management and  rapid adjustment of positions based on each scenario.

The Spanish market has seen the greatest growth in this period, after increasing assets under management of 4.355 billion euros and reaching 7.213 billion euros, representing a 152% increase compared to March 2014. The Santander Select Prudent fund is notable, with assets reaching 3.449 billion euros, as is the Santander Select Moderate fund with 2.546billion euros. In Mexico, the Santander Asset Management profiled funds together total 1.073 million euros (the Santander Select Conservative fund has been the most popular offering, making up 350 million euros) after growing 92%, while 459 million euros have been reached in Chile (84% growth) with Santander Select Prudent being the largest at 226 million euros. Germany has recorded a 558 million euro volume (+80%) and Brazil 82 million euros (+91%). Assets are around 2.262 billion euros in the United Kingdom.

The Select fund range was launched in Spain at the end of 2010. The range was launched in Chile and Mexico in 2011 and 2012 respectively while they have been sold in Brazil and Germany since 2013. The most recent launches took place in 2014 in Portugal and Poland, with great commercial success in both countries with assets of 537 million euros and 206 million euros, respectively.

The three risk profiles on which the Select range relies (Prudent, Moderate and Determined/Dynamic) each investor the profile choice that best suits their needs and risk tolerance levels. The Prudent fund, aimed at more conservative investors, represents 42% of the total Select range assets. The Moderate fund, which have a greater weight in equity, represents 39%  while the Determined/Dynamic fund, which has a more risk tolerant profile, represents 19%.

 

OppenheimerFunds Completes Private Client, Trust & Family Office Team

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OppenheimerFunds has fully staffed its team covering private clients, bank trusts and family offices, reinforcing the Company’s strategic drive to expand its core retail base and increase its capabilities in the ultra-high-net-worth market.

Most recently, OppenheimerFunds hired Nancy Bong as Strategic Account Manager on the team. She and fellow Strategic Account Manager Josean Fernandez have primary responsibility for managing the Company’s relationships with the private banks, national trust companies and regional and super-regional banks that make up OppenheimerFunds’ Strategic Account list.

“Nancy’s addition enhances our strong, experienced team that provides robust service and value for this critical client sector,” said Ned Dane, Head of Private Client, Trust & Family Office.  

In addition to Nancy and Josean, there are five Sales Directors who cover trusts, family offices and the local offices of several Strategic Account clients: Joe Stellato (Northeast), Tom Winnick (Mid-Atlantic), Justin Goldstein (Southeast), Chris Saul (Central) and Matt Brown (West).

Nancy joins OppenheimerFunds from Neuberger Berman, where she managed relationships with clients in the Private Bank and Trust channel. Previously, she worked at Lehman Brothers and Goldman Sachs. Nancy received her undergraduate degree from Queen’s University School of Business in Canada and her MBA from Harvard Business School. She is a CFA® charterholder and has her CAIA designation. Nancy is based in New York.

“Under Ned’s leadership, OppenheimerFunds is well positioned as a trusted, consultative advisor, aligned to meet the evolving needs of this essential client group,” said John McDonough, Head of Distribution.

Wells Fargo and Blackstone Sign a Mega Deal to Acquire a Real Estate Portfolio of $23 Billion From GE Capital

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Wells Fargo and Blackstone Sign a Mega Deal to Acquire a Real Estate Portfolio of $23 Billion From GE Capital
CC-BY-SA-2.0, FlickrFoto: Tony Hisgett. Wells Fargo y Blackstone firman un mega acuerdo para adquirir la cartera inmobiliaria de GE Capital por 23.000 millones de dólares

Blackstone and Wells Fargo announced that they had signed agreements to purchase most of the assets of GE Capital Real Estate in a transaction valued at approximately $23 billion.

The transaction breaks down as follows:

  • Wells Fargo has agreed to purchase performing first mortgage commercial real estate loans valued at $9.0 billion in the United States, UK and Canada.
  • Blackstone’s latest flagship global real estate fund, BREP VIII, has agreed to purchase the US equity assets for $3.3 billion. These assets are primarily office properties in Southern California, Seattle and Chicago.
  • Blackstone’s European real estate fund, BREP Europe IV, has agreed to purchase the European equity real estate assets, for €1.9 billion. These consist of office, logistics and retail assets, largely in the UK, France and Spain. The logistics assets will be integrated into Blackstone’s European logistics platform, Logicor, and the retail assets into its European retail platform, Multi.
  • BREDS, Blackstone’s real estate debt fund, has agreed to purchase performing first mortgage loans in Mexico and Australia for $4.2 billion.
  • BXMT, Blackstone’s publicly traded commercial mortgage REIT, has agreed to purchase a $4.6 billion portfolio of first mortgage loans primarily in the US with Wells Fargo providing the financing.

Eastdil Secured/Wells Fargo Securities acted as advisor to Blackstone and Wells Fargo. Simpson Thacher & Bartlett LLP acted as legal counsel to Blackstone and Dechert LLP acted as legal counsel to Wells Fargo.

GE Capital was advised by Kimberlite Group and BofA Merrill Lynch and represented by Hogan Lovells.

Mark Myers, Head of Commercial Real Estate for Wells Fargo, said, “This is an important transaction in the commercial real estate industry and Wells Fargo is pleased to be working with our colleagues at GE Capital and Blackstone. The portfolio of performing loans we’ve purchased is a strong addition to our commercial real estate platform in the United States, the United Kingdom and Canada, which are all active lending markets for us.”

Jon Gray, Global Head of Real Estate for Blackstone, said, “We are delighted to partner with GE on another major transaction and we thank them for their confidence in us. We also thank Wells Fargo for our longstanding relationship, and for their swift execution on this investment. This transaction clearly demonstrates the unique scale and reach of our real estate platform.”

These transactions are subject to normal regulatory and other approvals. The initial closings will take place in the second and third quarter of the year.

Do-It-Yourself Investment Culture Takes Steady Upward Path, Says Cerulli

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Do-It-Yourself Investment Culture Takes Steady Upward Path, Says Cerulli
CC-BY-SA-2.0, FlickrFoto: Dennis Skley . La cultura del do-it-yourself gana posiciones en la distribución de fondos, según Cerulli

European distribution is entering a new era, but the pace of change differs considerably from one market to the next. In the United Kingdom the low-margin business of fund distribution is being standardized, innovative digital propositions are flourishing, and layers of distribution are being removed.

According to Cerulli’s European Distribution Dynamics 2015 report, more than 82% of the international asset managers expect the marketshare of direct-to-consumer and D2C platform distribution in the United Kingdom to grow over the next five years. 54% of them think that it will grow significantly.

But they seemed to be also optimistic about the outlook of these channels in the rest of the continent. Roughly half of asset managers think their marketshare will grow in Germany, France, Italy, Spain, and Sweden. The rest expect theirs to stay roughly the same and only a tiny minority counts on its fall. Managers were less bullish about Switzerland, though. Only one-third of those surveyed anticipated that marketshare will “grow somewhat.”

Angelos Gousios, associate director with Cerulli in London, and one of the main authors of European Distribution Dynamics 2015: Preparing for a New Era said, “Managers can benefit from the digital revolution in various ways: by renovating their proprietary D2C distribution facilities, by becoming a key partner of an ‘online’ distributor or taking a financial stake in one, or finally go it alone and try selling their funds directly to the general public themselves.”

Barbara Wall, Europe research director at Cerulli added: “There’s a global trend toward robo-advice that should not go unnoticed. It started in the United States, with companies like Wealthfront gaining traction and it is spreading in Europe –Nutmeg in the United Kingdom and MoneyFarm in Italy– and also in Asia, with 8 Securities in Hong Kong.”

Afore Banamex Funds Two BlackRock Mandates for Global and European Equities

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Afore Banamex fondea dos mandatos con BlackRock en renta variable global y europea
Photo: Manuel. Afore Banamex Funds Two BlackRock Mandates for Global and European Equities

BlackRock has received an estimated almost US$500 mn from Afore Banamex to execute the global and European equities mandate granted in October 2013.

Thereby, the North American Fund Manager becomes part of the select club of foreign asset managementc firms to receive funds from this Afore, which is the only one which has funded its mandates since the “Comisión Nacional del Sistema de Ahorro para el Retiro” (CONSAR), a national commission for the retirement savings system, allowed these transactions.

Afore Banamex said in a statement that of the four mandates awarded, one is for US$220 mn in global equity granted to Blackrock (Global), and the other three totaling almost US$600 mn in European equity were granted to BNP Paribas, Franklin Templeton, and Blackrock in Europe, respectively.

“Through this strategy, workers affiliated to Afore Banamex will be able to maximize their returns. These four mandates bring to seven the total number of mandates which have already been funded,” said Grupo Financiero Banamex’ Retirement Funds Administrator.

Afore SURA and Afore Banorte, two other major pension fund managers in the country, have granted mandates, BlackRock has mandates from both, but have not as yet funded any of them.

“We are thrilled to confirm that we have funded two mandates for Afore Banamex, which will promote the diversification of their investment strategy. Through the mandates, Afore Banamex hired BlackRock in order to offer its clients access to global and European equities’ investment markets,” said Samantha Ricciardi, CEO of BlackRock Mexico.

“These are the first two investment mandates which we fund in the Mexican market, and we believe that the valuable experience we have established throughout this process, coupled with the dedicated local team, and our commitment to bring to Mexico a local supply of global investment resources, is essential in order to continue offering Afores the best active investment solutions,” continues Ricciardi. “ These factors will contribute to the funding process for other mandates for which we  have been selected as managers and which are in the pipeline, positioning ourselves as the leading international asset manager in the active investment sector in Mexico “

The management company, strongly committed to the Mexican institutional market, reinforced its team about a year ago with the appointment of Roque Calleja as the new Head responsible for developing the list of Afore mandates. These institutions currently manage a total of US$200 bn and, so far, have been awarded about US$5.5 bn in mandates. Since it is expected that up to 10% of its assets shall be granted in mandates, the potential for management companies is very high. On the other hand, one would expect that, given that there is a real breakthrough in terms of mandates and funding, Afores will shortly begin to consider other types of assets, such as commodities, for example, as so far they have opted for simple assets (global, European, and American equities).

CONSAR authorized Afore Banamex to carry out a transaction through investment mandates for the first time in SAR’s history in August 2013. The mandate was granted to Schroeders, and although it was for US$200 mn initially, it was ultimately extended to US$400 mn. Schroeders also funded its second mandate, amounting to US$470 mn for European equities, in April 2014. In September 2014 Pioneer Investments received funding of $ 400 million for European equities.

There are further transactions pending, as in January this year Afore Banamex reported that it had awarded a new international investment mandate for an amount between US$500-600 mn in separate accounts to four international management companies: Wellington Management, BlackRock, Pioneer Investments, and Nomura Asset Management.

 

Pemex and First Reserve Announce Substantial US$1 Billion Cooperation Agreement

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Pemex and First Reserve Announce Substantial US$1 Billion Cooperation Agreement
Foto: Thomas Rousing . Pemex y First Reserve firman un memorándum de colaboración de 1.000 millones de dólares

Petroleos Mexicanos (“Pemex”) and First Reserve, the largest global private equity and infrastructure investment firm exclusively focused on energy, announced a US$1 billion agreement to mutually invest in energy infrastructure for Mexico. 

The two organizations recently announced the first of such investments – the Los Ramones pipelines – which are expected to consist of 744 kilometers of natural gas pipelines, creating an essential energy connection for Mexico.  Construction of the projects has already begun, with full commercial operations expected in mid-2016.  Additional projects the two companies are pursuing include other large-scale essential infrastructure opportunities across the energy value chain.

The joint venture represents a significant milestone for both parties towards continuing to invest in energy infrastructure projects in Mexico and a statement of foreign confidence in the Mexican energy industry.  With this landmark partnership established, Pemex and First Reserve plan to invest capital in energy infrastructure projects throughout Mexico, combining the financing, structuring and industrial and operational experience needed to bring these critical projects to fruition.  These investments are expected to enhance the country’s energy profile, lowering electricity prices and supporting Mexican industry.

William Macaulay, Chairman and Co-CEO of First Reserve, commented, “As global investors, First Reserve is excited to be expanding our existing portfolio in Mexico, where we have believed there to be attractive investment opportunities for some time.  Through formal collaboration with Pemex, we feel we have gained substantial access to a region with strong supportive macro dynamics alongside a motivated and accomplished partner.  First Reserve looks forward to mutually exploring multiple investment opportunities throughout the country’s vast energy value chain on behalf of our investors and the country of Mexico.”