Paris head-quartered La Française, a US$54 billion multi asset-class manager (as at 31/12/2014), and London-based Inflection Point Capital Management (IPCM), a specialist firm focused on responsible, long-term Strategically Aware Investment (SAI), will commit to the 7 point voluntary Japanese Financial Services Agency (FSA) Code as the latest international signatories.
During the week of February 9th, a series of events are planned by La Française and IPCM in Tokyo, to commemorate the important step they are taking in signing the Stewardship Code. Ahead of the pivotal United Nations climate change summit scheduled for Paris in late 2015, the threats and opportunities for investors of global warming along with the greening of real estate assets will be a focus of the La Française and IPCM week in Japan.
Dr. Matthew Kiernan, Founder and Chief Executive of IPCM, currently advising on a roughly US$1 billion La Française Inflection Point global equities portfolio, explained: “The Stewardship Code highlights remarkable vision by the Japanese Government to pro-actively promote good governance, along with world class environmental and social practices, as a route to greater Japanese corporate success in a highly competitive global economy. IPCM is delighted to become a signatory to the Code today.”
Xavier Lépine, Chairman of La Française, commented: “We view the Japanese investment market and the influence of Japanese investors and companies around the world as a crucial component of 21st Century global economic vibrancy, financial stability and balanced growth. It is a genuine honour for La Française to become a signatory to the FSA’s Stewardship Code.”
“Along with transparency and good governance there are a broad range of new challenges for global investors such as climate change, resource depletion, ecosystems destruction and human rights issues in corporate value chains, ” added Mr Lépine. “As signatories to the Code, La Française’s knowledge will deepen and that will help our work with Dr. Kiernan and the IPCM team to create new investment opportunities for our clients and partners. Both the new Japanese Code and the country’s diplomatic success in delivering the 1997 UN Kyoto Protocol on climate change mark Japan out as a forward-looking global force as we seek to balance economy and environment.” 2 Paul Clements-Hunt, the original United Nations backer of the 2006 launched UN Principles for Responsible Investment (www.unpri.org), now backed by institutions representing US$45 trillion in assets, commented: “La Française and IPCM signing Japan’s Stewardship Code sends the strongest of signals of just how important this development in Japan is for global investment markets. The positive revolution unleashed by the three arrows of Abenomics is attracting the attention of the most sophisticated and forward-looking investors worldwide.”
Clements-Hunt, who left the UN in 2012 after heading the United Nations Environment Programme Finance Initiative for 12 years, is an IPCM Principal and Director, and advises La Française on Special Global Projects.
The FSA Code, capturing a set of Principles detailing sound approaches to responsible investment, was developed by a Japanese Government convened Expert Committee during 2013-2014 and was launched in February 2014. The Code allows large Japanese investment institutions, such as pension funds and insurance companies, to highlight their commitment to include a range of governance, environmental and social considerations in their long-term investment policy-making and investment decision-making. An increasing number of international institutions are now signing the Code.
La Française and IPCM, whose joint venture asset management company La Francaise Inflection Point (LFIP) was created in December 2013, are also taking a thought leadership role in the fast evolving, multi-US$ billion carbon investment space ahead of the pivotal United Nations climate summit that will convene in Paris in late November 2015. La Française and IPCM recently hosted a climate-investment focused dinner at the World Economic Forum in Davos, Switzerland.
In Tokyo on February 10th La Française and IPCM’s most senior executives will present on “From Kyoto to Paris: A Blueprint for Climate Success”, referencing the 1997 UN Kyoto Protocol agreement that created global carbon markets. During the Tokyo presentation La Française and IPCM will also introduce their Carbon Zero investment approach and cutting edge work to engineer Green Real Estate Investment Trusts.
Photo: Allan Ajifo. Alternative Ucits Demand Reaches Record High
The alternative UCITS sector has grown strongly in 2014, increasing by 41%YoY to a total of €224.3bn, according to the latest Alceda UCITS review.
The study also highlighted that managed futures were the best performing alternative UCITS strategy, with the index gaining 14.3% while event driven strategies declined by -2.7%.
Overall, 2014 was a challenging year for active managers with the AH Global UCITS Index which encompasses a total of 498 funds, returning only 1.3% in 2014, compared to the almost 6% gains seen in 2013.
Michael Sanders, CEO and chairman of the Board at Alceda Fund Management S.A., said: “These results show the ongoing attractiveness and demand for alternative UCITS strategies globally with investors increasing allocations and managers, in particular in the US, choosing UCITS to target European investors.
“In addition, the recent implementation of the AIFM Directive has resulted in a greater focus on UCITS with managers looking to build sustainable distribution strategies for their products.”
Manuel Sánchez Castillo. Photo: Linkedin. Manuel Sanchez Castillo, New Head of International Wealth Management for Latin America at BBVA Compass in Miami
As reported to Funds Society by sources close to the financial institution, Manuel Sanchez Castillo has been appointed Head of International Wealth Management for the Miami office of BBVACompass as well as head of the Latin American Offshore Private Banking project of the firm, while continuing with his duties as director of UHNW for the entire international segment.
Sanchez Castillo is replacing José Ramón Rodriguez, who has been promoted to Director of International Wealth Management, based in Houston, a position which until recently was held by Hector Chacon.
The executive joined BBVA Compass in 2013 to head a new department targeted at UHNW clients in Latin America. With over 20 years experience in the industry, Sanchez Castillo, has worked at Banco Santander for most of his professional career, first from Spain, and for the past 12 years in Miami, first as head of Investment Management, and later as head of Investment Advisory. During his time in Madrid he worked at Santander Asset Management, and Banesto Fondos as head of International Equities.
In 2009, Sanchez Castillo was appointed Head of Santander’s Private Wealth division. In 2011 he moved to BNP Paribas Wealth Management in Miami as director of Key Clients Latam, until joining BBVA Compass in April of 2013. Sanchez Castillo has a degree in Economics from the Universidad Complutense de Madrid (UCM).
CC-BY-SA-2.0, FlickrPhoto: Eneas de Troya. The Golden Rules of Multi Asset Investing
Underlying momentum in global growth moved to its best pace in four years during the second half of last year. Moreover, labour market dynamics, income trends and falling oil prices and interest rates bode well for further strengthening in the global cycle. Nevertheless, markets have been edge in recent months and volatility has started to trend higher after the Summer of 2014. Doubts about central bank behaviour, rising deflation risks, the economic and geo-political fall-out from oil price declines and renewed fears over Grexit have clearly weighing on sentiment and influencing investor behaviour.
Investors need to weigh these fundamental and behavioural cross-currents. The complex ecology of markets and the continuous mutual influencing of all components in the system makes it very hard to assess what the future direction of the market will be. Therefore, it is important to follow some principles to navigate the portfolio returns through the rough twists and turns of financial markets. Those are the 6 golden rules in ING IM´s multi asset investment approach:
1. Understand where you are
The environment around us is complex, not automatically reverting to an unobserved “equilibrium” and constantly changing. So, study the functioning of the ecology you operate in, map the players around you, understand how they interact. Key in this is to know what you don’t know. Be aware of the difference between uncertainty and risk, note the obvious limitations of the efficient market hypothesis due to heterogeneity of market players, bounded rationality and occasional irrationality, limits to arbitrage and the persistence of market “anomalies” and observed falsification of normally distributed returns.
This awareness helps to focus on robustness, both in the area of data research and portfolio construction. Balance portfolio exposures well across your opportunity set and between “safe” and “return” asset classes. While doing this always keep in mind not to under-estimate risk and not to over-estimate diversification benefits. Also, always expect the unexpected.
2. Expand your horizon
Continue to learn about the world you operate in and develop innovative research to explore the environment in the best possible way. This means not only understanding the underlying fundamentals well, but also developing expertise on the emotions and behaviour of the investors around you.
To do this effectively some creativity is needed. Information need to be found and utilized in an innovative way. On top of that the resulting data analysis needs to be rigorous and consistent to eliminate behaviour pitfalls, while also allowing investor skill to add insight on the unquantifiable like regime shifts at Central Banks or (geo) political shocks.
It also translated into the breath of your investment universe and the effective use of the diversity in investment opportunities, both across asset classes and through time.
3. Adapt to change
Allow yourself, said ING IM team, to be active, but make sure accountability is always in place and incentives an open minded way of thinking about the economy or markets. Therefore, change your opinion once the facts change or the market ecology has adapted. And while risk premiums are shifting during the process, take risk when opportunities are high and hide when uncertainty is not well rewarded.
4. Team up
Do not think you can do all of the above alone. Listen well to your stakeholders (clients, regulators, team members, other partners), determine the right risk tolerance and aim for a prudent investment solution. Utilize all skill in your investment team and stimulate cooperation and learning amongst team members against a backdrop of clear goals, responsibility and accountability. Play as a team.
5. Iron discipline
Make sure consistency of your investment decision is safeguarded well. Work with a strong investment process that works in different investment climates. Use strategist and portfolio manager skill and experience to construct a resilient investment toolkit. Have challenging discussion on motivations to deviate from guidance from the toolkit. Aim to have skin-in-the-game for decision takers.
6. Simplicity
Against the backdrop of the complex system of markets, keep it as simple as possible without damaging effectiveness. Identify clearly what the sources of returns are and where your own strengths lie in exploiting them. Value consistency over complexity and monitor liquidity, transparency and costs at all times aware.
CC-BY-SA-2.0, FlickrPhoto: www.pactomundial.org. State Street Corporation Signs United Nations Global Compact
State Street Corporation announced it has become a signatory to the United Nations Global Compact (UNGC), the world’s largest corporate citizenship initiative. The UNGC is based on 10 universal principles in the areas of human rights, labor, the environment and anti-corruption, which closely align with State Street’s corporate responsibility focus.
The UNGC initiative was officially launched in 2000 to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. State Street joins more than 12,000 other signatories from companies, governments, labor, and civil society organizations in approximately 145 countries.
“Our membership with the UNGC furthers our focus on these issues and emphasizes the importance of them to our clients, employees, shareholders and the communities where we live and work. We are pleased to become an official member of the UNGC initiative, as its 10 universal principles in the areas of human rights, labor, the environment and anti-corruption closely align with our own values,” said Alison Quirk, executive vice president and chief human resources and citizenship officer at State Street. “Our membership with the UNGC furthers our focus on these issues and emphasizes the importance of them to our clients, employees, shareholders and the communities where we live and work.”
By signing the compact, State Street confirms its support of the initiative’s 10 principles and its intent to advance those principles within its organization.
Photo: Gabriela Da Costa. Will 2015 Finally Be the Year When the Global Economy Returns to Normal?
Throughout the global economic expansion that is now stretching into its sixth year, we have experienced periods of accelerating growth followed by brief pauses or setbacks. Even with extraordinary monetary policy stimulus and ultra-low interest rates, the world economy has struggled to maintain an above-trend rate of growth. As a result, excess capacity remains. Little wonder that global inflation continues to surprise to the downside. “In other words, this expansion has been anything but normal”, point out MFS experts, Robert Spector, Institutional portfolio manager, Sanjay Natarajan, Institutional Equity portfolio manager, and Robert M. Hall, Institutional Fixed Income portfolio manager.
Will 2015 finally be the year when the global economy returns to normal?, asked. After all, consensus growth estimates reported by Bloomberg show an accelerating pace this year versus last year. And these forecasts probably underestimate the constructive impact of the sharp plunge in energy prices, which is likely a net positive for the global expansion.
“In our view, a normal economy is characterized by being relatively synchronized across regions, maintaining a self-sustaining growth rate at or above its potential without hyper- accommodative monetary conditions and having a functioning credit system so that easy central bank policies can work effectively. Let’s look at each of these three characteristics in turn”, they explain.
Synchronized across regions
The global economy remains unsynchronized. The United States is the undisputed growth leader among the major economies, with third-quarter real GDP growth hitting 5% at an annual rate, the labor market improving at an impressive clip and prospects for consumer spending looking solid. Energy-related capital spending will likely take a hit from lower oil prices, yet overall we expect US growth to be around 3% in 2015.
By contrast, European growth may struggle to hit 1%, given ongoing deleveraging and the threat of deflation. Although Japan could receive a boost from lower energy prices and a weaker yen, real wages may continue to stagnate, and structural reforms remain a headwind until they become a reality. Emerging economies in general face a muted global trade cycle and structural issues related to productivity. The bottom line is that the global economy will continue to grow in 2015, but without the reinforcing vigor of a synchronized expansion.
Self-sustaining growth at or above potential rate
Given these divergent growth trends, it will be difficult for the world economy to grow above the long-run potential rate on a sustained basis. “As a result, we expect global monetary conditions to remain super easy in 2015. Though the US Federal Reserve (Fed) has ended quantitative easing and is guiding the market toward a midyear rate tightening cycle, the timing of the first hike could be pushed out if inflation keeps undershooting expectations on downward pressure from crude oil prices or if US labor market improvements fail to generate wage gains”, says MFS.
Functioning credit system
Blockages in credit continue to get in the way of monetary stimulus, as money multipliers and the velocity of money are still falling. To be sure, deleveraging has reached an advanced stage in the United States, yet debt levels remain high by historical standards. Globally, there has actually been no net deleveraging since the financial crisis, owing to the debt buildup among European governments and emerging markets (EM). “Without the powerful accelerant of credit expansion, easy monetary policy can provide a buffer against deflation pressures and boost asset prices but cannot be the savior of global growth as in normal cycles”, concludes the MFS analysis.
The bottom line is that growth in 2015 may surpass last year’s tally, thanks mainly to the strength of the US expansion and the sharp drop in oil prices. However, we expect the recovery to remain far from normal, so the environment of low inflation and long-term sovereign yields should persist. “That would be good for equity prices and the US dollar. As long as the global economy avoids recession, which is our base case, global equities should outperform global government bonds in 2015”, they explain.
Photo: epSos.de . More Than 50% of Asset Managers Received Requests for Responsible Investing
New research from global analytics firm Cerulli Associates finds that more than 50% of asset managers received requests for socially responsible investing (SRI) and environmental, social, governance (ESG) mandates from institutional clients.
“Many executives we spoke with during our research interviews told us that they are getting more client inquiries regarding responsible investing strategies,” states Susana Schroeder, senior analyst at Cerulli. “Most managers deal with requests that involve restrictions against holding securities, which are often tied to responsible investing.”
Responsible investment encompasses several areas: ESG, SRI, mission-related investing, impact investing, and program-related investing.
“There is increasing acceptance among investors and managers that ESG factors, such as hazardous waste disposal and predatory lending practices, can have a material impact on a company’s financial wellbeing,” Schroeder explains. “Public defined benefit plans and nonprofits are most likely to incorporate ESG factors into their investment process, because of pressure from donors, students, taxpayers, and other constituents.”
“Institutional sales teams report that clients and prospects are inquiring about this area as they seek to better understand the different aspects of sustainable investing,” Schroeder continues. “Even professionals working in the trenches have witnessed this shift, including request for proposal (RFP) teams, which have reported a rise in the number of RFPs with embedded ESG-related questions.”
Miguel Salinero Barbolla, client service associate at Capital Group. Capital Group Expands Client Service Team
Investment management company Capital Group has announced the appointment of Miguel Salinero Barbolla as client service associate.
Based in London, Salinero is responsible for facilitating client servicing for Capital Group’s financial institutions and intermediaries in Europe.
He joins from BNY Mellon, where he worked most recently as head of international client services and prior to that as client service executive for Spain and Portugal.
Grant Leon, head of Sales for Capital’s Financial Institutions and Intermediaries business, comments on the appointment: “Miguel’s appointment is important as we continue to establish new – and deepen our existing – relationships with intermediaries and our distribution partners across Europe.”
Photo: José Luis Cernadas Iglesias. Riccardo Dallolio Joins H.I.G. Capital as Co-Head of European Real Estate
H.I.G. Capital, a global private equity investment firm with more than €13 billion of capital under management, is pleased to announce the appointment of Riccardo Dallolio as Managing Director and Co-Head of European Real Estate. Based in London, he will share these leadership responsibilities with Ahmed Hamdani, who has been a Managing Director in London since 2012.
With over 16 years in the real estate industry, Riccardo has extensive investment and transactional experience across a number of jurisdictions in Europe. Prior to H.I.G., he was at AXA RE where he was Head of Alternatives and Special Situations. During his time at AXA RE, he also held the positions of Head of Transactions in Europe and Head of Asset Management and Transactions in France. Prior to AXA, Riccardo was a Partner at Grove International Partners, and worked in the J.P. Morgan Real Estate Group in London.
H.I.G. Capital’s real estate platform targets opportunistic real estate investments, with a focus on adding value, improving performance, and achieving attractive risk adjusted returns. With offices in London, Madrid, and Milan, the H.I.G. European real estate team is active across a wide spectrum of real estate asset classes. It has completed 13 transactions across multiple jurisdictions in Europe in the last two years including the U.K., Spain, Italy, the Netherlands, and Finland. With the ability to invest in all parts of the capital structure, H.I.G. Capital is able to develop creative financing solutions and consummate transactions on an expedited basis. Typical investment size ranges from €10 million to €100 million.
In commenting on the appointment, Sami Mnaymneh, Co-Founder and Co-CEO of H.I.G., noted, “I am delighted to welcome Riccardo to the firm. He is a very experienced and successful real estate investor who significantly augments the expertise and capabilities of our team. I am confident he will play an instrumental role in H.I.G. Capital’s development and growth in the real estate asset class.”
BNY Mellon announced that it has signed an agreement with Deutsche Asset & Wealth Management to provide real estate and infrastructure fund administration services, representing roughly $46.3 billion in assets under administration.
Last July, BNY Mellon and Deutsche AWM announced that they had entered into exclusive negotiations to complete an agreement. Terms of the deal, which closed effective February 1, were not disclosed.
Under the agreement, Deutsche AWM will outsource its direct real estate and infrastructure fund finance,fund accounting, asset management accounting, and client and financial reporting functions to BNY Mellon. Up to 80 members of Deutsche AWM’s fund finance team are expected to transfer to BNY Mellon and become part of its Alternative Investment Services business.
“As investors shift into other alternative investments, the market for real estate asset servicing is poised for solid growth,” said Samir Pandiri, executive vice president and CEO of Asset Servicing at BNY Mellon. “Investment managers are turning to asset servicers like us who are better positioned to make the necessary investments in technology and people to deliver a higher level of service.
“This important new relationship will allow us to develop a more integrated accounting and client reporting solution that leverages Deutsche Asset & Wealth Management’s global presence and team, and help propel the growth of our real estate fund administration business,” Pandiri added.
“We have developed a close partnership with BNY Mellon and look forward to working with them on this innovative initiative,” said Pierre Cherki, head of Alternatives and Real Assets for Deutsche AWM. “Our goal is to provide clients the best service possible in this area and this strategic relationship will enable us to benefit from the resources of one of the world’s leading investment servicing companies.”
