Photo: bachman01. Latin America in Focus for Axa IM Growth Plans in 2015
AXA IM has announced its assets under management at the end of December 2014 hit a record €623bn, up 14% per cent from €547bn in 2013.
Net new inflows accounted for €19bn, dominated by third party clients, and €58bn came from market and foreign exchange rate impact.
Andrea Rossi, CEO of AXA IM, said: “Our priority as a business is to grow our third party assets, while continuing to serve and support the AXA Group around the world. I am therefore delighted to see that the majority of our €19bn in net new money inflows in 2014 came from non-AXA clients across both the institutional and wholesale markets. Positive growth in net new money, AuM, revenues and underlying earnings provide a solid base from which to accelerate our growth in 2015.”
Expansion plans for AXA IM in 2015 are targeting several areas. AXA IM wants to make its third party business growing in both the US and Canada. In 2014, in the US, the company strengthened its teams into boosting the RFP team and hiring a new head of Client Group, Stephen Sexeny. A participating affiliate agreement was established, that means the firm will be able to sell in the US market products managed in the UK.
After the hire of a team dedicated to the service of its Nordic clients in February, the firm plans to strengthen its presence in Latin America focusing on Mexico, Colombia and Peru and also targets to develop business in Chile, “where the company has been active with local pension fund clients for over 10 years.”
For the Asia Pacific area, AXA IM is also seeking a growth of its profile, client base and product offering. The company underlined its joint ventures in this area were performing well in 2014 and made “a strong contribution” to net new money inflows.
Rossi commented: “We are becoming more and more global. Today, we employ over 2,300 people, including 250 portfolio managers, in 28 cities across 21 countries. We now employ more than 150 people in the US and over 100 in Asia, not including our JVs. We will continue to expand our global footprint, but in a targeted fashion.”
He added: “We want to accelerate our growth in key mature markets where we don’t yet have a significant market share, such as the US, Japan and the Nordics. In high growth markets, such as Asia and Latin America, we will continue to develop our distribution coverage. We will also strengthen our historically robust positions in Europe by reinforcing our presence in the retail and unit-linked markets.”
Global analytics firm Cerulli Associates finds that nearly 30% of high-net-worth investors in the United States define themselves as self-directed investors, according to their High-Net-Worth and Ultra-High-Net-Worth Markets 2014: Addressing the Unique Needs of Wealthy Families report.
In the report, Cerulli analyzes the U.S. high-net-worth (HNW) (investable assets greater than $5 million) and ultra-high-net-worth (UHNW) (investable assets greater than $20 million) marketplaces. The report focuses on the three constituencies of investors, providers, and asset managers.
“This helps explain the dispersion of assets among providers, and although the direct channel’s surge in the high-net-worth marketshare gains have stemmed in more recent years, providers continue to boost their high-net-worth capabilities and presence among younger, tech-savvy wealth creators,” states Donnie Ethier, associate director at Cerulli. “For wealth managers, they represent increasingly worthy competitors that will likely test traditional managers’ willingness, and aptitude, to adapt to next-generation investors.”
The immense balances that many of these investors have within their self-directed accounts are further proof. This also helps explain where assets have flowed as investors have expanded their provider relationships. According to Cerulli’s research, more than half of high-net-worth investors have direct or online trading account balances between $500,000 and $1 million.
“The self-directed model becomes less favorable relative to other advice models as assets increase,” Ethier explains. “Logically, as assets increase, so does the complexity of portfolios, lending more credence to taking on an external advice sources and provider relationships. In addition to dealing with complex portfolios, advisors are an added expenditure, which can explain their lower use among retail clients.”
“High-net-worth and ultra-high-net-worth clients that are using a self-directed model represent a significant opportunity for asset managers that pass due diligence screenings. In the end, direct providers are yet another avenue for external managers to reach the pool of high-net-worth assets,” Ethier continues.
Opportunities to capture additional walletshare of these investors certainly exists for wealth managers and their advisorforces, although they should know going in that many high-net-worth investors use direct accounts to test their own investment ideas, provide liquidity, and even to shelter assets from their primary advisors.
According to the 2015 Legg Mason Global Investor Survey, 85% of 458 affluent U.S. investors surveyed said U.S. equities “offer the best opportunities over the next 12 months” among all domestic and global asset classes. This is an increase over the 74% who said the same going into 2014.
In addition, 63% said they are maintaining their equity allocation in 2015, while more investors (32%) expect to increase their allocation to equities over any other asset class. Only 6% said they intend to decrease their allocation to equities in 2015. The majority (89%) said they are optimistic about their investments for 2015.
The U.S. portion of the Legg Mason Global Investor Survey was conducted among 458 affluent investors with a minimum of $200,000 in investable assets. The online survey was conducted by Northstar Research Partners from December 2014 to January 2015.
“Investors are looking for the U.S. equity market’s strong run to continue,” said Matthew Schiffman, Global Head of Marketing for Legg Mason. “Last year, investors told us they had great confidence in U.S. equities for 2014 and they were right: The S&P 500 was up over 11 percent. This year, we’re seeing even more investors expressing confidence in the U.S. equity markets, and this is concerning.”
Mr. Schiffman continued: “Overconfidence can lead to a degree of complacency that could prevent investors from paying close attention to their overall financial plan and how they have allocated their assets as their own needs change. Investors have not changed their asset allocation since we started measuring investor sentiment three years ago, which could be another sign of complacency creep.”
U.S. Investor Asset Allocation
U.S. investors entered 2015 with an average asset allocation almost identical to their allocation going into 2014 and slightly more aggressive than in 2013.The average asset allocation among investors who considered themselves “aggressive” included 52% in equities going into 2015; 40% of aggressive investors said they intend to increase their allocation to equities in 2015.
The top three issues that investors worry could “derail the progress” of their investments in 2015 are:global economic instability; economic instability in the U.S.; and increasing market volatility.Only 11% are concerned about inflation and just 5% are concerned about rising interest rates/yields.
Going Global
Investors surveyed have an average of 13% of their assets invested internationally; 41% of investors said they “will be more focused on international investments in the next year compared to last year.”
“Investors may be more willing to travel abroad than invest there,” Mr. Schiffman said. “This goes back to the potential for complacency creep as investors continue to show a preference for investing at home. Opportunities abound globally and should be a consideration in any strategic asset allocation.”
The top three benefits respondents hope to gain by investing internationally are: Diversifying risk across different markets; potential for higher returns than in the U.S.; greater range of investment choices.
Investors see China and Japan as the countries representing the best non-U.S. market investment opportunities over the next 12 months. According to the respondents, the top ten countries (excluding the U.S.) are: China, Japan, Australia, Brazil, India, Europe excluding the UK, UK, Hong Kong, Singapore and Mexico.
Good News for Income-Oriented Investors: Investment “Income Gap” Shrinks Again
Since 2012, Legg Mason has been measuring the investment “income gap” – the difference between what investors seek from their income-producing investments and what they actually receive. This year’s survey reveals that the income gap has been cut in half since inception.
Having income-generating investments is considered a priority to 82% of investors surveyed. Investors also said that on average, 51% of their portfolios are invested in income-producing assets. The top three asset classes they invest in to meet their income needs are:Equity income funds; investment grade bonds and high yield bonds.
Mr. Schiffman stated: “Clearly, only time will tell if investor confidence in the U.S. equity markets will be rewarded again. Regardless of the market’s performance, we encourage investors to be mindful of overconfidence and complacency creep. We also encourage investors to work with financial advisors who will help them take a realistic, active approach to managing their assets recognizing that markets, and their needs, change over time.”
Photo: Kevin Charleston, new CEO and President of Loomis, Sayles & Company. Loomis Sayles Announces New Chief Executive Officer
After 20 years as Chairman of the Board and Chief Executive Officer (CEO) of Loomis, Sayles & Company, Robert J. Blanding has decided to transition his CEO responsibilities to Kevin Charleston, President, effective May 1, 2015. Bob Blanding will retain the Chairman position and actively participate in the strategic direction of the organization.
“Having partnered with Kevin, Jae and each individual on our management committee for over a decade (and some for many more), I have every confidence in our ability to work collaboratively for the future growth and success of Loomis Sayles.”
“This is the right time to transfer my day-to-day responsibilities as CEO,” said Bob Blanding. “I’m proud of the work of our management committee and tremendously confident about its ability to continue delivering the quality of services that our clients have come to expect.”
Bob became Chairman and CEO in April 1995 after joining Loomis Sayles in 1977. During this time, he has transformed the organization structurally and significantly extended its global reach. Bob oversaw an increase in assets under management from $38 billion (in April 1995) to $240 billion today.
“It has been a privilege,” said Dan Fuss, Portfolio Manager and Vice Chairman, “to work in partnership with Bob to meet our goal — superior investment results for our clients — while providing a vibrant, supportive environment for our employees. I am pleased that we will continue to benefit from Bob’s guidance as Chairman.”
Dan also expressed his full confidence in the leadership of Kevin Charleston and Jae Park, Chief Investment Officer (CIO) who oversees all of investment management. “Having partnered with Kevin, Jae and each individual on our management committee for over a decade (and some for many more), I have every confidence in our ability to work collaboratively for the future growth and success of Loomis Sayles.”
Jae Park joined Loomis Sayles in 2002 from IBM where he was Director, fixed income investments. Kevin Charleston joined Loomis Sayles in 2000 as Chief Financial Officer and was named President in April 2014.
“I am honored to assume my new role. Bob Blanding has set an outstanding example for me,” said Kevin Charleston. “Our definition of success remains the same – the achievement of consistently strong investment results for our clients. As CEO and President, I will continue to partner closely with Bob, Dan, Jae and the rest of the leadership team to deliver those results.”
CC-BY-SA-2.0, FlickrFoto: John Tregoning. La expansión urbana: una megatendencia para invertir a largo plazo
Accelerating urban expansion offers rich investment opportunities that coincide with the need for institutional investors to look beyond short-term gains as they seek new ways to build long-term strategies. The urban megatrend holds promise particularly in the areas of urban infrastructure, real estate, an evolving agricultural supply chain, and consumer goods and services, according to a white paper released today by Prudential Investment Management
The white paper, entitledThe Wealth of Cities,offers a new view of opportunities provided by urban expansion, with specific investment ideas in emerging and developed markets across a range of public and private vehicles that offer attractive avenues for investors.
“Understanding how megatrends affect asset classes is crucial as CIOs move toward a long-term strategic portfolio management approach that takes them beyond simply beating short-term benchmarks,” said David Hunt, CEO of Prudential Investment Management. “As we considered urbanization, we drew from expertise in our global investment businesses specializing in public and private fixed income, public equity, and real estate, to examine its impact across asset classes and share our best thinking on new investment ideas for capitalizing on the long-term opportunities created by expanding cities around the world.”
About 60 to 70 million people will be added to the urban population annually for the next 30 years, showcasing the unparalleled pace at which cities are growing. With this in mind, Prudential Investment Management published The Wealth of Cities, which outlines 10 investment ideas arising from the urbanization boom that are easily accessible to institutional investors.
The paper highlights several trends that offer attractive opportunities, including:
Creating technologically advanced wired cities: By 2020, the number of global Internet users is projected to double to four billion people, resulting in a global opportunity for public and direct private investments in IT infrastructure, broadband, data centers and cell towers.
Expanding transportation capacity: As new cities in emerging markets reach populations in excess of five million, the expansion of primary airports, major seaports and high-speed inter-city railways will present investable opportunities.
Launching anti-pollution initiatives: About half of the world’s urban population is exposed to unhealthy levels of air pollution. Companies providing solutions like clean energy, waste management and water treatment serve as attractive investment candidates.
Capitalizing on interest in the urban lifestyle: New mixed-use developments, both residential and commercial, are highly attractive investments as people and companies alike become increasingly attracted to urban lifestyle.
Growing retail outlets and logistics support: One billion new urban middle class consumers in emerging markets now have money to spend on retail purchases, allowing for direct and diversified investment opportunities.
Industrializing agriculture: The United Nations Food and Agriculture Organization estimates the world will need to produce 70% more food by 2050. Creating an efficient agriculture supply chain will require, among other things, improved transportation infrastructure, along with innovative and sustainable production methods over the long term.
Pershing today released a new report entitled, Women: Investing with a Purpose, exploring what drives women to invest and how advisors can best serve them based on those influences. While financial services firms have been ramping up their efforts to reach women investors, the report provides insight into critical gaps that still exist when it comes to what women want, what they need and what they are receiving from their financial advisors and firms with which they work.
Of the women who work with a financial advisor, 72% said they are very satisfied with their primary financial advisors. This finding points to room for improvement in advisors’ interactions with their women clients. Compared to men, women investors were more likely to want improvements related to their advisors’ soft skills. Women tended to highlight more than men “understanding my goals,” “listening to my needs,” and “patiently answering my questions.” Women were less likely than men to suggest their advisors could improve in “picking investments that perform better” (27% of women compared to 36% of men). Interestingly, nearly half of women (47%) said there was nothing that their advisors should change when asked what areas their financial advisor can improve.
“While there are common threads among all investors in terms of their expectations of their financial advisors, these findings suggest that an important factor is being overlooked by advisors working with women investors, and that is the purpose behind the reasons they invest,” said Kim Dellarocca, managing director at Pershing. “This missing factor may contribute to why 35% of women respondents who do not use a financial advisor say they don’t trust financial advisors are working in their interests. The reality is that a woman’s desired level of understanding can be different, which requires advisors to explore concerns, goals and trade-offs with greater directness and rigor.”
Underlying many of the survey findings are unique challenges that women face later in life that stem from realities including their having longer life expectancies, lower incomes during their working years, potentially higher medical costs and a greater motivation for the beneficiaries of their investments to extend beyond themselves. Given these challenges, increased clarity of clients’ goals can influence the ideal blend of solutions that may create more confidence and better experiences for women investors.
According to the study, retirement, education, flexibility and legacy are four common goals that drive women to invest.
Kommer van Trigt, from Robeco, explains where he sees value in fixed income. Robeco's Rorento Strategy Points Out 3 Sources of Value Within the Fixed Income Universe
Kommer van Trigt is responsable of fixed income investing at Robeco. In this interview with Funds Society, he explains his view about where to find value in the asset class this year.
After the ECB´s QE, have your investment perspective for European fixed equity changed or improved? What assets do you think should benefit from the QE? Will it serve equally to peripheral debt core to the peripheral or corporative?
Our key take away when the ECB announced it will engage in government bond purchases, was that the bank made clear it will buy securities with a maturity up to thirty years. This was not expected and is a big support for the longer end of the market. Both long dated securities in core and peripheral government debt markets will benefit. A significant part of our exposure in European bonds is concentrated in long dated bonds. Also from a valuation perspective this makes sense. Take German government bonds: securities with a maturity up to five years trade at negative yields.
In this sense, are you positive to peripheral countries debt, especially Spain? On what grounds, and to what extent, yields could be compresed?
We have exposure to Italian, Spanish, Irish and Portuguese government bonds. The ECB’s purchase program will continue to support these markets. We have shifted our exposure in these markets further out the curve. Exception being our holdings in Portugal where we invest in short dated bonds. Fair value assessments are difficult to make for these markets, but we envisage that the search for yield is here to stay. Central bank liquidity will find its way to these markets. A continuation of the liquidity driven rally is what we foresee. Obviously, improvements in the fundamental economic outlook will help this investment case. In this respect Ireland and Spain are clearly making most progress.
If the ECB´s QE leads to a higher inflation in the long term… Could it harm long-term assets, such as core government bonds?
In the end for sure. However for the upcoming period if anything there is a real risk that long term inflation expectations will remain low. The looming threat of deflation has been the reason in the first place why the ECB took the historical decision to go for QE. In the case of the US, you see how difficult it is to raise inflation expectations. The Fed initiated QE back in 2008 and 7 years later inflation expectations are still low and heading south.
One of the consequences of the ECB´s QE could be the depreciation of the euro. What do you think? Could it be a parity with the dollar?
In the long term that is possible. Back in 2002 the euro already traded below parity. Having said that, for the coming period we believe the euro depreciation will make a halt. It is quite a consensus position by now. Furthermore the ECB QE announcement is already behind us. Obviously a lot will depend on whether or not the Fed will make a start with normalizing its official target rate in the coming months.
The Fed is expected to meet. What do you expect to happen this year? Will there be a monetary normalization, or not?
The surprise would obviously be when they will stay on hold for the rest of the year. A June rate hike is more or less discounted by the market. The counter argument could be as follows: why would they act already with headline inflation nearing zero, long term inflation expectations well behaved, modest wage inflation, a significant US dollar strengthening and other central banks across the globe actually easing policy.
How the Fed will act towards the euro to dollar depreciation? Do you thin the FED would try to avoid it?
The effects of the strong US dollar on the US economy are already becoming clear. The net contribution of exports to fourth quarter growth was already negative. More and more companies are reporting headwinds related to the strong currency. The US economy is a relatively closed economy though, and other sectors can compensate for exports being somewhat under pressure. Up until now the US policy makers seem to be at ease with the exchange rate. As long as the overall US growth outlook remains constructive, they probably can live with it. Of course this is a key question: how will the US economy evolve in the coming quarters. Some weakness here and there is already visible. Stay tuned.
Which do you think will be the consequences of the Fed policies? With the ECB and the Bank of Japan being active, will there be a stability for market liquidityor may negative consequences be arising?
When Bernanke started talking about tapering, back in 2013, markets reacted sharply. Amongst others, emerging debt markets sold off heavily. Uncertainty about the consequences of a change in monetary policy, could be another reason why the FED might opt to wait a little longer to raise interest rates.
In the emerging world, many talk about a possible “monetary easing” in China, do you think that possible?
It is clear that economic growth is slowing in China. More stimulus measures are likely. A currency depreciation can be part that. However we believe the depreciation will be gradual. China is in the midst of transforming it economy. Less export led, more driven by domestic demand. A sharp currency depreciation would go against that strategy.
Is it attractive the emerging market debt? Or is not yet the time?
Yield levels look appealing. The average yield on emerging local debt is close to 6%. Compare that with 0.40% on German 10-year government bonds. However, that yield is only attainable when you leave open the currency exposure. Most emerging currencies are still under pressure. This can continue. The fundamental economic outlook for most of the countries in the universe doesn’t look promising either. On top of that lack of reform appetite in many countries and looming rating downgrades, also refrain us from re-entering these markets right now.
In the current global context, do you prefer “duration” or “credit” risk?
In October last year, we increased our duration risk following the dramatic decline in energy prices. The subsequent drop in long term inflation expectations as well as additional central bank easing across the globe, did indeed result in lower yields and positive bond returns. Over Summer we did cut back on our exposure in global high yield based on our assessment that spread levels were close to fair value. In the months that followed US credit markets have struggled, party driven by the turbulence in the energy sector which represents a sizeable part of the whole US credit market. Instead we much rather prefer to invest in subordinated bonds issued by financial institutions. This is a more European credit category with much room for great investment returns. Banks are becoming more safer and transparent institutions which from the perspective of a bond investor is good news. Regulation and intensified oversight, play out here. Of course, issuer selection for this more risky fixed income category is very important.
Where do you see value for fixed income in the current low rates environment?
Next to peripheral government bonds, subordinate bonds issued by financials, we also favor Australian government bonds. We anticipated the recent rate cut by the Australian central bank. The Australian economy has come under some pressure after commodity prices have slumped. The sizeable mining sector will no longer be the growth engine for the country. A weaker currency to support other exports sectors is very welcome. Australian 10-year yields are close to 2.5%, a “high yielder” in today’s bond market! The creditworthiness of the country is unquestionable with dent to GDP as low as 33%!
What are your bets on currencies?
For a long time we have anticipated US dollar strength versus the euro, the Japanese yen and the Australian dollar. Recently we scaled back on these positions taking profit on some significant moves.
Thomson Reuters has announced the winners of the Lipper Fund Awards 2015, UK. The Lipper Fund Awards are part of the Thomson Reuters Awards for Excellence, a global family of awards that celebrate exceptional performance throughout the professional investment community.
Invesco collected the top Group Award; Robeco also got an Award. The full list of Group Award winners include:
“This year as in years past, the Lipper Fund Awards winners have exhibited a high level of skill and talent in navigating the ever complex and interconnected markets of today. We at Lipper congratulate the 2015 Award winners for their demonstrated expertise and for delivering outperformance to their collective fund shareholders,” said Robert Jenkins, global head of Lipper Research at Thomson Reuters.
“As active fund houses come under greater competitive pressures in the UK, these Lipper Award winners are beacons among their peers in delivering consistent risk-adjusted returns in difficult markets. They fully deserve this accolade,” said Jake Moeller, head of Lipper UKI research.
Lipper data covers more than 285,000 share classes and over 129,000 funds in 62 markets. It provides the free Lipper Leader ratings for mutual funds registered for sale in over 40 countries.
In a report released yesterday entitled Brazilian Public Versus Private Companies: Current State of Affairs, S&P Capital IQ concludes that while Brazil’s publicly traded companies provide a better return on their assets in a majority of industries, privately owned companies generally do better at generating sales off their asset base. “Most privately owned companies use assets to drive sales more efficiently, but are not as good at managing costs” said Jay Bhankharia, Senior Manager, S&P Capital IQ, and author of the report. “We believe this implies that strategic guidance and increased oversight can potentially increase margins and profitability substantially for some of these companies.”
“Brazil and Latin America continue to offer attractive investment opportunities, as reflected in record breaking regional private equity fund raising and increased merger volumes in Brazil” said Cynthia Rojas Sejas, Vice President, Market Development-Latin America, S&P Capital IQ.
S&P Capital IQ looks at the performance of companies in various sectors of the Brazilian economy, while providing insight into the differences between the profiles of Privately Owned and Publicly Traded companies. This report compares public and private companies’ ratios of profitability, efficiency, solvency, and liquidity, leveraging the recent addition of Brazilian Private Company Financials to its comprehensive database of standardized and comparable data for public and private companies globally.
Brazilian Public Versus Private Companies: Current State of Affairslooks at a statistical sample consisting of 93 companies with more than $1 billion in revenue, 637 with $100 million to $1 billion in revenue, and 1,862 companies with less than $100 million in revenue. In addition to key valuation and credit metrics, the report takes a look at specific ratios within the banking and energy sectors to better understand key metrics in those industries.
S&P Capital IQ‘s Brazil research is the topic of an upcoming investment seminar entitled “Brazil: Uncovering Potential Opportunities” that will feature Macroeconomist Bernardo Wjuniski from Medley Global Advisors, and Jay Bhankharia and Richard Peterson from S&P Capital IQ.
Matt Krummell, portfolio manager of the strategy. MFS Launches Luxembourg Domiciled High Conviction US Equity Fund
MFS Investment Management announced the launch of MFS Meridian Funds – U.S. Equity Opportunities Fund. The fund is a concentrated, high-conviction US multi-cap equity strategy that utilises a disciplined, bottom-up stock selection and portfolio construction process that combines MFS’ fundamental and quantitative research.
The fund is an extension of an existing MFS strategy available through its US mutual funds since 2000. Managed by Matthew Krummell, CFA, it seeks to generate long-term risk-adjusted performance over a full market cycle of three to five years.
“We believe this style of equity investing offers a differentiated approach that can help meet the needs of investors seeking the right balance between risk and return,” said Lina Medeiros, president of MFS International Ltd. “The fund leverages two distinct approaches to security selection through the continuous assessment of fundamental and quantitative research. The strength of this design places clients at the heart of an investment process that has the potential to generate strong risk-adjusted returns in various market cycles”, she added.
The portfolio manager, in conjunction with MFS’ deep team of research analysts, routinely reviews position size and evaluates securities for inclusion in the portfolio. MFS’ blended research approach is widely used across multiple strategies at the firm and also used in investment strategies with more than $13.6 billion in assets under management.
Commenting on the launch, Matt Krummell said, ‘In our view, fundamental and quantitative research are complementary, the inherent strengths of one type of research generally offset the inherent weaknesses of the other. The combination of two independent stock selection processes in this portfolio means that we leverage only our best ideas for the benefit of our clients’.
The fund follows a disciplined, systematic approach to portfolio construction. It combines two independent stock selection processes. When a stock is simultaneously rated with both a quantitative and fundamental ‘buy’ recommendation, it is considered for the fund. We believe these are stocks of high-quality companies, trading at attractive valuations, and have a growth catalyst. Typically the fund may invest in 40 to 50 stocks. Holdings are primarily eliminated from the portfolio upon being downgraded to a ‘hold’ or a ‘sell’ by a fundamental analyst or the quantitative model.
