Photo: Fabio Rodrigues Pozzebom/ABr. Moody's Alerts About a Substantial Increase of Default Risk for Venezuela
Moody’s Investors Service has downgraded Venezuela’s government bond ratings to Caa3 from Caa1 and changed the outlook to stable from negative.
The key drivers of the rating actions are the following: Default risk has increased substantially as external finances continue to deteriorate due to a strong decline in oil prices; In the event of a default, Moody’s believes that the loss given default (LGD) is likely to be greater than 50%.
The stable outlook is based on Moody’s view that even if the oil price drops further, expected losses to bondholders are likely to be consistent with a Caa3 rating and unlikely to reach levels associated with lower ratings. The sovereign’s senior unsecured and senior secured ratings have also been downgraded to Caa3 from Caa1, as well as the senior unsecured medium term note program and the senior unsecured program to (P)Caa3 from (P)Caa1.
Venezuela’s long-term local-currency country risk ceilings were also adjusted to Caa2 from Caa1, the foreign currency bond ceiling to Caa3 from Caa1, and the foreign-currency bank deposit ceilings to Ca from Caa2. The short-term foreign currency bond and deposit ceilings remain at NP. These ceilings reflect a range of undiversifiable risks to which issuers in any jurisdiction are exposed, including economic, legal and political risks. These ceilings act as a cap on ratings that can be assigned to the foreign and local-currency obligations of entities domiciled in the country.
Lower oil prices
The principal driver of Moody’s decision to downgrade Venezuela’s sovereign rating is a marked increase in default risk owing to lower oil prices. The recent oil price shock has exerted pressure on Venezuela’s balance of payments and dwindling foreign reserves. The price of Venezuela’s oil basket, which is typically priced at a modest discount to the price of Brent, fell to an average of $54.03 per barrel in December 2014 from an average of $88.42 per barrel in 2014. As a result, Moody’s forecasts that Venezuela’s current account balance is likely to shift to a deficit of approximately 2% of GDP in 2015 from an estimated surplus of over 2% of GDP in 2014, the first such yearly deficit since 1998. The dramatic oil price drop, which we expect will be sustained, will negatively affect the balance of payments and will more than outweigh the potential benefits of future foreign investment inflows.
Moody’s believes that the key source of vulnerability for the sovereign’s credit profile is the external accounts. Given a heavy dependence on imports, external finances remain very rigid, decreasing the possibility of import adjustment to prevent a balance of payments crisis. Foreign currency outflows in Venezuela are likely to decrease only marginally in the event of policy measures to further curb import demand and capital account outflows. Although Moody’s believes the sovereign is highly likely to honor the upcoming €1 billion Eurobond maturing in March 2015, given the large mismatch between inflows and outflows, the probability of a debt default occurring in the next 1-2 years has risen from an already high level.
The second driver of the rating action is Moody’s assessment that in the event of a default, bondholder losses are likely to exceed 50% on the sovereign’s external debt instruments. Moody’s believes that balance of payments outflows are likely to exceed inflows by a significant margin at least through 2016, leading to a significant external funding gap that would suggest material debt reduction would be required to ensure balance of payments sustainability.
Moody’s believes that the authorities are unlikely to implement forceful policy measures to curb macroeconomic distortions and imbalances in the near term. Even if implemented, measures that target (1) further administrative controls to curb imports, (2) adjustments to the multiple exchange rate regimes, or (3) raising domestic oil prices to lower consumption and marginally increase exports, are unlikely to materially alter the current conditions that heighten the probability of default.
Despite the potential for increased external bilateral financing, Moody’s estimates that even under a best-case scenario the external funding gap would not be fully covered. Moreover, Moody’s believes that the current stock of foreign currency assets, including official reserves of $22 billion at the end of December 2014, would be insufficient to cover the country’s external financing gap.
In addition to the rising risk of a balance of payments crisis, Venezuela is in the midst of an economic recession and has a highly discretionary policy framework that reflects weak institutions. These challenges more than offset its credit strengths that include low albeit rising government debt and high income levels relative to emerging market and Latin American countries.
What could move the rating up/down
The rating would face upward pressure if balance of payments prospects improve significantly given a strong recovery in oil prices or if a sufficiently large increase of financing flows ensures stabilization of external accounts, says Moody’s. Conversely, the rating would face further downward pressure if external finances weaken in the absence of a recovery in oil prices, increasing the risk of greater losses to bondholders.
The Internal Revenue Service announces the opening of the International Data Exchange Service (IDES) for enrollment. Financial institutions and host country tax authorities will use IDES to securely send their information reports on financial accounts held by U.S. persons to the IRS under the Foreign Account Tax Compliance Act (FATCA) or pursuant to the terms of an intergovernmental agreement (IGA), as applicable.
More than 145,000 financial institutions have registered through the IRS FATCA Registration System. The U.S. has more than 110 IGAs, either signed or agreed in substance. Financial institutions and host country tax authorities will use IDES to provide the IRS information reports on financial accounts held by U.S. persons.
“The opening of the International Data Exchange Service is a milestone in the implementation of FATCA,” said IRS Commissioner John Koskinen. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system.”
Where a jurisdiction has a reciprocal IGA and the jurisdiction has the necessary safeguards and infrastructure in place, the IRS will also use IDES to provide similar information to the host country tax authority on accounts in U.S. financial institutions held by the jurisdiction’s residents.
Using IDES, a web application, the sender encrypts the data and IDES encrypts the transmission pathway to protect data transfers. Encryption at both the file and transmission level safeguards sensitive tax information.
Host country tax authorities in Model 2 IGA jurisdictions and financial institutions are encouraged to begin the enrollment process well in advance of their reporting deadline. To begin transmitting information in IDES, a financial institution or tax authority will need to first obtain a digital certificate. Digital certificates bind digital information to physical identities and provide data integrity. IDES stores each user’s public key and related digital certificate. All IDES enrollees (including host country tax authorities) must obtain a proper digital certificate in order to enroll; there is a list of approved Certificate Authorities available on irs.gov.
For host country tax authorities in Model 1 IGA jurisdictions, the IRS will directly notify them to let them know when it is time to enroll. Financial institutions will initiate enrollment online on their own; in order to enroll, the financial institution will need to have registered as a participating financial institution through the IRS FATCA Registration System and have a global intermediary identification number (GIIN) that appears on the IRS FATCA FFI list. The online address for IDES enrollment can be found here. IDES runs on all major browsers, including Chrome, Internet Explorer, Safari, and Firefox and will support application-to-application exchanges through the SFTP transmission protocol enabling a wide variety of users to interact with IDES without building additional infrastructure to support transmission.
Further information on IDES can be found here. The IDES User Guide with instructions for enrolling and using the IDES can be found here. The IRS has posted Frequently Asked Questions about FATCA and IDES on irs.gov and will continue to update the FAQs as questions are received. In addition, there is a comments link on irs.gov to submit questions specifically on IDES and another for other FATCA-related questions.
Photo: Nestor Galina. 7 Prices for 7 Commodities by Loomis, Sayles & Company
The commodity complex has seen a rapid fall since the middle of the 2014 due to global growth concerns, the US dollar rally and continuing overall growth in supply. “I believe prices may be close to bottoming and we could see a cyclical upturn in the first half of 2015”, says Saurabh Lele, Commodities Analyst for the macro strategies group at Loomis, Sayles & Company.
Crude oil
Lele expects crude oil prices to correct in 2015, bringing the Brent Crude Index to $85-95/barrel and the West Texas Intermediate (WTI) to $75-85/barrel by year end. “My opinion is that the current move in crude oil prices is unwarranted. I believe the market is mispricing geopolitical risk, a US supply response and the upcoming global refinery turnaround schedule (periods of refinery closure for maintenance and renewal services)”.
The situation in Libya is still volatile and recent disruptions to oil production are yet to have any impact on prices. Refinery demand in the second half of 2014 was the weakest in five years, not only due to global growth but also due to temporary factors such as closures and maintenance related shutdowns, explains. “The first half of 2015 will see very little maintenance related shutdowns as well as several new refineries initiating operations. Finally, US domestic production will adjust lower as energy and petroleum companies will have less cash to spend in 2015”.
Natural gas
In this case, the analyst expects prices to continue to trade in the $3.75 to $4.25 per mmbtu range (this is the price required for electric consumption to balance the market)
Natural gas seems to have found a comfortable trading range between $3.75 and $4.25 per mmbtu as electric utilities switch between natural gas and coal. Inventories, which were down significantly after the severe winter in early 2014, have built up steadily over the course of a cooler-than-usual summer. “In 2015 we are likely to see higher demand for natural gas due to higher industrial consumption, exports to Mexico and the start of LNG exports from the new Sabine Pass terminal in Texas”, argues.
Copper
Loomis, Sayles & Company expects copper to stay in a slight surplus after which supply growth is expected to slow and fall behind demand.
Inventories at the exchange and bonded warehouses are low and a slight pickup in demand could result in prices moving higher. “Over the next two quarters, we could see demand improve from higher grid spending in China, which has lagged its budgeted number year-to-date”, says Lele.
Iron ore
“Prices could correct and move up to the $80-90 per metric tonne range by the second half of 2015. Longer-term I believe iron ore prices to remain in $80-$90 range”, affirms Lele.
“The fall in prices exceeds what fundamentals would dictate – I believe the decline is being driven by de-stocking/restocking cycles. Demand should improve after the APEC (Asia-Pacific Economic Cooperation) summit in November as steel makers restart mills near Beijing”. Ore inventories at ports have fallen between 7-10% since their June highs, indicating low but stable demand. Iron ore inventories at steel mills are also close to their 2012 lows.
Thermal coal
He expects global thermal coal prices to stay in the $70-75 per metric tonne range over the next year due to weak demand is likely to persist with the only bright spot being medium-term Indian coal. “I see strong supply growth from Indonesia and Australia in the near-term; the impact of the thermal coal import tax is expected to be minimal as Indonesia and Australia are exempt due to their respective free-trade agreements with China”.
Gold
The firm expects gold prices to fall to $1,000/oz over the next two years. “Resilient mine supply and lower demand from China and India should push prices lower. I expect the Indian gold export tax to continue until the end of 2015 as well as Chinese demand for jewelry to remain subdued as anti-corruption sentiment reduces the demand for luxury goods. ETF selling is expected to continue as real rates move higher and inflation/deflation present no major concerns at this time”, enunciates.
CC-BY-SA-2.0, FlickrJosé Miguel Maté is Tressis' CEO. Morabanc to Launch in Spain, Acquire Tressis
Andorra’s Morabanc is said to be launching in the Spanish market through the acquisition of fund platform Tressis, according to Expansión. It could pay 50 millions euros for the 85% of the business, according to its sources.
The details of the acquisition are not known yet, but the operation seems to be close to reach a final point.
Morabanc would be the fourth Andorran bank to launch in Spain. Banca Privada d’Andorra entered the market through Banco Madrid; Crèdit Andorrà launched through Banco Alcalá; while Andbank was the only Andorran bank to enter the Spanish market with his own brand and by recently acquiring Inversis Banco.
Voya Financial announced that Paul J. Gennaro has joined the company as senior vice president, Corporate Communications, and chief communications officer. In this role, he will oversee all internal and external communications for Voya Financial, serving as a strategic advisor to senior management, setting the overall communications strategy, and both further defining and protecting the company’s reputation with key stakeholders. He will report to Chairman and CEO Rodney O. Martin, Jr.
“Paul is a recognized thought leader and has demonstrated experience working with several well-known global brands to help them strategically and effectively communicate with multiple stakeholders,” said Martin. “He has an impressive record, a diverse background of communications leadership roles, and significant experience overseeing programs to support a number of initiatives, including a successful initial public offering and a global rebranding effort. He will be a great asset as we continue to further define and protect our reputation in the industry and our brand in the marketplace. I’m pleased to have him on our team and I am looking forward to working closely with him as we continue to work toward achieving our vision to be America’s Retirement Company.”
Gennaro comes to Voya Financial with more than 25 years of experience and, during his career, has managed various facets of corporate and marketing communications, investor relations, public relations and government affairs. Most recently, Gennaro was senior vice president, Corporate Communications, and chief communications officer of AECOM, a $20 billion, fully integrated infrastructure and support services firm. At AECOM, Gennaro led all aspects of the firm’s global corporate communications, brand optimization and reputation management strategies. During his tenure at AECOM, which Gennaro joined in March 2006, he developed and executed communications strategies in support of more than 40 acquisitions, the company’s initial public offering and its global rebrand.
“I’m excited to join the Voya team and to be part of a company with a great vision and a commitment to helping Americans with their retirement readiness needs,” Gennaro said. “I look forward to helping build the Voya brand – and to helping Americans build a secure financial future.”
Prior to joining AECOM, Gennaro managed all global corporate and marketing communications for Johns Manville, a subsidiary of Berkshire Hathaway, Inc. He has also held communications leadership roles for global brands such as Ingersoll-Rand, Dell, and American Express. Gennaro began his career as a print/broadcast journalist and public affairs officer for the U.S. Navy.
Gennaro received a Bachelor of Science degree in aeronautics from Embry-Riddle Aeronautical University. He is a board member of Ethisphere LLC, serves on the board of advisors for the Emory University Center for Ethics, and also is on the board of directors for the DINFOS Foundation, which supports the U.S. Department of Defense Information School.
Gennaro is the recipient of several professional awards, including being named PR Week magazine’s PR Professional of the Year in 2013. He also received the 2013 John W. Hill Award from the New York Chapter of the Public Relations Society of America and, in 2010, the International Business Award for Communications Executive of the Year.
Franklin Square today has hired Berta Aldrich to serve as the firm’s Chief Marketing Officer. Ms. Aldrich joins the firm after spending the last 10 years with Vanguard, where she held executive positions in marketing strategy and planning, loyalty operations and investment education.
“Berta is a highly respected marketer and educator in our industry and we are delighted she has joined Franklin Square,” said Michael C. Forman, Chairman and CEO, Franklin Square. “Berta will help us further strengthen our position as a leader in alternative investments and our support for client and investor education programs.”
In her most recent position as Head of Marketing Strategy for Vanguard, Ms. Aldrich led the channel marketing efforts for the growth and expansion of its $1 trillion dollar Financial Advisory Services division. She previously served as Department Head of Vanguard’s Acquisition and Loyalty Marketing Operations, Marketing Executive to the Institutional Full-Service Retirement division and Head of Investor Education and Program Development. Before joining Vanguard, Ms. Aldrich had a 13-year career at the Principal Financial Group.
“Franklin Square is a leader in providing individual investors access to alternative investments historically reserved for large institutions,” commented Ms. Aldrich. “I am excited to join such an innovative, dynamic firm and a team that places such great emphasis on investor protection, client care and civic engagement.”
In 2013, Ms. Aldrich was named among Gramercy Institute’s 20 Rising Stars in Financial Marketing. She holds an MBA with honors from St. Joseph’s University and a BA in Finance from Iowa State University. Ms. Aldrich is a member of the board of directors for Camphill Special School and is a previous board member of the Mutual Fund Education Association.
Columbia Management announced today that it will rebrand its business as Columbia Threadneedle Investments in the first half of 2015. The new global brand will represent the combined capabilities, resources and reach of Columbia and UK-based Threadneedle Investments, offering clients access to the best of both firms and positioning the asset management group for a greater share of global growth.
Threadneedle has assets under management (AUM) of $150 billion (as of September 30, 2014) and is the fifth largest retail asset manager in the UK (IMA as of October 31, 2014). Together, Columbia and Threadneedle have $505 billion in AUM across developed and emerging market equities, fixed income, multi-asset solutions and alternatives. Both firms are owned by Ameriprise Financial.
The new brand – Columbia Threadneedle Investments – will reinforce the strength of both firms in established markets of the U.S., UK, and Europe and enable the group to grow its presence in key markets, including Asia Pacific, Latin America and the Middle East, stated the firm.
The established investment teams, strategies, processes and legal entities at both firms will not change as a result of the new global brand. Similarly, existing funds will not change, nor will existing client portfolios and mandates.
“This is an important and exciting new phase for us. We are bringing together a combined offering under the Columbia Threadneedle Investments global brand for the benefit of our clients and our business,” said Ted Truscott, CEO – Global Asset Management, Ameriprise Financial. “Columbia and Threadneedle have been working together for more than two years to increase the breadth and depth of our offering to clients. Presenting the combined capabilities of both firms under a single brand is the natural next step.”
“We are introducing the Columbia Threadneedle Investments brand to reflect the significant resources and expertise available to our teams around the globe. By working together we add depth to our offerings, enabling us to make better investment decisions and ultimately generate better performance for our clients, and the new global brand reflects this. Clients around the world benefit from our combined research ideas and insights, trading techniques and portfolio strategies,” Truscott said.
“Columbia and Threadneedle share many philosophies and values, including a commitment to delivering the investment outcomes our clients expect,” said Colin Moore, Global Chief Investment Officer. “In a world where financial markets and economies are increasingly interconnected, being part of a strong global partnership with our colleagues at Threadneedle is a considerable advantage. Over recent years we have deliberately fostered an environment of information sharing and debate between Columbia and Threadneedle, and I believe the aggregate resource is world class. While our investment teams remain true to their respective styles and processes, the sharing of research globally allows us to make full use of our collective intellectual capital and better inform our decisions to the benefit of our clients.”
“Columbia and Threadneedle have a shared vision, business strategy and values, albeit with distinct investment capabilities, local distribution and unique product offerings,” said Campbell Fleming, CEO of Threadneedle. “Under the new brand we become a global group, presenting our combined resources, investment perspectives and expertise to better serve our clients, both individuals and institutions, around the world.”
The European Fund and Asset Management Association (EFAMA), has released its latest international statistical release containing the worldwide investment fund industry results for the third quarter of 2014.
Investment fund assets worldwide increased 6.2 percent during the third quarter to stand at EUR 27.24 trillion at end September 2014. In U.S. dollar terms, worldwide investment fund assets decreased 2.2percent to US$ 34.28 trillion on account of U.S. dollar appreciation during the quarter.
Worldwide net cash inflows amounted to EUR 290 billion, up from EUR 252 billion in the previous quarter. A turnaround in net flows into money market funds was the main driver behind this result.
Long-term funds (all funds excluding money market funds) continued to register net inflows amounting to EUR 223 billion during the third quarter, albeit down from EUR 301 billion registered in the previous quarter.
Worldwide equity funds recorded reduced net inflows of EUR 24 billion, down from EUR 48 billion in the previous quarter. Worldwide bond funds registered net inflows of EUR 79 billion, compared to EUR 112 billion in the previous quarter. Balanced funds recorded reduced net inflows of EUR 72 billion, down from EUR 81 billion in the second quarter.
Money market funds recorded a turnaround in net flows during the third quarter as net inflows amounted to EUR 67 billion, compared to net outflows of EUR 49 billion in the previous quarter.The United States registered net inflows of EUR 33 billion during the quarter, with Europe attracting EUR 13 billion in net new money.
At the end of the third quarter, assets of equity funds represented 40 percent and bond funds represented 22 percent of all investment fund assets worldwide.The asset share of money market funds was 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 (50.3%), Europe (28.7%), Australia (4.9%), Brazil (4.7%), Canada (3.7%), Japan (3.2%), China (1.8%), Rep. of Korea (1.0%), South Africa (0.5%) and India (0.4%). Taking into account non-UCITS assets, the market share of Europe reached 36.3 percent at end September 2014.
CC-BY-SA-2.0, FlickrFoto: Eduardo Mar. A corto plazo las valoraciones en Brasil ya no resultan tan atractivas
Italy’s independent asset manager Azimut has signed a deal to acquire 50% of Brazil’s LFI Investimentos through AZ FuturaInvest, one of its Brazilian joint ventures, said italian media.
LFI is an independent wealth management company based in Sao Paulo, founded in 2009 with a proven track record on developing customized investment solutions for Brazilian HNWI.
The Brazilian company counts seven experienced professionals, with an average tenure of more than 25 years in the industry and approximately R$500m (US$190m) AUM.
AZ FuturaInvest is Azimut financial advisory arm for the Brazilian market providing professional advisory services on asset allocation, funds selection and financial education.
“With LFI, AZ FuturaInvest will be able to offer new and efficient wealth management solutions to families and HNWI clients leveraging on LFI experience to structure customized portfolios. The team of LFI will add up to the FuturaInvest advisory team which currently counts more than 40 professionals,” the company said.
The transaction, which is not subject to the approval by the competent authorities, involves a purchase price of around R$ 8.5m (around US$ 3.2m) to be paid to LFI founders in four tranches during the next five years depending on the attainment of specific targets.
Marcelo Vieira Elaiuy and Fabio Frugis Cruz, founders of LFI commented: “Joining Azimut project is a fundamental step to improve our business. We will be able to leverage on the entire Azimut structure maintaining our independent governance and focus on clients’ interests. We are confident that the quality of the new structure will result in huge benefits for our customers.”
Pietro Giuliani, Chairman and CEO of Azimut Holding, added: “Despite a tough 2014 for the Brazilian investment fund industry, our local operations registered an encouraging growth, confirming the value of our business model and the quality of our partners. The complementary nature of LFI and AZ FuturaInvest gives new strength to our project, which rests on providing asset allocation and financial advisory services to our clients. We continue to scout all the international markets in which Azimut operates in order to attract more talents, and the JV with LFI reinforces our focus on Brazil as one of the key markets for Azimut international expansion.”
Capital Strategies Partners, a third party mutual fund distribution firm, holds the distribution of AZ Fund Management products in Latin America
Robeco has appointed Maureen Schlejen as head of institutional sales and account management in charge of the Benelux and Nordic countries.
Based in Rotterdam, Schlejen will lead a team of account managers and be responsible for building Robeco’s institutional client base in the Netherlands, Belgium, Luxembourg and the Nordics.
Schlejen has been with Robeco since 1995, most recently as senior account manager institutional clients. She replaces Eric van der Maarel, who left the firm to join Aegon.
