. Safra Appoints 12 Private Bankers from RBC Wealth Management in Miami and Aventura
Safra National Bank of New York, Safra Securities, and J. Safra Asset Management, have finalized the recruitment of a large group of investment advisors from RBC Wealth Management, which is closing its international business later this February.
Safra’s Office in Miami
Safra Securities’ Miami office has recruited Julian Stienstra, former Managing Director Americas Private Banking at RBC Wealth Management. Stienstra has been involved in the RBC group since 1976, when he joined the group in Argentina, his home country. Since then, he has worked at several divisions of the Canadian bank, both in its retail banking division and in wealth management, based in different countries, including Brazil, Canada, and finally USA (Miami). Stienstra joins the Safra team in Miami as Executive Vice President, along with three Senior Vice Presidents, Diana Gangone, Arlette Ctraro and Julio Revuleta, a Vice President, Lupe Wong, and four Assistant Vice Presidents, Nanci Zarate, Claudia Foco, Jocelyn Gonzalez, and Monica Forgang. All of them worked previously at RBC Wealth Management.
Appointments to the Aventura office and to J. Safra Asset Management
In addition, Safra Bank’s New York Aventura office has hired Diana Duys and Cybelle Marinello, also from RBC Wealth Management, both as first VPs; finally, Michael Dejana joins J. Safra Asset Management as investment advisor and Senior Vice President. Michael Dejana worked as CIO for RBC WM in New York for over12 years, and had previously held the same position for 15 years at Barclays Wealth. Mr. Dejana will be working between Ney York and Miami.
Photo: Stephanie Ouwendijk, new a vice president and portfolio manager at Franklin Templeton Investments. Franklin Templeton Hires Portfolio Manager From Ashmore
Franklin Templeton Investments has announced that it has appointed Stephanie Ouwendijk as a vice president and portfolio manager.
Ouwendijk joined Franklin Templeton on 16 February 2015, as part of its Emerging Markets Debt Opportunities team which sits within the Franklin Templeton Fixed Income Group.
She is based in London and reports to William Ledward, senior vice president and portfolio manager, who leads the Emerging Markets Debt Opportunities team. The team currently manages over $10bn for institutional investors.
Ouwendijk joins Franklin Templeton from Ashmore Group, a London-based emerging markets asset management firm, where she served as fund manager since June 2010. Most recently, she was part of a team responsible for External Debt and Blended Debt funds, and in particular was responsible for CEE and Africa sovereign and quasi-sovereign credits.
Prior to working at Ashmore, she was an emerging markets analyst/portfolio assistant at Gulf International Bank Asset Management. She holds an MSc in investment management from Cass Business School in London, and MSc and BSc in business administration from Vrije Universiteit in Amsterdam. She is a Chartered Financial Analyst (CFA) Charterholder.
The Franklin Templeton Fixed Income Group is an integrated global fixed income platform comprising over 100 investment professionals located in offices around the world. The group launched its first fixed income portfolio more than 40 years ago and has been managing money for the institutional market for more than 30 years.
Global investors are significantly more positive on the outlook for Europe after the European Central Bank’s announcement of quantitative easing to reflate the region’s economy, according to the BofA Merrill Lynch Fund Manager Survey for February.
An overall total of 196 panelists with US$559 billion of assets under management participated in the survey from 6 February to 12 February 2015. A total of 157 managers, managing US$459 billion, participated in the global survey.
Europe’s profit outlook is at its best since 2009, according to panel members. A net 81 percent of regional specialists see the economy strengthening in the next year. Against this background, a record net 51 percent make the region their top pick in equities over a one-year horizon, up from January’s net 18 percent. A net 55 percent are already overweight.
The U.S. has been the main loser from this rotation. Overweights on U.S. equities have declined to a net 6 percent, down 18 points versus last month.
Overall, fund managers have increased their allocations both to stocks (a net 57 percent overweight, up six points month-on-month) and cash (a net 22 percent overweight, a five-point rise). This is at the expense of bonds, which are now seen as overvalued by a net 79 percent. Bonds are also perceived as the asset class most vulnerable to increased volatility this year.
Despite exuberance over Europe, the global growth outlook is little changed. This reflects declining expectations on China. A net 58 percent of respondents now expect that country’s economy to weaken over the next 12 months, the survey’s lowest reading on this measure in nearly two years.
“The ECB has successfully vanquished global deflation fears and induced the return of reflation trades in February,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “Sentiment has gotten ahead of the fundamentals on European equities. It is as if there is not a single bear left. We will need to see a strong recovery very soon to keep the bulls happy,” said Manish Kabra, European equity and quantitative strategist.
Eurozone only
Investors’ new bullishness on Europe is strongly focused on the Eurozone. Non-Euro markets are out of favor. Last month, France and Italy stood out as their worst picks, but a net 42 percent of regional fund managers now intend to underweight the U.K. and Switzerland this year. They have also shifted to a negative stance on Sweden.
Autos are now European regional investors’ favored sector. A net 26 percent are overweight, a month-on-month gain of 12 percentage points. The travel and leisure area has also gained support with a 10-point rise.
In contrast, banks and insurers saw notable declines in sentiment. Month-on-month falls of 32 and 20 percentage points, respectively, have taken both into underweight territory. Utilities are now the region’s least favored sector.
Inflation fuelled
Anxiety over potential Eurozone deflation has declined with the ECB’s QE announcement. Indeed, inflation expectations are picking up. A net 29 percent of fund managers expect global core CPI to be higher in a year’s time, up from a net 14 percent a month ago.
A potential geopolitical crisis is now clearly respondents’ major tail risk. One in three identifies it as their major concern.
Gold glisters again
China’s weakening outlook is weighing on Global Emerging Markets equities, but net underweights on GEMs have declined by 12 percentage points since January to a net 1 percent.
Sentiment towards gold is also improving. Forty percent of survey participants expect the price to be higher in 12 months’ time. Last month, bears on the precious metal still outnumbered bulls.
Only a net 3 percent now considers gold overvalued, compared to a net 20 percent as recently as December.
Many investors continue to see value in oil. A net 39 percent regard crude as undervalued, down slightly from January’s reading.
Spain’s CaixaBank has announced the launch of a takeover bid for above the 50% of Portuguese lender Banco BPI on top of the 44.1% that it has owned for the last 20 years.
CaixaBank said it would pay €1.329 per share in cash to buy Portugal’s fourth bank. The price was 27% up compared to BPI’s closing price on Monday.
The number would bring the Spanish lender’s purchase price up to €1.09bn.
According to the deal, BPI’s shareholders must also vote to remove a rule that restricts CaixaBank to voting rights equivalent to 20% of BPI’s capital.
Through its current stake in BPI, CaixaBank, which is also Spain’s third-largest lender by market value, serves some 1.7m Portuguese clients.
The offer, which will be filed in Portugal’s Comissão do Mercado de Valores Mobiliários portuguesa (CMVM) once regulatory approvals will be obtained, will be completed during the second quarter of 2015, CaixaBank said in a note today.
Photo: Jacob Ehnmark. Investec Asset Management Announces Use of Stock Connect in UCITS Fund Range
Investec Asset Management announced today that funds within its flagship Luxembourg-domiciled UCITS Global Strategy Fund range will now have the capability to invest in the Chinese domestic equity market using Shanghai-Hong Kong Stock Connect. Regulatory approval was received in December 2014 and it is believed that Investec Asset Management is the first global investment manager of UCITS funds set up to invest using Stock Connect.
This news follows the award of an RQFII (Renminbi Qualified Foreign Institutional Investor) licence by the China Securities Regulatory Commission (CSRC) and the allocation of its RQFII investment quota by the Chinese State Administration of Foreign Exchange (SAFE).
In the near future, Investec Asset Management intends to utilise its RQFII licence and quota to launch two new daily dealing UCITS funds in its GSF range, one focusing on Chinese equity exposure and the other on onshore Chinese bonds. This builds on its range of dedicated Asian investment strategies, including the Investec 4Factor All China Equity Strategy and the Investec Asia ex Japan and Investec EM Equity Strategies.
These developments allow Investec Asset Management to provide clients with direct access to mainland Chinese equity markets across both global and regional products in a product structure offering both flexibility and liquidity.
Greg Kuhnert, Manager of the Investec Asian Equity Strategy commented, ‘The A share market represents the other 50% of the China pie previously closed to foreign investors. Because of our long-term investment in the region and investment hub on the ground, this market appears rich with opportunities for investors such as us who are focused on companies demonstrating improving profitability, return on capital, capital discipline and valuations.’
Amadeo Alentorn, Manager and Head of Analysis for the Global Equity team at Old Mutual Global Investors, who was recently in Madrid . “The ECB has Disappointed by Acting too Late; There Was an Opportunity to Change the Sentiment a Year Ago”
After the last few years of constant increases in the equity markets, uncertainty is once again starting to make an appearance, in response to aspects such as the divergence in worldwide monetary policies, or the political and electoral events which could cause significant changes over the course of the year. In this current backdrop of greater uncertainty and volatility, the proposal of Old Mutual Global Investors, which recently presented in Madrid its long / short global equity strategy with an absolute return perspective (Global Equity Absolute Return), makes complete sense.
It is a totally neutral market strategy with zero exposure to market or beta, and uncorrelated with the market behavior, which makes it a good strategy to diversify risks. “It has an absolute return profile that is generating much interest among Spanish investors and looking for a 6% return over liquidity,” says Amadeo Alentorn, Manager and Head of Analysis for the Global Equity team at Old Mutual Global Investors. Something that has been achieved in recent years with a volatility of around 5% and which has allowed it to increase its assets to 3 billion dollars (of the total 5 billion which the company manages in equity, between this and other long only strategies).
Behind their success lies a systematic model, which, out of a global universe of 3,500 companies with the largest capitalization and liquidity in the world, selects 700, through the implementation of five criteria of a fundamental nature: valuation, growth, sentiment analysis, business management, and market dynamics.
These criteria change their weight and become more or less important depending on the market situation. Thus, the model has a number of historical situations by which it analyzes which factors have worked better, and acts accordingly. Therefore, the emphasis changes depending on the economic climate: if the market falls, the greatest weight will be on the quality of the companies, business management, etc., factors that tend to work better. “Currently, the sentiment is neutral: there is still risk aversion, despite the ECB. Although volatility will grow, and is greater than in the past, it’s still not too high. The current economic climate values strong balance sheets and the quality of the companies, the most defensive stocks; and valuation criteria do not work too well,” says the manager. In his opinion, the ECB has disappointed markets by acting too late, and a year ago would have had the opportunity to change the sentiment; hence he predicts lateral movements in the markets and increased volatility.
The model, which gets its profitability mainly from stock selection (i.e. choosing the securities on the long side to be better than short), also gets profitability through sector positions, which can afford to have some exposure: for example, they are short on energy securities and long in defensive sectors such as the health sector or utilities. In fact, amongst their long positions in Spain these sectors stand out, in securities such as Iberdrola and REE, for the strength of their balance sheets and sustainable growth of the sector. But regardless of sector positions, exposure is zero in currency, regional positions, or by country, the manager explains.
Amadeo Alentorn, Manager and Head of Analysis for the Global Equity team at Old Mutual Global Investors, works from London within a team consisting of two others managers, analysts, and training experts.
Wikimedia CommonsPhoto: Coolcaesar. FATCA Deadlines for 2015
Even though FATCA officially went ‘live’ on July 1st last year, APEX Funds Services reminds us sthat many of the key implementation deadlines will take place in the following years. FATCA generally imposes registration, due diligence and reporting obligations on Foreign Financial Institutions (“FFIs”).
Last year, FFIs were required to implement new account opening procedures and register with the US Internal Revenue Service (“IRS”). There was a surge in registrations on the IRS portal in late December as Model 1 FFIs rushed to register and obtain their Global Intermediary Identification Number (“GIIN”) before the year end deadline. For FFIs that have failed or were unwilling to register and comply, then 2015 will bring a number of challenges e.g 30% withholding tax on certain US source payments, stiff penalties and/or enforcement action by their local tax authority along with reputational, legal and other operational headaches.
Acording to Karen Wallace, Global Head of Compiance at APEX Funds Services Holdings, for FFIs that have registered under FATCA then their focus for 2015 should be on the following upcoming deadlines:
March onwards: registering for an on-line account with the IRS or relevant local tax authorities in order to comply with the reporting obligations e.g registration required by the Cayman tax authority by 31 March 2015.
31 March 2015*: reporting deadline to the IRS for Model 2 IGA jurisdictions and FFIs in non-IGA jurisdictions.
31 May/30 June 2015: typical reporting deadlines for Model 1 IGA jurisdictions.
30 June 2015: review of pre-existing individual high value accounts as at 30 June 2014 must be completed
*The IRS has advised an automatic 90-day extension is granted to all filers (without the need to file any form or take any action) with respect to calendar year 2014 only.
For the above reporting dates, FFIs must report the name, address, U.S. TIN (date of birth for pre-existing accounts if no U.S. TIN), account number, name and identifying number of the reporting institution, and account balance or value for US reportable accounts for calendar year 2014. Reporting obligations will increase in 2016 and 2017 respectively. It is essential that FFIs have a comprehensive FATCA compliance programme in place to limit non-compliance risk and meet the obligations of the relevant IGAs and/or the IRS.
The European Central Bank (ECB) pulling the trigger on QE was the first big news of 2015. According to the Generali Investments Europe analysts, this will set the tone for financial markets for quite some time to come.
“Core government bond yields will stay extremely depressed”, said Klaus Wiener, Chief Economist of GIE, in his Market Perspectives for February 2015. “With core yields so low, investors will be pushed into riskier assets; as a result, Euro area stocks will rally with double-digit total returns now likely both this year and next”.
Over the past few months, the outlook for the euro area economy has improved due to a number of factors. Above all, as the ECB’s various programs increasingly unfold their impact, faster loan growth in the private sector is likely. In addition, the euro area economy will benefit from the sharp decline in oil prices and the strong depreciation of the euro. All in, while some significant headwinds remain (e.g. geopolitical risks, weaker growth in emerging markets) a relapse into recession has become increasingly unlikely. If anything, some macro indicators of the euro area could start to surprise positively over the next few months.
On the fixed income side, yields have continued to drop, in some cases even to new historical lows. Since US yields are likely to rise in response to solid domestic conditions and the nearing of a first key rate hike, the transatlantic yield spread will reach new highs. Non-financial corporate bonds are still attractive in relative terms.
Just like the economy, equities stand to benefit from the weaker euro and the much lower oil prices. Even more importantly, with the low-yield environment to persist as a result of the ECB’s QE, investor demand will remain high for this asset class. As a result, GIE expects euro area stocks to outperform many of its peer markets in the developed world over the coming months.
Global gross domestic product (GDP) growth should accelerate somewhat in 2015 and 2016 from the pace of the last three years because of much lower oil prices, the avoidance of special drags on the world economy, and continuing easy monetary policies from global central banks, according to BNY Mellon Chief Economist Richard Hoey. Hoey made the comments in his February outlook.
Among the drags on the economy in recent years that are unlikely to be repeated are the weather-impacted decline in U.S. GDP in the first quarter of 2014 and the Japanese recession in the middle two quarters of 2014 due to the rise in the value-added tax, Hoey said. Furthermore, he added that in recent weeks there have been monetary policy easing moves from the European Central Bank, the Swiss National Bank, the Bank of Canada, the National Bank of Denmark, Norway’s Norges Bank, the Central Bank of the Republic of Turkey, the Central Reserve Bank of Peru, the Reserve Bank of India, and the Central Bank of Egypt, among others.
“Recent currency trends should support global growth,” Hoey said. “There should be a boost to export competitiveness in such economically weak regions as Europe and Japan, due to sharp declines in their currencies. These currency declines have coincided with a sharp drop in oil prices. As a result, they are more likely to have cyclically-appropriate anti-deflationary effects than to generate excess inflation.”
Hoey noted the recovery in global growth has been more sluggish in this cycle than in past recoveries. Despite the aggressive use of credit to finance the leveraged purchase of existing assets, he said the appetite to use credit to finance increased current spending has been restrained until now in many countries.
While Hoey is seeing tailwinds to economic growth from inexpensive energy that is likely to last for some time and the accommodative monetary policies, he points to a number of factors that could moderate the expansion in global GDP.
These restraints include a downward shift to lower trend growth in China, according to the report. China engineered a domestic credit boom a half-decade ago to limit the impact of the global financial crisis and global recession on its economy, Hoey said. However, he said the hangover from that credit boom is now contributing to a slowdown in the growth rate of China.
Hoey said the slowdown is occurring just as there is a demographic inflection point to slower growth in the Chinese labor force. He added, “We believe that the outlook for the Chinese economy is a downward shift to slower trend growth rather than a hard landing.”
Another challenge to growth cited by Hoey is the decline in the global trade multiplier. Before the financial crisis, global trade grew faster than GDP, but that does not appear to be the case now.
“As emerging markets are now becoming more dependent on domestic demand growth, the global trade multiplier has shifted down, with global trade and the global economy both growing at about the same pace,” he said.
Photo: Andreas Lehner. The Time for Sitting Back and Relaxing is Over
In the last hundred years, from 1915 to 2014, the classic 60/40 portfolio (60% equities/40% bonds) has generated 8.4% per year. That return can be broken down into 10.3% on equities and 5.6% on bonds. A period of that length obviously has its ups and downs, but despite the myriad crises over the last few decades, the figures for the last 50 and even the last 25 years are better still.
The performance of this simple strategy is not just good; it has also been consistent over time. It is then tempting to conclude that the 60/40 portfolio is both time- and crisis-proof and that investors should stick with it. The recent turbulent period is also concrete evidence of this, with a robust return of 7.2% over the last ten years. Quite an achievement in a decade marred by the global financial crisis, the Great Recession, record unemployment in many countries and sluggish economic growth.
According to Research Affiliates, since 2004 the 60/40 portfolio has beaten 9 of the 16 major asset classes. This implicitly demonstrates that it’s not easy to improve the success formula by adding an extra performance-enhancing asset.
“60/40 shows that you do not always have to take drastic steps to achieve attractive returns,” admits Jeroen Blokland, Senior Portfolio Manager of Investment Solutions. “But many of those other assets do not have 100-year track records.” And there is one further observation, of course. “The performance says nothing about the risk-return profile. Adding some other assets to the 60/40 would probably have added little in terms of performance but may well have reduced the level of risk.”
Nor is 100 years of history any guarantee for the future. The period between 1965 and 1974 was a difficult one for the 60/40 strategy, which generated a nominal annual return of 2.3%. And after adjusting for inflation the return was actually negative. That poor return was related to the high equity valuations and low bond yields at the beginning of the period. And now, in 2015, equity valuations are even higher and bond yields are even lower than they were in 1965. This could lead to an new era of low returns and Research Affiliates have given a figure for this. According to their models, the expected return for the 60/40 portfolio over the next ten years is a meager 1.2% per year.
More active – or smarter
The decision for investors now is whether to accept this or to actively adjust their portfolios. ‘Actively’ in this context does not just mean searching for ‘the new Apple’, emphasizes Blokland. “At asset-allocation level, you can shift to a larger weight in equities and less in bonds or to actively managed allocation funds. But within the parameters of the 60/40 strategy you can also search for strategies that have historically outperformed the broader market, without actually departing from the 60/40 split.”
According to Blokland, this brings you to factor plays – such as low volatility, value and momentum – that have a track record of generating extra returns and can be applied to both equities and bonds. “Not that this will suddenly turn the 1.2% return into 8%, but it may well help you generate an extra percent without increasing your portfolio’s level of risk.”
It is clear that investors who have been able to rely on the good old 60/40 strategy for years will now have to do something to ensure that their capital increases. The era of sitting back, relaxing and generating returns of 8% is coming to an end. Action is required – action in the form of active management.
