Uncertainty about the timing of a U.S. Federal Reserve rate hike continues to intensify. But, warns a leading global analyst at one of the world’s largest financial advisory organizations, investors should start preparing now for when the inevitable rise comes – and there are three key approaches to consider.
The warning from Tom Elliott, International Investment Strategist at deVere Group, follows Minneapolis Fed PresidentNarayana Kocherlakotaon Tuesday setting out his case for waiting until the second half of 2016 to start raising interest rates. This is contrary to the opinion of most Fed Policymakers, including the Fed Chair Janet Yellen, who believes that rates will need to start rising this year.
Mr Elliott explains: “Currently, the situation regarding when the Fed might move away from its zero rates policy of the last six years, is as clear as mud. However, when, finally, the Fed does start to raise interest rates the impact on capital markets could be severe. Therefore, investors who are, understandably, uncertain, should start preparing for this. I would advise investors to consider three steps.”
He continues: “First,find a multi-asset benchmark that you trust will deliver solid risk-adjusted returns throughout the business cycle. It maybe a 60 per cent global equity, 40 per cent global fixed income portfolio or a variation of that. Having such a benchmark should be a part of your long-term investment strategy.”
“Second,refuse to take active positions in what looks like a difficult investment environment. Hog the benchmark. Sitting on the fence is better than being caught on the wrong side of a central bank decision. Rebalance quarterly, forcing yourself to cash in winners and to buy losers. This discipline will protect you from rash decision making during periods of market volatility.
“Third, wait until the Fed has begun tightening monetary policy before returning to active bets.”
Mr Elliott adds: “Finally, if the need to take active positions is too strong to resist, I do think that Europe, excluding the UK, and Japan will continue to outperform. Europe, because of improved economic growth and the weak euro; and Japan because of rapidly improving corporate governance that is resulting in dividend and return on equity growth. It could be worth considering balancing this position with an underweight in U.S. large cap and emerging equities.”
Photo: Institution for Money, Technology and Financial inclusion. EM Growth to Bottom Out in Second Half, NN Investment Partners Says
After five years of growth adjustment, the risks within the emerging markets start to look more balanced, according to Maarten-Jan Bakkum, Senior Emerging Market Strategist at NN Investment Partners (former ING IM)
Global headwinds and obstacles to growth remain, but are not getting worse. Without an accident in China, emerging market growth should bottom in Q3 or Q4. China demand slowdown is structural and continues to put pressure on the emerging markets in terms of trade, but a correction in the housing market is slowing and monetary easing has started. US monetary policy normalisation continues to put pressure on EM capital flows, but ECB QE has refuelled the global search for yield. In this context, EM central banks see room to cut interest rates.
Maarten-Jan Bakkum, Senior Emerging Market Strategist at NN IP, said: “Rapid leverage growth has created macro imbalances and system vulnerabilities, pushing policy makers into action in some countries, including: Indonesia, South Africa and Brazil. Policymakers in Indonesia in particular, stood out. Reducing macro imbalances within the country with the central bank remaining relatively prudent and president Joko Widodo’s government removing fuel subsidies and thereby creating fiscal room for infrastructure investments.”
Also, South Africa has shown better growth momentum, strong earnings growth, improving terms of trade, and the government has shown more fiscal discipline.
Bakkum continues: “Other areas that are currently showing promise, include Mexico. Mexico is one of the few markets with a positive growth momentum. Its large exposure to the US and low sensitivity to China are key positive factors making this an overweight for us.”
ING IM believes that strong earnings momentum and solid capital inflows are the main reasons to like the Philippines at the moment. Reforms and more policy discipline continue to have a positive impact on growth prospects of India, where the lower oil price helps too. Also, better economic governance and lower political risk have helped Egypt’s growth to recover to pre-2011 levels.
Easier financial conditions can compensate temporarily for the lack of structural change but EM currencies remain vulnerable. More depreciation is likely to be needed to enforce the reforms that reduce macro imbalances and create engines of future growth.
Over 30 professional investors attended Aberdeen Asset Management’s presentation on Asian Equities in Miami. Aberdeen AM: "It is Becoming Important to Reconsider the Fact of Not Having any Exposure to Japanese Equities"
Over 30 professional investors attended Aberdeen Asset Management’s presentation on Asian Equities in Miami last month. Adrian Lim, CFA and senior investment manager for the management company, shared his views on the effect of US rates and the evolution of the US dollar over Asian equity assets, as well as the impact of falling oil prices and the effectiveness of reforms. During the event, the management company submitted its equity strategies for the Asia Pacific region and Japan. Following the presentation, attendees enjoyed a cocktail on the terrace of one of the most emblematic buildings in Downtown Miami, the heart of its financial center.
China vs Hong Kong
Aberdeen AM is known as a stock picking management company. Therefore, Lim maintains that “quality is the first thing we look for when selecting an asset.” One example that epitomizes this philosophy is that Aberdeen’s Asia Pacific strategy portfolio has a debt to equity ratio that is half of that recorded by its benchmark. As well as focusing on asset quality, Aberdeen looks for companies with attractive valuations to create concentrated portfolios (the Asia Pacific strategy portfolio currently has about 55 assets), in which stability is the main priority. “Of the Top 10 holdings on our portfolio, six have been in the portfolio for over 10 years,” Lim points out.
In this strategy, which does not include Japan, Aberdeen now has an overall weight in China and Hong Kong similar to its benchmark. Separately, however, exposure to Hong Kong is higher than the index, while exposure to continental China is lower. Lim again stressed the importance of quality when selecting stocks: “Chinese companies are generally of lower quality, Chinese rule of law is less strict, and there has been cheap access to capital in China for many years, and therefore companies have not had to focus too much on getting a good return on their business; they have become very large, but really not too profitable.”
Citing a Korean cellular phone manufacturer as an example, with very strong exposure in the cell phone market in China, Lim also adds that “it is not necessary to invest in shares listed in China to access Chinese domestic consumption.”
A Look at the Japanese Market
When talking about Japan, Lim says that “talking to an investor who has spent 20 years investing in Japan, and who, fed up with not profiting from their investment, most likely left the market at the beginning of this last rally, is not the same as talking to someone who has been investing in Japan only during the last three years, and who, therefore, has had a much better experience.”
Can we believe that it will be different this time? According to Lim, Shinzo Abe has been in power longer than most recent governments. “His commitment to introduce inflation in the economy is tremendous, and even if its not very popular with the Japanese population, he has managed to get reelected and to push a number of reforms, although he still has a long way to go.” In any case, as pointed out by the Senior Investment Manager, “it is becoming important to reconsider the fact of not having any exposure to Japanese equities.”
Even though the environment in Japan is currently more positive, we mustn’t forget that we are talking about an economy whose growth remains weak, and so “we choose exporter stocks such large tobacco or automotive manufacturers, whose behavior does not depend on domestic consumption, or companies selling components and materials to Japanese companies whose final market is an exporter, so that ultimately the demand comes from outside,” says Lim.
In terms of valuation, Lim points out that we have to take into consideration that we are talking about a developed market with high multiples, although not as high as those in Europe or the US.
India, an Emerging Market in its Purest Form
When talking about India, Lim explains that it is the purest example of an emerging market in the region. “It’s a challenging market, but at the same time, very subjective, with much ‘noise’ for the investor,” he says. According to Lim, the Modi government has been the best for the country in recent years, but you cannot ignore the fact that the Indian economy is slowing down, “and Modi cannot do much to prevent it; we cannot expect Modi to work an economic miracle for the whole of India such as the one he orchestrated in the state of Gujarat, of which he was governor before being elected as Prime Minister.” In such a market, it is particularly important to be a good stock picker: “If in Japan we are more inclined towards exporting assets, stock selection in India is purely directed towards the domestic consumer market,” says Lim.
CC-BY-SA-2.0, FlickrFoto: Moyan Brenn. Amanda Augustine se incorpora al equipo de análisis de BBVA Compass
Amanda Augustine has joined the BBVA Compass economic research team, led by the chief economist Nathaniel Karp. The bank’s six-member research team analyzes the U.S.economy and Federal Reserve monetary policy. The economic research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates.
Before joining the bank, Augustine worked as a project manager at consulting firm American World Services Corp. in Washington, D.C., focusing on the health care sector.
“We are pleased to have Amanda join us as her expertise on health care will add depth on a topic that’s so important to our economy,” said Nathaniel Karp, chief economist for BBVA Compass.
Augustine earned her MBA from the IESE Business School in Barcelona, Spain, and a bachelor’s degree in business administration and Spanish from American University in Washington, D.C.
Photo: Bert Kaufmann. Global ETP Flows of $36.1bn in March Ensured that 2015 Began With the Best Opening Quarter on Record
Global ETFs gathered $36.1bn in March to lift Q1 flows to $97.2bn, nearly triple the total from Q1 2014. The figures came largely from investor demand for non- U.S. equities, whereas the all-time high of $138.0bn from Q4 2014 was concentrated in U.S. equities. This demonstrates the ability of the ETP industry to respond quickly to changing market conditions while maintaining strong growth. Only one other quarter outside of the past two has ever topped asset gathering of $100bn, showed BlackRock ETP Research.
March was driven by accelerating non-U.S. developed markets equity flows of $32.6bn, nearly as much as the prior two months combined. Year-to-date flows of $71.0bn have almost reached the full-year total from 2014, spurred on by attractive valuations in Europe and Japan relative to the U.S. The divergence of increasingly accommodative ECB and Bank of Japan monetary policy with that of the Fed has also been a key factor.
Flows for Europe and Japan, as well as broad developed markets (EAFE), have benefitted significantly from currency-hedged equity funds, which had a record month gathering $13.4bn. This trend is expected to persist. The consensus is the U.S. dollar is in the midst of a strengthening cycle and these cycles have historically lasted for six to seven years.
Europe equity established a new monthly high of $14.8bn. While pan-European equities led with $13.4bn, German equities added $1.4bn and have already captured $4.8bn year-to-date.
“Investors recognized attractive valuations in European equities following the announcement of the European Central Bank’s ambitious quantitative easing program, adding $36.5bn into pan-European ETFs in Q1. European-listed ETFs are close to reaching $500bn in assets, as investors from Europe, Asia and Latin America added $34.2bn of new flows in Q1, the best quarter ever for the European ETF industry”, said Amy Belew, global head of ETP research at BlackRock.
Japan equity brought in $8.3bn, the second highest monthly total ever. Flows were diversified across Japan-, U.S.- and Europe-listed funds. Japanese stocks retain upside even as the Nikkei 225 index approaches its highest level in 15 years. Corporate governance reforms have shown progress and pensions have announced further reallocation of assets to equities.
U.S. equity flows improved by $6.2bn in March, helped by the Fed indicating after its March meeting that though rates may soon rise, the pace could be slower than previously expected. It was the second consecutive month of inflows, but year-to-date redemptions are still ($8.4bn) due to the impact of large cap weakness during January.
Emerging markets equity outflows resumed, hitting ($7.3bn) after stabilizing briefly in February. Broad EM equity and China equity redemptions overwhelmed a thirteenth consecutive month of India equity inflows.
Fixed income flows stayed ahead of record pace for the year, but slowed to $4.3bn in March. Appetite for European fixed income remained healthy as the ECB began the bond buying program announced in January. Flows totaled $3.6bn across sovereign as well as high yield and investment grade corporate bonds.
U.S. fixed income, however, had modest outflows of ($0.2bn). Investment grade corporate and broad U.S. funds each gathered $1.1bn, but high yield corporate momentum from recent months stalled and U.S. Treasuries experienced outflows of ($3.2bn).
Photo: Jeff Belmonte. Worldwide Investment Fund Assets Reach All-Time High at EUR 28 Trillion in Q4
The European Fund and Asset Management Association (EFAMA), has released its latest international statistical release containing the worldwide investment fund industry results for the fourth quarter of 2014 and the whole year 2014.
Investment fund assets worldwide stood at a new all-time high of EUR 28.29 trillion at end 2014, reflecting growth of 3.9 percent during the fourth quarter and 18.9 percent since end 2013. In U.S. dollar terms, worldwide investment fund assets totalled US$ 34.35 trillion at end 2014
Worldwide net cash inflows increased in the fourth quarter to EUR 335 billion, up from EUR 290 billion in the third quarter, thanks to strong net inflows to worldwide money market funds.
Long-term funds (all funds excluding money market funds) recorded net inflows of EUR 220 billion during the fourth quarter, slightly down from the EUR 223 billion registered in the previous quarter.
Equity funds attracted net inflows of EUR 44 billion, up from EUR 24 billion in the third quarter.
Bond funds posted reduced net inflows of EUR 63 billion, down from EUR 79 billion in the previous quarter.
Balanced funds also registered reduced net sales of EUR 52 billion, down from EUR 72 billion in the third quarter.
Coincidently, long-term funds registered net inflows of EUR 68 billion in both the United States and Europe during the fourth quarter.
Money market funds registered net inflows of EUR 115 billion during the fourth quarter, compared to EUR 67 billion in the third quarter of 2014. This result is largely attributable to positive net sales recorded in the United States of EUR 98 billion, whereas Europe registered net outflows during the quarter of EUR 10 billion.
Overall in 2014, worldwide investment funds attracted net sales of EUR 1,169 billion, up from EUR 848 billion in 2013. Worldwide long-term funds registered net inflows of EUR 1,015 billion in 2014, as all categories of funds registered net inflows during the year. The United States recorded net inflows into long-term funds of EUR 302 billion, with Europe registering net inflows of EUR 471 billion.
At the end of 2014, assets of equity funds represented 40 percent and bond funds represented 22 percent of all investment fund assets worldwide. Of the remaining assets money market funds represented 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 (51.2%), Europe (28.2%), Australia (4.7%), Brazil (4.4%), Canada (3.7%), Japan (3.1%), China (2.1%), Rep. of Korea (1.0%), South Africa (0.5%) and India (0.4%).
Carlos Fuenmayor - Foto cedida. BancTrust abre mesa de trading en Reino Unido
BancTrust has annunced that its London-based subsidiary, BancTrust Securities (Europe), has received a Variation of Permissions notice from the Financial Conduct Authority to enable it to commence secondary trading. The firm will now be dealing as principal for Asset Managers and Financial Institutions mainly based in Europe and the Middle East interested in investing in Emerging Markets Fixed Income.
Carlos Fuenmayor, CEO of BancTrust & Co., stated: “I’m honored to say that our London office has now been granted permission to operate its trading desk and offer true market color as well as execution. Our specialists in Emerging Markets provide unequaled coverage as well as exceptional investment opportunities.”
RobecoSAM, the investment specialist focused exclusively on Sustainability Investing (SI), announced the launch of its impact investing offering. RobecoSAM’s Environmental Impact Monitoring tool is the first of a broad suite of impact investing solutions to be released by the Company. The platform will leverage RobecoSAM’s expertise in SI including its proprietary corporate sustainability database, and will cater to institutional investors seeking both societal and financial returns on their investments.
RobecoSAM’s Environmental Impact Monitoring tool enables investors to quantify, communicate and optimize the environmental impacts of their listed equity and corporate bond portfolios. It measures the impact of investors’ portfolios on a series of tangible environmental indicators and indicates the magnitude of their portfolios’ environmental impact per invested dollar. The key quantitative indicators screened for are: greenhouse gas (GHG) emissions, energy consumption, water use and waste generation. The data can subsequently be used to enable investors to make better informed decisions on how to optimize their portfolios in order to maximize the positive or limit the negative environmental impacts of their investments.
Michael Baldinger, CEO, RobecoSAM: “The launch of our impact investing platform reflects RobecoSAM’s commitment to SI and is a response to investors’ increasing interest in investing with social and environmental improvement in mind. With 20 years’ experience in sustainability investing, no one is better positioned to bring a comprehensive impact investing platform to the market than RobecoSAM.”
Daniel Wild, Head of SI Research & Development, RobecoSAM: “Our Environmental Impact Monitoring tool draws on RobecoSAM’s deep sustainability investing expertise and unique corporate sustainability database to measure the environmental impact per invested dollar of investors’ portfolios. We use this information to optimize investors’ listed equity and corporate bond portfolios and achieve positive environmental impact without compromising financial returns.”
Environmental Impact Monitoring Leverages RobecoSAM’s SI Expertise
The Environmental Impact Monitoring tool uses the data collected from RobecoSAM’s Corporate Sustainability Assessment (CSA) and long-standing experience in analyzing financially relevant environmental data. Based on its CSA, an annual ESG analysis of more than 2,900 listed companies, RobecoSAM has compiled one of the world’s most comprehensive sustainability databases. RobecoSAM’s proprietary research and sustainability insight, gained through its direct contact with companies, serve as the foundation for measuring and monitoring the impacts of listed equity and corporate bond portfolios.
Photo: Ged Carroll. Emerging Market Currencies Face Renewed Pressure
The outlook for emerging market debt (EMD) is two-sided, said INM IM in its las market analysis. On the one hand, the global liquidity environment remains benign, thanks to low developed-market bond yields and a limited risk of rising yields, particularly in Europe and Japan. On the other hand, EM endogenous factors remain weak, as growth continues to struggle and reforms are still unconvincing.
Global liquidity still very supportive
The liquidity environment for EMD has remained supportive in the past few months. Even in the past weeks, when US bond yields rose by around 40 basis points, the search for yield remained strong. Hard-currency debt (EMD HC) benefited, as did high yield credits in developed markets. “As US bond yields rose and market expectations for the first Fed rate hike moved from autumn to summer, hard-currency debt clearly outperformed local-currency debt. A lot of this outperformance can be explained by the rebound of the oil price since the last week of January, as EMD HC had suffered relatively strongly from the sharp drop in oil prices. But the deteriorating prospects for EM currencies have also played a role”, explained Jacco de Winter, senior financial editor at the Dutch firm.
EM growth momentum has deteriorated
Two things have changed in the past few weeks, said de Winter. Firstly, EM growth momentum has deteriorated sharply. “Our own EM growth momentum indicator has declined sharply in the past weeks, after being stable at the neutral mark for several months. Of the 18 markets in the index, only Thailand, Chile and Mexico have a positive growth momentum now. The other 15 are negative or neutral. The worst momentum can be found in China, Indonesia and Russia”.
Secondly, monetary easing in the emerging world has become more pronounced, with recent interest rate cuts by Indonesia and Turkey. Twelve of the main 16 emerging economies are now on an easing path. This is the result of weak growth and falling inflation, and because policy makers want weaker exchange rates to compensate for lower raw material prices and/or lost competitiveness. Lower raw material prices continue to put pressure on many emerging economies, particularly the fundamentally weak ones. “This explains why in the past weeks Nigeria stopped defending its currency and Azerbaijan decided to devalue its currency (by 33%!) for the first time since 1999”, stated ING IM expert.
Volatility in EM currencies has increased
“The combination of weaker growth and overconfident central banks is a bad one for EM currencies, which have become more and more volatile recently. The fear that we have had for years now – that EM exchange rates eventually will have to depreciate much more to fully reflect deteriorated EM fundamentals – is becoming more relevant”, argued de Winter.
“In our view, EM central banks are counting too much on carry- trade-related hot money inflows. With the first Fed rate hike now only half a year away – this is what the Fed fund futures have priced in – countries like Turkey and Indonesia, with their high current account deficits and fragile domestic banking systems, should be more cautious. Especially since recent capital flows to the emerging world have already been weak”, afirmed ING in its analysis.
“Policy makers see no end to the growth slowdown. At the same time, inflation is declining. This probably makes them think that more currency depreciation is desirable, instead of a risk”, concluded.
Greg Jones, head of retail distribution for EMEA and Latin America at Henderson Global Investors. Courtesy photo.. Henderson GI: “Our Plans Over the Next Five to Six Years, are a Fivefold Increase in Latin America, to Reach 10 billion in Assets”
If we compare today’s Henderson Global Investors with the one of a few years ago, the image is almost unrecognizable. Since its origins as a UK based management company dedicated almost exclusively to the management of European assets, and focused on a more local (or, at most, continental) investor, the company has been immersed for the past few years in a process of strong changes which have transformed it into a global manager with a base of international investors and a distribution footprint that spans the globe, from Chicago to Singapore or Hong Kong (with a few exceptions, such as the African market). In fact, it has more than 900 employees in 19 locations around the world, spread across Europe, USA and the Asia-Pacific region.
Its acquisitions led it down this path of growth, internationalization, and business diversification: it bought Gartmore in 2011, providing it with a powerful basis for managing alternative assets; in 2013 it acquired a holding in 90 West AM, the Australian management company which specializes in natural resources; That same year it bought H3 Global Advisors, specialist in alternative raw materials and also Australian; and a year later it acquired the American company Geneva Capital Management, (specializing in growth stocks of small and mid cap). All of the above acquisitions aimed at not only diversifying their assets, but also at becoming a truly global player.
And in that vein, its medium-term objective is to build an investment infrastructure and also a global front office, as was explained by Greg Jones, head of the management company’s retail distribution for EMEA and Latin America, during an interview with Funds Society. “About five years ago we hardly had any business at all outside the UK,” he says; but now things have changed a lot.
One of the clearest pillars in that desire for globalization is in the US: “The United States is the market with the greatest savings; we started 12 years ago through a purely organic growth built around three equity strategies. It is a market where it is difficult to compete, so you have to offer something different, and therefore, we focus on the international stock market.” Currently, their plans are not just to maintain strong organic growth, but also to build a true “management factory” in the country, in line with the strategy set in recent years to build distribution capabilities on a global basis and aligned with the management company. “We want to build front offices and have local distribution capabilities,” he explains. In this regard, Jones anticipates that they will shortly hire a person in Miami to develop their plans and cover the US offshore market.
The fact is that Henderson GI is strongly committed to the US offshore market, one of its major areas of interest. “For a Latin American entrepreneur, these markets are more stable from a political point of view, and therefore, it’s natural to mobilize towards offshore centers in the US, and not just in Miami” the expert points out.
Overall, their plans are to hire over twenty people during the next few years, most of whom could join between 2015 and 2016, in order to meet the objectives of its strategic plan, which aims to double the company’s assets under management in 2018 (assets under management in 2013 amounted to 76.6 billion Euros). The company aims to have a balanced base and grow both institutionally and in distribution.
Latin America: another key element of this journey
Besides the US, Latin America is another key point in this global journey, where GI Henderson’s business, which they seek to increase fivefold in approximately the next five years, has evolved considerably since attracting its first client, whose fortune was generated in the region’s railroad business. “Two and a half years ago we had no assets in South America and we now have 2 billion. In five to six years, our plans are to have 10 billion,” he explains, very confident in the growth potential offered by the region.
What are the reasons behind such confidence? “It is an attractive market because it is very open, to me it is more attractive than Asia,” says Jones. “It is more modest in terms of assets under management, but the investor base is more Europeanized, due to its history. Furthermore, the time horizon of investment in Asia is shortsighted, and turnover is higher than in Europe or South America,” he explains. Other factors supporting Latin American history reside in demographics and compulsory private pension savings in some countries; and also in their lack of capabilities. “The capabilities in equity management, especially in European and global equities, are still very low in the region and there we see an opportunity to present our range of international equities at a very early stage,” says Jones.
Within the pension market, Chile is the management company’s greatest client and its priority, due to its attractive policy and regulatory framework, market size, and openness. Jones also highlights the exciting opportunities in Peru and Colombia: in Peru, Henderson GI is the active management company with the greatest presence in their pension funds. Yet, the interest in passive management, which is taken strategically when in their opinion it should be tactical, is increasing in these markets. Their plans also include the Mexican Afores. However, taking into account that the institutional and pensions market in LatAm is a more volatile market than retail, the success of the management company is to also reach that distribution client and achieve sustained growth within this segment, which is something they are accomplishing.
To continue growing in LatAm, the company has partners in different markets such as Santander, which through its Select range distributes Henderson funds in countries like Mexico or Brazil. And, according to Jones, Brazil has now been completely sidelined in its list of priority markets: “There are many management companies which are closing down; in order to succeed in that market you have to compete with high domestic interest rates and if you can’t, there is no point. Moreover, it is a very closed and complicated market; we are in no rush to get there”.
An array of unique products and a diverse range
In order to achieve his objectives, the expert does not lose sight of the idiosyncrasies of their investors and their various demands. “In Latin America the investor primarily seeks growth, used to investing in their local markets and with the emerging bias: growth will be the theme that dominates during the next five to ten years.” Meanwhile, in Europe, the issue of income is stronger, like in the US, where there is high demand for vehicles that offer high dividends, as the population ages. “But in Latin America the investor is younger, has to save for a mandatory pension fund, and there is a large structural support for investments that seek long-term growth,” explains Jones.
The fact is that another of Henderson Global Investors’ major changes in recent years has been the diversification of its product range: from equities (which accounted for 99% of its assets in 2009) to a much wider range (in which the weight of equities representing around 60%, and wherein the fixed income products (with around 22% and strengthened capacities), multi-asset, and alternatives have gained weight, a trend that will continue in the coming years). Therefore, Henderson GI has gone from a phase in which they were more focused on investment at European level (and equity) to another in which they are seeking to add value by investing in all types of markets from global equities to bonds or emerging market debt.
“There are management companies which, with the good performance of a fund, they gain trust and are given the benefit of the doubt when launching new products, even though there may not be a history of returns. We are not at that point yet, although 83% of our funds beat their benchmarks with a horizon of three years and we are building the distribution infrastructure required” said Jones, who aims to be given the benefit of the doubt when innovating. Something they do often through a process which has changed in recent years (the generation of the idea can come from managers or the sales team, and before its release has to pass through the Product Strategy Group as well as through an implementation committee) .
That innovation was very strong in 2014, with the launch of a global equity fund focused on income (a segment where they could generate more products), another of global natural resources (under the belief that long-term inflation and growth of the population will increase the demand for natural resources); and several credit funds, including one focused on the emerging world, an area “that still offers value.” Looking ahead, according to Jones, product innovations could focus on segments of global emerging debt, equities (both in Europe and Latin America) and liquid alternative products (in the institutional space).
And, all through active management. “Active management does not try to beat a benchmark every single day … it’s about strategic long-term investments, while passive management is more tactical and short-sighted. We have to educate investors in this,” he adds.
