Foto: Armada Española. Los activos de los RIAs alcanzarán el 28% de la cuota de mercado en EE.UU. en 2018
New research from global analytics firm Cerulli Associates predicts registered investment advisor (RIA) and dually registered advisor assets will reach 28% marketshare by year-end 2018.
“As of year-end 2013, the RIA and dually registered segment account for 20% of total intermediated retail investor assets, and we expect that number to reach 28% by 2018,” states Kenton Shirk, associate director at Cerulli.
“The asset marketshare of the RIA channel exceeds headcount marketshare, reinforcing the fact that RIA advisors manage more assets than advisors outside of the channel, on average,” Shirk explains. “When you combine this data with our projected growth of the channel, it would seem that the RIA channel would be a high priority for asset managers. However, the channel presents unique challenges for product providers, which can reduce the appeal.”
“Ongoing growth of RIA practices with more than $1 billion in assets has occurred, and while these practices are certainly attractive on a standalone basis, they become less so when compared to wirehouse branch offices, which represent equal or larger opportunities,” Shirk continues. “The reality is that strategic partnerships with large broker/dealers ensure branch office access and consideration for inclusion in the portfolios recommended by home-office teams, which can result in millions of dollars of flows based on a single decision.”
Cerulli cautions that while the RIA and dually registered segments represent a flourishing distribution opportunity, product providers must make every effort to ensure they are creating an efficient and sustainable process to address this dispersed market.
More than 62 percent of pre-retirees now say they are “terrified” of what health care costs may do to their retirement plans, according to an annual Nationwide Retirement Institute survey. The survey reveals concern about out-of-control health care costs and the Affordable Care Act (ACA) increasing those costs.
According to the online survey conducted from Oct. 6 – 14, 2014, by Harris Poll of 801 Americans age 50 or older with at least $150,000 in household income (“affluent boomers”), 72 percent say one of their top fears in retirement is their health care costs going out of control. More than half (55 percent) believe the ACA will increase those costs and more than one-quarter of employed affluent boomers (26 percent) now believe they will never retire.
“Even America’s affluent workers don’t know how they will fund their health care costs in retirement and they don’t expect ObamaCare will help them,” said John Carter, president of Nationwide’s retirement plans business, which provides defined contribution and defined benefit plans to more than two million participants, representing nearly $100 billion in assets under management. “The attention the ACA has received in the past year has increased awareness of health care costs in retirement. We think that’s a step in the right direction, and what Americans need now is a plan to adequately prepare for those costs. It is possible. However instead of making a plan, too often the ‘plan’ is to just continue working.”
The attention the ACA has received in the past year has increased the percent of pre-retirees who feel very confident to confident that they know their personal benefits and consequences of the ACA (32 percent vs. 24 percent). Yet, pre-retirees are also more likely than last year to say they expect their biggest expense in retirement to be the cost of health care (51 percent vs. 43 percent).
Many Americans like aspects of the ACA, such as guaranteed coverage and access to multiple insurers. However, most affluent boomers (64 percent) believe the ACA will be a significant drain on the U.S. economy and will do more harm than good to their employer (63 percent). More than two in five affluent boomers (45 percent) say they would delay their retirement if they had to buy their own health insurance. Over one-quarter of parents (27 percent) say they would delay their retirement in order to keep their children on their employer-based health insurance plan.
Understanding Medicare
Over three in five affluent pre-retirees (61 percent) wish they understood Medicare coverage better, and 73 percent of those who discussed their retirement plans with a financial advisor say it is important or very important their financial advisor discusses health care costs during retirement with them when planning for retirement. Nearly two-thirds of affluent pre-retirees enrolled in Medicare did not know that Medicare does not cover long-term care costs.
Solutions available
However, 77 percent say they have not discussed their health care costs during retirement with a professional financial advisor. Of those who have talked with an advisor, three-quarters (75 percent) discussed health care costs in retirement not covered by Medicare.
To help simplify this complicated issue and encourage these discussions, Nationwide’s Personalized Health Care Assessment uses proprietary health risk analysis and up-to-date actuarial cost data such as personal health and lifestyle information, health care costs, and medical coverage to provide a meaningful, personalized cost estimate that will help clients plan for medical expenses. For those under 65, it bases its calculations on the average cost of a Silver Plan in the Affordable Care Act exchanges in their state.
“It’s much easier for advisors to have these difficult conversations when they can use a tool to provide a fact-based cost estimate based on their clients’ health risk and lifestyle,” said Kevin McGarry, director of the Nationwide Retirement Institute. “They now can break down and simplify a complex topic to take clients from terrified to confident.”
Photo: Roland zh. Vontobel Asset Management Sharpens Positioning to Achieve Further Global Growth
Vontobel Asset Management – which is currently part of Bank Vontobel AG – will be run as an independent legal entity and a wholly-owned subsidiary of Vontobel Holding AG in future. This strategic realignment is intended to form the basis for further growth in the global asset management market.
The creation of an independent legal entity is in line with Vontobel Asset Management’s strategy of operating internationally. The independence of asset managers is assigned high importance in most asset management markets and is a key selection criterion applied by international consultants and clients. This realignment underscores the international growth strategy pursued by Vontobel Asset Management, and this efficient and modern organizational structure takes account of global competition, says Vontobel.
The new company will operate under the name ‘Vontobel Asset Management AG’. The transformation of the business unit into an independent legal entity is subject to the approval of the Swiss Financial Market Supervisory Authority FINMA and the General Meeting of Shareholders of Bank Vontobel AG on April 29th, 2015.
Opportunity International, the premier global financial services organization for the poor, announced Credit Suisse will help support a new education initiative to improve the quality, availability and affordability of education in impoverished areas of Latin America, Africa and Asia.
“Investing in education is one of the most decisive ways to help people work their way out of poverty,” said Vicki Escarra, Global CEO of Opportunity International. “Research has shown that education raises a student’s future economic status and can even extend life expectancy. We look forward to continuing our important partnership with Credit Suisse to expand educational opportunities for thousands of youth through access to financial services.”
Building on a successful six-year partnership with Credit Suisse, this new three-year program will launch education finance initiatives in Colombia and Tanzania and expand existing programs in the Dominican Republic, Ghana, Kenya, Malawi, Rwanda, Uganda, India and the Philippines to help more than 530,000 children and youth through a combination of innovative savings, lending, insurance and financial education products and services. Specifically, the initiative will provide school improvement loans to help build and expand schools, hire and train teachers, provide lunches and help pay for other activities to increase the number of students in school and improve the quality of education they receive. The initiative will also provide school fee loans to help parents pay tuition and buy books and other school supplies to ensure their children stay in school regardless of family income fluctuations.
“More than 67 million children worldwide are not enrolled in schools, often because their family simply cannot afford the costs of school fees, tuition or supplies, or because quality education isn’t available where they live,” said Manuel Rybach, Global Head Corporate Citizenship and Foundations for Credit Suisse. “Credit Suisse and Opportunity International understand that investing in education is an investment in the future. That’s why we’ve partnered— to ensure that children around the world have opportunities to learn and grow.”
An estimated 7.1 million people have already benefited from the partnership between Opportunity International and Credit Suisse’s Microfinance Capacity Building Initiative through support of electronic-banking transactions, training for microfinance staff and financial services for people in impoverished areas. The new “Empowering Generational Change through Education” initiative aims to achieve the following goals:
Provide 2,200 school improvement loans to private school proprietors, impacting the access and quality of education for approximately 484,000 students.
Provide 52,000 school-fee loans to parents and students to help parents to pay tuition and fees, impacting the education of approximately 161,000 students.
Pilot and expand additional educational services to provide young people with a formal education and the skills they need to get a job. Services provided will include child savings accounts and youth financial education in Africa; and the EduSave program—an innovative, free insurance program to cover a child’s school costs in the event of a parent or guardian’s death or permanent disability.
Provide education finance bank staff with training and development opportunities to help them service Opportunity’s growing educational programs.
Increased investor exposure to alternative assets is being led by private equity, with two in five Limited Partners (LPs) planning an increased target allocation to the asset class in the next twelve months, according to CollerCapital’s latest Global Private Equity Barometer. However, although one third of investors say they will also increase their allocation to real estate, the same proportion will reduce their allocation to hedge funds. (Separately, almost two thirds of LPs say they expect large private equity investors to review their hedge fund exposure in the wake of CalPERS’ decision to stop investing in the asset class.)
Still-strengthening return expectations explain private equity’s popularity with investors. Almost all (93% of) LPs are now forecasting annual net returns greater than 11% from their private equity portfolios over a 3-5 year horizon (up from 81% of LPs two years ago). A quarter of LPs are forecasting net returns of over 16%.
“In today’s low-yield world it’s hugely impressive to see such a high proportion of private equity investors expecting annual net returns of more than 11%,” said Jeremy Coller, CIO of Coller Capital, “and Limited Partners are telling us there is more to play for. They believe private equity returns could get even stronger with further enhancements to General Partners’ operational skills and more specialised funds.”
Areas of LP interest
Investors give several indications where they see attractive opportunities in this edition of the Barometer.
Emerging economies remain a strategic imperative – with 15-20% of LPs planning to begin or increase PE commitments to China, Hong Kong, Taiwan and South East Asia.Another popular region is Latin America, where one in seven LPs expect to begin or increase commitments. India is the area over which investors betray most uncertainty: the same proportion of LPs (8%) plan to increase and to reduce their commitments in the subcontinent.
LP backing for funds taking minority positions in private companies looks to remain strong. Half of investors are already committed to such funds, and an additional 13% of LPs said they are likely to seek this kind of exposure in the future. Investors will also be interested in GPs with strong buy-and-build credentials – two thirds of LPs believe buy-and-build investments will outperform other buyout investments in the next 3-5 years.
Private equity investment in ‘real assets’ is another increasingly popular area. Two thirds of LPs already have private equity exposure to energy-focused funds; half have private equity exposure to real estate; and between a quarter and a third of LPs have investments in funds focused on mining, shipping, timber and farmland. The Barometer shows that all these areas will attract new investors over the next three years.
Credit investment is another focus for investors – one third of LPs say they plan to scale up their exposure to credit over the next 12 months. Banks’ relatively weaker position in credit markets is illustrated by LPs’ views on future sources of debt funding for buyouts: just over a third of investors expect banks to take a bigger share of buyout debt in the next three years, compared with almost two thirds expecting a higher share for CLOs and high-yield bonds.
The Barometer confirms that the trend toward more direct investing by LPs (i.e., proprietary investments into private companies and co-investments alongside GPs) will continue. Approaching half (45%) of today’s LPs do no direct private equity investing or have less than a tenth of their exposure to ‘directs’, but only one in five LPs expects to be in the same position in five years’ time.
Gender diversity in private equity firms
The majority (88%) of private equity investors (most of whom are male) believe that a higher proportion of women in senior positions at GPs would have little direct impact on private equity returns. However, three in five LPs also believe that PE firms benefit more broadly from gender diversity. Around 70% of these investors say that greater gender diversity at senior levels results in better team quality and team dynamics in private equity firms; and around 40% see benefits to GPs’ governance, investor relations, and risk management.
DC pension funds
Attempts are currently being made to solve the problems associated with defined contribution (DC) pension plans investing in private equity. The Barometer shows that a large majority (88%) of Limited Partners expect these initiatives to succeed, and that DC plans will make private equity commitments over the next five years. However, most (70% of) investors believe DC pension schemes will remain a minor source of capital for the industry.
Additional Barometer findings
The Winter 2014-15 edition of the Barometer also charts investors’ views and opinions on:
The economic cycle and the risk of deflation in the eurozone
Photo: Seattle Municipal Archives. Why are Americans so Pessimistic about the U.S. Economy?
Five years after the Great Financial Crisis (GFC), despite improvements in GDP growth and employment, the U.S. public still seems to be oppressed by a cloud of negative sentiment. A recent PewResearch Survey found that a majority of Americans still perceive the economic climate as poor or fair at best (83%), a level still far below pre-crisis sentiment. Mike Temple, portfolio manager of the Pioneer Dynamic Credit Fund, explains the reasons for this pessimism.
In the eyes of many, a freight train of seemingly unsolvable problems –cost and quality of education, income disparity and structural unemployment– is leading to an accelerating decline of the U.S. and a possible near-term repeat of the GFC that ravaged investor portfolios. “We don’t deny that many daunting challenges lie ahead. But dynamic, longer-term trends are opening up entirely new avenues of invention and industry, which could potentially usher in an era of stunning growth and prosperity. We are optimists and think it is time to step back from the fear and uncertainty that currently characterizes the public mood and explore these trends, their impact on the economy and their implications for investors”, said Temple.
The Root of The Problem: What Happened to the Jobs?
“We believe much of the pessimism is rooted in the challenges that the labor sector is facing. The chart below provides evidence that the rate of recovery in employment, in the last two recessions, has slowed dramatically, which has led to a national debate as to whether the rise in unemployment is structural (permanent) or merely cyclical”, affirm the portfolio manager.
The Federal Reserve believes that the U.S. unemployment story remains largely cyclical (translation: all we need is a robust recovery). Some distinguished voices suggest that we have entered an era of “stagnation” and need to lower our expectations, said Temple, believing the employment challenge is evidence of an economic malaise brought on by an era of diminishing innovation and demographic headwinds. “While we agree with the Stagnation argument that the demographic tailwind of the Baby Boom era is behind us, we are convinced that the longer-term employment problem is linked to the technological replacement of human workers“, says Pioneer Investments research.
The Weak Employment Cycle Began a Long Time Ago
The weak employment cycle began a long time ago with the deceleration of the labor force growth driven by secular trends, which is the foundation of the Stagnationist argument – demographics, including retiring baby boomers, female labor and immigration.
The “participation rate” (the share of the working-age population that is actually in the labor market) has been on the decline since 2000 as more people retire and leave the workforce. However, it is the younger population and the most productive sector of the workforce (25-54 year olds) that is the key driver. This segment should be the most resilient to cyclical and demographic trends, but it has clearly suffered a setback.
From Geographical Outsourcing to Technological Outsourcing
Growing competition from China is one reason for structural weakness in the U.S. job markets, explain Temple. Relocation of manufacturing to areas of the world, where labor was dramatically cheaper resulted in a loss of jobs in the U.S. Despite losing 7 million manufacturing jobs over three decades and manufacturing declining as a percentage of GDP (currently 13%, down from high teens in 1990’s), the absolute size of manufacturing output still grew. Other major sectors such as Construction, Mining, and Information have also experienced a broad decline since the beginning of the 21st century.
“Yet over this time frame, the economy has continued to grow. What gives? We believe that the geographical labor arbitrage that took place in the manufacturing sector over the past 25 years masked a wider phenomenon of technological labor arbitrage. And it is technological arbitrage – which we will examine in our next blog – that will dramatically shape th U.S. economy in the coming decade”, concludes Temple.
Asset managers, pension funds, banks and insurers expect to be spending more on tax and regulatory-related change in 2015 and for some years beyond, according to a new poll by BNY Mellon.
The poll, conducted at BNY Mellon’s recent third annual Tax and Regulatory Forum in London, found that 71% of the almost 250 delegates attending the event expected to see higher costs in the coming year compared to 2014.
While at the start of the event only 41% felt tax and regulatory-related costs would increase in 2015 – and 5% expected to see spending decline – by the conclusion of the day’s programme, which explored some 20 tax and regulatory changes, the consensus among delegates had shifted significantly.
Key findings of the poll included:
UCITS V will be a key focus for providers and clients alike in 2015. 43% of delegates believe the cost of compliance will be higher than for the Alternative Investment Fund Managers Directive (AIFMD), with 29% saying it would be about the same or less.
As was the case with AIFMD, delegates were concerned about the proposed timing of upcoming regulatory changes and the potential for another bottleneck around compliance and approvals to materialise in Q1 2016.
At this stage 65% of delegates polled were undecided as to when they will implement the necessary changes mandated by UCITS V.
Questioned as to when they expect to see the current wave of regulatory change to materially recede, 38% of delegates said 2017, while 54% said never.
When asked about outcomes for investors, responses echoed findings from previous BNY Mellon surveys. 51% of delegates expected investors will see higher costs and less choice – but also better protection.
There was marked optimism – 82% of delegates – in that firms also see some opportunities arising from the current changes, with half of those respondents saying these opportunities would be material to their own business.
Asked to identify those opportunities, 38% said cost savings, while 24% cited new markets and new asset classes. Only 15% identified new product developments.
Paul North, head of product, Europe, Middle East and Asia at BNY Mellon, said: “There seems to be a consensus that the next two years will be the most demanding in terms of tax and regulatory work and costs. Despite this, we also note the continued optimism among asset managers when they consider their longer term prospects around, and ongoing interest in, reducing costs and maintaining the pace of product development.”
“The global trend towards tax transparency is at the heart of regulatory reform,” said Mariano Giralt, head of EMEA tax services at BNY Mellon. “The challenge for financial institutions is to keep pace with a host of new initiatives which include FATCA, the OECD’s Common Reporting Standard and potentially a Financial Transaction Tax which would cover 11 EU countries. These initiatives are adding significant compliance costs for financial institutions.”
Photo: Clyde Rossouw, head of Quality at Investec Asset Management. Investec: Quality Businesses Typically Create Dependable Earnings Growth in Difficult Market Circumstances
Clyde Rossouw, Head of Quality at Investec Asset Management, explains his outlook for 2015.
What has surprised you most in 2014?
In terms of market performance the biggest surprise in 2014 has probably been the strength of the US stock market compared to most other markets around the world. In fact, it has been the only game in town; we have had a strong dollar and a great performing US stock market almost at the expense of everything else. We know that at the margin people have had the expectation that the US was getting better and that looks like it is running its course now.
How will ‘quality’ companies fare in 2015?
The ‘quality’ businesses we target have typically been able to create dependable, meaningful earnings growth in difficult market circumstances such as we have now, i.e. falling bond and commodity prices. Therefore, we would expect to see a similar consistency of earnings in 2015. In the past, when market participants have started to look for more dependability, quality assets have moved back into focus. As a result, we would expect a relative re-rating of such assets and that is typically the type of business in which we would look to invest in our strategies.
Where do you see the greatest opportunity in 2015?
We are focusing on two distinct categories: Companies that have pricing power and business models that are able to embrace ‘disruption’ risk.
Typically, businesses that have pricing power are able to put through inflationary or above inflationary rates of increases in their product prices. Tobacco is an obvious example: every year excise duties go up all around the world and even though the incidence of smoking is declining, tobacco companies have this pricing power mechanism built into their business model and are able to put up prices.
The other opportunity that we believe investors should focus on is businesses that have very strong market shares or business models that are able to embrace disruption risk. Technology is changing the way in which businesses have to operate. Therefore, investing in companies that are part of the disruption, but at the same time have very strong cash-generating business models, such as Microsoft, is, we believe, one way of offsetting some of the pricing risks that are at play in the market place.
What are the biggest risks to these views?
The biggest risk to any equity-based investment strategy would be if markets were to be just dismal and disappointing. We have had various episodes in the past, such as the financial crisis in 2008/9, where there was no obvious tailwind for stock market performance, and also in 2011, when there was a fear the euro zone might implode.
The biggest risk for us, therefore, is that even though we are invested in businesses that we think are more dependable in terms of their earnings, there could potentially be a significant drawdown because they are part of the equity markets.
How are you positioning your portfolio?
The businesses we invest in are typically of high quality. We also have sector preferences and have done a considerable amount of work looking at which parts of the market are able to produce companies that have intrinsically high quality characteristics. So, in terms of the natural leanings in our portfolio, we will always have a relatively high weighting in consumer staple names, certain parts of the pharmaceutical market and also within areas of technology. This does not mean that other parts of the market do not interest us, but generally they will have smaller weightings.
A cornerstone philosophically of the way we construct our portfolios is what some people would conceive to be inherent biases. But, based on academic evidence, we would rather invest in parts of the market where we believe we can maximise our probability of investment success.
In terms of individual stocks, our top ten holdings comprise a technology company, three pharmaceutical companies, a non-bank financial stock and a range of consumer staples companies with a specific focus on beverages, food, tobacco and home & personal care products. We still see opportunities across the board, but it is very much motivated by bottom-up opportunities and looking for superior businesses that have those key characteristics.
Backed by its longstanding experience developed around its four core business activities, La Française has finalized its new visual identity after more than three years of intensive development. The Group is thereby donning a new image symbolising its new strategy which is resolutely international and firmly grounded in its four core businesses.
It also represents the relationship of trust which it fosters with its affiliates.
More modern, unifying, dynamic and visible, this new identity expresses the Group’s values, namely cohesion and responsibility, audacity and creativity, elegance and finesse, all combined with experience and expertise.
On this occasion, the Group is redesigning its fourth core business, which is to become La Française Global Direct Financing, and its Asset Management business is renamed La Française Global Asset Management. Within this business activity, La Française des Placements is taking the name La Française Asset Management.
This approach reflects the highly cohesive organization between the Group’s different areas of expertise, focused on four core businesses:
La Française Global AM (Asset Management);
La Française Global IS (Investment Solutions);
La Française Global REIM (Real Estate Investment Management);
La Française Global Direct Financing.
Xavier Lépine, Chairman of the Board of La Française, said: “It was essential to symbolise the Group’s new profile through our visual identity, to be perfectly aligned with our positioning, our values and our ambitions. The Group’s strength is based on these four core businesses and our capacity to connect and share our areas of expertise to provide our clients with even more innovation: these four loops are the perfect symbol of this, representing the links we have been forging with our clients for many years.”
The rapid pace of both innovation and obsolescence in technology offers a constant flow of investment opportunities worldwide. Hyper-connectivity, cyber security, smartphones, the “digital wallet” and Big Data are among the major themes three technology analysts from across Natixis Global Asset Management are closely following. They share their insight along with 2015 outlooks for technology in the U.S., Europe and Asia.
Tony Ursillo, CFA, Equity Analyst, Portfolio Manager Loomis, Sayles & Co. explain: “On the consumer technology side, we are intensely focused on the relentless shift to mobile smartphone usage. Apple’s introduction of the iPhone in 2007 marked the beginning of the modern era. In those seven years, smartphones have achieved an installed base of over two billion users globally, with more than one billion new smartphones being sold every year”.
While the early play on mobile was oriented around device sales, including tablets, “we believe the more lucrative opportunity now revolves around expanding usage of smartphones by that already installed base. We are focused on companies that offer compelling applications or solutions that can be adopted by that base”, says Ursillo.
Expanding the social network
“Within the corporate or enterprise end market, we see two powerful trends that are far outpacing the trend line of about 3% growth in information technology (IT) spending”, tells the portfolio manager. The first is the shift of IT resources to “the cloud.” The cloud can simply be thought of as a hyperscale data center environment managed by an IT vendor who acts as a servicer, providing access to resources that historically would have been implemented and managed on premise by the enterprise itself.
The second powerful enterprise trend, continues Ursillo, is the heightened concern around securing enterprise data. High profile credit card breaches at retailers such as Target, Home Depot, and Neiman Marcus, as well as online sites like eBay, have put the spotlight on how vulnerable the payment information and other personal data of tens of millions of U.S. consumers are to an increasingly sophisticated hacker community. And that has made security breaches not just a network risk, but a business risk.
Is the “digital wallet” here to stay?
It´s no surprise that many companies are positioning themselves to gain a foothold in the online and mobile payments space. Giants like Apple, Amazon, Google and PayPal already have brand-name recognition and can leverage hundreds of millions of existing customer accounts with attached credit card or bank account information. “We maintain our belief, however, that the vast majority of these transactions will continue to traverse the existing financial network infrastructure, largely controlled by Visa and MasterCard”.
Meanwhile, Hervé Samour Cachian, Head of Value & Opportunities – European Equities says that Natixis Asset Management technology focus today is on everything that is related to Hyperconnectivity – the use of multiple communication systems and devices that allow us to remain constantly connected to networks and streams of information. This includes trends like Internet of Things, Big Data analytics, digital commerce & payment and social media. There are numerous applications, including driverless car technology, Google GlassTM and contactless payment systems that could be game-changers in the future.
“Emergence of the digital economy is the main theme in technology for us. Digitalization is a tremendously disruptive force in society and it knows no boundaries. Companies that fail to amend and to adapt their business model accordingly could be at risk, while companies that are preparing for this new paradigm can be offered multiple opportunities to reap the benefits”, explains.
“We are finding a few European tech companies connected to digital payment solutions that appear attractively valued today. For example, Paris-based Ingenico, which is a global leader in seamless payment solutions for mobile, online and in-store channels, combines three key drivers in our view: structural growth, market share gain and expansion up the value chain. We believe it could benefit long-term from the adoption of chip cards in the U.S. and the emergence of mobile payments. Another area of growing interest interconnected to it all is digital security. Within this space, European firms such as Gemalto are leading providers of innovative digital security solutions globally”, affirms Cachian.
Outlook for European technology
Despite a gloomy macroeconomic picture for Europe and other parts of the world, Natixis GAM have a positive outlook for the technology sector in 2015. Search for growth could lead investors to increase their exposure to the tech-related stocks and especially the ones that either sell or create cutting-edge products. “We believe that Internet of Things is the area of technology that could offer the most promising opportunities in 2015 – driven by gadgets and the widespread adoption of wearable technology.”
Ng Kong Chiat, Equity Analyst, Portfolio Manager of Absolute Asia Asset Management conclude that2014 extended the strong growth pattern for the technology sector seen over the past few years. Asia-ex-Japan technology stocks were driven by the launch of Apple’s iPhone 6 and iPhone 6 Plus in September. They were also boosted by the expiry of Microsoft’s support for Win XP earlier in the year – which gave rise to and supported a corporate PC replacement cycle. Further penetration of smartphones into the emerging markets and the moderate economic recovery in the developed markets, which prompted more corporate technology spend, also supported growth in the industry this year.
“But these positive factors in 2014 could turn into hurdles for the industry in 2015, as they have created a large base and are beginning to lose momentum. In addition, some of this growth was linked to a one-time event which we may not witness in 2015. Accordingly, we believe there will be less impact from the next version of the iPhone to be released in the New Year, as well as other Apple products. Also, we believe there will be a less robust PC replacement cycle in 2015, slower penetration of smartphones worldwide and more moderate technology capital expenditures by global companies. With such a backdrop, it may be trickier to navigate in the technology space”, argues.
