The European Fund and Asset Management Association (EFAMA) has published its latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS for November 2014. 27 associations representing more than 99.6 percent of total UCITS and non-UCITS assets at end November 2014 provided them with net sales and/or net assets data.
The main developments in November 2014 in the reporting countries can be summarized as follows:Net sales of UCITS reduced to EUR 27 billion in November from EUR 44 billion in October. This fall in net sales came despite increased net sales of long term funds during the month.
Long-term UCITS (UCITS excluding money market funds) posted increased net inflows of EUR 31 billion, up from EUR 23 billion in October. Equity fund net sales returned to positive territory in November posting inflows of EUR 2 billion, against net outflows of EUR 6 billion in October. Bernard Delbecque, Director of Economics and Research commented: “The decline in stock market uncertainty brought back net sales of equity funds to positive territory in November.”
Bond fund net sales reduced to EUR 11 billion, down from EUR 16 billion in October. Balanced funds enjoyed a pick-up in net sales to EUR 13 billion in November, up from EUR 9 billion in October.
Money market fund net sales returned to negative territory in November posting outflows of EUR 4 billion in October, compared to net inflows of EUR 22 billion in October.
Total non-UCITS net sales remained relatively steady in November at EUR 16 billion. Net sales of special funds (funds reserved to institutional investors) remained at EUR 12 billion for the second consecutive month.
Total net assets of UCITS stood at EUR 8.02 trillion at end November 2014, representing a 1.5 percent increase during the month.
Total net assets of non-UCITS increased 1.4 percent to stand at EUR 3.17 trillion at month end. Overall, total net assets of the European investment fund industry stood at EUR 11.2 trillion at end November 2014.
Photo: Ahron de Leeuw. The Emerging Consumer: It’s all About the Rise of the Emerging Middle Class
The nineteenth century industrial revolution created a substantial Western European and American middle class. Today the same is happening in emerging markets. Over the next two decades, the global middle class is expected to expand by another three billion, from 1.8 billion to 4.9 billion, coming almost exclusively from the emerging world. In Asia alone, 575 million people can already count themselves among the middle class — more than the European Union’s total population, explain Jack Neele and Richard Speetjens, managers of the Robeco Global Consumer Trends Equities strategy.
This crossover from West to East in terms of size and spending of the middle class has large implications for expected consumption growth:
Adapt to shifting local demands
The aging population in China will need new financial services to help them save for retirement. In addition, the pressure from urbanization will lead to growing demand for green technologies. The transformation is most dramatic in China, but there will be shifts across many developing economies. What these households want may be very different from the consumer demands seen in previous periods of rapid economic development. Businesses will need to tailor the products they offer to shifting local demands.
More money to spend
Over the past decades, developed economies have dominated sales of durable consumer goods. Penetration is still relatively low in many rapid-growth economies. Once household incomes approach USD 10,000, however, demand for durable consumer goods picks up. As more households in these economies move into higher income bands, they will have more money to spend on discretionary items. Demand for services such as communications, culture and recreation will grow at almost twice the rate of food spending.
Strong local positions or strong Western brands
However, this higher growth in consumer spending in emerging markets has not been an easy win for consumer companies. Many local companies prioritized sales growth, but intense competition, value-focused consumers and rising costs are making it difficult to boost the bottom line. Amid rising volatility, companies must be more careful and strategic in how they approach these markets. This is the reason why within our emerging consumer trend we focus on companies with very strong local market positions or strong Western brands.
Foto: PrimelmageMedia, Flickr, Creative Commons. Seis tendencias en real estate a vigilar en 2015
The world in which we live and work is changing rapidly and it’s sometimes difficult to spot the trends that will shape the coming years. “We have been tracking these trends and considering the potential implications for the real estate industry”, says KPMG.
“These trends are not only to be watched and accepted, there are real developments that will call for action if you are to stand out. If you anticipate those trends, real opportunities can emerge for your business”. Here’s what they’ll be watching in 2015:
Globalization
Driven by the need to diversify beyond domestic markets, global capital flows will continue to build. This will bring even greater understanding of RE markets as a whole. KMPG prediction is that the result will be an expanded RE universe with investors on the lookout for strong risk-adjusted returns.
Shift to “real assets”
Uncertainty, heightened volatility and slower growth has led to investors allocating a larger piece of the pie to “real assets”. This term comprises a variety of tangible investments that give investors options and are widely thought to provide a stable source of income in weak markets and access to capital appreciation in strengthening markets.
Increasing risk appetite
The so-called “flight-to-core” has led to significant competition for prime assets in sought-after locations. As they are currently increasing allocations to real estate, investors are being forced – through competition – and encouraged – by improving economic sentiment – to diversify. “We expect to see new geographical locations, asset classes and asset segments gain in popularity”.
Asset class broadens
Property types which would have been considered ‘specialised’ just a short time ago are now becoming mainstream. As investors increasingly seek long-term income flows, demand for assets with operating elements – such as hotels, student accommodation and so on – are receiving increasing interest, which in turn is leading to yield compression. All signs point to this continuing.
Securitization
The depth and breadth of listed REITs/companies is increasing, with more conservative balance sheets post-2009. The shift from Defined Benefit (DB) to Defined Contribution (DC) is also supporting this trend, along with the emergence of DC-compatible private equity vehicles. Will this continue into 2015? We certainly believe so.
Debt
Ongoing bank deleveraging is making space for new entrants to debt markets. “Watch this space as we believe this is the sign of things to come”.
Nuveen Investments has announced it has extended its offerings to non-U.S. investors with the availability of a new UCITS fund focused on large cap core equities. The new fund is offered via Nuveen Global Investors Fund plc through a UCITS structure.
The new fund is managed by Nuveen Asset Management (NAM) LLC, a Nuveen investment affiliate recognized as a global investment manager with a broad investment platform. As a $130 billion multi-asset-class investment manager, NAM’s collaborative approach to portfolio construction is driven by integrated research and risk management processes.
The objective of the fund is to provide long-term capital appreciation through investments in large cap core equity securities. Led by respected portfolio manager and market strategist, Bob Doll, the portfolio management team will select securities using an investment process that combines quantitative, objective analysis with fundamental, research-based measures. Securities generally are added to the portfolio based both on the ranking given to a particular security by the multi-factor quantitative models used by the management team as well as the fundamental analysis of the securities.
Photo: Moni Sternbach, European Long Short team at Man Group.. Man GLG Appoints Moni Sternbach to European Long Short Team
Man Group has announced the appointment of Moni Sternbach to its European Long Short team.
Sternbach, who joins from hedge fund business Cheyne Capital, will manage a new strategy which GLGplans to launch in Q1 2015.
Sternbach, a mid-cap specialist, joins Man GLG after almost three years as lead manager of the Cheyne European Mid Cap Long/Short strategies.
Prior to Cheyne, Sternbach was head of European smaller companies at Gartmore Investment Management, where he worked from 2002 to 2011. He has also worked at Bank of America and Deloitte & Touche and graduated from Cambridge University with an MA in Economics. He is a CFA charterholder and a qualified accountant (ACA).
Sternbach will report to Man GLG’s co-CEOs Teun Johnston and Mark Jones.
Teun Johnston said: “Moni is an experienced European fund manager with an excellent track record and he will further enhance our capabilities in the European Long Short space. His mid-cap expertise will form the basis of a new strategy which we will announce in due course and it is with great pleasure we welcome him to Man GLG.”
Moni Sternbach said: “Man GLG has a clear advantage in delivering investment returns and creating value for clients. Its leading edge infrastructure, corporate access and distribution are differentiators in an increasingly complex environment and I am hugely excited to be joining its exceptionally strong team of analysts, portfolio managers, strategists and traders.”
Photo: Daniel Schwen . Afore Banamex Grants its Fourth Investment Mandate, in Asian Equities, to Four International Management Companies
Afore Banamex announced that it has awarded its fourth international investment mandate, worth between US$500 and US$600 mn, in separate accounts to four international fund managers: Wellington Management, BlackRock Pioneer Investments, and Nomura Asset Management.
Also noteworthy is the fact that this mandate is also the fourth in the history of the Mexican Retirement Pension System, as Afore Banamex is the only pension fund manager that has generated mandates under the precept approved by the Consar in 2013.
The aim of this operation is to diversify the investment strategy through this legal precept by which Afore Banamex hires the services of the mandataries so that its clients can access investments in Asian markets, particularly in Japan, Australia, South Korea, Singapore, China, India, and Hong Kong, with the most specialized and experienced teams in financial asset management worldwide.
Gustavo Lozano, CEO of Pioneer Investments, told Funds Society that this latest mandate, which is not the first which Pioneer Investments receives, shows that “we have been able to import and offer our knowledge and skills to the asset management industry in Mexico, offering diversification strategies and providing expertise in risk and asset management which will help to solidify the pension industry in Mexico. This will benefit the country’s pensioners and savers,” he pointed out.
It should be remembered that last October Consar authorized the funding of Afore Banamex’ investment mandate in European equities to Pioneer Investments, a US$400 mn separate account which was awarded in October 2013. The total amount of that mandate, which was also granted to BlackRock, BNP Paribas, Franklin Templeton and Schroders, was US$1bn.
The combined amount of the four mandates approved to date by the Mexican Pension Funds’ System regulator exceeds US$1.8bn , including the last US$600 mn dollars of this latest Afore Banamex mandate.
As was pointed out by company sources, “Afore Banamex is still the only Afore in Mexico to implement and fund these type of investment strategies, demonstrating its commitment to innovation and efficiency, once again enabling it to offer its clients the best returns through an internal process strictly adhered to the financial system’s official standards and best practices in risk control issues.”
In “Getting Closer to Home,”Henry H. McVey, Member & Head of Global Macro and Asset Allocation at KKR, outlines key global trends that he believes will impact asset allocations for the year.
“While the general backdrop for risk assets remains favorable, we are no longer advising folks to “Stay the Course” as we did in our January 2014 Outlook piece,” McVey writes. “Rather, given where we are in the cycle and the magnitude of gains in recent years, we have begun the inevitable process of “Getting Closer to Home” in terms of our asset allocation targets. In particular, we do advise folks to raise some cash and to tilt the invested part of the portfolio to become more opportunistic in 2015.”
In the piece, McVey also outlines key themes that make compelling “arbitrages” in the global macro landscape that CIOs and portfolio managers should pursue this year. These include:
China’s slowing is not an aberration. As such, its role in the global economy is materially shifting, which means that McVey expects to see sizeable restructuring and recapitalization opportunities in sectors that previously over-earned and/or overstretched their footprints.
Many corporations still have inefficient capital structures, including too much cash and too little debt, in his view. As such, investors can still benefit from corporate and/or shareholder actions to lower companies’ cost of capital and/or improve growth, including buybacks, dividends, capital expenditures and acquisitions.
Despite a slew of liquidity in the system, many companies across both emerging and developed economies still can’t get proper access to credit. Hence, McVey still sees a compelling illiquidity premium that is worth pursuing, particularly in today’s low rate environment.
McVey suggests harnessing volatility in the liquid commodity markets. He continues to favor private real asset investments with upfront yield, growth and long-term inflation hedging relative to traditional liquid commodity notes and swaps.
Government deleveraging in the developed markets is disinflationary, which drives McVey’s thinking about the direction of long-term interest rates as well as the relative value of risk assets against the risk-free rates.
La Française REM purchased the PANORAMA SEINE and DOCKSIDE buildings, located 255 and 224 quai de la Bataille de Stalingrad respectively in Issy-les-Moulineaux (92130), ZAC des Chartreux, overlooking the river Seine, near Paris. Designed by architects Patrice Novarina and Atelier de Midi, and built by Sefri-Cime, the office complex was completed in 2008.
The acquisition includes two buildings: a seven-storey building (at 255) with 7,905 m² of office floor space; a two-storey building (at 224) with 2,082 m² of office space, including restauration facilities. The complex has 116 underground parking spaces. The global headquarters of the Sodexo group have been based there since 2008, under a twelve-year lease.
La Française REM was assisted by law firm Fairway Avocats and 14 Pyramides Notaires. The financing was provided by pbb Deutsche Pfandbriefbank, assisted by Lefèvre Pelletier & associés and Attorney Moisy-Namand. The seller was assisted by DTZ, as part of an exclusive mandate, and law firms K&L Gates and Le Breton & Associés.
Photo: Fabio Rodrigues Pozzebom/ABr. Moody's Alerts About a Substantial Increase of Default Risk for Venezuela
Moody’s Investors Service has downgraded Venezuela’s government bond ratings to Caa3 from Caa1 and changed the outlook to stable from negative.
The key drivers of the rating actions are the following: Default risk has increased substantially as external finances continue to deteriorate due to a strong decline in oil prices; In the event of a default, Moody’s believes that the loss given default (LGD) is likely to be greater than 50%.
The stable outlook is based on Moody’s view that even if the oil price drops further, expected losses to bondholders are likely to be consistent with a Caa3 rating and unlikely to reach levels associated with lower ratings. The sovereign’s senior unsecured and senior secured ratings have also been downgraded to Caa3 from Caa1, as well as the senior unsecured medium term note program and the senior unsecured program to (P)Caa3 from (P)Caa1.
Venezuela’s long-term local-currency country risk ceilings were also adjusted to Caa2 from Caa1, the foreign currency bond ceiling to Caa3 from Caa1, and the foreign-currency bank deposit ceilings to Ca from Caa2. The short-term foreign currency bond and deposit ceilings remain at NP. These ceilings reflect a range of undiversifiable risks to which issuers in any jurisdiction are exposed, including economic, legal and political risks. These ceilings act as a cap on ratings that can be assigned to the foreign and local-currency obligations of entities domiciled in the country.
Lower oil prices
The principal driver of Moody’s decision to downgrade Venezuela’s sovereign rating is a marked increase in default risk owing to lower oil prices. The recent oil price shock has exerted pressure on Venezuela’s balance of payments and dwindling foreign reserves. The price of Venezuela’s oil basket, which is typically priced at a modest discount to the price of Brent, fell to an average of $54.03 per barrel in December 2014 from an average of $88.42 per barrel in 2014. As a result, Moody’s forecasts that Venezuela’s current account balance is likely to shift to a deficit of approximately 2% of GDP in 2015 from an estimated surplus of over 2% of GDP in 2014, the first such yearly deficit since 1998. The dramatic oil price drop, which we expect will be sustained, will negatively affect the balance of payments and will more than outweigh the potential benefits of future foreign investment inflows.
Moody’s believes that the key source of vulnerability for the sovereign’s credit profile is the external accounts. Given a heavy dependence on imports, external finances remain very rigid, decreasing the possibility of import adjustment to prevent a balance of payments crisis. Foreign currency outflows in Venezuela are likely to decrease only marginally in the event of policy measures to further curb import demand and capital account outflows. Although Moody’s believes the sovereign is highly likely to honor the upcoming €1 billion Eurobond maturing in March 2015, given the large mismatch between inflows and outflows, the probability of a debt default occurring in the next 1-2 years has risen from an already high level.
The second driver of the rating action is Moody’s assessment that in the event of a default, bondholder losses are likely to exceed 50% on the sovereign’s external debt instruments. Moody’s believes that balance of payments outflows are likely to exceed inflows by a significant margin at least through 2016, leading to a significant external funding gap that would suggest material debt reduction would be required to ensure balance of payments sustainability.
Moody’s believes that the authorities are unlikely to implement forceful policy measures to curb macroeconomic distortions and imbalances in the near term. Even if implemented, measures that target (1) further administrative controls to curb imports, (2) adjustments to the multiple exchange rate regimes, or (3) raising domestic oil prices to lower consumption and marginally increase exports, are unlikely to materially alter the current conditions that heighten the probability of default.
Despite the potential for increased external bilateral financing, Moody’s estimates that even under a best-case scenario the external funding gap would not be fully covered. Moreover, Moody’s believes that the current stock of foreign currency assets, including official reserves of $22 billion at the end of December 2014, would be insufficient to cover the country’s external financing gap.
In addition to the rising risk of a balance of payments crisis, Venezuela is in the midst of an economic recession and has a highly discretionary policy framework that reflects weak institutions. These challenges more than offset its credit strengths that include low albeit rising government debt and high income levels relative to emerging market and Latin American countries.
What could move the rating up/down
The rating would face upward pressure if balance of payments prospects improve significantly given a strong recovery in oil prices or if a sufficiently large increase of financing flows ensures stabilization of external accounts, says Moody’s. Conversely, the rating would face further downward pressure if external finances weaken in the absence of a recovery in oil prices, increasing the risk of greater losses to bondholders.
The Internal Revenue Service announces the opening of the International Data Exchange Service (IDES) for enrollment. Financial institutions and host country tax authorities will use IDES to securely send their information reports on financial accounts held by U.S. persons to the IRS under the Foreign Account Tax Compliance Act (FATCA) or pursuant to the terms of an intergovernmental agreement (IGA), as applicable.
More than 145,000 financial institutions have registered through the IRS FATCA Registration System. The U.S. has more than 110 IGAs, either signed or agreed in substance. Financial institutions and host country tax authorities will use IDES to provide the IRS information reports on financial accounts held by U.S. persons.
“The opening of the International Data Exchange Service is a milestone in the implementation of FATCA,” said IRS Commissioner John Koskinen. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system.”
Where a jurisdiction has a reciprocal IGA and the jurisdiction has the necessary safeguards and infrastructure in place, the IRS will also use IDES to provide similar information to the host country tax authority on accounts in U.S. financial institutions held by the jurisdiction’s residents.
Using IDES, a web application, the sender encrypts the data and IDES encrypts the transmission pathway to protect data transfers. Encryption at both the file and transmission level safeguards sensitive tax information.
Host country tax authorities in Model 2 IGA jurisdictions and financial institutions are encouraged to begin the enrollment process well in advance of their reporting deadline. To begin transmitting information in IDES, a financial institution or tax authority will need to first obtain a digital certificate. Digital certificates bind digital information to physical identities and provide data integrity. IDES stores each user’s public key and related digital certificate. All IDES enrollees (including host country tax authorities) must obtain a proper digital certificate in order to enroll; there is a list of approved Certificate Authorities available on irs.gov.
For host country tax authorities in Model 1 IGA jurisdictions, the IRS will directly notify them to let them know when it is time to enroll. Financial institutions will initiate enrollment online on their own; in order to enroll, the financial institution will need to have registered as a participating financial institution through the IRS FATCA Registration System and have a global intermediary identification number (GIIN) that appears on the IRS FATCA FFI list. The online address for IDES enrollment can be found here. IDES runs on all major browsers, including Chrome, Internet Explorer, Safari, and Firefox and will support application-to-application exchanges through the SFTP transmission protocol enabling a wide variety of users to interact with IDES without building additional infrastructure to support transmission.
Further information on IDES can be found here. The IDES User Guide with instructions for enrolling and using the IDES can be found here. The IRS has posted Frequently Asked Questions about FATCA and IDES on irs.gov and will continue to update the FAQs as questions are received. In addition, there is a comments link on irs.gov to submit questions specifically on IDES and another for other FATCA-related questions.
