HSBC Headquarters in Curitiva. Photo: Morio . HSBC Brazil Lays off 800 Employees, with the Final Figure Expected to Reach 1,000
The Brazilian subsidiary of the British bank HSBC has laid off about 800 employees during the last week, and according to calculations by the Workers’ Guild, which were published on Saturday by the newspaper “O Estado de Sao Paulo” and picked up by the local press, that figure is expected to reach 1,000.
Funds Society contacted the bank’s subsidiary in Brazil to confirm the news; the company, however, declined to comment on the news which has been reported in the local press and is echoing the international financial press.
The National Confederation of Financial Sector Workers (Contraf-CUT) reported that a group of workers at the Curitiba Agency (southern Parana state capital) went on strike in protest at the cuts that the Group is carrying out in the country.
Employees at the Curitiva administrative center in Sao Paulo also joined Curitiva in the stoppages. According to Contraf, layoffs are taking place across the country and represent 4.5% of the group’s workforce. In Brazil, the bank has over 1,700 branches and offices in 550 cities.
Likewise, HSBC Brazil has more than 21,000 workers nationwide and is the fourth largest private bank in the country and the seventh in terms of assets. As for the results of the British bank during the third quarter, although it recorded a 7% increase in net profits, results in Latin America fell by 56% before tax, mainly because of its business in Brazil and Mexico.
Photo: Allan Ajifo. Old Mutual Global Investors Launches Pan African Fund
Old Mutual Global Investors has announced the launch of the Old Mutual Pan African Fund. The Fund will be managed by Cavan Osborne, supported by Peter Linley, of Old Mutual Investment Group (Pty) Limited, a South African partner company of Old Mutual Global Investors.
Osborne and Linley are part of a 17 strong team based in Cape Town. This team includes 12 analysts, all of whom are either country or sector specialists. Osborne was named Best African Fund Manager by African Investor in September 2014 for his management of Old Mutual Investment Group’s existing African capabilities which are available for South African investors. The existing Old Mutual Pan African Fund has US$11.75 million AUM (as at 30 September 2014) and has delivered annualised US$ net returns of 13.4%* over the past three years.
The strategy, which is suitable for clients looking to invest over a five to seven year period, aims for long-term capital growth by investing in companies that benefit from economic developments and growth across the African continent. This includes those listed on regulated African stock markets and other global markets, where more than 50% of their revenue or profit comes from Africa. The strategy will invest in approximately 30 to 40 stocks and will be seeded with US$ 50 million.
Cavan Osborne, comments on the opportunities for investors in the new fund: “We believe that now is an excellent time for investors with a slightly higher appetite for risk to invest in Africa. The continent provides a diverse range of investment opportunities and is currently going through a massive growth period with economic forecasts suggesting there are good returns to be had over the next few years”.
“At Old Mutual Investment Group our focus is to identify those companies that we believe will benefit from growth in Africa, building a diverse investment portfolio that will deliver long-term capital growth for investors.”
Julian Ide, CEO, Old Mutual Global Investors, adds:“This is an exciting development for Old Mutual Global Investors as it is the first time that we have collaborated with our colleagues in South Africa to launch a fund for a global client base. We are committed to ensuring our fund range offers a variety of asset classes and approaches for clients. We believe that there are excellent investment opportunities to be found within Africa and our new Fund will offer clients access to the top talent in the industry.”
30 St. Mary Axe Building - The Gherkin. The Safra Group To Acquire London Premier Property 30 St Mary Axe
The Safra Group, controlled by Joseph Safra, and Deloitte, the receiver for the London property 30 St Mary Axe, today announced an agreement under which Safra will acquire 30 St. Mary Axe, a 180-meter office tower that is the second-tallest building in the City of London. Financial terms of the transaction were not disclosed.
Completed in 2004, 30 St Mary Axe, otherwise known as The Gherkin, provides highly flexible space and outstanding views of London. It is an iconic part of the London skyline, recognized around the world as a great achievement by noted architect Lord Norman Foster. It encompasses approximately 50,000 square meters of office space and its largest tenants are Swiss Re and Kirkland & Ellis.
Safra Group said, “The acquisition of 30 St Mary Axe is consistent with our real estate strategy of investing in properties that are truly special – at the best locations within great cities. While only ten years old, this building is already a London icon that is distinguished from others in the market, with excellent value growth potential. We intend to make the building even better and more desirable through active ownership that will lead to a range of enhancements that will benefit tenants.”
Photo: Stephen Thornber, Portfolio Manager of Threadneedle’s Global Equity Income . Threadneedle’s Global Equity Income Recaps Negatives and Positives for the Last Ten Months
Stephen Thornber, Portfolio Manager of Threadneedle’s Global Equity Income strategy, reviews the developments of the past ten months or so and outlines how the team has responded to recent challenges.
Style rotation
April and May of this year witnessed a significant movement away from growth stocks and into their value and defensive counterparts. Threadneedle’s positioning in more growth-oriented dividend stocks meant that it did not benefit from this rotation, unlike the more traditional, low-growth dividend strategies, which did gain an advantage.
Threadneedle continues to believe that its long-term strategy of investing in growing companies with high and sustainable dividend yields should generate superior returns. While it expects interest rates to increase only slowly, Threadneedle says we should be wary of low growth ‘bond proxies’ in the current environment.
Regional allocation
A diverging economic performance has seen US equities significantly outperform those in Europe and Asia this year. Additionally, the dollar has strengthened against the euro and most global currencies. Threadneedle’s Global Equity strategy has been positioned underweight the US, partly due to the fact that American stocks traditionally offer relatively low dividends.
Over thirty per cent of the portfolio is invested in the US, and Threadneedle could increase this exposure either through taking larger positions or selecting additional American stocks. However, they will continue to construct the portfolio from the best individual high-dividend stock ideas, which means that it is likely that they will remain structurally underweight the US market relative to the benchmark.
Sector allocation
The portfolio has been underweight the technology sector, which has outperformed this year. It has also been overweight the telecommunications sector, which has underperformed.
Thornber states that the portfolio will continue to be constructed by picking individual stocks on their merits rather than allocating by sector. In the past the team has had considerable success by investing in Asian technology companies with high dividend yields such as Delta Electronics. But the majority of US technology stocks, (even dividend payers such as Microsoft), remain well below their yield threshold for investing in a stock. The strategy will thus likely maintain its bias against technology. Within telecommunications, Threadneedle continues to avoid highly-indebted legacy, fixed-line operators, but favors exposure to younger, mobile-focused players, and those in faster-growing economies.
Exposure to China
The authorities in Beijing have tightened credit restrictions in order to cool China’s overheated property market. Consequently, sentiment towards companies with both direct and indirect exposure has weakened. The portfolio has been overweight Asia, and some of the more economically-sensitive Asian stocks to which they have exposure have underperformed.
Exposure to beta within Europe
Within the portfolio’s overweight position in Europe, exposure has been concentrated in Scandinavia, Germany, France and Switzerland. Unfortunately this has not shielded the strategy from deteriorating confidence, particularly following events in Ukraine. Positions in the media, financials, construction, industrials and telecoms sectors have all underperformed. Threadneedle continues to have confidence in the outlook for other investments held in Europe, but they are reviewing the scale of their overweight positioning given the softening outlook.
Acknowledging the positives
Notwithstanding the challenges outlined above, the strategy has benefited from positive investments this year. Highlights included the purchase of L Brands (Victoria’s Secret), in February, when the stock was depressed following weather- affected December results. The original investment case was based on both improving results in the US, as the economy brightens, and its global store roll-out plans. Since investing, the stock has paid two dividends, and gained c.20% on improved sales results and sentiment.
Elsewhere, UK healthcare stock AstraZeneca has outperformed following a takeover bid from Pfizer, which was ultimately rejected. Threadneedle recognized the attractive free cash-flow generation and improving prospects for the large cap pharmaceutical sector as early as 2012, as a number of companies moved towards or through patent expiries on major drugs. With fresh innovation, particularly in the area of immunoconcology, and tax-driven M&A, investor appetite for the industry has dramatically improved. We think AstraZeneca remains an attractive stand-alone investment, but would not be surprised should Pfizer return to the deal-making table in the future.
Conviction in the strategy remains intact
While recent performance has disappointed, the strategy has built an excellent long-term track record over the last seven years by patiently investing in ‘Quality Income’, i.e., companies with high, sustainable and growing dividends. Threadneedle plans to continue pursuing the approach that has underpinned this performance and is working hard to ensure that the good record is maintained. Thornber notes that investors should be aware that the portfolio has a defensive bias, and therefore its best relative performance usually occurs in weaker periods for the market. In that respect, he would remind investors that the last two years have been very rewarding, and that caution should be exercised in extrapolating recent trends over a longer period. It is also important to note that the strategy acts on a two to three-year view when taking investment decisions, and is prepared to ride out periods of underperformance to deliver its long-term objectives.
Foto: Moyan Brenn. AllianzGI Launches Flexible Emerging Markets Debt Fund
Allianz Global Investors has announced the launch of the Allianz Emerging Markets Flexible Bond Fund.
“We firmly believe that strong economic-growth prospects, favourable demographics and markedly improving fundamentals mean that emerging markets debt (EMD) is set to perform over the longer- term, despite any liquidity risk from a rise in US interest rates or country-specific geo-political tensions,” said Greg Saichin, CIO of AllianzGI’s EMD business and a 26-year veteran of the asset class.
The Allianz Emerging Markets Flexible Bond fund will invest across the full range of emerging markets debt instruments, including companies and countries of any credit rating or currency. The flexible approach enables the fund’s experienced team to construct a portfolio based on their conviction views of an asset class where individual securities can exhibit an exceptionally wide range of risk and return.
“The launch of this fund represents a significant milestone in our plan to make AllianzGI a benchmark in global emerging markets debt management. As a team of active, specialist EMD managers we understand and are able to navigate the diverse risks associated with this vast and varied asset class,” added Saichin, who has been a flexible bond investor for nearly 10 years having been an early pioneer of the approach.
Nick Smith, Head of European Retail Sales (Ex-Germany) at AllianzGI, added:
“This fund, which covers the full EMD spectrum, will give investors the opportunity to access carefully identified, high-conviction growth opportunities across some of the world’s most dynamic and diverse geographies, currencies and sectors.”
“This is an asset class where experience really counts. With no two emerging markets the same, our regional teams are able to act in clients’ interests in local time, using their skilled, experienced eyes to unlock the very best buying opportunities.”
The fund is a Luxembourg domiciled SICAV, available through the AGIF (Allianz Global Investors Funds) platform, a vehicle AllianzGI uses to distribute its funds to a number of markets across the globe. The fund is currently available to institutional investors in the UK and will be made available to retail investors later this year.
AllianzGI’s Emerging Market Debt franchise was launched in October 2013 on the conviction that emerging economies will expand more quickly than developed markets, offering potential for superior returns. The team is now 10 strong, with portfolio managers and analysts in London, New York and Hong Kong.
AdvisorShares announced that the AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS) has received a Five-Star Morningstar Rating for both its three-year and overall risk adjusted performances from inception through October 31, 2014 out of 347 funds in Morningstar’s Mid-Cap Blend category.
TTFS is managed by TrimTabs Asset Management (TrimTabs), a Sausalito, Calif.-based SEC registered investment advisor affiliated with TrimTabs Investment Research, the renowned independent institutional research firm founded by Charles Biderman that focuses on equity market liquidity.
In pursuing its investment strategy, TTFS invests in companies that shrink their equity float—the total number of shares publicly available for trading—while growing free cash flow and reducing leverage on their balance sheets. These are important attributes that differentiate TTFS from a passive approach to buyback investing. Utilizing a quantitative algorithm, the manager screens approximately 3,000 U.S. companies on a daily basis and then invests in their highest ranked 100 stocks for TTFS’ equal-weighted portfolio. TrimTabs’ liquidity research shows that companies using free cash flow to shrink the trading float of shares create a potentially profitable supply and demand imbalance as more money chases fewer shares, and TTFS’ performance reinforces that notion. Since its inception on October 4, 2011, and through October 31, 2014, TTFS has outperformed the Russell 3000 Index.
Morningstar compares each ETF’s risk-adjusted return, with at least a three-year history, to the open-end mutual fund rating breakpoints for each of its respective categories. Consistent with the open-end mutual fund ratings, TTFS earned its five-star ranking as being in the top 10% of funds – that includes both ETFs and mutual funds – in the Mid-Cap Blend category.
“We are pleased that TTFS becomes yet another domestic equity strategy from AdvisorShares transparent actively managed ETF suite to earn a Five-Star Morningstar Rating™,” said Noah Hamman, chief executive officer of AdvisorShares. “Although statistically speaking it’s difficult for active equity managers to outperform their benchmark indexes, it’s not hard to find those managers who produce alpha especially when they’re fully transparent. This ranking is further testament to TrimTabs industry-leading portfolio management delivered with the sought-after benefits of a transparent active ETF structure.”
“For decades, our industry-leading liquidity research has shown that companies with positive free cash flow that engage in float shrink can create a profitable supply and demand imbalance as more money chases fewer shares,” said Mr. Biderman, chief executive officer of TrimTabs and co-portfolio manager of TTFS. “Our key assumption is that the enterprise value should not drop at companies that use a portion of their free cash flow to reduce the number of shares outstanding. Indeed over the past three years we have discovered that price of the remaining shares have gone up by more than the percentage of share count reduction.”
The increased market turbulence in the last couple of weeks is driving investors to question if they should be repositioning their investment portfolios, whether the current volatility is a new normal, and what will happen to different asset classes as interest rates start to rise and inflation moves further up the agenda.
Now in its nineteenth year, the newly launched 2015 Long Term Capital Market Return Assumptions by J.P. Morgan Asset Management aims to help investors answer these burning questions and navigate the increasingly complex investment universe.
Anthony Werley, Chief Portfolio Strategist in J.P. Morgan Asset Management’s Endowments and Foundations Group, and one of the leading authors of the paper, said, “It has been six years since the end of the great recession and we are certainly on the road to normalization. In general, due to continued headwinds, we believe that diversification across geographies and asset classes will be rewarded in the longer term.”
He continued, “Globally, we see decoupling continuing as the eurozone and Japan actively pursue easier monetary policies and the monetary policy cycle turns in the UK and US. In the US, we believe growth will be constrained compared to prior cycles and that inflation will remain range bound. In addition, long-term nominal return expectations for US treasuries, corporate bonds and equities are more subdued and the implied risk premia arguably offers limited protection against any missteps in the policy normalization process.”
The Assumptions put forward different considerations and opportunities for investors with different objectives, for example:
Opportunities for investors in search of diversification:
Use diversified hedge funds as fixed income substitute
Invest in commodities for their diversification benefit
Add duration in non-US government bond markets where central banks are easing
Opportunities for investors in search of higher returns:
Reconsider the case for emerging markets where valuations are lower and top-line growth is likely to be higher
Add direct or indirect leverage while funding rates are low
Invest in less liquid markets such as value-added real estate and private equity
As well as providing vital information to investment decision makers across all types of investors, including pension funds, wealth managers, insurance companies and endowments, the Assumptions also form the investment principles around J.P. Morgan Asset Management’s multi-asset portfolios, which include defined contribution target date funds, multi-asset income funds and tailored strategies within the Solutions Group.
Photo: Tuxyso . Advent International Raises Largest Private Equity Fund Dedicated to Latin America
Advent International announced that it has received $2.1 billion in commitments for Advent Latin American Private Equity Fund VI (“LAPEF VI” or the “Fund”), reaching the Fund’s hard cap after less than six months in the market. LAPEF VI is the largest private equity fund ever raised for Latin America.1 Advent’s previous fund dedicated to the region, LAPEF V, closed on $1.65 billion in 2010.
Over 60 institutional investors participated in LAPEF VI, including public and corporate pension funds, endowments and foundations, funds of funds, sovereign wealth funds, family offices and other financial institutions. The majority of the capital came from limited partners in LAPEF V, with Advent admitting a select number of new strategic investors into the Fund as well. Approximately half the capital was raised from North American investors, one-quarter from European investors and the remainder from institutions in Latin America, the Middle East and Asia.
“We are pleased with the strong support we received from both existing and new investors,” said Advent Managing Partner Patrice Etlin. “We believe the high level of demand reflects our leadership position in Latin America based on our strong 18-year track record and differentiated strategy for creating value in companies. Latin America continues to be an attractive region in which to invest. It is a large, growing market with an expanding middle class, opportunities for productivity enhancement, a high degree of family ownership and limited competition from other financial sponsors relative to the size of the markets.”
Continuing the strategy of its predecessor funds, LAPEF VI will focus on control-oriented investments in later-stage companies throughout Latin America, investing mainly in Brazil, Colombia and Mexico. The Fund will target sectors where Advent has significant experience both regionally and globally, including business and financial services; healthcare; industrial and infrastructure; and retail, consumer and leisure.
“LAPEF VI underscores our longstanding commitment to investing in attractive opportunities in our target sectors throughout Latin America,” said David Mussafer, Managing Partner and Co-Chairman of Advent’s Executive Committee. “We believe our industry and local market expertise, combined with our global resources and operational approach to creating value, provides us with a distinct competitive advantage in the region. We are pleased investors continue to recognize this and we remain focused on exceeding their expectations.”
Foto Cedida. Greg Saichin, CIO de deuda de Mercados Emergentes de Allianz GI. Greg Saichin repasa su primer año en Allianz GI
Greg Saichin joined Allianz Global Investors on 23 September 2013 to build a new emerging market debt business. A 26-year veteran of the asset class, here is his personal reflection on the journey and his hopes for the future.
“I walked through the doors of Allianz Global Investors for the first time last September with a sense that big things were about to happen. The company had energy and momentum following its transformation to a single brand and I was excited and proud to be asked to create a new business in this challenging asset class that I know and love.
The so-called taper tantrum was still fresh in my mind, but I was confident in my plan to assemble a team of experienced portfolio managers, credit analysts and traders, who would be able to protect and build value for clients when US interest rates finally rise. Twelve months on, I can tell you that the team has exceeded my expectations and I am still more than a little surprised at how far we have come in so short a space of time. One year at AllianzGI has been like four or five years anywhere else!
Let me share with you some of the important milestones from our journey so far.
The first challenge came for me and my colleagues, Oleksiy Soroka and Zeke Diwan, when we took over management of the Allianz Emerging Markets Bond strategy just three months after entering the company. By April 2014, we had been joined by a further five professionals – Naveen Kunam, Shahzad Hasan, Vlad Andryushchenko, Eoghan McDonagh and Daniel Haas we launched three new funds to extend the global EMD coverage and complete the first stage of my strategic plan. We launched a fourth fund in the US at the beginning of September, taking total assets under management to an impressive US$1.8bn. I could not be more pleased with this progress, but this is just the beginning of a very ambitious plan to make Allianz Global Investors a benchmark in global emerging markets debt management.
We are sovereign specialists and credit experts, who combine top-down country analysis with bottom up credit research to construct portfolios across the entire EMD risk spectrum.
Emerging market debt is a vast, varied and at times volatile asset class that can deliver a valuable contribution to overall portfolios in the hands of experienced, specialist investors. Given this scale and complexity, I felt it was essential for Allianz GI to have a global presence augmented by decentralized decision making so that our regional teams are empowered to act in the interests of clients in real time.
Our coverage of Latin America, Emerging Asia and Central & Eastern Europe, the Middle East and Africa is hence driven out of New York, Hong Kong and London, where I am pleased to say that we are regarded as local investors, with all the privilege and credibility that status conveys.
Our investment process benefits from duality as well. We are sovereign specialists and credit experts, who combine top-down country analysis with bottom up credit research to construct portfolios across the entire EMD risk spectrum. How does this work in practice, I hear you say. Well, take Chinese real estate as an example.
Around 20 to 25 million people a year are moving from the Chinese countryside to the cities, requiring significant investment in urban infrastructure. Great sovereign angle. Yet, there is not enough public finance available for all these projects, which is where bottom up analysis of the private companies that have stepped up to fill the funding gap can be so invaluable.
Quite simply, you cannot afford to enter the sector through third level builders in third tier cities without a firm conviction. In this context, we look for well-run companies that can pre-fund cash flows throughout the lifecycle of a construction project, usually because they have existing credit lines and a strong relationship with local banks. They must also have a track-record of delivering projects on time and be on good terms with the local authorities, which are influential if not key to this entire sector.
Another example of personal relevance to me, is my native Argentina. I have anticipated that it would default twice in the last 13 years and I cut my exposure to zero ahead of both occasions. A money manager needs to understand the emotional drivers that may impact investment decisions and flows in the wider markets without falling victim to such influence himself. This was an example, however, of how the diverse cultural backgrounds in our team give us a unique insight into how events will unfold in a particular country. On both those occasions, the market thought that Argentina would avoid a default, and on both occasions I knew the market was wrong! Similarly, in the CEEMEA region, we took early action to diversify away from Russia before the full extent of the country’s involvement in Ukraine had unfolded. As a native of Ukraine, Oleksiy’s cultural insight was crucial to that decision.
AllianzGI’s EMD team has achieved a huge amount in a short space of time, but we have ambitions to do far more in the years to come. In 2015, we plan to further refine our investment process to ultimately scale up conviction ideas into multiple client solutions. As much as I am proud of what we have achieved, I am even more enthused about what we will do in the year ahead.”
Allan MacLeod, director de Distribución Internacional de Old Mutual Global Investors. Old Mutual Global Investors nombra a Allan MacLeod director de Distribución Internacional
Old Mutual Global Investors announced that Allan MacLeod has joined the business in the newly created role of Head of International Distribution.
Based in London and reporting to Warren Tonkinson, Head of Global Distribution, Allan will be responsible for expanding Old Mutual Global Investors’ footprint in the global financial institutions and international sector. The business has already made steady progress in increasing its market share in this sector, however, it is widely recognised that this is a key sector where significant future growth opportunities exist.
Allan 25 has years of experience in the asset management industry. He spent 21 years at Martin Currie in a variety of senior roles including eight years managing money. He set up and ran the hedge fund business and had a number of international sales and client service roles, including running global distribution for the firm. He was also a member of the executive committee and a main board director. He left Martin Currie in 2011 and joined Ignis Asset Management in 2012 as Head of Global Accounts and spent two years building their business in the Middle East, Japan, Asia, Australia and North America.
