Foto: Fondo Monetario Internacional Fotógrafo/Stephen Jaffe - Fotografías de la Reunión Anual del FMI 2007, FMI. ¿Exuberancia irracional 2.0?
The warning signs of new asset bubbles are growing almost by the day. Major institutions, like the International Monetary Fund (IMF) and the Bank for Internatinal Settlement (BIS), as well as individuals who have been right at pointing out bubbles in the past – such as Raghuram Rajan, Governor of the Reserve Bank of India, who correctly anticipated the US real estate bubble – have all started issuing words of warning.
Stefan Hofrichter, CFA, Head of Global Economics & Strategy at Allianz Global Investors, has written a report which was discussed in Allianz GI Investment Forum in Frankfurt last month where he addresses the following issue:
Are we currently witnessing the creation of a new asset bubble or, even worse, a series of asset bubbles fuelled by ultra-easy monetary policy?
The debate should not come as a surprise: US equities were just a few percentage points off their record highs as of the day of writing the report, and other major equity markets have reached all-time highs or multiyear highs over the course of 2014. Bond spreads – be it corporate bonds, emerging market bonds or euro-zone sovereign bonds – are tight by historical standards, albeit not at historical lows. In addition, real estate prices have rebounded forcefully over the past few years in the US, the UK and several euro-area countries. House prices have risen, especially in countries that did not suffer from the burst of a debt-financed real estate bubble at the end of the last decade. This is particularly true for China, other major emerging markets – like Turkey, Brazil and India – and several industrialized markets, notably Hong Kong, Singapore, Canada, Norway, Sweden and Israel. Allianz GI therefore thinks it makes sense to update its research on asset valuation and asset bubbles.
You may access the complete report through this link, though, these are some of the conclusions:
EQUITIES: Based on the cyclically adjusted price-earnings ratio (“CAPE”), also known as “Shiller PE”, global equities look roughly fairly priced and in line with long-term average multiples. European equities, especially in the periphery, even look cheap on this metric. The same holds true for emerging market equities, which are again trading at a discount of around 20 % compared to equities from industrialized countries and are at their lowest valuation reading since 2006 – and at a similar discount as they were in the mid-1980s.
While US equities today are undoubtedly at high multiples compared to their own history, valuations are not in bubble territory and do not preclude a further rise in stock prices. Current valuations are no reason to become ultra- cautious on equities at this juncture, even though current valuations are likely to imply below-average real returns in the coming decade if past experience is a guide for future developments.
BONDS:High-quality sovereign bonds, such as US Treasuries, UK Gilts and German Bunds, are trading significantly below what Allianz GI thinks are nominal trend GDP growth rates, which should be the long-term reference value, based on both economic theory and past experience. Nevertheless, Allianz GI is more relaxed about the valuation of non-German euro-area sovereign bonds relative to Bunds.
Compared to the beginning of the year, though, the valuation assessment today is less favorable for corporate bonds, even though spreads compared to sovereigns are higher today than they were just before the burst of the real estate bubble. This statement is particularly true for high-yield bonds, be it in the US or Europe.
Emerging market bonds issued in hard currencies (benchmark: EMBI+) are reasonably priced, according to Allianz GI’s report. Still, the manager finds that local currency bonds offer better value: first, because of the higher yields compared to sovereign bonds from developed markets; and second, because they also expect additional gains from currencies, which look undervalued in the calculations based on Allianz GI’s long-term valuation approaches.
Jaime Cuadra. Photo: Lindein. Jaime Cuadra Joins the Business Development Unit at Compass Group Asset Management
Jaime Cuadra has recently joined the ranks of Compass Group Asset Management from Mercantil Commercebank, following the departure of Rafael Tovar, who left the Chilean company to join Nikko AM.
Jaime Cuadra Jr. joined Compass Group as Vice President where will be responsible for leading the business development efforts out of New York for institutional clients globally in the United States, Europe, Asia and Middle East, while also covering key accounts in Miami and New York for private banks, and family offices. Prior to that, he worked for 9 years at Mercantil Commercebank (Miami) where he held positions as an internal consultant managing projects and most recently as an Associate on the Products team for the bank’s broker dealer and registered investment advisor.
He holds a Bachelors of Science degree in Industrial and Systems Engineering from Florida International University as well as Bachelors in Finance from Nova Southeastern University. He is bilingual in Spanish and English.
Ezentis' Chairman, in Madrid Stock Market. Courtesy photo. Spain's Ezentis Group Achieves a New Contract from Vivo in Brazil
Ezentis Group, through its subsidiary in Brazil, Serviços e Engenharia Instalação of Comunicações (SEICOM) has been awarded a contract for works of installation and maintenance of mobile network sites of the company Vivo (Telefónica Brazil) amounting to 96,194,366 reais (31.5 million euros).
The contract – which have a duration of three years – plans to manage the installation and maintenance works of the mobile network Vivo in the states of Rio de Janeiro and Espírito Santo.
Ezentis has increased its portfolio of contracts in Brazil amounting to 198 million euros since it presented to investors and analysts the 2014-2017 Strategic Plan on April, 2. This Plan involves placing Brazil as the main market for the company with a weight of 37% in sales in the coming three years.
Ezentis is an entrepreneurial group with presence in nine Latin American countries, whose goal is to improve the quality of life of people in over 15 million homes, through total satisfaction of the telecommunications, energy, and water operators in the region. Ezentis bases its vision on two solid pillars: innovation and social corporate responsibility, because by working to improve work and workers’ productivity it is able to guarantee greater satisfaction of its clients, greater security for their workers, and a positive environmental impact.
Courtesy photo by DeVanx Assets. Fancy Red Diamonds Emerge as New Asset Class
DeVanx Assets, a Swiss rare mineral investment advisory, has reported that demand for red diamonds among institutional, ultra-wealthy investors, and intermediaries is surging as their value continues to increase. Red diamonds are one of the rarest minerals in the world and the highest quality of these diamonds have more than tripled in value in the past decade.
One of the most anticipated red diamond events, Rio Tinto’s annual Argyle tender, is currently creating a global bidding war featuring the Argyle Cardinal, a rare red 1.2–carat diamond, 3 additional reds, and 51 Argyle pink and purplish-red diamonds. Experts say the highest quality investment worthy red diamonds can command up to $2.5 million a carat. Only 13 fancy red diamonds have been included in the annual tender during the past 30 years. This year’s tender ends on October 8, 2014.
Accordingto Paula Vance, CEO of DeVanx Assets, her company has standardized the red diamond industry by tracking data including sales and pricing over the past 50+ years from the entire supply chain, mining to investors.
“The careful review and selection of an investment grade red diamond is critical to enjoy the highest ROI for these stones,” she said. “While certainly beautiful and precious, not all red diamonds are of investment quality. The best in red diamonds have become a new asset class offering stable value appreciation and low volatility, and are an excellent inflation hedge and substitute for gold and other precious metals.” Accordingto DeVanx’s in-house GIA Master Gemologist, Doris Hangartner, only 126 investment grade fancy red diamonds are known to exist in the world today.
DeVanx Assets offers exclusive access to 82% of the world’s limited supply of open market investment grade red diamonds. It provides customized asset packages meeting client specifications and liquidity programs to allow investors to capture capital in six to 12 months versus the typical three to five years.
“Our client base is shifting,” says Vance. “While the majority is institutional, such as independent wealth managers, private banks, intermediaries and family offices, more Ultra High Net Worth Investors are seeking to directly invest in red diamonds. These investors hail from all over the world: Europe, Russia, China, Japan, Korea, U.S., Canada, and South America.”
Photo: Ork.ch. JP Morgan Recruits María Ángeles Arias to Join its Team in Switzerland
As was reported to Funds Society by sources familiar with the appointment, Maria Angeles Arias, from AndPrivateWealth in Geneva, joins JP Morgan Suisse to take up her post as senior banker for the company’s Mexican team.
With over 13 years experience in private banking, Arias worked for over two years as Senior Banker, also for Mexico, at Andbank’s AndPrivateWealth. She was previously relationship manager for Santander Private Banking for a period of 11 years during which she worked from Madrid, Miami and Geneva.
Arias, a graduate in Law from the Complutense University of Madrid, has a Master in Financial Markets from the “Instituto de Estudios Bursátiles” (IEB, Madrid), and a Management Development Program (MDP) from the IE Business School, as is listed in her Linkedin profile.
ETFGI’s research finds ETFs and ETPs globally have gathered a record US$199.0 Bn in net new assets through the end of Q3 2014, surpassing the previous high of US$185.8 Bn set in the first three quarters of 2012. The Global ETF/ETP industry has 5,463 ETFs/ETPs, with 10,510 listings, assets of US$2.6 Tn, from 225 providers listed on 61 exchanges, according to preliminary data from ETFGI’s end Q3 2014 Global ETF and ETP industry insights report.
YTD NNA flows reached record levels for the ETF/ETP industries in Japan at US$15.0 Bn, Europe at US$47.4 Bn, and globally at US$199.0 Bn.
“In September investors invested the majority of net new money into North American equity exposures. Due to the on-going situation in the Ukraine, Scotland’s referendum vote, and the Bank of England Governor’s statement that a rate increase was “getting closer”, investors reduced their exposure to Europe. The unfavourable geopolitical environment caused the S&P 500 to decline 1% in September. Developed markets declined 4% while emerging markets declined 7%.” according to Deborah Fuhr, Managing Partner at ETFGI.
In September 2014, ETFs/ETPs saw net inflows of US$13.2 Bn. Equity ETFs/ETPs gathered the largest net inflows with US$14.8 Bn, while fixed income ETFs/ETPs saw net outflows of US$449 Mn and commodity ETFs/ETPs experienced net outflows of US$1.5 Bn.
SPDR ETFs gathered the largest net ETF/ETP inflows in September with US$10.5 Bn, followed by Vanguard with US$7.0 Bn, First Trust with US$939 Mn, Van Eck with US$858 Mn and Wisdom Tree with US$789 Mn.
iShares is the largest ETF/ETP provider in terms of assets with US$980.3 Bn, reflecting 37.3% market share; SPDR ETFs is second with US$431.6 Bn and 16.4% market share, followed by Vanguard with US$406.8 Bn and 15.5% market share. The top three ETF/ETP providers, out of 225, account for 69.3% of Global ETF/ETP assets, while the remaining 222 providers each have less than 4% market share.
Mario González-Pérez and Álvaro Fernández Arrieta. Courtesy photo. Capital Group Opens Office in Madrid with Álvaro Fernández Arrieta and Mario González
Capital Group has opened its first office in Spain, in Madrid, as part of its expansion plans in a number of strategic markets (11 in total) outlined at the start of 2014.
The Madrid based Business Development Managers are Álvaro Fernández Arrieta and Mario González Pérez.
Grant Leon, head of Sales, Private Wealth Distribution at Capital Group, said: “Spain is an important market where we are seeing demand from existing and prospective clients for investment managers that offer long-term stability. We are very happy to announce the establishment of our new office in Madrid, demonstrating our commitment to Spain. Working with clients in their home market is key to ensuring that we continue to understand and anticipate their needs and provide a personal and efficient service.”
Fernández Arrieta joined Capital Group from Amundi Asset Management in July 2014 with over twenty years’ experience in the sector, while González Pérez has been with Capital Group for over 10 years.
Both will be responsible for nurturing relations with existing clients, and for developing new business opportunities, in Spain.
Capital’s equity offering includes US, European and emerging markets funds. Its fixed income offer focuses on high yield and emerging debt. Capital Group’s entire range of strategies, which comprises 20 Luxembourg funds, is registered in the Spanish market.
Photo: Kallerna. BNY Mellon to Acquire U.S. Investment Manager Cutwater Asset Management
BNY Mellon has announced that it has reached an agreement to acquire Cutwater Asset Management, a U.S.-based fixed income and solutions specialist with a 20-year track record and approximately $23 billion in assets under management. Located in Armonk, NY, the firm is currently a wholly-owned subsidiary of MBIA Inc.
Upon completion of the deal, Cutwater will operate as part of BNY Mellon Investment Management and will work closely with, and be administered by, Insight Investment. Insight is one of BNY Mellon’s premier investment management boutiques and one of Europe’s leading investment managers. The addition of Cutwater’s capabilities will enhance BNY Mellon’s and Insight’s U.S. platform and abilities to offer specialized fixed income solutions.
Cutwater’s products and investment solutions include a wide range of fixed income strategies such as core, long duration, high yield, loans and absolute return strategies.
Curtis Arledge, CEO, BNY Mellon Investment Management, said, “BNY Mellon’s strategy is to deliver the most innovative solutions via the most talented investment managers to meet our clients’ objectives. Cutwater brings an impressive performance history, strong intellectual capital and an investment culture consistent with BNY Mellon’s. Given the unprecedented interest in the fixed income market at this time, we are excited by the opportunity to expand our investment offerings for clients as a result of this combination of fixed income capabilities.”
Abdallah Nauphal, CEO and CIO, Investments, Insight Investment, said, “Insight has grown by aligning our investment solutions with the needs of our clients. Cutwater’s strong U.S. domestic fixed income and solutions track record and experienced team will complement Insight’s strategy in the U.S. as we build upon our existing position as a European leader in liability risk management and fixed income. Working closely with Cutwater will augment our current fixed income capabilities, deepening our fixed income research and portfolio management expertise in the world’s biggest and most diverse credit market.”
Clifford D. Corso, CEO and CIO, Cutwater, added, “Cutwater is delighted to be joining a true global leader in the asset management industry. This union is a logical next step for Cutwater. We share a similar investment philosophy and approach designed to offer products and relevant client solutions.”
BNY Mellon Investment Management is one of the leading fixed income managers with a diversified portfolio of investment boutiques offering fixed income solutions. These include Standish Mellon Asset Management Company, LLC and Mellon Capital Management Corporation headquartered in the U.S.; Insight Investment, the Alcentra Group, and the Newton Group headquartered in the UK; and Meriten Investment Management GmbH headquartered in Germany.
The terms of the transaction were not disclosed. The transaction is subject to standard regulatory approvals and certain other conditions and is expected to close by the beginning of the first quarter of 2015.
With assets under management (AUM) of US$1.8 trillion the U.S. market for exchange-traded funds (ETFs) is more than three times that of Europe, and is growing at a faster rate. But there are signs that European ETFs are on the cusp of a new phase of growth, particularly in the retail market, driven by influential new entrants and a favorable regulatory climate, according to the October issue of The Cerulli Edge-Global Edition.
“Costs are coming down not only because of greater competition but also in response to the demands of retail investors using ETFs as strategic core holdings,” says Barbara Wall, Europe research director at Cerulli Associates.
“Although U.K. advisors have been slow to embrace ETFs post retail distribution review, a growing number are exposed to ETFs through model portfolios. Take-up is also gaining momentum in other European markets, notably Germany and the Netherlands. The shift will be given a significant boost by the Markets in Financial Instruments Directive.”
The smart beta bandwagon is also gathering pace amid growing demand for innovative passive investment strategies. Last year, ETFs employing smart beta approaches grew by 59% in the United States, and accounted for more than one-third of cash inflows into the asset class. Value and dividend strategies were popular with investors and advisors, accounting for 56.6% of U.S. smart beta exchange-traded products, while growth products account for a 21.7% marketshare.
“The advantages of ETFs are beginning to be felt in South America and Asia,” notes Angelos Gousios, a senior Cerulli analyst. “Exposure to China through Renminbi Qualified Foreign Institutional Investor (RQFII) ETFs has exploded since their launch just over two years ago, and allocations to cross-border ETFs by Latin American pension funds have grown on average 35% annually for the past four years, and are catching up with allocations to cross-border mutual funds.”
In LatAm, Mexico is home to the largest locally domiciled ETF market in Latin America with one-half of the region’s listed ETFs, and assets of US$6.2 billion, or almost two-thirds of the region’s total. Almost 60% of these funds are dedicated to equity strategies with the majority focused on the domestic market. The rest are fixed income.
In China, the market for RQFII ETFs appears to be thriving. The first was launched more than two years ago, but 16 are now trading on the Hong Kong stock exchange, and several more have been listed in New York and London. Cerulli believes that the RQFII ETF space will continue to gain traction as demand for exposure to China grows, and the RQFII program is likely to continue to be developed by the Chinese authorities as they strive to internationalize the renminbi.
Growth in USA
Cerulli estimates that 32.5% of ETF assets in the United States–which should surpass US$4.5 billion in 2015–are owned by U.S. institutions. Almost three-quarters (70%) of ETF providers say increased institutional adoption will be a major driver of growth over the next 12 months, which is a significant jump from 2013, when the figure was just 38%.
Michelle Boquiren. Foto cedida . Michelle Boquiren llega a Amundi como jefa de Distribución de Fondos en Estados Unidos
Amundi Distributors USA, LLC announced that Michelle Boquiren has joined the company, as Senior Vice President, Head of U.S. Fund Distribution. Amundi Distributors is a wholly-owned subsidiary of Amundi.
As Head of U.S. Fund Distribution, a new position, Ms. Boquiren is responsible for maintaining and deepening Amundi Distributors’ relationships with U.S.-based distributors and global distributors headquartered in the U.S.; managing existing and developing new partner relationships; and developing new fund solutions for investors. Ms. Boquiren will report to Stephen A. Eason, CFA, Chief Executive Officer and work primarily from Amundi Distributors’ offices in New York, New York.
Christian Pellis, Global Head of External Distribution, Amundi, commented, “We are delighted to welcome Michelle on board to head up Amundi Distributors’distribution business. Amundi, through its U.S. subsidiaries (Amundi Distributors USA, LLC and Amundi Smith Breeden, LLC) is firmly committed to its growth ambitions in the U.S. which is a key market. Michelle’s recruitment will strengthen Amundi’s footprint in the U.S.; she brings extensive experience in international fund distribution and I am confident that her contribution will help to take Amundi Distributorsto its next development phase.”
“We are pleased to have Michelle as the newest member of our team. Amundi is actively expanding its institutional and fund management business through its U.S. subsidiaries. With her 20 years of experience and many close relationships with key participants in the fund industry, Michelle is the ideal person to lead this expansion. I look forward to working with Michelle,” stated Mr. Eason.
Before joining Amundi Distributors, Ms. Boquiren held several senior management positions in business development and sales at Investec Asset Management for American and International client from 2006 to 2014. Prior to Investec, Ms. Boquiren was Managing Director, Origination and Distribution at Overture Financial Services, LLC. Earlier, she held product development and senior specialist positions at Merrill Lynch, Global Private Client Group. Ms. Boquiren began her financial services career at Philippine Commercial International Bank.
Ms. Boquiren holds an MBA in Finance, Dean’s List, from the Asian Institute of Management in Manila, Philippines. She earned a BA in Management, Dean’s List, from De La Salle University in Manila, Philippines.
