Foto: Dan Smith, Adrian Pingstone, Yann, Alexandra Studios. Compiled by Anonymous101. What the ECB’s Decision Means for Emerging Markets
The European Central Bank (ECB) introduced three measures aimed at loosening monetary policy further and at supporting lending to non- financial companies. These measures will not only address the deflationary concerns which policy makers are worried about, but also help boost domestic demand, growth, as well as external demand for imports, which will directly benefit emerging market countries. The three measures in more detail are:
1.Refinancing rate: It reduced its main refinancing rate, at which it lends the majority of liquidity to the banking system, by 0.10% to 0.15%.
2.TLTRO: It introduced targeted longer-term refinancing operations (TLTRO). This will enable ECB bank counterparties to initially borrow up to 7% of their loans to the euro-zone non-financial private sector, excluding mortgages.
3.QE: Last, but by no means least, the ECB announced that it would “intensify preparatory work” on a scheme promoting the purchase of asset-backed securities, a form of quantitative easing (QE).
What do these measures mean for emerging markets?
According to Peter Eerdmans Co-Head of Emerging Market Fixed Income and Werner Gey van Pittius Co-Head of Emerging Market Fixed Income at Investec AM, there are four key points:
1. Impact on emerging market central bank policy makers
Central bank policy makers from Mexico to China, Turkey to Hungary have been more dovish taking into consideration not only their domestic economic circumstances but also the prevailing global rate policy of the major central banks. The expectations for easier monetary policy in the euro zone have maintained the global trajectory of ample monetary liquidity among the major central banks.
2. Domestic growth in emerging markets
Lower domestic interest rates and cheaper funding for corporates and governments amid contained inflationary pressures should further boost domestic growth across the regions. This has been a particular long-term aim of politicians and policy makers who wish to rebalance their economies and diversify away from the traditional focus on exports to developed economies. Our view remains that these efforts will take some time to rebalance, and in the meantime exports will continue to be the largest driver of growth.
3. Trade and exports
As well as suppressing domestic interest rates, another benefit from global liquidity is an increase in growth and trade, which eventually drives emerging market exports.
So far, the picture on world trade seems quite favorable for emerging markets. The question remains, however, what impact would the ECB’s recent moves have for trade with Europe, and which regions in particular are likely to benefit from that.
4. Ample global liquidity, low volatility and search for yield
The last, but by no means least, impact of ECB policies on emerging markets is the continuation of ample liquidity. This has taken volatility levels to lows not seen since before the great financial crisis.
Ample liquidity, low volatility and a clear trajectory by central banks to keep monetary policy accommodative have accentuated the search for yield across global markets. We continue to see demand for yield and particularly for emerging market yield, which offers attractive valuations, stronger fundamentals than developed markets, and positive real yields. The one caveat is that historically these periods of sub-normal volatility have not lasted more than two to three years, but, in our view, policy makers are still a few years away from raising concerns on liquidity given benign inflationary pressures and output gaps.
In conclusion, Investec AM expects he latest ECB moves not only to maintain the increasing demand for exports from emerging markets, but also to boost growth dynamics within emerging economies through more dovish central bank policies, as well as improving market sentiment through ample liquidity, clear communication and low volatility.
Campaña publicitaria Bankinter . Jose Manuel Garcia de Sola Joins Bankinter as Non-Executive Chairman of Bankinter’s Asset Management Unit
Bankinter, a Spanish lender and insurer, hired Jose Manuel Garcia de Sola, a former senior executive vice-president of Banco Santander’s Banif private bank, said to Bloomberg four people familiar with the information.
Garcia de Sola will be non-executive chairman of Bankinter’s asset management unit, which oversees 11.4 billion, said the people. Garcia de Sola left Santander six months ago after a 15-year career at the bank including 11 years at Banif, where he worked alongside Santander Chief Executive Officer Javier Marin.
At Santander, Garcia de Sola most recently led business development at Santander’s asset management unit in the U.S. for the last two years.
Phil Apel, Head of Fixed Income and James McAlevey, Head of Interest Rates at Henderson. Recent Events Affecting Global Fixed Income Markets
James McAlevey and Phil Apel, members of the Henderson Fixed Income Strategy Group (ISG) discuss the big developments of recent weeks, including the 50 basis points interest rate cut in Mexico, the buoyant US non-farm payrolls number and the package of monetary policy measures announced by the European Central Bank at its June meeting. Discover what this means for portfolio positioning in terms of country exposures, yield curve positioning and currency preferences.
James focuses on recent developments:
50 basis points cut by Bank of Mexico (most favoured of our EM markets but lightened up some of the exposure after recent strong gains)
Non-farm payrolls print (first time four consecutive months of 200,000 plus net job gains occurred in last 10 years), underscores fact that US economy is at more advanced stage in economic cycle and facing greater interest rate risk
Aggressive policy package announced by European Central Bank. Will not see full impact of negative rates until fully enacted but could have meaningful behavioural consequences in terms of how economic participants react to being charged for holding deposits. Greater liquidity should help to anchor short rates lower for longer. Targeted Longer Term Refinancing Operations (TLTRO) is contentious: it is not clear that banks need the money or that enterprises are clamouring for the cash but the terms offered are attractive and the four year term is longer than expected.
Phil explains portfolio positioning:
Taking little interest rate risk and limiting exposure to US Treasuries, prefer Europe
Intermediate bonds (3-5 year part of curve) should benefit most from negative rates in Eurozone.
Peripheral eurozone govt debt beginning to behave like core govt bonds but with yield pick-up
Credit assets have performed well in Eurozone, seeing better relative value in sterling market
Within currency exposure, favour USD over euro
Portfolio positioning reflects ISG views and has direct relevance to the Henderson Unconstrained Bond Fund.
Foto: Rafa Esteve . MFS Introduces Managed Wealth Fund
MFS Investment Management announced the launch of MFS Managed Wealth Fund, a flexible equity fund that seeks to provide capital growth with moderate volatility. The fund also aims to mitigate the effects of significant declines in equity markets. In seeking to achieve its total return investment objective, the fund will invest in three underlying MFS funds — MFS Growth Fund, MFS Value Fund and MFS Institutional International Equity Fund — for exposure to US and international equities. The fund will also use derivative instruments to manage its net exposure to the equity market, based on its management team’s view of risk and reward opportunities.
Portfolio manager James Swanson, MFS’ chief investment strategist, will serve as the fund’s lead manager. Joining him are Michael W. Roberge, MFS president and chief investment officer, William J. Adams, co-head of MFS’ Fixed Income Department, Barnaby M. Wiener, an international equity portfolio manager and Robert M. Almeida, Jr., an institutional equity portfolio manager. These portfolio managers are responsible for determining the target strategic allocations to the underlying funds and actively managing the fund’s net asset class exposure.
MFS expects the fund’s target allocation to be equally weighted among the three underlying funds. The management team will have the ability to reduce the fund’s exposure to the equity market and/or currency markets and potentially add exposure to additional asset classes primarily through the use of a tactical overlay. The overlay will use derivative instruments, including futures, forward contracts, options, structured securities and swaps. In addition, MFS may seek to limit the fund’s exposure to certain extreme market events.
View of Paseo de la Reforma in Mexico City. Photo: Alejandro Isla. José Santamaría Joins BBVA Compass’ International UHNW Client Division
As confirmed to Funds Society by sources familiar with the appointment, BBVA Compass has just recruited José Santamaría, a professional with over 20 years experience, to its international UHNW clients’ department. Santamaría has just taken up his new post in New York at the beginning of July.
The company’s international UHNW clients’ department is headed by Manuel Sanchez Castillo and depends on the international wealth management division, which in turn is managed by Hector Chacon.
Santamaría, a private banker specializing in high net worth clients, has extensive experience in asset management and investment banking.
Santamaría comes from Deutsche Bank, where he held the position of manager in New York for three years; his role also involved managing the bank’s relationship with Latin American private banking clients.
Prior to joining Deutsche Bank in 2011, Santamaría founded, and was CEO of Meridian Gestión Patrimonial in Madrid, a multi-family office specializing in wealth management solutions for European and Latin American families, as is listed on their Linkedin profile.
Before that, Santamaría was a banker for 14 years at JP Morgan Chase in New York, Geneva and Madrid, managing one of the biggest books of private banking clients. Santamaría also worked as a portfolio manager in Spain, Switzerland and the United States, where, amongst other functions, he was responsible for the creation of global discretionary portfolios, management of fixed income modules in discretionary accounts, and the creation and support of the Luxembourg mutual funds’ platform.
Santamaría has also worked at UBS in Switzerland, where he was responsible for Investment Consulting and Business Development for the Americas, besides being a frequent speaker on alternative investments at numerous events and conferences in the region. He was also a member of the Key Client Group for the Americas in Geneva.
Previously, BBVA Compass’ new member worked for Citibank in Zurich as a trainee, as risk manager for a hedge fund, and as bond portfolio manager for Latin American clients and prior to that for a real estate firm in Spain.
Santamaría has a degree in Business Administration from the Autonomous University of Madrid and has a Masters’ degree in Financial Management & Administration from the European Business Institute.
Vicent Steenman, nuevo coordinador mundial de Análisis de Carmignac. Foto cedida. Carmignac Appoints Vicent Steenman Global Coordinator of Analysis, a newly created position
Carmignac Group today announces the creation of a Global Research Coordination role as well as promotions in the European and Emerging Markets teams for the benefit of the whole Funds range.
Vincent Steenman is appointed to the newly created role of Global Research Coordinator, whose objective is to increase cross-fertilization of investment ideas between the Paris and London research teams. Prior to this appointment, Vincent, 33, was in charge of the capital goods sector at Carmignac, partner at Zadig Asset Management, analyst at LVMH-Groupe Arnault Family Office. He graduated from Ecole Polytechnique in Paris and holds a Master’s degree in Finance from HEC School of Management in Paris.
Edward Cole is appointed today co-manager of the fund Carmignac Emerging Patrimoine (960M€). Edward will co-manage the equity component of the Fund alongside Simon Pickard and Charles Zerah who keeps managing the fixed income component. Edward, 38, so far analyst on EMEA at Carmignac, has seven years fund management experience co-managing emerging markets long-only and hedge funds at Ashmore Group and Finisterre Capital, and seven years as an EMEA equity strategist, notably at JP Morgan Securities. He graduated from the University of Bristol with a BSc in Politics and from the London School of Economics with an MSc in International Development.
Malte Heininger is appointed sole portfolio manager of Carmignac Euro-Entrepreneurs (413M€), a small and mid caps Fund he has co-managed with Muhammed Yesilhark since January 6th 2014, when they both joined Carmignac. Before Carmignac, Malte, 33, worked about 4 years at SAC Global Investors’ London office, where he was a member of Muhammed Yesilhark’s team, managing a large European equity portfolio, and was a former investment banker at Morgan Stanley. He graduated from ESCP-EAP in Paris.
Wikimedia CommonsMiguel Angel Suarez, manager of LarrainVial AM’s International Equities. Courtesy photo . LarrainVial AM is Committed to Spanish Recovery Through a Long-Only Fund
LarrainVial Asset Management has just launched the fund LarrainVial Spain, “which aims to provide local clients with exposure to Spanish recovery, through our fund, but in the hands of experts who provide fundamental analysis and a focus on the long-term opportunities, as well as ample knowledge of companies, managers and the dynamics of each of that country’s sectors,” explained Miguel Angel Suarez, manager of LarrainVial AM’s International Equities, and the fund’s portfolio manager to Funds Society.
As to why a fund on Spain, Suarez said it comes at a time when “the upward phase in the Spanish economy’s cycle is just beginning. We must remember we are beginning to emerge from a troubled period of almost seven years duration, thereby there are still opportunities for buying cheap businesses, when the cycle is normalized (in 2 or 3 years), they are going to cost a lot more … So, as soon as domestic demand strengthens, credit ratingscontinue to improve, unemployment begins to decrease slowly, and credit begins to flow, the possibility of further repricing in that country is very high.”
The manager also added that the recovery has come earlier than was announced, and is being stronger than what everyone expected. “Exports to different destinations are growing at high rates, the labor market has eased, thanks to a positive and profound reform, and the financial sector has been almost completely sanitized. In addition, the tax reform announced some days ago lowers corporate taxes and creates a tax system which greatly favors entrepreneurs and investment and competitiveness, which has now improved greatly as compared to that of their European counterparts,” he said.
The new instrument, which was launched in June with daily liquidity, is aimed at institutional investors and high net worth individuals in Chile. In terms of strategy, Suarez explained that it is an actively managed, long-only fund, with high conviction that is agnostic to benchmark, and therefore has no major limitations in terms of sectors, market capitalizations or weight in the index. The portfolio turnover is low and is concentrated only in the best ideas (15 to 20) where the highest value is seen for its future appreciation potential.
Almost 25% is invested in the industrial sector, followed by banks with 23%. Media accounts for 19% and insurance and cyclical consumption weigh around 14% each. Finally, technology and telecommunications closes at 5%.
“The banking and insurance sector is the one which currently carries most weight in the portfolio, and we still see much upside there due to the recovery in domestic demand and lower bank’s funding costs. Especially in the case of the medium sized Banks, which are less covered by analysts outside Spain and more exposed to domestic recovery,” added the fund manager.
As for the expected return, although he added that they don’t have any expected returns, Suarez, said they are “very positive and we believe that given the timing of the business cycle in Spain, there is substantial potential of appreciation going forward.” In fact, he added, “We are firmly convinced that, in the coming years, the Iberian stock market should exhibit markedly higher returns than the European average, thereby strengthening the attractiveness and value currently available in equities, especially in medium sized companies, which are not as closely followed by analysts and where any increases in performance or valuations are sometimes very fast and difficult to anticipate,” he said.
Foto: Mattbuck. Henderson launches the Henderson Horizon Global Natural Resources Fund
Henderson Global Investors has added to its Horizon range with the launch of the Henderson Horizon Global Natural Resources Fund. The Luxembourg domiciled SICAV will be sub-advised by Australian based fund management group, 90 West. Henderson acquired an initial 32.3% shareholding in May 2013 and increased the holding to 41.4% in May 2014. Executive Chairman, David Whitten, will be lead fund manager.
The Fund will primarily invest in high quality liquid assets from a universe of more than 1,000 global natural resource companies with a market capitalisation in excess of US$2bn. The portfolio will typically consist of 40 – 60 global natural resource stocks operating in the mining, energy and agricultural sectors.
David Whitten, says, “The 90 West team believes opportunities in the sector are heavily dependent on the quality of the resource itself. The long-term trends of increasing population, prosperity and urbanisation, particularly among developing economies, are leading to a rising global consumption of natural resources. These demands, combined with a constrained supply for certain commodities, provide a favourable investment climate and are captured through the investment themes within the fund.”
David Whitten was head of global resources at Colonial First State from 1997 – 2010. He has managed the 90 West Global Natural Resources Fund (distributed in Australia only), which is run on a similar basis as the Henderson Horizon Global Natural Resources Fund, since July 2012.
The 90 West investment team includes three specialists with more than 80 years’ combined experience.
Photo courtesy of Banco Ficohsa. Banco Ficohsa cierra la compra de la banca de consumo de Citibank en Honduras
Banco Ficohsa announced it has completed the purchase of Banco Citibank de Honduras and Cititarjetas de Honduras, after receiving the required regulatory approvals. The transaction does not include Banco de Honduras, which conducts Citi’s corporate banking business in Honduras.
The acquisition is the largest transaction of its kind undertaken by a Honduran bank. Ficohsa now becomes the largest bank in Honduras and one of the top 10 banks in Central America.
The deal included an US$ 80-million capital contribution, which brings Ficohsa’s total net worth to approximately US$ 350 million, which represents 21% of Honduras’ total financial system’s net worth. The contribution is comprised of tier 1 and tier 2 capital.
“We are pleased with the regulators’ decision and thank them for their vote of confidence. This is a very important step in our expansion and growth strategy,” said Camilo Atala, president of Grupo Financiero Ficohsa. Atala added, “This transaction, and the associated capital contribution, reaffirm our continued commitment to the development of the country.”
The combined entity will have a loan portfolio of US$2 billion, a deposit base of over US$1.6 billion and US$ 2.7 billion in assets, which represent 20% of the total assets of the Honduran financial system (using pro forma figures of the companies combined as of March 31, 2014.)
The acquisition strengthens Ficohsa’s service offering, which will become the most robust consumer banking portfolio in the country, while complementing its primary focus on the corporate segment. It will also strengthen its footprint, reaching 450 ATMs (the largest in Honduras) and 150 service points.
As a next step, Banco Ficohsa must submit a merger plan to the regulator, whose primary objective is to ensure a smooth transition for customers and employees of both institutions. The merger plan requires regulatory approval prior to its implementation.
The two entities will be fully merged once all assets are transferred. This is expected to take place during the first quarter of 2015. In the meantime, both entities will continue to operate independently with no change in current operations.
“Citi has been present in Honduras for almost 50 years and we are committed to the country,” said Reina Irene Mejía, Citi’s Country Officer in Honduras. “We are not leaving Honduras. Our strategy is to focus our operations on our Corporate Banking business to strengthen our position and continue offering top quality services in those areas where we can add the most value, backed by Citi’s unique global network.”
Today, July 1 2014, is a ‘dark day for the 7 million Americans living overseas and for U.S. firms that operate globally’, according to the chief executive and founder of deVere Group, Nigel Green.
The assessment from Nigel Green, founder and CEO of deVere Group, which has 80,000 mainly expat and international investor clients, comes on the day America’s controversial global tax law, FATCA, (Foreign Account Tax Compliance Act) is officially brought into effect after years of delays.
Under FATCA, all non-U.S financial institutions are required to report the financial information of American clients who have accounts holding more than $50,000 directly to the IRS.
Mr Green comments: “It is claimed by its proponents that this new tax act is designed to catch tax evaders who illegally shelter money offshore. This is a noble aim. But FATCA cannot possibly tackle this important global issue effectively due to its dragnet, untargeted approach.
“Instead what it does – because of its plethora of serious unintended adverse consequences – is to brand Americans who choose to live and/or work overseas as financial pariahs. U.S. expats are now routinely rejected from foreign financial institutions (FFIs), such as banks in their country of residence, because FATCA’s costly and onerous regulations mean Americans are now typically deemed more trouble than they are worth.
“Similarly, American businesses working in international markets are now often branded with a leprosy-like status. Clearly, this can only be detrimental to their global competiveness and could, in turn, hit American jobs and the long-term growth of the U.S. economy – which would then, of course, have far-reaching consequences beyond the U.S.
“All this to ‘recover’ an estimated $1bn per year, which is enough to run the federal government for less than two hours. “July 1 is indeed a dark day for the 7 million Americans living overseas and for U.S. firms that operate globally. “Thankfully, there are ways qualifying U.S. expats can mitigate FATCA’s adverse effects. One such solution is for the U.S. taxpayer with assets abroad of more than $50,000 to create a tax-efficient, supplementary overseas pension contract.”
The deVere Group CEO adds: “There are other important questions to be asked too about the wholly imperialistic nature of FATCA. Countries and FFIs have been coerced into complying with FATCA’s expensive, burdensome, privacy-infringing, sovereignty-violating regulations by the U.S. – or have to face heavy penalties. In effect, these countries and FFIs are now working as de facto IRS agents.”
