Real estate (RE) is an obvious target for investors searching for yield and is therefore outperforming other asset classes. The latest monetary developments have made ING IM decide to reduce our overweight position in global RE. Regionally, they increased our position in the Eurozone and cut our overweight in the UK.
The asset manager remain positive for RE, as fundamentals in developed markets are improving and the search for yield is expected to stay with us for a while. This is especially the case in the Eurozone, thanks to persistently easy ECB policy.
Regional performances in real estate year-to-date
Real estate outperforms other asset classes
Being an obvious target for investors searching for yield, real estate (RE) equities have outperformed other asset classes and sectors this year. Besides capturing an attractive dividend yield, real estate investors have also some optionality on a broadening economic recovery.
Rate hike speculation could throw a spanner in the works
However, the ride might become a bit more bumpy as speculation about when and which central bank will tighten monetary policy first may impact bond yields. The sharp rise in 10-year bond yields in May and June 2013 – particularly in the US and the UK – which was triggered by Ben Bernanke’s “taper talk” is still fresh in investors’ minds. The rise in yields caused a sharp correction in real estate equities.
Bank of England likely to be the first mover
The UK central bank is expected to be the first mover. This was confirmed by Bank of England (BoE) Governor Carney on June 12, when he stated that the first BoE rate hike “could happen sooner than markets expect”. This went not unnoticed by the UK real estate market which corrected immediately (see graph). This might be a prelude of things to come when monetary policy is being tightened. On top of that, the BoE last Thursday announced some (modest) measures to try prevent a booming (London and South East England in particular) housing market threatening financial stability in the future.
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Hispania Activos Inmobiliarios has acquired a 90% stake in ONCISA for an amount of 80.2 million euros, by means of the subscription of a capital increase. ONCISA is the real estate company of Grupo de Empresas de la ONCE (“Grupo ONCE”) and its Foundation (“Fundación ONCE”) and owns 46,416 m2 of office space, distributed in 9 assets, 8 located in Madrid and 1 in Malaga. The implied valuation of the portfolio after the capital increase is 120.4 million euros, including debt.
This transaction has been made in the context of a wider collaboration agreement signed between Grupo Azora -Hispania’s investment manager- and Fundación ONCE. This agreement sets the basis for collaboration in projects related to people with disabilities and their inclusion in society and in the corporate world, as well as on improving their accessibility to goods and services.
All of the assets within the ONCISA portfolio are of high quality and excellently located: those in Madrid are all in highly consolidated areas, in the surroundings of the M-30 ring road, and the building in Malaga is located next to the historic city centre.
In a separate deal, closed last 27th of May of 2014, Hispania acquired -from a third party- two floors of the Murano building for an acquisition price of 4.4 million euros. The rest of the Murano building already belonged to ONCISA. These two floors have been contributed as part of the capital increase subscribed by Hispania – completing the ownership of 100% of the building- along with a cash contribution of 75.8 million euros, making up the full price of 80.2 million euros for the acquisition of the 90% stake.
The success in the completion of this transaction has been significantly influenced by the fact that Grupo Azora, Grupo ONCE and Fundación ONCE share common social interests with a special concern for the promotion of a strong social responsibility across all of their respective company practices.
“This new deal of Hispania in the office market in Madrid fits perfectly with our investment strategy. The association with Grupo ONCE and its Foundation represents a great opportunity to develop new joint corporate initiatives. The agreement signed with Fundación ONCE is an important step for Azora in terms of corporate social responsibility and we are really committed with the opportunity of collaboration that will derive from this relationship”, said Concha Osácar, Board Member of Hispania.
On the other hand, the Chairman of Grupo ONCE y its Foundation, Alberto Durán, has shown his satisfaction for the closing of this transaction because it will allow the group to reinforce other areas of corporate activity in which they are already working and which are more conducive to the creation of employment for people with disabilities, “which is the identity sign and origin of our companies”, he added.
Alberto Durán has highlighted that the collaboration with Grupo Azora will extend during the coming years thanks to the collaboration agreement signed between Fundación ONCE and Grupo Azora, “which foresees, among other things, the integration of up to 75 people with disabilities”.
After this transaction, Hispania has already invested a total amount of 205.7 million euros since it listed on March 14th 2014: 120.35 million euros in offices, in 11 assets with a total GLA of 64,622 m2 (46,416 in the ONCISA portfolio and 18,206 in the 2 buildings in Les Glòries, Barcelona), 63.8 million euros in residential in 213 dwellings in Parque Diagonal del Mar, in Barcelona, and 21.5 million euros in hotels in the Hotel Guadalmina in Marbella, Málaga.
Photo: kuhnmi. Credit Suisse Sells its Wealth Management Business in Italy to Banca Generali
Credit Suisse Italy and Banca Generali have announced that they have reached an agreement for the sale to Banca Generali of the Italian affluent and upper affluent private banking operations of Credit Suisse Italy.
The transaction will entail the sale of the business line including, inter alia, the agency contracts of about 60 financial advisors of Credit Suisse Italy, accounting for a current total portfolio of over €2 billion AUM. Consideration for the sale will fall within a range of €47 to €50 million and will be determined on the effective date of the transaction, planned for November 2014. Taking advantage of favourable market conditions, with rates at a low, Banca Generali will finance the acquisition primarily through debt, with the remainder in cash. The transaction is subject to prior authorisation by the Bank of Italy, as well as satisfaction of the additional contractually established conditions.
Through this acquisition, Banca Generali aims to meet the growing demand for qualified investment advice in Italy by speeding the development of its network of financial professionals and private bankers, who are compatible and well matched with their colleagues at Credit Suisse in terms of their profiles, portfolio size and geographical positioning. Through the deal, Banca Generali will further reinforce its presence in strategic areas in Italy.
Credit Suisse is expediting the implementation in Italy of its global strategy of focusing its asset management business on entrepreneurs and large families who can benefit from its integrated advisory model with both asset management and investment banking advice.
The CEO of Banca Generali, Piermario Motta, commented: “We are extremely satisfied with the agreement reached with Credit Suisse. This deal is a further step forward in the extraordinary growth process on which we have embarked in Italy. I am proud to have the opportunity to welcome to Banca Generali a group of colleagues with a strong track record from a highly prestigious international company. They will help us reach our investors with increasingly broad, effective coverage.”
Giorgio Riccucci, Head of Private Banking Market Area Italy, Credit Suisse, stated: ”I am highly satisfied with the agreement reached with Banca Generali, a strategic acquirer with which we share the same values, along with a high degree of proficiency and experience in best serving our clients with dedication. This deal, along with the recent acquisition of Morgan Stanley’s private banking operations in Italy, will allow us to actively pursue our project of focusing on HNWI and UHNWI clients. In the UHNWI segment alone, we recorded inflows of assets under management of over €1 billion in the first six months of 2014. We will continue in this direction. We have planned significant investments of both an organic and non-organic nature. I would also like to thank all of my colleagues who have contributed to the development of Credit Suisse’s private banking business in Italy. I am certain they will find Banca Generali to be a cutting-edge partner with which to continue their professional growth in the long term.”
China Qing Dynasty Flag 1889. Matthews Asia Awarded QFII License to Invest in China’s A-Share Market
Matthews Asia has been awarded a Qualified Foreign Institutional Investor (QFII) license by the China Securities Regulatory Commission (CSRC) and a US$100 million quota from the Chinese State Administration of Foreign Exchange (SAFE).
The award of a QFII license and quota enables the firm to invest, on behalf of its clients, up to US$100 million directly into China’s domestic securities market, including the market for China A-shares. Currently, direct investments into this market by foreign investors can only be made with a QFII license and quota. The quota will be made available to funds managed by the company, including its US-domiciled open-ended equity mutual fund family, Matthews Asia Funds.
China’s A-share market is the fifth largest public equity market in the world. It consists of over 2,300 companies totalling approximately US$2.6 trillion in market capitalization1 and offers investors the opportunity to invest directly into a growing market of companies that are benefiting from China’s economic transformation. The breadth and depth of the market also presents a much bigger pool of investment opportunities compared to Chinese companies listed on the H-share market in Hong Kong or the B-Share markets in Shanghai and Shenzhen.
The A-share market is considerable, but Matthews Asia believes that significant improvements in corporate governance standards are still required. The firm believes this supports the need to conduct extensive due diligence on prospective investments and highlights the value of taking a long-term active management approach.
Matthews Asia is a specialist investment manager located in San Francisco. With US$26.6 billion in assets under management as of June 30, 2014, the firm focuses on long-term investing solely in Asia.
Daniel Diaz. Foto: Linkedin. Dani Díaz Leaves JP Morgan and Joins Credit Suisse as a Senior Banker
According to information provided to Funds Society by sources familiar with the appointment, Daniel Diaz Torroba has joined the ranks of Credit Suisse as a senior banker serving UHNW clients in Latin America.
With over 17 years experience in the private banking industry, he joins the Swiss institution, from JP Morgan, where he has worked for almost five years as executive director specializing in high net worth families and institutional clients. Previously, Diaz held various positions in private banking and investment banking in such well-known firms as UBS and CITIBANK.
Diaz has a degree in Business Management and Administration from the University of Navarra and has an MBA from Darden Graduate School of Business.
Foto: Mattbuck. Beamonte Investments entra en Kiwii Capital, una startup mexicana dirigida a pymes
Beamonte Investments together with its affiliates, “Beamonte”, a leading private investment firm in Boston, announced that it has invested in Kiwii Capital SAPI, a Mexico City start-up dedicated to providing factoring to SMEs. Kiwii was launched in late 2013 by the Mexico team of Beamonte Investments, but just recently finalized funding.
With Kiwii, Beamonte Investments opens its first operation as a company builder in Latin America. The format turns the typical startup formula on its head by identifying robust business models, selecting them as projects, and then getting the best entrepreneurs to partner with to implement them. Beamonte Investments offered the seed capital as well its global network to ensure proper financing. Beamonte has significant experience managing non-banking financial institutions in Mexico, having managed approximately 150 million US dollars in credit assets in the country.
Kiwii Capital is run by Salvador Gaytan, a veteran of commercial banking. “I’m thrilled to be part of this project with Beamonte Investments because the product that we offer helps SMEs to manage their cash flow to grow to the next level. In Kiwii we work with companies with Annual Sales between MXP 15 million to 70 million that provide products or services to large corporations.”
Kiwii Capital is specifically designed to serve small and middle market family-owned operating enterprises in Mexico. Kiwii offers Factoring with terms of 30, 60 and 90 days, helping small businesses to stabilize their cash flow. In factoring, the underlying assets are the seller’s accounts receivable, which are purchased by the factor at a discount. The remaining balance is paid to the seller when the receivables are paid to the factor, less interest. Kiwii will be raising USD 15M in the next 12 to 18 months .
Luis Felipe Trevino, Managing Director of Beamonte and Chairman of the Board at Kiwii Capital commented, “We are exited to build a company from the ground up. As with any other in our portfolio, Kiwii is going to receive our support, advice, network and expertise, but our team members will help Salvador to run the day to day operations. Over time, we will attract talent to grow the company to the next level.”
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.
