Investors have become more discerning about investing in emerging markets as their economies reform at varying speeds, according to findings from the annual independent survey released by CREATE-Research and commissioned by the Principal Financial Group® and Principal Global Investors.
“Emerging markets are no longer seen as a homogenous group. Different countries are developing at different speeds,” said Barb McKenzie, chief operating officer of Principal Global Investors. “Those identified as embracing a reform agenda are recognized as being more attractive. Survey respondents expect these economies to converge structurally and financially with developed economies in the near-term.”
Nearly 35 percent of survey respondents believe China will deliver strong returns over the next three years, while only 15 percent believe Brazil can do so. Similarly, more than 50 percent of respondents believe China will make significant progress in implementing necessary economic reforms, whereas only 6 percent believe Russia can do so.
The report, Not All Emerging Markets Are Created Equal, explores the extent to which emerging economies and developed markets will converge or diverge over the rest of this decade. It seeks to uncover how emerging economies resemble their developed peers in terms of economic well-being and investment approaches, and analyzes factors that are likely to affect convergence.
The findings are based on a survey of more than 700 pension plans, sovereign wealth funds, pension consultants, asset managers and fund distributors across 30 countries with combined assets under management of $29.7 trillion. The survey was followed by 110 interviews.
From buy-and-hold to tactical
Marked volatility in emerging markets has caused investors to become more discerning, changing the landscape of emerging markets investing to be considered tactical rather than buy-and-hold. According to the survey, those investors viewing emerging market assets as an opportunistic play has increased from 30 percent to 48 percent for equities, and from 15 percent to 51 percent for bonds, since 2012.
“While emerging markets in the East continue to converge with developed markets in the West, it is clear from our research that emerging economies will no longer move in lock step,” said Prof. Amin Rajan, CEO of CREATE-Research and author of the report. “This could be the age of stock-pickers, as catchy acronyms such as BRICS become irrelevant.”
United States drives global economy
Survey respondents view the United States as the key driver of the global economy over the next three years:
Forty-seven percent of investors believe the U.S. recovery will deliver the best returns
Nearly 65 percent of investors believe the U.S. government will make significant progress in rebooting its economy
Thirty percent of investors think the outlook for Europe remains decidedly cloudy, with isolated pockets of revival expected only in Scandinavia and the United Kingdom
Key findings by investor segment
Themes emerging from the survey relative to each investor segment include:
Defined benefit plans: aging member demographics are driving the transition from asset accumulation to liability matching, with opportunistic investors looking toward distressed debt, emerging marketing equities, ETFs and emerging market corporate bonds
Defined contribution plans: inadequate plan balances are intensifying the search for higher returns with the most opportunity seen in ETFs and active equities and bonds
Retail investors: becoming ultra-cautious as they approach or reach retirement with a focus on cost, convenience and capital preservation when choosing investment products
High-net-worth investors: pursuing a range of goals including inflation protection and regular income via real assets and low volatility via balanced and capital protection funds
“The research clearly shows a change in the landscape of emerging markets investing as investors become more discerning,” said Julia Lawler, senior vice president at The Principal®. “The demographics of aging populations with an eye toward retirement coupled with investors interested in a buy-and-hold approach are leading a fundamental change in asset allocation decisions.”
Kimco Realty Corp., North America’s largest publicly traded owner and operator of neighborhood and community shopping centers, has announced that as part of its stated strategy to exit Latin America, it has sold four retail properties from its Mexico portfolio for a gross sales price of 1.1 billion Mexican pesos (US $82.1 million). The portfolio sale generated pro-rata proceeds to Kimco of approximately 688.1 million Mexican pesos (US $53.3 million).
The four Mexican assets total 1.2 million square feet and were developed between 2005 and 2009 in the cities of Rosarito, Tijuana, Los Mochis, and Mexicali. Anchor tenants include Wal-Mart (4), Home Depot (2), and Cinepolis (3). The four-property portfolio divestiture follows the disposition of a nine-property Mexican portfolio in the first quarter of 2014.
The sale represents continued progress on Kimco’s goal to simplify its operations by exiting Latin America and focusing primarily on the U.S. and Canadian shopping center portfolios. Kimco is currently negotiating contracts for the disposition of all of its remaining retail Latin American assets.
Kimco Realty Corp. is a real estate investment trust (REIT) headquartered in New Hyde Park, New York, that owns and operates North America’s largest publicly traded portfolio of neighborhood and community shopping centers. As of March 31, 2014, the company owned interests in 835 shopping centers comprising 122 million square feet of leasable space across 42 states, Puerto Rico, Canada, Mexico and South America. Publicly traded on the NYSE since 1991, and included in the S&P 500 Index, the company has specialized in shopping center acquisitions, development and management for more than 50 years.
The Financial Industry Regulatory Authority (FINRA) has announced that it has fined Merrill Lynch, Pierce, Fenner & Smith, Inc. $8 million for failing to waive mutual fund sales charges for certain charities and retirement accounts. FINRA also ordered Merrill Lynch to pay $24.4 million in restitution to affected customers, in addition to $64.8 million the firm has already repaid to harmed investors.
Mutual funds offer several classes of shares, each with different sales charges and fees. Typically, Class A shares have lower fees than Class B and C shares, but charge customers an initial sales charge. Many mutual funds waive their upfront sales charges for retirement accounts and some waive these charges for charities.
Most of the mutual funds available on Merrill Lynch’s retail platform offered such waivers to retirement plan accounts and disclosed those waivers in their prospectuses. However, at various times since at least January 2006, Merrill Lynch did not waive the sales charges for affected customers when it offered Class A shares. As a result, approximately 41,000 small business retirement plans, and approximately 6,800 charities and 403(b) retirement plan accounts available to ministers and employees of public schools, either paid sales charges when purchasing Class A shares, or purchased other share classes that unnecessarily subjected them to higher ongoing fees and expenses. Merrill Lynch learned in 2006 that its small business retirement plan customers were overpaying, but continued to sell them more costly shares and failed to report the issue to FINRA for more than five years.
Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement, said, “Merrill Lynch failed to offer available waivers to customers, including small business retirement accounts and charitable organizations. FINRA’s commitment to investor protection is highlighted by the significant restitution component of this settlement, which reinforces that investors must be able to trust that their brokerage firm will offer the lowest-cost share classes available to them. When firms fail to do so, we will take appropriate action.”
Merrill Lynch’s written supervisory procedures provided little information or guidance on mutual fund sales charge waivers. Even after the firm learned that it was not providing sales charge waivers to eligible accounts, Merrill Lynch relied on its financial advisors to waive the charges, but failed to adequately supervise the sale of these products or properly train or notify its financial advisors about lower-cost alternatives.
In concluding this settlement, Merrill Lynch neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Prudential Investments has launched the Prudential Long-Short Equity Fund, available for the US market. The fund uses long and short positions within the full spectrum of U.S. equity market capitalization. The fund’s managers seek to add value by selecting attractive long positions, while having the flexibility to short sell securities they view as unfavorable. In addition, they can adjust the fund’s net long market exposure to take advantage of market conditions.
“With this new fund, our goal is to provide investors with growth potential from their equity investments, while seeking less volatile return patterns,” said Stuart Parker, president of Prudential Investments.
The fund is managed by a team from Quantitative Management Associates, including Peter Xu, Stacie Mintz and Devang Gambhirwala, who average 22 years of investment experience. With more than a decade of experience managing long-short equity portfolios, QMA has deep expertise in applying adaptive models to an array of investment and asset allocation strategies, including long-only, active extension, market neutral and alternatives strategies.
“In this fund, we are building on what we already do well,” said Stacie Mintz, a managing director and portfolio manager at QMA. “The strategy combines our active, bottom-up stock selection approach with insights from our asset allocation team to create a flexible portfolio designed to help investors in volatile markets.”
QMA, an asset management business of Prudential Financial, had more than $111 billion in assets under management as of March 31, 2014. The business manages equity and asset allocation portfolios for institutional pension plans, endowments, foundations, and subadvisory accounts for other financial services companies.
Edificios en Nueva York. Foto: DanielFoster437. PREI y L&L compran un conjunto de edificios de oficinas en Nueva York por 160 millones
In a $160 million joint venture, Prudential Real Estate Investors and L&L Holding Company, LLC, acquired 511-541 West 25th Street, three interconnected office properties in Manhattan’s Chelsea art gallery district, the companies announced. PREI, which is acquiring the properties on behalf of German institutional investors, is among the world’s largest real estate investment management and advisory businesses, and is a business of Prudential Financial, Inc.
Situated adjacent to the High Line – an elevated freight rail that was transformed into a public park – and two blocks from the Hudson River, the properties feature 200,000 square feet of space, including 300 feet of retail frontage on one of New York’s most prominent art gallery blocks. The buildings, which were constructed between 1910 and 1917 and renovated over the past two years, also have unobstructed views of the High Line.
“This acquisition is consistent with our investors’ strategy to own urban infill office properties in major cities,” said David Pahl, a managing director with PREI. “The unique location of these offices in one of New York’s most prominent art gallery districts, combined with the favorable market conditions, and the value L&L brings, made this an extremely attractive transaction for our investors.”
“This acquisition reflects our continuing efforts to seek out opportunistic and value-added opportunities in the New York metropolitan area,” said David W. Levinson, chairman and CEO of L&L Holding Company, LLC.
“The property offers exceptional upside potential, given the scarcity of office space along the High Line.”
CC-BY-SA-2.0, FlickrFoto: Johey24. Los promotores chinos salen fuera para saciar el apetito del inversor chino por bienes raíces en el exterior
Property firms have quickened their pace of offshore expansion to meet the appetite of Chinese consumers and find new opportunities beyond the tepid domestic property market.
In the first quarter of 2014, institutional investors’ offshore property investments rose 25 percent year-on-year to 2.1 billion dollars, while the sum going to residential property grew by 80 percent, according to Jones Lang LaSalle Inc, a global real estate services and investment management company.
The overseas residential property investment by China’s institutional investors in the quarter exceeded 1.1 billion dollars, smashing last year’s record of 600 million dollars. The real estate projects in Britain, Australia and the United States were most favored by Chinese investors.
Offshore expansion by Chinese investors gets more impressive than the domestic market because it has a higher potential profit, analysts say.
Wanda Group, one of China’s largest property developers, announced in January that it would invest up to 3 billion pounds (5.1 billion U.S. dollars) in British cities. Greenland Group also announced earlier this year that their overseas investment reached almost 35 billion yuan (5.6 billion U.S.dollars) in 2014.
Developers, abundantly liquid because of previous successes, are diversifying their portfolios, focusing on gateway cities, such as London, New York, Los Angeles and Singapore, according to Zhu Fei, researcher from Yuexiu Property Institution.
With the financial environment in foreign countries relatively benign compared to China, some property firms have gone public in Hong Kong or the United States, Zhu said.
Growing Appetite
The upsurge in overseas expansion can be attributed to the growing appetite of Chinese people for residential properties in pursuit of capital security, access to education and health care, permanent residency and citizenship, to name but a few.
Around 150,000 Chinese emigrate overseas annually, which is expected to generate a purchase demand for properties worth more than 75 billion yuan, said Li Qingwen, general manager of DTZ Real Estate Consultancy Company Guangzhou.
Traditional destinations of immigrants top the money flows, said Fu Zhenhuang, analyst from Deloitte, adding that investment has been most active in London, New York, Singapore, Sydney, Manchester and Hong Kong.
Statistics from Savills, a real estate agent, suggest that Chinese consumers invested 13.5 billion dollars in the overseas market in 2013, almost double that of 2012.
Huang Yuwei, executive CEO of an overseas property investment company, said his company sold less than 10 houses a year seven years ago, and now move 15 to 20 daily. “Investing in overseas property will be much more impressive in the next ten years,” he said.
Calculations based on the asset scale of the Chinese high net worth individuals suggest that 1,100 billion yuan will flow into overseas properties.
Foto: Gabriel Sanz. Cartica da otra vuelta de tuerca y demanda a Itaú para evitar la fusión con CorpBanca
Cartica Management, has amended its complaint in the matter of Cartica v. CorpBanca, Saieh, et al. to, among other things, include Itaú Unibanco Holding S.A. and Banco Itaú Chile (together, “Itaú”) as Defendants along with CorpBanca S.A. and Álvaro Saieh, its controlling shareholder. Other Defendants include CorpBanca’s Directors, its Chief Executive Officer, and its Chief Financial Officer; and Saieh’s holding companies (together, “CorpGroup”).
The complaint alleges Saieh, Itaú, CorpBanca and the other Defendants committed violations of anti-fraud provisions and disclosure requirements of the United States Securities Exchange Act of 1934. The complaint seeks to enjoin the closing of the proposed transaction. The case is pending in the United States District Court of the Southern District of New York.
Saieh, Itaú and CorpBanca are charged in the Amended Complaint with, among other things, continuing to withhold material information, and failing to correct material misstatements, even after Cartica filed its Complaint identifying multiple violations of U.S. securities laws. For example,
CorpBanca’s and Saieh’s two filings since Cartica commenced its lawsuit have been late and materially incomplete. First, a belated 20-F filing made by CorpBanca on May 15, 2014 provided incomplete and inconsistent additional disclosures, leaving the overall disclosures materially misleading. Second, on May 29, Saieh and CorpGroup filed a Schedule 13D that by CorpGroup’s own admissions in the Schedule should have been filed more than five years ago. Furthermore, the belated Schedule 13D failed to disclose that Saieh, Itaú, and CorpGroup had formed a group to hold shares for the purpose of effecting a change in control. The document also omitted any information regarding Saieh’s, CorpGroup’s and Itaú’s motivations for effecting a change-in-control at CorpBanca – even though the provisions of Section 13(d) require full and complete disclosures concerning, among other things, their intentions, agreements and acts related to the change in control at CorpBanca.
Saieh, CorpBanca and the other Defendants materially misstated to the market and their investors the size of the credit facility they entered in January 2014. They initially disclosed to the market that the credit facility was for US$950 million, and over the next four months they reiterated the US$950 million figure. Then, following Cartica’s filing of a lawsuit and increased pressure for additional disclosure, the Defendants’ most recent May 2014 disclosures revealed that the credit facility was for US$1.2 billion—a material misstatement of US$250 million.
Based on the most recent material misstatements and omissions made by Saieh, including the five-year delinquent and still-deficient Schedule 13D, it has become clear to Cartica that Itaú is actively working with Saieh to close the transaction, a transaction being supported by fraud. Cartica has therefore made the important decision to name Itaú as a defendant in the amended complaint filed yesterday.
“Our initial complaint made clear that Itaú and the Saieh entities had formed a group subject to the filing requirements of Section 13(d). We reasonably thought that Itaú would respond by belatedly complying with the law by jointly filing a 13D with the Saieh Group,” said Cartica’s Managing Director for Corporate Governance Mike Lubrano. “Unfortunately, Itaú decided to continue to flout U.S. securities law and regulations, and so we added Itaú as an additional Defendant and have asked the court to compel Itau to comply with US securities law.”
“The Itaú Transaction should be enjoined so that the Boards of CorpBanca, CorpGroup and Itaú, as well as the Boards of every other potential acquirer, receive the unmistakable message that any acquisition of CorpBanca must be fair and transparent,” said Cartica Managing Director Teresa Barger.
“Saieh’s, Itaú’s and CorpGroup’s failure to provide material information about this fraudulent deal is not mere oversight, it is a critical part of the plan to pull off this wrongful transaction,” Ms. Barger continued. “Saieh, Itaú and CorpGroup cannot fulfill their disclosure obligations without revealing to the public that they made a backroom deal to secure short term liquidity, cash and long-term benefits for Saieh and CorpGroup.
“The facts are that the piecemeal and delinquent disclosures remain incomplete, and every new disclosure raises new issues or reveals additional misstatements,” Ms. Barger said. “CorpBanca, Saieh and Itaú still have not disclosed many documents that would allow minority shareholders to make informed decisions about the proposed combination. Nor have they done anything to correct their omissions and misrepresentations or to end this wrongful scheme. Simply put: Saieh and the Defendants made or permitted misleading statements and omissions that led to the Itaú Transaction on its current unfair and undervalued terms, without CorpBanca’s minority shareholders having the opportunity to take any steps to protect their interests. Shareholders of U.S.-listed companies deserve better.”
Foto: Cobblucas, Flickr, Creative Commons. MiFID II supondrá para muchos profesionales independientes del mercado financiero el cese de su actividad
Jean Pierre Cuoni will step down as Chairman of EFG International in 2015 and is disposing of 30% of the Cuonis’ family shareholding in the company.
Jean Pierre Cuoni, Chairman of EFG International, has announced his intention to step down as chairman by not seeking re-election at the Annual General Meeting in 2015, the twentieth anniversary year of the company he co-founded in 1995. He has taken this decision on account of his age (77).
While he will be stepping down as chairman, the intention is that Jean Pierre Cuoni will remain a member of the board and will remain an active supporter of the business in an ambassadorial role. EFG International expects to announce a new chairman designate later this year.
EFG International is a global private banking group offering private banking and asset management services, headquartered in Zurich. EFG International’s group of private banking businesses operates in around 30 locations worldwide, with circa 2,000 employees. EFG International’s registered shares (EFGN) are listed on the SIX Swiss Exchange.
Photo: Norbert Aepli
. UHNW and HNW Clients will Continue to Value Propositions of Offshore Centers
Private wealth booked across borders reached $8.9 trillion in 2013, an increase of 10.4 percent over 2012 but below the increase in total global private wealth of 14.6 percent. As a result, the share of offshore wealth declined slightly from 6.1 percent to 5.9 percent, according to Boston Consulting.
Offshore wealth is projected to grow at a solid CAGR of 6.8 percent to reach $12.4 trillion by the end of 2018. The offshore model will continue to thrive because wealth management clients—particularly in the high-net-worth (HNW) segment, with at least $1 million in wealth, and in the ultra-high-net-worth (UHNW) segment, with at least $100 million—will continue to leverage the differentiated value propositions that offshore centers provide. These include access to innovative products, highly professional investment and client-relationship teams, and security (most relevant for emerging markets). Indeed, the latest tensions between Russia and Ukraine, as well as the escalated conflict in Syria, have highlighted the need for domiciles that offer high levels of political and economic stability.
In 2013, Switzerland remained the leading offshore booking center with $2.3 trillion in assets, representing 26 percent of global offshore assets. (See the accompanying exhibit.) However, the country remains under heavy pressure because of its significant exposure to assets originating in developed economies—some of which are expected to be repatriated following government actions to minimize tax evasion.
In the long run, Switzerland’s position as the world’s largest offshore center is being challenged by the rise of Singapore and Hong Kong, which currently account for about 16 percent of global offshore assets and benefit strongly from the ongoing creation of new wealth in the region. Assets booked in Singapore and Hong Kong are projected to grow at CAGRs of 10.2 percent and 11.3 percent, respectively, through 2018, and are expected to account collectively for 20 percent of global offshore assets at that point in time.
Overall, repatriation flows back to Western Europe and North America, in line with the implementation of stricter tax regulations, will continue to put pressure on many offshore booking domiciles. Reacting to these developments, private banks have started to revisit their international wealth-management portfolios. Some have acquired businesses from competitors—through either asset or share deals—while others have decided to abandon selected markets or to serve only the top end of HNW and UHNW clients. The goal is to exit subscale activities in many of their booking centers and markets, and in so doing to reduce complexity in their business and operating models.
Nonetheless, players that have decided to leave selected markets have not always obtained the results they hoped for. An alternative and potentially more effective course of action—one already embraced by some leading players—would be to establish an “international” or “small markets” desk that addresses all non-core markets.
The key to success is to clearly differentiate products and service levels by market and client segment. For core growth markets, full-service offerings that include segment-tailored products (including optimal tax treatment) should be featured. All other markets (and client segments) should be limited to standard offerings.
CC-BY-SA-2.0, FlickrFoto: RhysA. Aberdeen ya tiene sustitutos para Gary Marhsall al frente de las Américas
Aberdeen Asset Management announced the appointment of Mr. Andrew Smith and Mr. Bev Hendry as Co-heads of its business in the Americas, reporting directly to Chief Executive Martin Gilbert. Andrew and Bev will be based in Philadelphia, the firm’s headquarters in the Americas. The announcement was made this afternoon by Martin at the annual Aberdeen Investment Conference in New York City.
As previously announced, Gary Marshall, current Head of Americas, is returning to the United Kingdom, to serve as Chief Executive of Aberdeen’s recent acquisition, Scottish Widows Investment Partnership (subject to regulatory approval). During his four and a half years in the role, the business in the Americas region nearly doubled from $40 billion to $78 billion in assets under management.
Martin Gilbert, Chief Executive of Aberdeen Asset Management, comments: “Andrew’s and Bev’s combined expertise, experience and knowledge means they are well placed to lead Aberdeen’s business in the Americas, an important region for us. We have institutional, wholesale and closed-end fund investors located across the U.S., as well as significant footprints in Canada and South America. Our diverse range of investment capabilities in the equities, fixed income, property, alternatives and multi-asset investment areas means that we are positioned to continue to build our presence in the Americas.”
Bev Hendry is returning to Aberdeen from Hansberger Global Investors in Fort Lauderdale, Florida, where he has worked for six years as Chief Operating Officer. Bev established Aberdeen’s business in the Americas in Fort Lauderdale, moving from his home city of Aberdeen, Scotland, in 1995; he first joined Aberdeen in 1987. He left Aberdeen in 2008, when the company moved to consolidate its headquarters in Philadelphia, choosing to remain in Fort Lauderdale with his family. His return to his Aberdeen roots now that his family has grown, is a very welcome development for the firm. Bev is a Chartered Accountant and will serve as Co-head of Americas and Chief Financial Officer for Aberdeen’s business operations in the Americas.
Andrew Smith has been acting deputy to Gary Marshall during Gary’s tenure as Head of Americas, and Chief Financial Officer and Chief Operating Officer for Aberdeen’s Americas business. Having seen considerable growth in that business, it is appropriate that Aberdeen now split the two roles. Andrew will be Co-head of Americas and Chief Operating Officer for Aberdeen’s Americas business. He joined Aberdeen in 2000 via the acquisition of Murray Johnstone, a Glasgow-based fund manager, where he was operating in a senior capacity in that firm’s U.S. business. Originally from Glasgow, Scotland, Andrew has been living in the United States for 16 years; 4 of those were in Fort Lauderdale where he and Bev previously worked together.
Andrew and Bev will divide the various Head of Americas responsibilities between them, ensuring a clear allocation of duties while maintaining close cooperation and coordination. They will alternately chair Aberdeen’s weekly Executive Committee in the Americas.
Aberdeen has successfully integrated the Scottish Widows Investment Partnership (SWIP) team in the Americas. The SWIP acquisition, which was completed earlier this year, adds approximately $4 billion to the assets managed by the North American Fixed Income team.
