Foto: PaulDAmbra, Flickr, Creative Commons.. “Construimos nuestro portafolio en base a la convicción, no siguiendo el peso del índice”
Aberdeen’s high yield team gives a brief overview of its investment process.
What is your investment process?
We are long-term buy and hold investors, not short-term traders. We look at the risks and strength of the underlying creditor protection and side-step complex instruments we do not understand. We look to avoid sectors that experience long-term structural decline, such as IT or technology companies, we prefer industries with a more mature profile. We build a portfolio based on conviction rather than benchmark weight but with enough diversification to limit the impact of defaults.
Meeting with company management is also important and in this regard we typically favor those with experience navigating through a full business cycle.
How do you choose which issues to invest in?
If we like a company then we look at the range of issues available in which to invest and on a valuation basis we decide which deals offer us the best opportunity. When we invest in senior or subordinated debt we look for certain capital structures.
For senior debt we look at bonds with a ratio of 1 to 4 times leverage and for a subordinated bond it is a ratio of 4 to 6 times leverage. When the market sells off senior debt becomes cheaper therefore allowing us to buy bonds relatively cheap while reaching our yield target. We regard non-index issues as a key part of our investment strategy.
This unconstrained approach allows us to benefit from yield pick up from some non- benchmark issues.
Do rating agencies influence your investment decisions?
While we are actively aware of company ratings and any potential hurdles that get highlighted by the agencies, we are not actively concerned as we conduct our own bottom-up research before choosing to invest. Our process is fundamentally driven, meaning that we carry out our own analysis in order to generate a much deeper financial understanding of a company. For example we occasionally find value in CCC rated bonds, yet just because the rating agency has given this bond a rating that reflects a high degree of risk it doesn’t necessarily reflect its true value. We will speak to the agency if they choose to upgrade or downgrade a bond we own and we may potentially view these actions as a trigger point to buy.
What experience does your team have in high yield?
Aberdeen has considerable expertise in this market, having managed a dedicated high yield portfolio for over 13 years. Our knowledge in this asset class is extensive, with over 50 years dedicated experience in high yield bond markets.
Photo: Alvesgaspar. Was The Last Decade Too Kind to Emerging Markets?
John Stopford, co-head of Investec Asset Management’s multi-asset team, discusses the potential to add emerging market exposure from an income perspective.
The last decade saw a number of key developments which helped emerging markets to deliver exceptionally strong returns. These included the rise of China as a leading economic power, the consequent commodity bull market, the Global Financial Crisis, a surge in capital flows supported by low interest rates and money printing in the developed world which led to a reassessment of the relative risks of emerging market investments.
More recently, the gloss has come off the developing world. Equities, bonds and currencies have all underperformed their developed market counterparts, in some cases dramatically. China has gone from being the main driver of growth to the epicentre of investor’s fears about the sustainability of Emerging Market outperformance. Investor inflows have turned to outflows as growing pessimism has replaced rampant optimism.
So, was the last decade a short-lived boom, or do emerging markets represent an enduring investment opportunity?
Emerging market investing was not just a passing fad, but an enduring opportunity, albeit with setbacks along the way
Our belief is firmly the latter. Developing economies are engaged in a multi-generational process of convergence with the developed world. Not all economies will make it, but the progress of the last 25 years has been staggering, and the aspirations of billions of people in a much more open global society seem likely to provide a powerful impetus for further development.
This process has never been a straight line. There have been plenty of crises and setbacks along the way, although encouragingly these have often acted as a spur to necessary reform. It is generally hard to make difficult decisions in good times, but greater challenges have tended to focus the minds of policymakers. The current period is no different. Last year’s plenum in China, for example, puts it on a much more sustainable medium-term footing, even if implementation is not without its challenges. We think similarly, wide-ranging reforms in Mexico bode well for growth and inward investment.
The global environment is likely to be less helpful for emerging markets in the next few years than over the previous decade, but market pricing has already adjusted significantly to reflect this. Yields have risen sharply in bond markets, also equities and currencies have declined, materially, taking many markets to what we think are cheap levels.
In an income context, we see benefits to adding emerging market exposure
In an income context, we see opportunities to add emerging market exposure. Yields on many bonds look increasingly competitive in an absolute sense and on a relative basis against alternatives such as high yield, which appears pretty fully priced. For example, Brazilian three year bonds paying almost 13% price in a pretty downbeat future. Emerging market equities and related securities also offer good opportunities, although pay-out rates make them less compelling in many cases for income-seeking buyers. Global mining stocks, however, are a variant on the theme, with pretty decent yields.
Markets have sold-off to reflect a more challenging environment and now offer attractive yields – but selectivity is required across markets
Some selectivity is required because not all emerging markets and securities are created equal, especially if some of the drivers of the last 10 years have lost their power. We believe, however, that it is better to buy markets when they are less popular and cheap than when they are everyone’s favourite holding. The shift towards pessimism across emerging markets suggests that investors should be looking to add exposure, even if it is too soon to go ‘all in’. In addition, a belief that developed economies can decouple from problems in the developing world are probably almost as misplaced as they were the other way around.
Photo: Tungsten. The MFA Introduces Online Hedge Fund Glossary
Managed Funds Association, the global trade association representing the hedge fund and managed futures industry, has announced the launch of a comprehensive online hedge fund glossary in collaboration with Latham & Watkins LLP through its Book of Jargon® – Hedge Funds. This resource, available on MFA’s website, provides users with a complete set of key terms, phrases, and definitions specific to all aspects of the global hedge fund industry.
The new hedge fund glossary on MFA’s website offers users access to an interactive library of more than 900 terms, including acronyms regularly used to describe key industry terms, as well as jargon adopted by professionals in the hedge fund industry. The Book of Jargon® – Hedge Funds is also available as a free app that allows users to access the information on Apple’s iPhone and iPad devices. The hedge fund glossary is a meaningful addition to MFA’s full complement of educational offerings for the public, investor, and fund manager communities. These resources include MFA’s online video series on hedge fund basics, educational presentations and infographics, as well as a comment letter database detailing the industry’s position on regulatory matters affecting financial markets participants.
“The launch of the hedge fund glossary further exemplifies MFA’s commitment to educational offerings for hedge fund professionals and serves as another helpful resource for those looking to learn more about how our industry functions,” said Richard Baker, MFA President and CEO of the Managed Funds Association. “These global businesses can be complex, but we believe our glossary allows those who are curious and interested in hedge funds to gain clarity on the basic elements, strategies, and terms that govern the day-to-day operations of the industry,” Baker said.
“We are pleased to collaborate with the MFA on this project to make our Book of Jargon® – Hedge Funds available on the MFA website. We are delighted to support the MFA’s endeavor to provide the hedge fund community with educational resources,” said Steve Wink, corporate partner and co-chair of Latham & Watkins’ Hedge Fund Task Force.
“Covering deal terms from ‘A/B Exchange’ to ‘VWAP’ and more than 900 terms in between, we’re pleased to provide MFA’s members and the wider financial community with this interactive library of the A’s – Z’s of hedge fund jargon,” said Christopher Clark, litigation partner and co-chair of Latham & Watkins’ Hedge Fund Task Force.
Content in the glossary will be regularly updated by Latham & Watkins to reflect changes in legislation, terminology, and definitions that are relevant to the global hedge fund community. The full glossary is available online here, and Latham & Watkins’ Book of Jargon® – Hedge Funds app is available for free from the iTunes App Store here.
Wikimedia CommonsPhoto: Ricardo Carreon. Myth Busting: Women Investors Lean Toward Loyalty to Financial Advisors
Russell’s recently released report “What Really Matters to Women Investors” goes a long way toward debunking any perception that women lack loyalty to their financial advisors. An earlier industry study found that 70 percent of women investors would fire their advisors within a year if their spouses were to die. In contrast, a separate study released by Russell in January 2014 finds that a sweeping majority of women indicate they would stick with their current advisor in such a scenario.
Russell surveyed more than 300 financial advisors and more than 900 women investors working with financial advisors, focusing on two generations of women: Gen X (ages 32 to 47) and the Silent Generation (ages 67 to 80). Results show that 78% of Gen X women and 93% of Silent Generation women would stay loyal to their advisors if they became widowed.
While the research shows that women investors have a propensity toward loyalty to their financial advisors, it also emphasizes the need for advisors to earn this loyalty by aligning their professional capabilities with specific financial planning needs and service approaches. Not surprisingly, advisors can deepen loyalties within their client base by catering to specific values that rank highest in priority among women investors in these two age brackets. Russell’s study provides fresh insight into the priorities and service needs of these women investors.
Both advisors and women investors can benefit by better understanding each others’ capabilities, preferences and needs. Undoubtedly, women are an attractive target client segment for financial advisors given their growing economic power. But beyond this, they can be great clients, because they are predisposed to take a longer-term perspective, are assuming greater responsibility for investing decisions and value tailored advice and guidance from a financial advisor. What’s more, it is clear that when they feel they are being heard and are on track to their investment goals, they are loyal clients who will often actively refer their advisors to family and friends.
It’s worth noting that the improved economic climate since 2008 may play a role in the shifting results of such research. But it’s also possible that advisors have been appealing more to the needs of their female clients as more women have taken on the responsibility of investing.
More than half of women surveyed (52% of Gen X and 63% of Silent Generation) share the responsibility for managing the financial aspects of a household (savings and investments). In marriages and partnerships in which one person bears the brunt of the financial responsibility, that person is usually a woman, according to the study. Nearly one third (29%) of Gen X women and a quarter (24%) of Silent Generation women have more financial responsibility than a spouse or partner. Less than a quarter of women (19% of Gen X and 14% of Silent Generation) say their partner has more responsibility.
Advisors should focus less on budgeting, more on long-term planning
While 74% of advisors say they help develop spending guidelines and budgets for their clients, many women indicate this is not a primary need. Some 77% of Gen X women and 81% of Silent Generation women say they’re comfortable managing their own day-to-day finances.
The same research suggests that women investors are inclined to focus on long-term financial planning issues, such as healthcare, long-term care, and maintaining their lifestyle during retirement. Among advisors surveyed, 56% believe their female clients have a longer-term perspective when it comes to financial planning, while only 5% say male clients take a longer-term view.
Advisors would do well to build up active listening skills
For women investors, constructive communication ranks as the most essential characteristic in the advisory relationship. Some 86% of Gen X women and 87% of Silent Generation women say it’s important that advisors show they are actively listening.
Many women also cite clear communication as vital to such working relationships. A large majority (82% of Gen X and 83% of Silent Generation) of women say it’s important that an advisor adapts explanations to their level of investment knowledge. These women also appreciate advisors who encourage them to take an active interest in their investments. Some 80% of Gen X women and 70% of Silent Generation women want an advisor who explains how decisions might affect them and a partner differently in the future.
Clearly, listening skills and the ability to consider client input are especially essential for advisors interested in cultivating a lasting relationship with women investors.
High responsibility with a confidence gap
Despite the balance of financial management in households, women also acknowledge a lack of confidence when it comes to knowledge of investments and the investment process. More than half (52%) of Gen X women and more than a third (35%) of Silent Generation women indicate they have little or no knowledge about investments.
Since the vast majority of women will find themselves managing financial matters on their own during their lifetimes, women investors represent an opportunity for advisors who can help them build their knowledge, develop strong financial plans and increase their confidence.
Advisor must nurture client relationships
Relationships are important to women. A large percentage of women surveyed (83% of Gen X and 81% of Silent Generation) want an advisor who provides a personal level of service. Personalized notes and birthday reminders, for example, are great ways to make a client feel valued.
Advisors would also benefit from remembering milestones and details about their clients’ family lives. This is important not only to building a relationship but also for the purpose of tailoring financial planning advice.
BNY Mellon has announced the appointment of Imad Abukhlal as Head of Middle East and Africa of BNY Mellon Investment Management EMEA Limited. In this role, Abukhlal has responsibility for the development and management of all business capabilities across the region. Based in Dubai, Abukhlal reports to PeterPaul Pardi, CEO of Asset Management EMEA and Global Head of Distribution at BNY Mellon Investment Management.
Joining from Western Asset Management (WAMCO), Abukhlal has over 18 years of experience as an investment manager and was most recently Senior Executive Officer and Head of the Dubai office. He was responsible for distribution, client service, and marketing for Middle East, Africa, and Central Asia. Between 2000 and 2008 he established the firm’s Middle East business.
Abukhlal brings extensive experience having also worked at Lyras Financial Services, a multi-family office, as an analyst and portfolio manager focused on investing across various asset classes including fixed income, equities, and currencies.
Pardi commented on the appointment: “Imad joins us with a wealth of relevant experience and is highly respected; we are confident he will add valuable skills and resource and be an excellent addition to the existing team. In addition to the expanded geographical coverage and institutional clients, Abukhlal is also responsible for building out additional client segments as well as heading up the region’s investment management team”.
Abukhlal holds a bachelor degree in Mechanical Engineering from Westminster University, an Msc in Ocean Engineering from University College London and an Msc in Shipping Trade and Finance from Cass Business School.
Seven Capital Management has obtained the approval of the CSSF (Luxembourg financial regulator) to launch its BlackSnake fund, an AIFM-regulated alternative investment fund (AIF). Using the same investment strategy as the Seven Absolute Return fund managed according to the Commodity Trading Advisors (CTA) strategy, the new BlackSnake fund will cover a broader range of asset classes, including commodities and foreign exchange. Its CTA Global Trend Following strategy will invest in fixed income, equity, forex and commodity futures markets, with a volatility target of 20%.
“We’re stripping back to the bare-bones of who we are”, said Johann Schwimann, CEO of Seven Capital Management. “By launching the BlackSnake alternative investment fund, Seven Capital is returning to the select club of high yield CTA managers.”
“Furthermore, the new AIFM regulations enable us to manage a Luxembourg fund from Paris and to apply our investment process to it”, added Johann Nouveau, CIO and Partner of Seven Capital. “It is the first European cross-border passport between France and Luxembourg for direct alternative investment and it represents a real breakthrough for French fund managers in a highly competitive international environment.”
The AIFM regulations are currently the highest level of regulation in Europe. Seven Capital Management, which obtained this approval in August 2013, worked closely with the firm Reinhold & Partners to set up and create the specialised investment fund (SIF) in Luxembourg.
“Seven Capital Management was the first French management company to submit its European AIFM application. That enabled us to collaborate effectively with the supervisory authorities in France and Luxembourg and to secure the necessary approval to launch the SICAV”, stated Bertrand Gibeau, a partner at Reinhold & Partners. Seven Capital Management also chose to team up with Caceis for custodian and valuation services because of its in-depth knowledge of the French and Luxembourg markets as well as issues related to the AIFMD.
Deutsche Asset & Wealth Management (DeAWM) has announced that Simon Mendelson has joined as a Managing Director and Head of Product Management and Development in the Americas. Based in New York, Mendelson reports to Jerry Miller, Head of Deutsche Asset & Wealth Management, Americas.
In this newly created position, Mendelson will be responsible for overseeing the development, implementation and positioning of DeAWM’s investment products and solutions in the Americas. He will play a key role in aligning DeAWM’s investment and distribution channels, not only to develop and deliver new products, but also to manage and optimize existing product capabilities.
“Simon brings extensive experience and a deep understanding across our broad investment capabilities,” said Miller. “His appointment will help to accelerate DeAWM’s growth strategy by aligning our product offerings with the needs of investors.”
Mendelson is the latest high-profile strategic senior hire by DeAWM as it pushes to further expand its product offerings, increase outreach to current and future investors, and continue to build its market share in the Americas. Over the last six months, DeAWM has added more than a dozen leading asset and wealth management executives to its Americas team while investing in new technology and launching innovative fund offerings. In November 2013, DeAWM Americas launched the first ETF to provide access to China A-shares with AUM doubling in size since the launch.
Mendelson has more than two decades of leadership and operating experience having spent nine years at BlackRock and 14 years at McKinsey & Co. He was most recently Global Head of Product Development at BlackRock, which he joined in 2005. From 1990 to 2005, he was a Senior Partner in the financial institutions practice at McKinsey & Co., where he focused on insurance, brokerage, and asset management.
Mendelson is a graduate of Harvard Law School and Yale University.
Photo: Thomas Wolf. Nuveen Investments Extends Global Reach with Expanded Platform in Chile
Nuveen Investments, has announced the Chilean Comisión Clasificadora de Riesgo has approved 15 Nuveen mutual funds for investment by Chilean pension funds. Nuveen Investments will partner with Raymond James, through their subsidiary RJ Delta Capital, to make these strategies readily available to pension funds in Chile.
This latest effort builds upon Nuveen’s growing presence in Latin America, and meaningfully advances the firm’s goal of broadening its global reach through offering world-class investment expertise to institutional and individual investors as well as the advisors and consultants who serve them.
“Chile is a very important part of our overall regional strategy,” said Oscar Isoba, Nuveen Investments’ Senior Vice President and Head of Business Development for Latin America. “The Chilean asset management industry has been a regional pioneer and a great advocate for investors throughout the area. This focus aligns with our own commitment to helping our growing base of global clients meet their financial goals.”
The newly registered funds draw upon the deep expertise of several Nuveen affiliates, and include the following:
• Nuveen Core Bond Fund • Nuveen Core Plus Bond Fund • Nuveen Dividend Value Fund • Nuveen Global Infrastructure Fund • Nuveen High Income Bond Fund • Nuveen Inflation Protected Securities Fund • Nuveen Large Cap Growth Opportunities Fund • Nuveen Mid Cap Growth Opportunities Fund • Nuveen Strategic Income Fund • Nuveen Tactical Market Opportunities Fund • Nuveen Santa Barbara Dividend Growth Fund • Nuveen Tradewinds Global All-Cap Fund • Nuveen Winslow Large Cap Growth Fund • Nuveen Symphony Credit Opportunities Fund • Nuveen Preferred Securities Fund
Photo: Work by Harry Wilson Watrous (1857–1940). Americans Find Discussing Personal Finances as Difficult as Talking About Religion and Politics
A new survey from Wells Fargo revealed that Americans find discussing personal finances as difficult as talking about other thorny discussion topics like religion and politics. Nearly half of Americans say the most challenging topic to discuss with others is personal finances (44%), whereas death (38%), politics (35%), religion (32%), taxes (21%), and personal health (20%) rank as less difficult. These results come from Wells Fargo’s Financial Health study, a national online survey conducted by Market Probe, Inc., of 1,004 adults between the ages of 25 and 75, designed to take the pulse of Americans’ perceptions of their own financial health.
“It’s not surprising people don’t want to talk about money, investments, tax strategies, or even how much to put aside for a child’s education,” said Karen Wimbish, director of Retail Retirement at Wells Fargo. “But not spending time today to think about the future can be costly in the long-run. I think of personal finance in the same vein as my health—I wouldn’t keep concerns about my physical health private. I’d consult a doctor or talk to a friend or family member about it.”
Although people find it easier to talk about politics and religion over money, that doesn’t mean financial concerns are not top-of-mind. Two in five (39%) Americans report that money is the biggest stress in their life, 39% say they are more stressed about finances now than they were last year, and a third of Americans (33%) report losing sleep worrying about money. When asked what they would do differently if they could go back five years, more adults cite regrets about saving and spending (49%) than about shortcomings in all other areas of their life, including taking better care of their physical health, diet and fitness (42%), pursuing different personal relationships (21%), and working more to improve their career (16%).
Knowing what to do also appears to be a major barrier to a healthier financial life. In terms of getting in physical shape and exercising, respondents said the hardest part is “motivating themselves to get started” (40%) and “sticking to a plan” (36%). But for financial health and saving money, the hardest part is “knowing the best approach” (35%) and “sticking to a plan” (35%). Only 9% of respondents said motivation was the biggest barrier for improving financial health. In addition, about a third report they are more worried about their financial health than their physical health.
“When someone is physically out of shape, they typically understand that eating well and exercising more will help get them back on track,” said Wimbish. “With money, however, there’s a lack of understanding about the importance of designing a plan. Only a third of adults have some type of financial plan or a simple household budget in place, which means most Americans don’t have the roadmap needed to improve their financial health.”
According to the study, a majority of Americans feel financially healthy when addressing their basic needs, but feel less so when trying to control spending and saving for retirement and emergencies. Two thirds (67%) feel in financially good or great shape with regards to paying their monthly bills, and over half (56%) feel financially good or great in their ability to live within their means. However, only 40% feel financially good or great about their amount of discretionary spending and about their “rainy day” savings. Only a third (33%) described feeling good or great shape in their ability to retire comfortably.
Conversations about money
Seventy-one percent of adults surveyed learned the importance of saving from their own parents. Despite this, only a third (36%) of today’s parents report discussing the importance of saving money with their children on a frequent basis, with 64% indicating they talk about savings with their kids less than weekly or never.
For a quarter of married or partnered adults (25%), financial concerns have had an impact on these relationships. About a third (33%) have difficulty discussing money with their spouse or partner, and a quarter (25%) often have heated discussions with their significant other about money and household finances.
Gender differences
The study revealed some distinct differences between women and men when it comes to money matters. Half of women (50%) find it difficult talking with others about personal finances, versus 38% of men. Women are also less confident about their investment knowledge. Only 29% of women said they know where to invest in today’s market (compared to 42% of men).
Almost half of women (45%) grade their financial literacy a ‘C’ or below, while 65% of men assess their level of financial literacy as a ‘B’ or higher. Men also express greater confidence in their ability to maintain their standard of living, with 57% feeling in good or great financial shape in this area versus 49% of women.
The study also revealed the following saving and spending-related behaviors:
Adults are far more likely to have their car serviced (82%) or take a vacation each year (69%) than review their finances (43%).
Those who feel to be in poor or average financial health are twice as likely to update their Facebook profile (47%) than they are to review their finances (25%).
Two-thirds (65%) of adults spend at least two hours watching television each day, while only one third (34%) spend at least 15 minutes thinking about their finances daily.
One in four (25%) adults would rather pay for a personal trainer than a financial advisor.
About a third (32%) of retirees feel more stressed financially now than they did before retiring—especially those who retired early (before age 60).
The Dreyfus Corporation (Dreyfus), a BNY Mellon company, has announced that it has launched the Dreyfus Global Emerging Markets Fund, an actively managed, equity mutual fund. The fund is designed to seek capital appreciation by investing in emerging market countries including those located in Africa, Asia, Europe, Latin America, and the Middle East. Dreyfus has engaged its affiliate, Newton Capital Management, Ltd., to serve as the fund’s sub-adviser. Dreyfus is the fund’s investment advisor.
“The current volatility in emerging markets worldwide has created noteworthy opportunities for those investment managers who have a history of emerging markets expertise,” said Dreyfus President Charles Cardona. “Newton has more than 20 years of experience investing in emerging markets and emerging market equities. Using Newton’s distinctive global thematic approach to investing, we are confident Newton will continue to locate emerging markets opportunities.”
Newton employs a fundamental bottom-up investment process that emphasizes quality, including stock fundamentals and balance sheet strength, return on capital employed through the market cycle, and governance prioritizing shareholder interests. The process of identifying investment ideas begins by using a dynamic framework of identifying a core list of investment themes. Newton has currently organized its themes into four main areas of change: debt, crisis and policy; innovation; energy, environment and infrastructure; and geopolitics and demographics. Newton’s themes are based primarily on observable global economic, industrial, or social trends that Newton believes will positively affect certain sectors or industries and cause stocks within these sectors or industries to outperform others.
“As emerging markets equities are currently experiencing increased volatility, we believe there are increased investment opportunities available there for the long-term,” said Helena Morrissey CBE, Chief Executive Officer of Newton. “Newton has a long history investing in emerging markets and is delighted to be subadvising the Dreyfus Global Emerging Markets Fund, building on its strong investment record running this strategy in the UK. The fund seeks to capture the growth available in emerging markets through a high-conviction actively-managed portfolio, which uses Newton’s investment themes to guide its long-term approach, together with strong fundamental stock-picking skills to not only find the best companies in which to invest, but also to identify those sectors and industries that are best avoided.”
Robert Marshall-Lee and Sophia Whitbread, CFA, are the fund’s primary portfolio managers. Mr. Marshall-Lee, the lead portfolio manager, is the investment leader of the emerging markets equities team at Newton, where he has been employed since 1999. Ms. Whitbread is an investment manager on the emerging markets equities team at Newton, where she was employed from 2005 to 2010 and rejoined in January 2011.
Newton’s dedicated Emerging Markets Core Team utilizes the global research team of 29 in identifying the best emerging markets ideas globally. To pursue its goal, the fund normally invests at least 80% of its net assets in common stocks and other equity securities or derivatives in emerging market countries represented in the Morgan Stanley Capital International Emerging Markets Index (MSCI® EM Index), the fund’s benchmark index.
