Photo: US Navy. The Hedge Fund Industry Could Reach a Record $3 Trillion by 2014 Year End
The hedge fund industry is predicted to reach a record $3 trillion by 2014 year end -up from $2.6tn as of 2013 year end-, driven by significant inflows, most notably from institutional investors, according to a recent study by Deutsche Bank. This is based on investors’ predictions of $171 billion net inflows and performance-related gains of 7.3% (representing $191 billion).
The bank has released its twelfth annual Alternative Investor Survey, which stands as one of the largest and longest standing hedge fund investor surveys available. This year over 400 investor entities participated, representing over $1.8 trillion in hedge fund assets and over two thirds of the entire market by assets under management (AuM).
Barry Bausano, Co-head of Global Prime Finance at Deutsche Bank, said: “Hedge funds continue to establish their growing position within the broader asset management industry, alongside some of the more mainstream asset managers. The hedge fund industry is predicted to reach a record $3 trillion by 2014 year end driven by significant inflows, most notably from institutional investors.”
According to the survey, commitment from institutional investors continues to strengthen: nearly half of institutional investors increased their hedge fund allocations in 2013, and 57% plan to grow their allocations in 2014. Institutional investors now account for two thirds of industry assets, compared to approximately one third pre-crisis.
Anita Nemes, Global Head of the Hedge Fund Capital Group at Deutsche Bank, said: “With the majority of investors happy with hedge fund performance, we expect institutional investors to further strengthen their commitment to hedge funds. Last year’s respondents targeted 9.2% for their hedge fund portfolios, and hedge funds delivered – the weighted average return for respondents’ hedge fund portfolios this year was 9.3%. Looking forward, respondents are targeting 9.4% for 2014.”
Investors are happy with hedge fund performance: 80% of respondents state that hedge funds performed as expected or better in 2013, after their allocations returned a weighted average of 9.3% in 2013. 63% of respondents, and 79% of institutional investors, are targeting returns of less than 10% for their hedge fund portfolios in 2014. Equity long short and event driven are the most sought after strategies.
About the fee trends, the study says 2 & 20 is not the norm. Investors today pay an average management fee of 1.7%, and an average performance fee of 18.2%. While fees have come down slightly, investors remain willing to pay for performance: almost half of all investors would allocate to a manager with fees in excess of 2&20 where the manager has proven ‘consistent strong performance in absolute terms’.
The industry will have a bigger part of a bigger pie. 39% of investors are now embracing a risk-based approach to asset allocation, up from 25% in 2013. 41% of pension consultants recommend this approach to clients. The risk-based approach effectively removes historical constraints on the percentage allocation to absolute return strategies, allowing equity long/short managers to compete with long only and fixed income absolute return funds within the overall fixed income risk budget.
Conducted by Deutsche Bank’s Global Prime Finance business, the survey identifies trends amongst a growing and evolving hedge fund investor base. Respondents include asset managers, public and private pensions, endowments and foundations, insurance companies, fund of funds, private banks, investment consultants and family offices. Allocators from 29 different countries completed the survey. Approximately half (46%) of responding investors manage $1bn+ in hedge fund AuM, and 18% manage over $5bn.
Photo. Bruno_tak, Flickr, Creative Commons.. Mexico: The Next Brazil?
There is a natural tendency to benchmark Mexico with Brazil. Indeed,Credit Suisse can identify demographic, socioeconomic and political factors capable of driving a steady rise in the middle- income bracket, similar to that seen in Brazil over the last decade with a similar potential impact on the fortunes of the Mexican consumer. However, Credit Suisse says “there are headwinds today that stand in the way of this structural potential”, which are reflected in the cautious near-term measures of optimism.
With a net 25% of consumers expecting an improvement in their financial position in the next six months, Mexico ranks fourth in Credit Suisse’s fourth annual Emerging Consumer Survey – a detailed study profiling consumer sentiment and its drivers across the emerging world. Credit Suisse has again partnered with global market research firm Nielsen to conduct nearly 16,000 face-to-face interviews with consumers across nine economies (Brazil, China, India, Indonesia, Russia, Saudi Arabia, Turkey South Africa and, for the first time, Mexico).
“Interestingly, Mexico scores the lowest in the survey in terms of the number of respondents that perceive their government to be very effective or quite effective at solving problems that relate to the population (17% of the total), which might be an indication that we are in the very early stages of the new administration’s reform agenda and the structural changes proposed in areas such as education and labor markets, among others. A fierce debate on reforms and perhaps some skepticism is natural, although it is still too early to forecast positive results”, says the report.
In terms or sectors, although carbonated drinks (unsurprisingly) have been bought by much of the population over the past 12 months, only 16% plan to do so going forward; categories that look to have stronger growth going forward, however, include smartphones and internet. Spending on cars has been high (29%), but is set to decline next year (10%).
Brazil: Missing a beat
The structural optimism among Brazilians again comes across in the survey, but near-term risks do emerge. Brazilian consumers remain the most upbeat when judged by the balance of respondents who see their personal finances as likely to improve in the next six months.
However, the more immediate perceptions are less bullish. When asked whether it was a good time to make a major purchase, Brazilians were the third most pessimistic in our survey – with a net –10% figure claiming it was a bad time. This would be consistent with the prevailing environment of slower economic growth (2% in 2013), social unrest, higher inflation and lower real income growth. To a large degree, the buoyant nature of the longer-term optimism might be explained by the ongoing low unemployment rate and its broader underpinning of real wage growth.
Unsurprisingly, the actual year-on-year decline in the degree of optimism has been most acute at the lower end of the income spectrum, as evidenced by a 16% and 36% year-on year decrease in confidence in the two lowest income brackets we surveyed. This may be primarily explained by the substantial increase in food inflation during 2013 (5.5% in the last 12 months – the highest level among all the economies surveyed).
With regard to consumption, momentum continues to favor the discretionary end. The following sectors showed the greatest momentum in spending, according to Credit Suisse: smartphones (+17% versus +11% in our 2012 survey), fashion apparel (+10%), computers (+6%), internet access (+5%) and smartphone penetration is still relatively low at 45%, suggesting further ample room for growth.
In general, the survey concludes that the cyclical backdrop is more challenging, but structural optimism is retained. The net percentage of consumers surveyed across the nine countries who believe their financial position will improve relative to those who feel it will deteriorate stands at a net 26% compared to 28% a year ago. The study finds a fall in the number of consumers seeing now as a good time to make a major purchases. For example, in Brazil nearly two- thirds of people regarding now as not a good time to make a major purchase. Anyway, the report says the profile of the emerging consumer differs vastly within and between countries and understanding this fact is key to unearthing relative growth opportunities and identifying risks.
A presentation video outlining the key findings of the survey can be found here. For a copy of the survey, please click here.
Barbara Rupf Bee. Deutsche Asset & Wealth Management Appoints Barbara Rupf Bee to Lead Distribution in EMEA
Deutsche Asset & Wealth Management (DeAWM) has announced that Barbara Rupf Bee has joined the firm as Head of Global Client Group EMEA.
Rupf Bee will lead a coverage team responsible for delivering DeAWM’s investment products and services to institutional and retail clients across Europe, the Middle East and Africa. She will also join the EMEA region and Global Client Group Executive Committees.
The Global Client Group team in EMEA comprises approximately 400 professionals. Across both asset and wealth management, the EMEA region accounts for approximately EUR 600 billion of DeAWM’s EUR 931 billion of assets under management.
Michele Faissola, Head of Deutsche Asset & Wealth Management, said: “Barbara is a perfect fit for our global firm. She has extensive experience across the full breadth of our product offering, including traditional and alternative investments, as well as developed and emerging markets. She also has a deep understanding of the needs of both retail and institutional investors. I am delighted to welcome her to the team.”
Based in Frankfurt, Rupf Bee reports to Dario Schiraldi, Head of Global Client Group. She brings almost 30 years’ experience to Deutsche Asset & Wealth Management. She was most recently Chief Executive Officer of Renaissance Asset Managers Group, a specialist asset manager focused on emerging Europe, Russia and Africa.
Before that she spent approximately 10 years with the HSBC Group. From 2007 to 2012, she served as Global Head of Institutional Sales for HSBC Global Asset Management. Previously she was CEO of HSBC Alternative Investments Ltd, the investment advisor to HSBC’s fund of hedge funds and institutional client portfolios. She began her career in private banking.
Peter Roemer, who previously held the role of Head of Global Client Group EMEA, has decided to leave Deutsche Bank to pursue other opportunities.
ING Investment Management International has announced that the ING (L) Renta Fund Global High Yield has surpassed the €5 billion mark in assets under management (AUM).
Despite Asian and European investors being increasingly worried about rising interest rates, high yield continues to attract positive flows with returns attractive compared to those available within the fixed income space. Furthermore, the sensitivity to changes in interest rates is low within high yield.
ING IM’s outlook for the asset class remains cautiously optimistic and the investment manager prefers spread over rates, reflecting the belief that the credit fundamentals remain healthy leading to low default rates. Furthermore, ING IM believes that the global economic recovery, particularly in the US, will lead to gradually rising interest rates.
Tim Dowling, Head of Global High Yield at ING Investment Management, said: “Our overall return expectation for the asset class is a return of around 5% which is near the current coupon yield levels. There is still some room for further spread tightening which is dampening the impact of rising interest rates. In contrast to Emerging Markets debt, the flows to the asset class remain supportive, particularly within the European space.”
Launched in 2001, the Global High Yield strategy is managed on a total return basis, combining credit analysis on individual issuers with top down views on regions, credit quality, and industry sectors to construct a diversified investment portfolio that balances avoiding defaults with investments that offer attractive upside potential.
Dowling continues: “At ING IM we prefer exposure to credit risk over the exposure to interest rate risk. Within Europe there is still a positive flow towards high yield while in the US we have seen some signs of rotation from fixed income to equities.”
Wikimedia CommonsPaquin también se une al Comité de Gestión de Banca Global y Soluciones de Inversión. . Lyxor AM nombra consejero delegado a Lionel Paquin
Lyxor Asset Management has announced the appointment of Lionel Paquin as CEO. He replaces in this position Inès de Dinechin who will leave the Group.
He joins as well the Management Committee of the Global Banking & Investor Solutions division.
Mr. Lionel Paquin was previously the Head of Lyxor Managed Accounts Platform since 2011. He has also held the position of Chief Risk Officer and Head of Internal Control at the firm, and was a member of Lyxor Executive Committee since September 2007.
Prior to this, Mr. Paquin has served as Managing Director and Principal Inspector of the “Inspection Générale” at the Societe Generale Group since June 2004. Mr. Paquin began his career in 1995 in the French Ministry of Finance as a high-ranking civil servant and held several positions within this Ministry.
Mr Lionel Paquin is a graduate of Ecole Polytechnique (1993) and ENSAE (1995).
Brickell World Plaza, where Deutsche is based in Miami. Former Barclays’ Executives Canalda, Meyerhans, Muñoz and De La Lama Join Deutsche Bank in Miami
Deutsche Asset & Wealth Management has signed on four former Barclays W&IM professionals to join their team in Miami. Diego Canalda, Roman Meyerhans, Narciso Munoz and Diego De La Lama joined Deutsche Bank Securities at the end of last January, as bank sources confirmed to Funds Society.
This move by Barclays conforms to the new strategyof reducing the complexity of certain business areas, which was made public in September 2013. Since then, and as part of this strategy, the division of W&IM Barclays is proceeding to reduce the number of regions, among which are those of Latin America and the Caribbean, in which it provides services to clients. Last September, Barclays announced the closure of 100 private banking centers, five booking centers, and the downsizing of its workforce worldwide.
Two years earlier, in 2011, the British company threw itself entirely into increasing its client base in Latin America and the Caribbean, and hired a number of U.S. professionals for the task, including Narciso Muñoz, amongst others.
Canalda, with over 15 years’ experience, assumed the post of Managing Director. Before joining Barclays Wealth in Miami as director in 2008, he worked at Lehman Brothers for ten years.
Meanwhile, Muñoz, CFA with 20 years’ experience in the financial sector, worked at HSBC Private Bank International before joining Barclays Wealth Management in Miami in October 2011. Muñoz, part of the group who joined Barclays at a time when the British bank was firmly committed to boosting its Latin American business, joins Deutsche Bank Securities as Director.
De la Lama, also from Barclays W&IM, will assume the duties of Assistant Vice President. De la Lama has also worked at HSBC Private Bank, UBS Wealth Management and Intercam Securities.
Deutsche Asset & WM provides service to 180,000 clients from 130 offices in APAC, Europe and the Americas. It has 298,000 million dollars in assets under management from private banking clients, and the company employs 900 professionals dedicated to private banking and high-net-worth clients.
Income investors generally look at reliable yield stocks or firms with the ability to grow their dividend over time, or some combination of the two. By definition, according to Stephen Thornber, fund manager at Threadneedle, this either means investing in businesses that can generate plenty of cash to return to shareholders over time or in companies that can become decent and dependable dividend payers in the future. Neither of those, he highlights, are a bad place to be. “It does require a long-term perspective, however, and consequently you won’t usually find income investors following the latest investment fads.” Thornber lists the following ten reasons to invest in global equity income:
1. Equity income investors take a long-term perspective.
3. Income strategies have outperformed strong-performing equity markets in the last few years. But remember that dividends (and dividend growth) drive total real returns from equities – and could become even more important in a low growth/low return world.
4. Income stands up as an investment approach in its own right.
Burns Supper organized by Aberdeen in Miami. Aberdeen Commemorates the Scottish Tradition by Holding a "Burns Supper" in Miami
For the third consecutive year, Aberdeen Asset Management organized its characteristic “Burns’ Supper” in Miami last week. The firm’s clients who attended the event enjoyed an evening in which the whiskey and the bagpipes were followed by the toasts to the eighteenth century Scottish poet Robert Burns, which was the aim of the occasion.
Gary Marshall, who until this year headed Aberdeen Asset Management for the Americas, acted as “master of ceremonies” in the purest Scottish tradition. Marshall will soon return to the UK to continue to develop management tasks for the firm, while David Steyntakes overtakes as managing director of the Aberdeen Asset Management team in the Americas region, as was reported by the company in late 2013.
Aberdeen Asset Management has its corporate headquarters in the city of Aberdeen in northeastern Scotland, where its roots date back to 1875, although the current asset management company was established in 1983.
“I am delighted to witness how Aberdeen’s presence in Miami is reinforced year after year, thanks to the support of an excellent team and of course, thanks to your support as clients,” explained Gary Marshall to his guests. “Once again we gather on a date close to January 25th, the birthday of Scottish poet Robert Burns, to resume this tradition which is an important part of Scottish culture, and essential to our overall corporate identity.”
“Aberdeen has closed 2013, by, amongst other achievements, becoming the first European independent asset manager in terms of assets under management listed on the stock exchange, following SWIP’s acquisition, with over half a trillion dollars in assets under management, of which more than 75 billion are in the Americas region.”
During the dinner, which included the traditional Scottish “haggis”, the guests enjoyed a Whiskey Tasting commented by Nicholas M. Pollacchi, Whisky Master, who has worked as Public Relations’ Director at The MacAllan and The Glenrothes, two prestigious Scottish distilleries. Since 2010 he has his own company, The Whisky Dog, which organizes whiskey tasting events in the U.S.
Several members of Aberdeen’s team in the U.S, London, and Scotland, both of the commercial division and of its investment team accompanied the guests during the cocktail and dinner, which was enlivened by Piper Robert Ritchie, Canadian born piper of Scottish origin and a resident of South Florida since 1956.
Rodrigo Nuñez Aguilar. Natixis Global AM nombra nuevo director de Cuentas Globales para Latam y EE.UU. Offshore
Natixis Global Asset Management (NGAM) has announced the appointment of Rodrigo Nunez Aguilar as Director of Global Key Accounts, Latin America and U.S. Offshore.
Nunez Aguilar, based in New York, will manage U.S. Offshore and Latin America fund distribution sales teams and focus on strengthening NGAM’s relationships with cross-border fund distributors in the United States and in Latin America. He will report to Sophie del Campo, head of Latin America for NGAM International, and Ed Farrington, head of U.S. Offshore Sales.
“Rodrigo will play a critical role in linking our existing U.S. Offshore business to our growing presence in Latin America,” said Hervé Guinamant, President and Chief Executive Officer of Natixis Global Asset Management – International Distribution. “Latin America is one of the fastest growing fund markets in the world, and we know that our unique approach to portfolio construction will strongly resonate.”
Nunez Aguilar has over 17 years of asset management industry experience, most recently as head of funds and advisory sales for Latin America and U.S. Offshore at Barclays. He previously served as New York-based executive director for Latin America and U.S. Offshore Distribution at Morgan Stanley Investment Management and in roles at ING Barings and Bank Boston.
Nunez Aguilar holds an MBA from the Leonard N. Stern School of Business at New York University and a B.A. in economics from the Universidad Catolica Argentina. He holds FINRA Series 7 and 63 licenses and is a CFA charterholder.
Giordano Lombardo, Group Chief Investment Officer at Pioneer Investments, opens this month’s CIO Letter quoting Marcus Aurelius: “Look beneath the surface; let not the several quality of a thing nor its worth escape thee”. The subject of this letter is risk. An extract of the main risks that may break the support for risky assets, according to Lombardo, follow. You may access the complete document through the attached pdf file or through this link.
Walking on a Tightrope (Amid the Credibility of Central Banks and the Risk of Crisis)
The first month of the year has confirmed the main scenario presented in our latest Outlook: developed countries’ economies are gathering momentum and Central Banks retain accommodative monetary policies, extending support for risky assets. However, there is no shortage of reasons for being careful going forward.
Emerging Markets stand out as the weakest spot, as most investors refrain from entering countries with high current- account deficits (Argentina, Turkey and other Asian countries are again under the spotlight) or with political uncertainties putting the skids on overdue economic reforms.
None of the sources of volatility spotted recently has dramatically changed our constructive view on risky assets, especially equities. However, in this letter, I believe it is worth focusing on the main risks that may undermine our investment strategy, notably a change in investors’ expectations on monetary policies and the deflation, particularly in Europe:
– The main risks to an investment strategy favoring risky assets are a change in investors’ expectations on monetary policies and deflation in Europe. Playing with market expectations is not an easy task. In our view, the FED is walking on a tightrope and the risk of disappointing the markets is not negligible.
– The second main risk to our base scenario is deflation. Deflation is hardly a healthy condition for the economy: it tends to defer consumption and investments, to aggravate the debt burden and dampens economic growth as a result. Being in a low inflation/disinflation scenario or in outright deflation can make a significant difference for financial markets. Equities tend to anticipate the deflation, thus proving how important is the role of expectations and the credibility of the Central Bank.
The place where the deflation risk appears to be more tangible is Euroland. In the Eurozone, the drop of inflation below 1% hides a high dispersion in individual data.
The ECB needs to decide what is the lesser evil: avoiding deflation in the periphery, while allowing for some inflation in the core, or sticking to an “anti- inflationary” orthodoxy, which is going to kill the hopes of an economic recovery. We believe that the market has not fully realized nor priced the risk that the ECB has no plan to counter deflation and that political disagreement will lead to a prolonged standoff on the course of action.
Another source of risk to our global scenario is a marked slowdown in the world economy, coming from increasing turmoil in Emerging Markets, as we briefly mentioned. As we have seen, the risk is that they become “victims” of a change in the US monetary policy.
You may access Pioneer Investment’s full CIO Letter through this link or by accessing the pdf attached at the top left corner of this page.
