Photo: silvernet2. Calypso Technology Expands Offices in Santiago, Chile
Calypso Technology has expanded their offices in Santiago, Chile. This expansion is in response to a rapidly growing client base and increasing opportunities in the Latin American markets.
The office serves as a professional services hub as well as a sales and marketing base for the region. The territory had previously been managed from Calypso’s New York office, but with recent sales momentum and growth of Calypso’s local and regional client portfolio, including COMDER, Banco Penta, Banco de Crédito del Perú, Banco Crédito e Inversiones en Chile, a local presence was required.
Working with exchanges and banks in the Latin American markets, Calypso provides a cross-asset front-to-back office platform that meets the trading and operational needs of a region that is modernizing and consolidating its capital markets infrastructure. Calypso provides OTC derivatives clearing and processing infrastructure to the world’s top clearing houses, including COMDER, CME, Eurex, BM&FBovespa, TSE, SGX, HKEX and ASX.
Calypsocustomers in Latin America are among the leading users and dealers of a broad range of asset classes including interest rate derivatives, settlement and non-settlement currencies, money market indexed loans, fixed income instruments, FX products and derivatives hedging.
Carlos Patino, Director of Business Development, Latin America & the Caribbean, comments, “Key to our strategy as a global leader has been to identify, understand and implement solutions to meet the challenges faced by local financial institutions particular to their markets. We see great demand for our cross-asset capabilities from banks in the region who are looking to increase market share – both locally and globally, as foreign investors continue to focus on the region. These currents are also being driven by a need to comply with multiple regulatory regimes, while moving quickly to capitalize on current opportunities. We look forward to playing a critical role in evolution of the regional markets and supporting institutions as they grow.”
Better than expected US macroeconomic data and a somewhat more hawkish perception of the Fed have increased the probability of Fed tapering on December 18. Although ING Investment Managament still believes that tapering will not start before March 2014, it is wise to assess the broader market consequences of such a move.
Markets seem to have adapted to the concept of Fed tapering. Evidence is emerging that they have ‘learned’ to understand the Fed better as they have started to appreciate the difference between tapering and tightening.
EM currencies remain vulnerable to tapering (expectations)
Probability of tapering in December has increased
A number of better than expected US macroeconomic data, combined with a somewhat more hawkish than expected Fed statement after its last meeting on 30 October has brought back speculations in the market that Fed tapering could start rather sooner than later. Although we must not be fixated too much on one month’s data, the assumption of many market pundits that corporate confidence and hiring intentions would take a hit from the government shutdown and the budget discussion does not seem to materialize.
The asset manager still believe that the tapering of the Fed’s asset purchases is more likely to commence somewhere in the first quarter of next year, also because the December meeting will coincide with the conclusion of US budget discussions, which given past precedence have a high probability of failure. Still, the odds of December tapering have increased. It is therefore crucially important to take the balance of risk surrounding our view into account. Moreover, we need to assess what the broader market consequences of such a policy move will be.
Emerging market assets remain vulnerable
Most vulnerable to tapering still are emerging market (EM) assets. As we can see in the graph on the front page, EM currencies (represented by the JP Morgan ELMI+ index) have moved largely in line with the US Treasury yield since the start of the taper talk in May. After the last Fed meeting on October 30, the Treasury yield resumed its rise while EM currencies started to weaken again after an impressive rally since early September. As EM assets have attracted so much foreign capital since the Fed and other central banks introduced their unprecedented monetary policies, they remain vulnerable to capital outflows. As with the US Treasury yield, we do not expect a sharp move comparable to the May/June period, but the risk of further weakening is likely.
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Value-add real estate, which are properties exhibiting marginal operational or physical challenges, offer better total return prospects than core real estate, according to a white paper from CenterSquare Investment Management
The paper, Era of Execution, written by P.J. Yeatman, head of private real estate for CenterSquare, and Jeffrey Reder, senior vice president, private real estate, for CenterSquare, focuses on the potential of value-add strategies to generate attractive risk-adjusted returns in private real estate. Value-add strategies involve acquiring real estate at an attractive cost basis and then resolving the property’s deficiency, stabilizing the income stream, and increasing the overall value of the property for disposition.
Core real estate, generally defined as high-quality assets in prime locations with stable cash flows, is traditionally viewed to have the least risk. These properties were the first to attract significant institutional capital from risk-averse investors following the Global Financial Crisis. As a result, this segment of the private real estate market was the first to recover, according to the report.
But now these core properties appear to be over-valued, and better investment opportunities can be found within value-add real estate, CenterSquare said.
“Our view is that we have entered an era in which value creation through strategic execution offers the most compelling risk-adjusted returns,” said Yeatman.”The raw materials for a value-add real estate strategy can still be acquired at an attractive cost, particularly when compared to core properties, which appear to be overbought.”
Reder added, “We see assets that are not functioning optimally, but can be improved so that their value and ability to deliver returns to investors are both significantly increased.”
CenterSquare also noted that in past market cycles, recovery of private market values have lagged that of public real estate market values. “Based on the public market value recovery we’ve seen since 2009, we can infer that we are in the midst of an optimal private market investment period,” said Yeatman.
Another advantage of value-add real estate strategies singled out by the report is that because of the low cost basis at which they can be acquired, they are better positioned to withstand potential shocks to the market. In the white paper, CenterSquare said the most attractive value-add properties are primary assets in secondary growth markets and secondary assets in primary growth markets.
Photo: Dori. Nexxus Capital Raises $550 Million for its Sixth Private Equity Fund
Nexxus Capital announced the final closing of its sixth institutional private equity fund, Nexxus Capital VI, with capital commitments of $550 million. The Fund was oversubscribed, significantly exceeding its original target of $400 million.
In addition to strong support from existing and new local institutional investors, Nexxus Capital VI has attracted commitments from new investors from North America, Europe and the Middle East. Pension plans, sovereign wealth funds, and endowments account for the majority of the investor base.
Nexxus VI is comprised of two vehicles: a Mexican public vehicle listed on the Mexican Stock Exchange and an Ontario limited partnership. Both vehicles will co‐invest on a pro‐rata basis according to total available resources of each vehicle.
MVision Private Equity Advisers acted as lead global fundraising adviser. Santander and Citigroup acted as joint‐bookrunners for the Mexican vehicle.
Nexxus Capital VI expects to make equity and equity‐related investments in midsize companies primarily in Mexico, where there is an opportunity to institutionalize family or entrepreneurially owned businesses. Nexxus Capital’s approach focuses on the implementation of operational efficiencies and maximizing liquidity value after taking portfolio companies public or selling to strategic or industry buyers, which is a continuation of the successful investment strategy applied to its prior funds.
White & Case LLP served as US legal counsel to the Fund, General Partner and Manager, and Stikemann Elliott served as Canadian legal counsel to the General Partner.
Foto: Mylius. Latinoamérica experimenta crecimientos de doble dígito en fondos mutuos y de pensiones
According to new research from Cerulli Associates, a Boston-based global analytics firm, the major Latin American mutual and pension fund markets of Brazil, Mexico, Chile, Colombia, Peru, and Argentina have experienced double-digit growth in the past five years.
“The Latin American region’s mutual fund industry has seen a21.3% five-year compound annual growth rate between 2008 and 2012, ending 2012 with USD $1.1 trillion in assets under management,” comments Nina Czarnowski, senior analyst at Cerulli. “On the pension side, the region has seen a 15.1% increase in assets under management between 2011 and 2012. The mandatory nature of contributions to the private pension systems in Chile, Colombia, Mexico, and Peru further highlights their potential as assets continue to grow even if market conditions are unfavorable.”
Cerulli‘s latest report, Latin American Distribution Dynamics 2013, is an annual report focused on distribution and product development trends in the six major markets – Argentina, Brazil, Chile, Colombia, Mexico, and Peru.
“We have seen similar growth in each of the major markets in this region,” Czarnowski explains. “In Brazil, mutual fund assets grew 15.6% from 2011 to 2012, and the Mexican mutual fund industry closed 2012 with a 13.9% increase over 2011. In Colombia, the mutual fund industry has averaged growth of more than 20% annually for the last five years, as has the pension fund industry, while the Chilean compulsory and voluntary pensions’ assets under management rose 10% year-over-year.” Czarnowski goes on to indicate thriving opportunities for global managers wishing to expand into the region, as both mutual funds and pension funds have been increasing allocations to cross-border vehicles, in particular to ETFs.
The report outlines challenges and opportunities in the non-resident and local private clients’ segments, as well as underlines the growing importance of the region’s private pension systems for foreign asset managers, and further points out important structural changes in the Brazilian market to keep the industry evolving.
Cerulli believes that the rise of the middle class, low unemployment, and improving salaries will contribute to further industry growth in this region. In addition, insufficient market depth, and local economic and market pressures will continue to push local authorities to open doors to global markets.
Photo: Roland Zh. Merger of Julius Baers' Infidar and WMPartners to Create Top Independent Asset Manager in Switzerland
Infidar Investment Advisory, part of the Julius Baer Group, and WMPartners Wealth Management are to merge. The move, which will create one of the largest independent asset management companies in Switzerland, is intended to consolidate their leading market position. The transaction is expected to be completed in the first quarter of 2014.
Established in 1954, Zurich-based Infidar Investment Advisory employs a staff of 26 and has been led by Markus Gonseth since 2007. WMPartners Wealth Management, which also has 26 employees and is headquartered in Zurich, was set up in 1971 and is owned by its three partners Willi Leimer, Balthasar Meier and Heiner Grüter. Both companies are already amongst the leading independent asset managers in Switzerland.
In a first step, the Julius Baer Group acquired the shares in WMPartners, and in a second step Infidar will merge with WMPartners. The parties have agreed not to disclose the terms of the transaction.
Employing around 50 staff and managing client assets worth over CHF 4 billion, the new company will be one of Switzerland’s largest independent asset managers and will work together with around 30 custodian banks.
Once the transaction is complete, Heiner Grüter, currently partner and CEO at WMPartners, will head up the new company as its CEO. He will continue to pursue the same proven, client-focused strategy, supported by the existing combined management team and the employees of the two constituent companies. The present CEO of Infidar, Markus Gonseth, will focus on client advisory in future.
All the partners in both companies will continue to have a hand in operations after the merger has gone through. Markus Gonseth, Willi Leimer and Balthasar Meier will also have a seat on the new company’s Board of Directors. “The two companies complement each other perfectly. We will be able to guarantee our clients the surest possible continuity while also being even better placed to meet our existing and future client requirements with our combined strengths,” explained Heiner Grüter.
“The new company will remain completely independent with regard to investment decisions and choosing its custodian banks. At the same time, it will be able to handle the increasingly complex requirements that we are seeing nowadays, while also enjoying the backing of a strong partner in the form of Julius Baer,” said Yves Robert-Charrue, Head Independent Asset Managers & Global Custody at Bank Julius Baer. “By bundling our skills and expertise, we are creating one of the largest independent asset managers in Switzerland,” he added.
Photo: Diliff. Lloyds Banking Group Sells its SWIP Asset Management Business to Aberdeen AM
Lloyds Banking Group has agreed to sell its asset management business Scottish Widows Investment Partnership Group Limited (SWIP) to Aberdeen Asset Management for an initial consideration payable in Aberdeen shares with a value of approximately £560 million ($900 million), and a further deferred consideration, payable in cash, of up to £100 million ($160 million). As part of the transaction, Lloyds will enter into a long-term strategic asset management relationship, whereby Aberdeen will manage assets on behalf of the Group.
The sale and strategic relationship are expected to result in a stronger asset management partner for the Group and its customers, combining Aberdeen and SWIP’s strengths across fixed income, real estate, active and quantitative equities, investment solutions and alternatives. SWIP’s management and employees will transfer to Aberdeen upon completion.
The sale does not include Scottish Widows, Lloyd’s life, pensions and investment business, which remains core to the Group.
In consideration for SWIP, Lloyds will receive approximately 132 million new ordinary shares of Aberdeen, equivalent to approximately 9.9 per cent of its enlarged issued ordinary share capital.
Aberdeen has also committed to deliver additional consideration 12 months after completion calculated with reference to the amount by which Aberdeen’s volume-weighted average share price for the five trading days prior to completion (the “VWAP”) is below 420 pence but above a floor of 320 pence. To the extent the VWAP is below 320 pence, the Group has the option to terminate the sale. Based on Aberdeen’s share price of 427 pence at close on 15 November 2013, the Group’s shareholding in Aberdeen would have a value of approximately £560 million. In addition, further consideration of up to £100 million will be payable in cash over a five year period depending on the growth in business generated from the strategic relationship with the Group.
Lloyds intends to be a supportive shareholder and has agreed lock-up arrangements whereby, subject to certain exceptions, it will maintain its initial shareholding for at least one year, two-thirds of its initial shareholding for at least two years and one-third of its initial shareholding for at least three years. Further detail on the lock-up arrangements, which can be waived at any time by Aberdeen, is set out at the end of this announcement.
Funds under management for SWIP were £136 billion ($219 billion) at 31 August 2013. The sale is expected to complete by the end of the first quarter of 2014, subject to obtaining the necessary regulatory and other consents.
PIMCO has hired Virginie Maisonneuve as Managing Director, Global Head of Equities and Portfolio Manager. She joins PIMCO from Schroders Plc, where she most recently served as Head of Global and International Equities. Ms. Maisonneuve will be based in the firm’s London office. Her official start date is currently expected to be in January 2014.
Said Mohamed A. El-Erian, PIMCO’s CEO and co-CIO: “Virginie is a proven equity investor and leader who has delivered a track-record of success for clients throughout her 25-year career as a portfolio manager and a business builder. We are delighted to have Virginie on board as part of our multi-year effort to deepen and expand the set of global investment solutions we provide to clients around the world.”
In her new role, Ms. Maisonneuve will lead PIMCO’s active equity portfolio management, contributing also to the development and introduction of new equity and asset allocation strategies.
PIMCO’s equity offerings total more than $50 billion in assets under management. Going forward, the firm will continue with its strategy of carefully adding resources and introducing additional strategies in equities, alternatives, ETFs and other areas to help our clients meet their long-term investment objectives.
“Together with PIMCO’s existing active equity portfolio management teams and our highly-successful StocksPlUS strategies, Virginie will play an instrumental leadership role in enhancing the many ways we serve our clients in the years to come,” added Dr. El-Erian.
Wikimedia CommonsFoto: Devcore. ECB Improves Climate for Equities
The surprise but welcome rate cut by the European Central Bank (ECB) has improved the climate for equities, says Robeco’s portfolio manager for Global Allocations.
The rally in share prices driven by extra liquidity from monetary easing throughout this year is likely to continue, Lukas Daalder believes.
As a result, Robeco Asset Allocation has increased its overweight position to equities. At the same time, underweight positions in government bonds have been raised, as lower rates means reduced yields on sovereign debt, Daalder says.
The rate cut also made the euro drop in value by more than a cent against the US dollar. The asset allocation team has now opened up a short position on the EUR/USD, essentially predicting that the single European currency will fall further in value.
‘The global currency war is in full swing and the ECB just added a bit of artillery’
Liquidity-driven rally to continue “We expect the current liquidity-driven rally in equities to continue for several months,” says Daalder. “We have become more constructive on equities as major risks have diminished while excess liquidity will remain around for longer.”
Some perceived risk factors that were seen as a threat to stock prices include the US government shutdown, which in the end did not endanger the US and global recovery. However, it did distort the macro data, shifting market expectations for the end of quantitative easing to the first quarter of 2014, leaving more excess liquidity around for longer in the economy.
The picture is less rosy for government debt, however, at least in the near term, says Daalder. “The ECB rate cut has pushed bond yields lower, but we don’t think this will be the case in the near term. We expect yields to gradually normalize from here,” he says.
Global growth is picking up “Economic growth is picking up globally and, although the US Federal Reserve (Fed) has postponed tapering for now, it will probably start reducing its bond-buying program in the first quarter of next year. Then, the strong downward pressure on bond yields that we have seen over the last couple of years will start to end.
“And with the latest rate cut by the ECB we think yields have been pushed to the lower end of the range and will start to rise from here.”
Shorting the euro makes sense for now, says Daalder. “The ECB rate cut can be viewed as an instrument to fight the natural forces that drive up the euro like the positive current account surplus, the shrinking central bank balance sheet and disinflationary trends,” he says.
“With US tapering only postponed until next year and certainly not cancelled, we expect the US dollar to strengthen against the euro. The global currency war is in full swing and the ECB just added a bit of artillery.”
As base rates have lowered, the portfolio manager says high yield bonds remain the most attractive asset class, particularly as spreads against benchmark German bunds have dropped further below their long-term average. This makes them less risky, especially as default rates remain low, while returns remain strong.
European equities favored Within equities, the asset allocation team has become less constructive on North America as earnings revisions have deteriorated. “Europe looks currently more favorable to us as the improved macro data has not been fully translated into relative equity performance, and of course the ECB rate cut will help share prices further,” says Daalder. “From a macroeconomic point of view, the delay in tapering should be positive for cyclical stocks.”
Among other asset classes, the team is neutral on emerging market debt and commodities, and negative on real estate, due to its sensitivity to interest rates.
Photo: ProtoplasmaKid. Liberty Mutual Insurance Enters Mexico with the Acquisition of Primero Fianzas
Liberty Mutual Insurance announced the acquisition of Mexican surety company Primero Fianzas from Grupo Valores OperativosMonterrey, a private investor group. The acquisition enables Liberty Mutual Surety, a business unit of Liberty Mutual’s Global Specialty strategic business unit, to expand its extensive international presence by entering Mexico’s $600 million surety market. The parties have not disclosed the financial terms of the agreement and the acquisition is subject to Mexican regulatory approval.
Headquartered in Mexico City, Primero Fianzas wrote over $33 million in gross written premium in 2012 primarily in the administrative and credit bond segments and operates through 11 offices writing surety business in all Mexican states. The company is the 4th largest surety writer in Mexico based on 2012 market share and ranks #1 in the Mexican credit surety segment.
“We believe Primero Fianzas provides an attractive platform for investing in and expanding our global surety and insurance capabilities in the growing Mexican market,” said Chris Peirce, President of Liberty Mutual Global Specialty. “Primero has strong market presence and a record of profitable growth. Its excellent agent and customer relationships complement Liberty Mutual Surety’s significant underwriting capacity and global expertise, and further solidify our leading North American surety presence.”
This acquisition in Mexico adds to Liberty Mutual Insurance’s current international presence in 28 countries spread across Latin America, Europe, and Asia through the company’s Global Specialty and International business units. Liberty Mutual Insurance is the largest property and casualty insurer in Venezuela, second largest property and casualty company in Colombia, and is among the top 10 property and casualty companies in Brazil and Chile.
