According to a report released by Morgan Stanley this week, the brokerage firm is more constructive on Greece than consensus expectations. “A recovery hasn’t started yet, but soft data are becoming less bad, as the shocks that hit the Greek economy – including euro exit worries – are starting to dissipate, and bank deposit flows now look fully stabilized”.
Morgan Stanley points out that the competitiveness gap is closing. “With unit labor costs likely to fall further, the incentive for Greece to exit the Eurozone to boost competitiveness via a weaker exchange rate is no longer there,” points out the research. Morgan Stanley expects Greece to reach a primary budget surplus this year and maintain it thereafter.
“We expect the GGB strip to reach 52.5% by year-end. We also see valuations higher in most scenarios of second restructuring”
They also emphasize that contagion risks from Cyprus appear limited. “The main sources of uncertainty are domestic politics and the ongoing Troika review of the Greek program. While there’s some room for maneuver, the government’s ability to stay the course will continue to be widely watched by investors over time”.
Morgan Stanley finds the risk/reward particularly attractive in GGBs. “Current valuations are lower than in most of the medium-term scenarios we laid out. In fact, we expect the GGB strip to reach 52.5% by year-end. We also see valuations higher in most scenarios of second restructuring”.
Morgan Stanley’s economists, Daniele Antonucci and Samar Kazranian, see downside only in the case of a euro exit (a remote tail risk, in their view) or a potential second restructuring with the private and the official sectors taking a 60% principal reduction which they consider would be a quite a harsh scenario for the private sector.
Ketchup Heinz. Muzinich: el bajo precio del LBO de Heinz no refleja una vuelta al apalancamiento excesivo
Headlines have been awash in talk of the Heinz LBO. The bonds priced at month end at 4.25% ‐ the lowest yield ever for an LBO issue. In its latest Corporate Credit Market Snapshot Muzunich considers the Heinz deal to be a one‐off and in no way reflective of an uptick in LBOs or a return to excessive leverage. “Heinz was relatively unique since it is a highly recognizable brand name and benefitted from Warren Buffett’s participation. Buffett’s sizeable equity contribution helped drive down financing costs for the bond and loan portions of the deal,” highlights the snapshot, available in the asset manager’s website.
According to Muzinich, the deal also highlights the strength of the loan market ($10 billion of Heinz loans cleared the market) and the generally favorable borrowing rates currently available. Muzinich does not believe the deal reflects deteriorating corporate fundamentals. “On the contrary – corporate fundamentals remain strong as evidenced by the increase in rising stars (high yield companies that are upgraded to investment grade status),” points out the asset manager in the report. Last month in the U.S. high yield market, four companies with $12 billion of bonds outstanding, were upgraded to investment grade. “This is the highest number of monthly upgrades from high yield to investment grade in more than 7 years and underscores the strong corporate fundamentals that underpin the current high yield market”, they conclude.
Foto: Butterfly austral. ING IM: Invertir por regiones y sectores, y no por tipo de activo
Markets provided remarkably healthy returns to investors in the first quarter of the year despite ongoing headlines over political brinkmanship in both Europe and the US. With global equities up close to 10% and also real estate and most fixed income assets printing firmly positive returns, ING IM points out that most multi- asset portfolios are already close to year-end targets. According to the latest HouseView report published by the firm, on a risk-adjusted basis (correcting for the volatility of the asset class) equities have clearly taken over the lead from credits as the star performer of the year.
Still, Valentijn van Nieuwenhuijzen, Head of Strategy in ING IM, remarks that both returns and investor flow dynamics clearly show that investor appetite has broadened across asset classes that provide some form of income rather than that it rotated from fixed income into equities. The main change in investor behavior is that not only yields are being searched for, but that all asset classes that provide a claim on future cash flows, generated either coupons, rents or dividends, have become more popular destinations for cash that had been piled up in recent “crisis” years.
Another important change in the behavior of investors, he emphasizes, is that they have not only become willing to broaden their horizon, but also have started to discriminate much more between markets. This is partially reflected in the unusually large gap between the performance of commodities (that do not earn any income and often have a negative cost of carry!) and other risky assets. Also it is shown by the less “top-down”-driven nature of the market. Not only has dispersion in the performance between asset classes become more visible, but also at regional, sectorial and security level have performances started to deviate much more and have observed correlations come down sharply.
As the strategist continues, this type of market dynamics create a wider set of investment opportunities that are not only concentrated at the highest allocation or asset class level. More than in previous years, it seems that the investor crowd is being crafted to look for market opportunities at a lower level that is relatively uncorrelated to the overall risk appetite of the broader market.
Within ING IM’s own asset allocation stance it is certainly visible that opportunities have shifted from asset classes towards regions and sectors. At the beginning of the year the asset management firm had much more pronounced asset class tilts, with overweights in equities (strong), real estate (medium) and credit (small) and an underweight in treasuries (medium). Throughout the first quarter however asset class tilt have been reduced and ING IM is currently left with only small overweights in equities and real estate and neutral stances in the rest.
Within regions and sectors, however, the firm gradually accentuated their preferences in recent months as underweights in emerging markets and Europe were built-up in both equity and fixed income space. Also, Japan was moved to a firm overweight within equities and US sensitive High Yield was upgraded to our best pick in fixed income.
Moreover, their stance within equities on global sectors and emerging market countries does no longer have a clear “high beta”-tilt and is very much driven by idiosyncratic drivers. ING IM is, for example, long in both industrials and healthcare, while being underweight in both materials and telecom. Also, the asset manager is underweight in both Indonesia (high beta) and Malaysia (low beta) for country specific reasons.
In the search for the best opportunities in markets and the best balance between risk and return, ING IM currently sees different opportunities than at the start of the year. Therefore, they have crafted an allocation stance that is less dependent on the risk-on/risk-off theme and concentrates on exposure at a different level in the allocation spectrum. Depending on the state of the global cycle, visibility on political risks and observed shifts in investor behavior the firm will assess over time whether future adaptation in their allocation stance will move back up to the asset class level or intensify the regional and sectorial tilts.
Wikimedia CommonsFoto: NASA . Las firmas de private equity se globalizan para hacer frente al menor crecimiento
Private equity firms around the world are bracing for tough conditions for both fundraising and deal-making, according to Grant Thornton International Ltd’s Global Private Equity Report. Now in its second year, the report is the result of 143 in-depth interviews with senior private equity practitioners around the globe.
“The report highlights that the search for profitable growth remains fundamentally about strategy rather than pure geographical expansion. Growth remains the key, and is driving the globalization of the private equity industry, including Canada”
“A central role of the private equity community is to seek new growth opportunities and then act as a catalyst for that growth. Many of today’s investors are finding themselves at the centre of the evolution of a truly global economy and the continuing search for new corporate frontiers,” says Tim Oldfield, Partner, Corporate Finance, Grant Thornton LLP.
“The report highlights that the search for profitable growth remains fundamentally about strategy rather than pure geographical expansion. Growth remains the key, and is driving the globalization of the private equity industry, including Canada,” he adds. “At the same time, private equity is also acting as a driver of globalization. Canadian private equity firms need to grow outside the Canadian market”.
The report provides insight into the expectations of private equity general partners (GPs) for numerous aspects of the fundraising and investment cycle. It shows, among other things:
Indonesia, Peru, Colombia and Turkey top the list of new “high growth” markets where private equity is likely to see the most opportunities;
deal activity expected to slow in China and India;
foreign trade buyers seen as most likely exit route (particularly Japan, China and Korea);
a dramatic drop in fundraising confidence and economic outlook.
Fundraising fears This year’s report sees a marked decline in fundraising expectations of GPs around the world, with nearly three-quarters (72 percent) describing the fundraising outlook as either “negative” or “very negative”. In 2011, the figure was just 46 percent. The most dramatic decline in optimism from 2011 is evident in the BRICS: Brazil, Russia, India, China and South Africa. This year, 78 percent of respondents in these markets described the fundraising outlook as “negative” or “very negative”. In 2011, the figure was 39 percent.
Private equity firms looking for new investors Private equity firms are expecting to have to turn to a greater number of new investors – or limited partners (“LPs”) – and rely less on their existing LPs to make follow-on commitments to their next funds. This year, 40 percent of respondents said they expect their next fund to be majority funded by first time investors. In 2011’s report, this figure was only 24 percent.
Global exit routes Private equity firms are looking across borders for exit routes, in particular to overseas trade buyers. More than half of respondents (52 percent) expect the majority of the trade buyers they transact with in the near term to be foreign, while a further 20 percent expect the split between foreign and domestic buyers to be 50-50. Only 28 percent expect to deal mostly with domestic trade buyers. Globally, China and Japan, Europe and North America are the regions from which most GPs expect non-domestic strategic buyers to originate.
Regions as expected sources of non-domestic acquirers
China, Japan, Korea
31%
Europe
24%
North America
22%
South East Asia
11%
India
10%
MENA
1%
Africa
<1%
Latin America
<1%
Russia
<1%
Top ten “high growth” markets While growth in “high-growth” countries outstrips that seen in Western markets, the search for growth leaves local private equity firms to keep a watchful eye on where tomorrow’s deal-flow will originate. While a move to new unknown territories may be a risk too far for many Western funds, investors based in regions such as Canada typically have good visibility on the next frontier markets.
1
Indonesia
2
Peru
3
Colombia
4
Turkey
5 =
Myanmar
5 =
Egypt
5 =
Saudi Arabia
8 =
Mexico
8 =
Ghana
8 =
Malaysia
xpected investment activity by region
Region
Increase
Same
Decrease
Asia Pacific
50%
44%
6%
China
33%
11%
56%
India
33%
22%
45%
Latin America
78%
22%
0%
MENA (Middle East & North Africa)
60%
33%
7%
North America
59%
41%
0%
Western Europe
27%
64%
9%
There is an enormous expectation for growing new deal activity in Latin America with 78 percent reporting that they expect an increase. This represents only a slight dampening of last year’s sentiment, when 89 percent of respondents expected deal activity to increase in the region.
Foto: Avenue. RobecoSAM da el pistoletazo de salida a su análisis anual de sostenibilidad
Every year RobecoSAM invites the 2,500 largest companies in terms of free float market capitalization from all industries to participate in its annual Corporate Sustainability Assessment (CSA). In addition, 800 companies from the emerging markets are invited to participate and gain eligibility for inclusion in the recently launched DJSI Emerging Markets. The CSA is the research backbone for the constructions of all the Dow Jones Sustainability Indexes (DJSI). After the assessment, companies are included in the DJSI World if their sustainability performance ranks among the top 10% of their industry peers.
800 companies from the emerging markets are invited to participate and gain eligibility for inclusion in the recently launched DJSI Emerging Markets
The CSA focuses on a company’s long-term value creation with over 100 questions on financially material, economic, environmental, social and corporate governance practices. Over half of the questions are industry-specific as RobecoSAM is convinced that industry-specific sustainability risks and opportunities play a key role in a firm’s long term success. The other half includes questions on general sustainability issues such as corporate governance, product stewardship and talent attraction and retention.
The assessment process has continuously been refined over the years. This year, RobecoSAM has aligned several of its Climate Strategy questions with corresponding questions asked by CDP, the provider of Climate Disclosure abd Climate Performance Leadership Indexes. This will reduce the workload for 90% of DJSI participating companies which also respond to the request for climate change information through CDP.
Further, the 2013 CSA and DJSI family will be aligned with the Global Industry Classification System (GICS), thus meeting commonly accepted sector classification standards. The switch to GICS, which is a widely used standard in the financial industry, will therefore allow the DJSI to become more attractive for investors as it meets the need for one complete and consistent set of global sector and industry definitions. The changes will be implemented into all the indices. This means that the former 19 ICB super sectors will be replaced with 24 GICS industry groups, and the 58 RobecoSAM sectors will be replaced by 59 RobecoSAM industries.
Jaap van Duijn (1995–2003), Antony Bunker (1971–1983), Donald van Raalte (1959–1971), Mark Glazener (since 2003), Guus van Oostveen (1973–1993) e Izaak Maartense (1988–1995) . El primer fondo de Robeco cumple 80 años rodeado de todos sus gestores
Three centuries of investment experience round one table – an occasion that brought Robeco together for the 80th anniversary of the Robeco NV global equity fund. On Thursday 21 March 2013, the fund’s former portfolio managers discussed the past, present and future. A lot has changed in 80 years. Where the first fund manager Lodewijk Rauwenhoff even sold participating units to clients from his bicycle, the current fund manager, Mark Glazener, requires an entire team to decipher the complex information flows. And yet a great deal remains the same. The quest for quality and low risk stocks is as apparent as ever.
Peter Ferket, Robeco’s head of equity investment, questions the passionate investors – the oldest of which is 93 – on the daily reality of investing. At the table sat Mark Glazener, portfolio manager since 2003, and all his living predecessors: Jaap van Duijn (1995–2003), Izaak Maartense (1988–1995), Guus van Oostveen (1973–1993), Antony Bunker (1971–1983) and Donald van Raalte (1959–1971). Together they have managed the Robeco fund for more than 50 years. The first two fund managers – Lodewijk Rauwenhoff and Ewold Brouwer – are deceased.
Robeco NV was founded on 24 March 1933. This was the second milestone after the formation of the Rotterdamsch Beleggingsconsortium in 1929. What began as a club of wealthy Rotterdammers developed into one of Europe’s largest investment funds, ensuring its survival from the crisis in the thirties. With investment company Robeco as its progeny, its post-war formula of internationally diversified investments in quality stocks became a major success.
What are the key differences in a fund manager’s tasks between now and then? Mark Glazener emphasizes the size of his equity team: “In the past, the fund was managed by a small number of people. Typically now we have a team of three portfolio managers and nine analysts that together administer the portfolio.
But what has stayed the same over those 80-years? Mark Glazener points out that many things stayed the same in his fund: “Someone who buys a Robeco fund, buys a well-diversified portfolio of quality equities, leaving the investment decisions to those who face such matters daily and who buy and sell with care. This is not a fund for cowboys.”
You may access the complete interview through this link
Foto: Akarsh Simha . Schroders completa la compra de STW Fixed Income Management
Further to the announcement on December 17, 2012, Schroders plc (Schroders) announces that its subsidiary, Schroder U.S. Holdings, has today completed the acquisition of 100 percent of the share capital of STW Fixed Income Management LLC (STW), a value-orientated, US investment-grade fixed income manager.
Karl Dasher, Head of Fixed Income, said: “This acquisition accelerates our strategic ambitions in the US by adding top-quartile capabilities in Unconstrained Taxable and Tax-Aware strategies across the duration spectrum. We also deepen our talent base in an investment market that is critical to our success globally. I am delighted to welcome our new colleagues to Schroders and believe we can deliver significant benefits for clients with our combined capabilities.”
Wikimedia CommonsMarinus van Reymerswale. En los mercados emergentes es más fácil amasar fortunas que construir compañías globales
“Emerging Markets: Africa, Central & Eastern Europe, Middle East—Joining the Global Ranks of Wealth Creators,“the third in a series of wealth reports fromForbes Insights and Société GénéralePrivate Banking, is based on an analysis of 250 ultra high net worth individuals in 22 countries in Africa, Central and Eastern Europe, and the Middle East, with an average fortune of $2.8 billion.
“Emerging Markets: Africa, Central & Eastern Europe, Middle East—Joining the Global Ranks of Wealth Creators”
The individual fortunes that have been created there, in some cases in just over two decades, are breathtaking. They are not yet up to the levels of the largest fortunes in mature markets, such as the United States and Western Europe, but they are catching up fast considering the short time span since their inception. For example, the average size of the fortunes of the 20 richest individuals are: $24.3 billion in the United States, $20.1 billion in Western Europe, $10.1 billion in Russia, $7.6 billion in the Middle East, $3.2 billion in Central Europe and $2.3 billion in Africa.
The report concludes that it is, in fact, “easier” for an individual in an emerging market to amass a fortune worth a billion dollars than to build a major global company. According to the report, 6% of the world’s 2,000 largest public companies, as listed on the Forbes Global 2000, are owned or co-owned by billionaires from Africa, Central Europe or the Middle East. But as many as 14% of the world’s billionaires on the Forbes billionaires list come from Africa, Central Europe or the Middle East.
Among other key findings from the report:
The openness of the wealthy about their fortunes is lower in emerging markets studied for this report than in mature markets. On a scale from 0 to 10, with 0 being not open at all and 10 being very transparent, the Forbes Insights Wealth Panel—composed of editors of Forbes international editions and Forbes wealth analysts—assigned the emerging markets analyzed for this report a score of 4.2, and mature markets a score of 7.3.
The openness of the wealthy about their fortunes correlates directly with the attitudes of their countrymen toward them. The more open the wealthy are about their fortunes, the more their countrymen accept them, and vice versa. In terms of social attitudes towards great wealth, the gap between the emerging and mature markets is just two points, with the Forbes Wealth Panel scoring mature markets at 6.3, and emerging markets at 4.1.
The wealthy in emerging markets analyzed for this report like to display their riches slightly less than their counterparts in mature markets (North America and Western Europe). In terms of wealth display, the Forbes Insights Wealth Panel awarded mature markets a 6, and emerging markets a 5.3, on a scale from 0 to 10, with 0 being very discreet about wealth and 10 being total display. There are, however, vast regional differences among emerging markets. The Forbes Insights Wealth Panel ranked the wealthy in Africa and Central Europe as the most understated, with Russia and the Middle East the most open in their wealth display.
Foto: MichaelMaggs. La búsqueda de alfa empuja a un tercio de los profesionales de hedge funds a saltarse la ley
An independent survey of hedge fund professionals commissioned by law firm Labaton Sucharow LLP, HedgeWorld and the Hedge Fund Association, revealed that nearly half (46%) believe that their competitors engage in illegal activity, more than one third (35%) have personally felt pressure to break the rules, and about one third (30%) have witnessed misconduct in the workplace.
When asked if they would blow the whistle or report the misconduct, 87% of respondents said they would report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program. This investor protection program has broad extraterritorial reach and offers eligible whistleblowers, regardless of nationality, significant employment protections, monetary awards and the ability to report anonymously. To ensure that adequate funds are available to pay awards, Congress has established a replenishing Investor Protection Fund, which currently has a balance in excess of $450 million.
“While wrongdoing in the hedge fund industry may not be as widespread as many outside the industry believe, it does occur, and people in the industry are aware of it,” remarked Christopher Clair, Managing Editor at Hedgeworld. “It’s only when we eliminate the unfair advantages sought and exploited by some that true alpha can be found.”
“The high percentage of hedge fund professionals that are aware of the SEC Whistleblower Program and are willing to report wrongdoing is extremely encouraging,” said Jordan Thomas, Chair of the Whistleblower Representation Practice at Labaton Sucharow. “Without individuals willing to report possible securities violations, internally or externally, responsible organizations and law enforcement authorities cannot police the marketplace effectively and efficiently.”
The survey’s top ten findings include:
46% of respondents reported that their competitors likely have engaged in unethical or illegal activity in order to be successful.
35% of respondents reported feeling pressured by their compensation or bonus plan to violate the law or engage in unethical conduct, while 25% of respondents reported other pressures that might lead to unethical or illegal conduct.
30% of respondents reported that they had personally observed or had first-hand knowledge of wrongdoing in the workplace.
87% of respondents would report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program, while 83% of respondents were aware of this important program.
29% of respondents reported that it was likely that they would be retaliated against if they were to report wrongdoing in the workplace.
28% of respondents reported that if leaders of their firm learned that a top performer had engaged in insider trading, they would be unlikely to report the misconduct to law enforcement or regulatory authorities; 13% of respondents reported that leaders of their firm would likely ignore the problem.
54% of respondents reported that the SEC is ineffective in detecting, investigating and prosecuting securities violations.
34% of respondents reported that recent regulation and law enforcement scrutiny will weaken the hedge fund industry.
13% of respondents reported that hedge fund professionals may need to engage in unethical or illegal activity in order to be successful and an equal percentage would commit a crime–insider trading–if they could make a guaranteed $10 million and get away with it.
93% of respondents reported that their firm put the best interests of investors first.
“Our members have a deep commitment to corporate integrity,” noted Lara Block, Executive Director of the Hedge Fund Association. “Although some of the findings are troubling, this groundbreaking survey provides valuable insights that will help the industry to further strengthen its investor protection programs and root out any bad actors.”
. Julius Baer completa la integración de Merrill Lynch IWM en Uruguay, Chile, Mónaco y Luxemburgo
According to schedule, Julius Baer transferred further legal entities in four locations in relation to its acquisition of Merrill Lynch’s International Wealth Management (IWM) business on 1 April 2013. The entities involved are in Uruguay, Chile, Monaco and Luxembourg. This represents another major milestone in the integration process which was launched with the Principal Closing of the transaction and the related acquisition of Merrill Lynch Bank (Suisse) S.A. on 1 February 2013, said the bank in an statement.
The transfers will add substantially to Julius Baer’s existing businesses in Uruguay, Chile and Monaco. In the case of Luxembourg,Julius Baer gains a new foothold with a strong presence.
Boris F.J. Collardi, Chief Executive Officer of Julius Baer Group Ltd., said: “With the addition of Uruguay, where we are now one of the biggest players, and Chile we have expanded our business massively in the fast growing market of Latin America. In Monaco we strongly increase our presence, adding further momentum to our local business development. Moreover, we enter the market in the important financial centre Luxembourg with a substantial client base, which also opens up new business opportunities.”
The financial advisors and client relationships of the concerned entities have been transferred on 1 April 2013, whereas the client assets will be transferred in a staggered manner from Merrill Lynch to the Julius Baer platforms, in line with applicable regulations in the respective markets.
The rebranding of the entities will be completed as soon as possible after receipt of the relevant approvals of name changes from the appropriate authorities.
“The transaction is well on track. This latest step marks another major milestone in the implementation of the integration process. I am very pleased with the good progress made in the last couple of months and am confident that the upcoming transfers will take place as planned,” Boris Collardi commented.
Other major businesses adding substantial scale to follow shortly
The other major businesses to transfer, expected to occur during the remainder of the year, are in Hong Kong, Singapore and the UK. All of them will add substantial scale to Julius Baer’s global network, taking the respective local businesses into the leading group of international private banks in these markets.
The International Wealth Management business of Merrill Lynch outside the US is an excellent strategic fit for Julius Baer, strengthening the Bank’s presence in key growth markets around the globe and significantly enlarging its asset base. The integration phase which was launched in February 2013 is expected to be completed in the first quarter of 2015, with the bulk of the large entities and businesses transferring in 2013.
