Photo courtesyMurat Kalkan, BBVA Global Wealth Advisors Director
BBVA Group has announced the creation of BBVA Global Wealth Advisors in Miami. The new service aims to serve high net-worth Latin American clients and complement the international wealth management service already offered in Switzerland and Spain.
Initially, the service will be available to non-US resident clients from Latin America who are interested in having an international investment advisory solution in the United States. To qualify for the service, clients must bring assets under management of at least $500,000.
BBVA Global Wealth Advisors clients will have access to non-discretionary portfolio management services, advisory and wrap fee accounts, and other investment options, the press release said.
“The opening of BBVA Global Wealth Advisors in Miami will allow us to advance the integration of the local and global capabilities of BBVA’s wealth management, enhancing the value proposition for our clients,” said Jaime Lázaro, Global Head of BBVA Asset Management & Global Wealth.
Murat Kalkan, Head of BBVA Global Wealth Advisors, added: “Establishing our own US-based investment advisory service for the Group’s high net worth clients is a critical component to our value proposition in our service to these clients.”
BBVA Asset Management & Global Wealth is the unit that coordinates the asset managers, investment advisors, and private banks of the BBVA Group globally.
VanEck, a global investment manager with a focus on providing innovative investment strategies, is pleased to announce a reduction in the management fees for two of its fixed income exchange-traded funds (ETFs), effective immediately.
The management fee for the VanEck Intermediate Muni ETF (ITM) has been lowered from 0.24% to 0.18%, while the management fee for the VanEck Fallen Angel High Yield Bond ETF (ANGL) has been reduced from 0.35% to 0.25%. These adjustments reflect VanEck’s commitment to offering competitive pricing and enhancing value for investors.
“As part of our regular review of our pricing strategy, we are delighted to lower the management fees for these ETFs,” said Ed Lopez, Head of Product at VanEck. “Lower fees add to the value proposition of these ETFs, along with efficient access to targeted opportunities in the fixed income space that we believe are compelling right now within an income-oriented portfolio.”
ITM seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ICE Intermediate AMT-Free Broad National Municipal Index, which is intended to track the overall performance of the U.S. dollar denominated intermediate-term tax-exempt bond market. ANGL seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ICE US Fallen Angel High Yield 10% Constrained Index, which is comprised of below investment grade corporate bonds denominated in U.S. dollars, issued in the U.S. domestic market and that were rated investment grade at the time of issuance.
The US ISM services index shows that business activity and new orders are performing well, but companies are increasingly focused on trimming their workforce. The employment component of the index has dropped into contraction territory, indicating a potential risk of job losses in the coming months.
However, with inflation pressures looking less worrying, the Federal Reserve should have the flexibility to respond, said James Knightley, Chief International Economist, ING Bank in a new report for ING Bank.
The ISM services index for February came in at 52.6, below the consensus forecast of 53.0. However, business activity and new orders improved to 57.2 and 56.1, respectively, indicating expansion in these areas. Employment, on the other hand, dropped to 48.0, the second sub-50 print in the past three months, and the six-month moving average is also below the 50 line.
The relationship between the ISM services employment index and the monthly change in nonfarm payrolls has historically been strong, but in 2023 and into 2024, they have had an inverse relationship. With job loss announcements seemingly picking up and the quit rate falling, it does appear that the jobs market is cooling.
Prices paid fell back in the report, which is a positive sign given the recent strength in core inflation readings. The ISM indices and GDP growth, indicating that the economy may not be as robust as GDP alone suggests. Nonetheless, there is little sign of employers taking an axe to jobs, and the Federal Reserve should have the flexibility to respond to any potential job losses.
The full report can be found on the ING Group site.
Photo courtesyDavid Nicholls, portfolio manager at Global Emerging Markets Sustainable de East Capital.
According to David Nicholls, portfolio manager of East Capital’s Global Emerging Markets Sustainable fund, emerging markets are, in many ways, the most obvious destination for sustainable investment: investing in line with the UN Sustainable Development Goals. Given his experience, in this interview we wanted to discuss with him the complex issue of investing sustainably in these markets.
In this context, is there a difference when talking about emerging markets in Asia, Europe and Latin America?
While the investment backdrop for these regions is indeed very different, the sustainability integration process remains constant – finding good quality companies that are managing well their material sustainability impacts across their value chains. Generally, we find that Latin America and Europe are a bit more sophisticated in their disclosure, but we always look beyond the glossy sustainability reports and more at how companies are actually run, because what really matters is what companies are doing, not what policies they have or how they report.
How does the fund manager deal with this issue in the investment process of its funds and in particular of this fund?
We believe that by far the most useful way of assessing a company’s sustainability profile is to be on-the-ground, meet management in their offices and ask the tough questions. Often a one-hour meeting will tell us more than reading pages and pages of sustainability disclosure ever would. We also try never to give companies the benefit of the doubt, if we have concerns, we engage with management and encourage them to address these issues.
We do our own assessment, we do not buy external ESG data and scores, and we apply a forward-looking lens when analysing the practices and standards. We also look at the ownership of companies, we believe that KYO “Know Your Owner” is an important part of our work, especially when we invest in entrepreneurs-led companies.
Do you think this myth that “it is difficult to invest sustainably” is slowing down European investors’ interest in emerging markets?
It is more likely that the exceptionally poor performance of China in recent years (especially compared to the US) has turned investors away from emerging markets rather than concerns about sustainable investing.
Having said this, we have received feedback from various investors that the huge wave of downgrades of peer funds from Article 9 (the highest level of sustainability) to Article 8 or even Article 6 has led to questions about the validity of the concept of “sustainable investing”. However, we believe that investors such as ourselves who remain at Article 9 have robust processes and detailed disclosure that clearly documents this.
In Europe we read that the energy transition is a great investment opportunity under ESG criteria, is the same true for emerging markets?
This is a great question because historically we have generated significant alpha by investing in the energy transition in China, a market which controls over 90% of the entire solar value chain. Unfortunately, we are now seeing quite alarming overcapacity in the Chinese solar sector, as well as in batteries and even electric vehicles, which has driven down margins and prices. This is great to support the demand, with solar panel prices down 50% from their peaks in Q3 2022, but less good for investors. As a result, we currently have little direct exposure to the energy transition, although we do see some value in some very niche areas with large moats, such as smart meter manufacturers.
Where do you see the main investment opportunities for 2024 within emerging markets? What geographies, types of companies or sectors do you prefer?
Our approach is to remain broadly country neutral in our allocation, so that we can focus on stock picking within countries, our active share has always been very high. Having said this, the most exciting opportunities in the emerging markets universe, are to be found in countries like India and Indonesia, which offer strong structural growth for many years to come.
Of course, the “elephant in the room” is China. Its weight in the benchmark (MSCI EM Index) has fallen from 44% to 26% over the past four years due to underperformance, but China remains the largest country. We believe much of the bad news is priced in, given the extremely low valuations. Here we have a balanced portfolio of high-quality exporters whose revenue streams are uncorrelated to the domestic economy (for instance Africa’s largest mobile phone seller), as well as bottom fishing in some bombed-out stocks; for example, we bought a fintech company trading at 1.5x PE with a 15% dividend yield at the beginning of the year.
What type of strategies do you recommend for investing in emerging markets and why?
A core part of our investment philosophy is that emerging markets remain highly imperfect and are thus fertile grounds for active on-the-ground investors like us. For example, five of our eight core team members are based in Asia and this support that we aren’t afraid to deviate from the usual emerging market names. We believe sustainability is an important lens, even if just to give a “quality bias” to the portfolio, though the ability to remain dynamic and react to the constant change takes precedence.
Given the current macro context, what can this type of strategy bring to investors’ portfolios?
The perception amongst investors we have spoken with recently is that this type of strategy offers a huge option value if China starts to rerate, something we saw in November 2022 when China returned 60% in three months. We would, however, argue that it is a bit more nuanced than this, and that the strategy offers exposure to high quality, exciting companies in fast growing economies, while maintaining the potential upside to benefit if China does rerate.
Mutual fund assets decreased slightly in January 2024, but still managed to have their best month for flows since January 2023, according to the latest issue of The Cerulli Edge—U.S. Monthly Product Trends.
Meanwhile, ETF assets reached a new all-time high, with a notable division of flows between active and passive ETFs. However, commodities and allocation ETFs had a particularly bad month, shedding 2.5% and 2.3% of assets due to flows during the month, respectively.
The uncertain economic, monetary, and political outlooks, as well as increased emphases on tax awareness and ESG considerations, are driving high-net-worth (HNW) wealth management firms to improve their strategic asset allocation services in many ways.
Integrating customization and optimization tools, such as direct indexing, into wealth managers’ standard asset allocation service offerings is increasing firms’ ability to provide their clients additional value.
Implementing more bespoke investment solutions and private market investment access to clients at scale increasingly requires intermediaries to have a robust account aggregation and performance reporting ecosystem.
The trend towards customization and private market investments is becoming increasingly important in the HNW wealth space. As clients demand more personalized and tailored investment solutions, wealth management firms must adapt and innovate to meet these needs.
By providing access to private market investments and implementing customization tools, firms can differentiate themselves from their competitors and provide added value to their clients, concludes the report.
This issue of The Cerulli Edge-U.S. Monthly Product Trends analyzes product trends through January 2024, including mutual funds and exchange-traded funds (ETFs), and explores the product and service offerings being adopted by high-net-worth (HNW) practices.
The report highlights that mutual fund assets declined by just $10 billion to $18.5 trillion in January, due to the small effects of both net outflows and market developments. However, in terms of flows, this was their best month since a year ago January 2023.
In addition, ETF assets grew by 0.6% in January thanks to net flows of $43.5 billion, and reached a new all-time high. The split of flows between active and passive ETFs was notably tight at $20.9 billion and $22.7 billion, respectively. Commodity and allocation ETFs had a particularly bad month in January, with losses of 2.5% and 2.3% of assets by flows for the month, respectively.
On the other hand, the uncertain economic, currency and political outlook-as well as increased emphasis on tax awareness and ESG considerations-are prompting high-net-worth (HNW) wealth management firms to enhance their strategic asset allocation services in many ways.
In this context, Cerulli highlights that the integration of customization and optimization tools (e.g., direct indexing) into wealth managers’ standard asset allocation service offerings is increasing the ability of firms to provide their clients with additional value. The implementation of more customized investment solutions and access to private market investing at client scale increasingly requires intermediaries to have a robust ecosystem of account aggregation and performance reporting.
Credit Sesame published the results of a comprehensive study on the financial literacy and well-being of younger generations, particularly their understanding of credit and other personal finance matters. In the age of viral trends and digital consumption, Gen Z is rewriting the financial script, proving that their credit story is far from conventional.
A new survey, conducted by OnePoll on behalf of Credit Sesame, illuminates the complicated love affair between Gen Z and credit, challenging stereotypes and ushering in a new era of financial consciousness.
Amidst the TikTok craze, the survey unveils a startling revelation: 92% of Gen Z prioritizes a credit score of 750 or higher over the allure of tens of thousands of social media followers. This shift in priorities challenges preconceptions, painting a portrait of a generation that understands the impact of a robust credit history on their financial well-being.
Amongst other findings, a survey of 500 Gen Z and 500 millennials conducted by OnePoll on behalf of Credit Sesame revealed:
66% of respondents believe that their credit score is a good measure of their financial health.
One-third believe that age-old myth that checking your credit score will affect it and 19% couldn’t correctly match the definitions of debit and credit.
42% of respondents would rate their understanding of how credit scores work as “average to poor.”
82% of respondents admit they struggle to keep up with their friends’ saving and spending habits (35% of millennials struggle “very much” vs only 24% of Gen Zers).
Credit card debt is impacting younger Americans’ larger goals, such as buying a house (35%), taking a dream vacation (29%) and saving for retirement (28%).
44% of respondents said they would leave their bank due to poor customer service, compared to only 15% for failure to reduce their carbon footprint.
Credit scores have been the gold standard for creditworthiness for decades, yet the traditional credit scoring methods have long been a source of confusion for consumers, made evident by the survey results showing 42% of respondents rating their understanding of how credit scores work average to poor. Credit Sesame breaks down the barriers for everyone to build better credit scores, especially people with low or limited credit history, commonly seen amongst young people working to establish strong financial health.
Despite some of these knowledge gaps, Gen Z and Millennial respondents are abiding by age-old and wise money mantras, such as “time is money” (52%), “save for a rainy day” (46%) and “never spend money before you have it” (42%).
The study also underlines the difference between the two generations surveyed. Millennials reported opening their first bank accounts at 21 plus applying for their first credit cards and starting to pay rent around the age of 23. Meanwhile, Gen Z respondents started opening bank accounts and credit cards earlier, at 19 and 20, respectively. This notable drive to start their financial journey younger aligns with valuing peer experiences and collective wisdom on social media platforms like TikTok and YouTube over traditional authority figures in finance of generations past. Interestingly though, one in 10 of Gen Z said they do not currently have a credit card or credit score.
The survey also indicated that in-person banking and the use of cash seems to be going out of style: 43% of respondents prefer to bank online with 28% admitting they either “always” or “often” feel judged for banking in person. Similarly, 28% of Gen Z respondents “always” or “often” feel judged when using cash to pay, with more than a third of millennials sharing the same sentiment.
A recent survey by BMO Real Financial Progress Index has found significant disparities between men and women when it comes to concerns about cost of living and inflation.
Over the past three months, 61% of women expressed concern about the cost of living, compared to 54% of men. Similarly, 59% of women voiced concern about inflation, compared to 52% of men.
The survey also found that women are more likely than men to identify certain expenses as barriers to making real financial progress. Specifically, family-related expenses and monthly bills are more likely to be seen as obstacles by women (24% vs. 21% of men and 38% vs. 30% of men, respectively).
The BMO Real Financial Progress Index finds that more women than men say they share financial responsibilities with their partners, such as setting financial goals for the family (68 percent of women compared to 57 percent of men) and managing day-to-day finances like paying bills (50 percent of women compared to 44 percent of men).
Additionally, women are more likely to experience financial anxiety when it comes to keeping up with monthly bills (67% vs. 60% of men).
Overall, women are also more likely to be concerned about their financial situation, with 44% saying their concerns have increased over the last three months, compared to 35% of men.
Furthermore, women are less likely to feel in control of their finances, with 82% of men saying they feel in control compared to 71% of women.
Despite recent strides made by women in terms of pay, education, and workplace representation, these findings suggest that there are still ongoing challenges when it comes to achieving financial security and long-term wealth.
This article has been prepared with information from BMO, to see the full report of the firm click on the following link.
Heinz Volquarts, Head of Americas International (Canada and Latam) al State Street | LinkedIn
State Street has entered the US Offshore business after solidifying its position in Latin America. With approximately $10 billion in Mexico and a presence of $7 billion in the Andean region, through Credicorp Capital, the ETF-specialized manager meets a growing demand from banks, Heinz Volquarts, Managing Director, Head of Americas International (Canada and Latam) of the firm, told Funds Society.
Volquarts highlighted that US Offshore “is a really new business” for the firm and that it emerged as a response to major financial entities in the U.S., which were inquiring about products for non-residents.
State Street spent the year 2023 laying the groundwork for the business to start a “proactive” strategy from 2024 onwards. For this, they have promoted Diana Donk as the person in charge of ETF sales for the US Offshore business.
Latin America
The executive reviewed the importance of the Americas market (excluding the U.S.) in terms of assets, highlighting Canada as the largest, followed by Mexico with about $10 billion, and then Chile, Peru, and Colombia, which together are close to $7 billion dollars.
Volquarts talked about the work they do alongside Credicorp Capital as a distributor and highlighted a synergy in the “sales effort and leadership vision”. The State Street team works in conjunction with the distributor: “we travel with them probably five or six times a year,” he explained.
Mexico, on the other hand, has a team in which Ian López is responsible for the business. They have around 83 products listed in the U.S. market that trade on the SIC of the Latin American nation. In addition, a list of 35 UCITS funds in the same country.
Regarding investor preferences, both in Mexico and US Offshore, the expert said that accumulation classes are the most requested strategies, however, not all State Street products are of these characteristics.
Consequently, Volquarts emphasized that if there is demand, they “could launch a new accumulation class in Mexico” and commented that a very effective way to expose oneself to the S&P 500 with UCITS is through the SPYL (TER=3bps) with State Street’s accumulation classes.
Regarding Chile, he said that UCITS are no longer the market’s biggest concern. While it is a very new regulation, the new double taxation treaty with the U.S. allows “to use U.S. products,” thus opening up a “more attractive” proposal, he argued.
Meanwhile, in Colombia and Peru, the opportunity for UCITS is more latent. In the Caribbean country, about 80% of the assets are housed in sectorial ETFs. In an election year in many influential countries such as Mexico, the U.S., India, and Russia, to name a few, investors “look for ways to position themselves depending on the market.”
State Street is a manager heavily skewed towards equity ETFs given the enormous relevance of the SPDR ETF and all products related to the S&P500. Latin America follows the same pattern, and 90% of its assets are in equity ETFs, compared to 10% in fixed-income ETFs.
Finally, the Managing Director, Head of Americas International (Canada and Latam) of the firm highlighted “the success they have had with ESG strategies”. For example, one of their products, EFIV, has reached $1 billion in assets. Volquarts estimated that 70% has been sold to pension funds in Latin America, mainly in Chile, Colombia, and Mexico.
Vontobel Swiss Financial Advisers (Vontobel SFA) has appointed Alejandro Botero as Senior Relationship Manager to provide Latin American investors with diversified wealth management solutions.
With nearly 20 years of experience in relationship management and business development, Botero will focus on advancing Vontobel’s private client relationships with investors in Latin America, primarily in Colombia, Peru and Argentina.
Prior to joining Vontobel, Alejandro was a relationship manager and wealth strategist at BBVA Compass / PNC Private Banking, where he managed portfolios for Latin American and US clients and customized investment strategies and asset allocations based on client needs. Previously, he held senior roles at Santander Private Banking and HSBC.
He studied Economic Sciences at Pontificia Universidad Javeriana in Bogotá, Colombia.
“We are committed to helping investors achieve their financial goals through global investment diversification and customization,” said Victor Cuenca, Head of Vontobel SFA Miami Branch. “We are pleased to welcome Alejandro to our team in Miami and look forward to strengthening our reach to investors in Latin America.”
Vontobel SFA offers US and Latin American investors tailored solutions, centered on jurisdictional, geographic and currency diversification. Headquartered in Zurich, with offices in Geneva, New York and Miami, Vontobel SFA is the largest Swiss- domiciled wealth manager for US clients.
