The first Funds Society Fund Selector Forum New York was held a few days ago following the success of the two editions of the Summit in Miami, which Funds Society also organized in collaboration with Open Door Media. In this first edition, 20 fund delegates / selectors and financial advisors within the US offshore sector met at the Waldorf Astoria hotel in Manhattan to listen to the explanations of experts from Brandes Investment Partners, Carmignac, Edmond de Rothschild Asset Management, and Henderson Global Investors.
Kevin Loome, Head of US Credit, highlighted key aspects of Henderson Global Investors’ high yield debt investment philosophy; Sandra Crowl, a member of Carmignac Investment Committee, outlined her vision of leadership in global asset allocation; Kevin Thozet, product specialist of Edmond de Rothschild Asset Management, spoke about how to generate absolute returns in the fixed income universe; and Jeffrey Germain, of Brandes Investment Partners, shared his vision on the 'value' opportunities in European equities and emerging markets.
According to Loome, between 6 and 8 billion dollars in fixed income are yielding negative results “which we, as investors, must fight against." Referring to the risk of corporate default, the Henderson executive pointed out the extensive repair damage that has occurred, and said he had noticed better quality in newly issued debt. The fixed income market is an inefficient market composed of 1,700 companies globally, while ETFs are limited as to what they can access, he explained. In reference to the daily liquidity, according to Loome, the global high yield market is "impossible to index". Loome affirmed that his company’s analysts are finding incorrectly rated bonds, with CCC, for example, and that in the seventh year of the credit cycle it is increasingly important to analyze them, and not to simply follow the ratings. Finally, regarding the energy sector, he pointed out that markets are open to buying new issues of companies in the sector with oil at $ 50, but that at 70 would be even better.
Following Loome, Sandra Crowl was of the opinion that the Chinese situation is a key factor for macro evolution. Government movements in China have had an effect on the price of commodities and on private credit growth and a stabilizing effect is taking place. With regard to oil prices, she said she expected it to reach $ 70 within 18 months and said she could see evidence of recovery, for example, in recent US corporate results, but believes it is too early for rejoicing yet. Regarding Europe, the speaker from Carmignac said she expects changes in government policy, and encourages greater fiscal involvement, because the QE program is not working as intended, and believes the British government will have no choice but to negotiate a smooth exit, given the strong impact of Brexit in its economy. As regards the United States, she seems convinced that regardless of who wins the elections, infrastructure spending will be increased; and advised that it is prudent to reduce exposure to equities before the US elections and before the Italian referendum, as it was prior to the British referendum on Brexit. Finally, she pointed out that in future, natural sources of alpha will be related to millennials, technology, longevity and growth in emerging markets, and declared she was buying Argentinean government debt denominated in dollars, and that she found Polish public debt attractive.
Jeffrey Germain followed, and focused on value investing; he said that it’s easier to find “value” opportunities in Europe than in the United States and that European stocks are at historic lows, setting Russia as an example, which is so cheap that "you are paying for the cash balance ". He pointed out that some British value companies could benefit from the post Brexit inflation, and mentioned British Isles food sector companies as an attractive sector for value investing. Furthermore, the Brandes Investment Partners representative said that copper has good behavior as compared to iron, competing increasingly stronger in the Chinese market, where it’s pushing prices downward. Finally, he agreed with the preceding speakers pointing out that oil is cheaper than it should be given the current economic situation.
Finally, Kevin Thozet was optimistic with respect to bonds linked to inflation ,and said it is unlikely that the rates of short –term debt in Germany, Austria, Holland, Belgium, and France fall below those of deposits the European Central Bank. Regarding emerging markets, he was of the opinion that although the risk may be lower than what the consensus on emerging markets suggests that there are still risk factors involved such as US interest rates and fluctuations in crude oil prices. The Product Specialist from Edmond de Rothschild Asset Management does not expect a hard landing for the Chinese economy, but noted that debt related to real estate weighing 20% of GDP, is a risk factor. Finally, he pointed out that emerging market debt is 12% of global debt and that market size has implications on liquidity.