CC-BY-SA-2.0, FlickrGlyn Jones
. Glyn Jones, New Independent Non-Executive Chairman at Old Mutual Wealth
Old Mutual Wealth appointed Glyn Jones as the independent non-executive Chairman of the Old Mutual Wealth Board, subject to regulatory approval.
He will replace Bruce Hemphill, CEO of Old Mutual plc, who is stepping down as Old Mutual Wealth’s Chairman. Bruce will continue to be a director of the Old Mutual Wealth Board. Glyn will be working closely with Bruce as Old Mutual plc seeks to execute the managed separation of the wealth business.
Glyn is presently the Chairman of Aspen Insurance Holdings, a New York Stock Exchange listed business, and the Chairman of Aldermore Group, the challenger bank that went public in 2015 on the London Stock Exchange. Previous non-executive roles included being the Senior Independent Director on the Direct Line Insurance Group, a board he joined ahead of its listing on the London Stock Exchange as a FTSE 100 company. Other past chairmanships include: Hermes Fund Managers, BT Pension Scheme Management and Towry, a financial planning and wealth advice business.
Glyn started his career with Deloitte, Haskins & Sells, a predecessor firm to PWC, where he was a senior partner in the consulting practice specialising in financial services. In 1991, he joined Standard Chartered Bank where he ran their international private banking business which was headquartered in Hong Kong. On his return to the UK in 1997, he joined NatWest Bank and was appointed CEO of the Coutts Group, the domestic and international private banking business, as well as having responsibility for NatWest Investments and NatWest Stockbrokers. In 2001, Glyn joined Gartmore Investment Management as CEO until 2004.
Paul Feeney, CEO of Old Mutual Wealth, said: “I am very pleased that Glyn has agreed to join the Old Mutual Wealth Board as Chairman. His depth and breadth of understanding of the financial services industry, which has been gained from leading top industry companies over the last 20 years, will be of great benefit to our business. He also brings extensive experience of chairing both public and private boards. I look forward to working with Glyn as we build on the momentum that exists to transform Old Mutual Wealth into a truly outstanding business. I believe we have an exciting future ahead of us.”
Jones added: “I am delighted to be invited to be the new Chairman of Old Mutual Wealth. This is a unique and leading wealth management business which is well placed to succeed in the fast developing and exciting industry in which it operates. I look forward to helping Old Mutual Wealth in its development and playing my part, alongside my fellow board directors, in supporting and guiding Paul and his executive management team, as well as working closely with Old Mutual plc to help them achieve their strategic objective of managed separation.”
Old Mutual Wealth is a subsidiary of Old Mutual plc. Old Mutual plc is in the process of executing a managed separation strategy that will separate the Group into its four constituent businesses: Old Mutual Wealth, Old Mutual Emerging Markets, Old Mutual Asset Management and Nedbank.
CC-BY-SA-2.0, FlickrPhoto: Nimalan Tharmalingam. London Remains the Top Leading Global Financial Centre
London, New York, Hong Kong, Singapore and Tokyo remain the five leading global financial centres according to the twentieth Global Financial Centres Index (GFCI 20). Published by Z/Yen in collaboration with the China Development Institute (CDI), the GFCI rates 87 financial centres. London is one point ahead of New York (on a scale of 1,000 points this is insignificant). Singapore is 42 points behind New York in third place. Tokyo, in fifth place, is 60 points behind New York.
The UK ‘Brexit’ referendum result is not reflected in the GFCI 20 results so far. GFCI 20 was calculated based on data collected up to the end of June 2016 – a few days after the referendum result on 24 June. Looking ahead to GFCI 21, assessments given to London in July and August are significantly down from previous levels. GFCI 21 may show some significant changes. London, New York, Singapore and Hong Kong remain the four leading global financial centres.
All North American centres except Calgary are up in the ratings. Calgary focuses on energy finance and the recent volatility in oil prices is likely to have caused a decline in Calgary’s rating. San Francisco and Boston are second and third in North America – reflecting the growing importance of FinTech. Chicago re-enters the GFCI top ten and Toronto, the leading Canadian centre, is now 13th having been eighth a year ago.
Western Europe remains a region in flux. Luxembourg and Dublin show strong rises in the ratings whilst Geneva and Amsterdam fall. Early indications following the Brexit referendum result are that decision-makers are looking around and considering Luxembourg and Dublin as potential locations if they need to leave the UK. Wealth management in Geneva may be suffering from increased transparency requirements of international regulators. Seven of the top ten Asia/Pacific centres see a fall in their ratings.
Some Eastern European and Central Asian centres prosper whilst others struggle. Warsaw, Tallinn and Riga are now the leaders in this region. Istanbul, Moscow, St Petersburg and Athens continue to languish. Turkey and Russia are both involved in armed conflict. Although geographically removed from the fighting, the financial centres in these countries are clearly affected by the uncertainty this creates.
Australasian centres are doing well. Three of the top five global centres are Asian. Hong Kong and Singapore had some small declines. Sydney and Melbourne both saw solid increases in their ratings.
Offshore financial centres are recovering lost ground. Jersey, Guernsey, the Isle of Man, the Cayman Islands, Bermuda, the British Virgin Islands, and are all up in the GFCI 20 ratings.
Middle Eastern centres decline. With the exception of Bahrain which saw a modest rise, all Middle Eastern centres were somewhat down although Dubai only fell by a single point remaining well ahead of other centres in the region.
Latin America down, Caribbean Up. Sao Paulo, Rio de Janeiro and Mexico continue to struggle. Trinidad & Tobago have entered the index for the first time in 71st place.
Mark Yeandle, Associate Director at the Z/Yen Group and the author of the GFCI, said “Changes in perceptions following the Brexit referendum are not yet reflected in the GFCI. However, early signs are that London could see a decline next time round. Which centres may gain from this is hard to predict.”
Fan Gang, CEO of the CDI, said “We are delighted to be working with Z/Yen Group in producing this index. It is a very exciting time for financial centres in China as Shanghai, Shenzhen and Beijing all rose in the GFCI ratings in GFCI 20. Dalian and Qingdao were also seen as performing well in recent editions. We anticipate that Chinese financial centres will rise rapidly in importance around the world.”
Photo: Stralem & Co. Wall Street's Oldest Woman has Died
Irene Bergman, Senior Vice President and Financial Advisor at Stralem & Company, Inc., a New York asset management firm founded in 1966, has passed away.
Born in Berlin, Germany on August 2nd, 1915 to a prominent private banker, she started her career in 1942 after arriving as a refugee from Europe. At Stralem & Co, Bergman helped oversee about $1 billion and managed accounts for U.S. and international clients. She joined the company in 1973 from Loeb, Rhoades & Co., where she worked six years as an investment manager in the international department. She previously spent a decade as an assistant manager in Hallgarten & Co.’s foreign department, working on merger arbitrages and writing a weekly market letter.
Bergman stopped going to the office in December 2014 and worked from home until her death. To celebrate her 100th birthday, she was invited to ring the bell at the New York Stock Exchange.
CC-BY-SA-2.0, FlickrPhoto: greeblie
. Baby Boomers Are the Largest Users of ETFs
Despite the commonly held view that exchange traded funds (ETFs) are most popular with younger investors, a new whitepaper from Pershing, a BNY Mellon company, in conjunction with Beacon Strategies, finds that investors between the ages of 51-70 who work with advisors are, in fact, the largest users of ETFs, followed by those over the age of 71.
The report, The Evolving ETF: Using Exchange Traded Funds in Client Portfolios, surveyed more than 1,500 advisors in the U.S and around the globe. More than two-thirds of advisors who use ETFs intend to increase their usage over the next 12 months, while 55 percent said that more than half of their clients already have ETFs in their portfolios.
“The widespread assumption across the investment management industry is that the continued growth and popularity of ETFs is being driven by younger investors. However, advisors are telling us that this is not necessarily the case,” said Justin Fay, director of financial solutions for alternative investments and ETFs at Pershing.
“We found that ETF usage in portfolios is most prominent among the Baby Boomer and Greatest Generation populations, mainly because these investors have become increasingly aware of the cost efficiency and access to a variety of styles that ETFs may provide, which can help them achieve their financial goals,” he added.
Pershing and Beacon Strategies’ whitepaper revealed a number of other key findings, such as:
Advisors view ETFs as critical investments in client portfolios
Performance is the key criteria for choosing a specific ETF
Further education needed around ETFs
“ETFs can be a particularly attractive investment option for advisors, offering customizable solutions and potentially lower-cost access to markets, countries and sectors than many other comparable investment vehicles. While the RIA channel continues to dominate in terms of ETF use, we are seeing increased adoption across other channels, particularly independent broker-dealers who are implementing ETFs more frequently within portfolios, and this trend is expected to continue,” concluded Fay.
To obtain a copy of Pershing’s whitepaper, follow this link.
CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn. Cazenove Capital Management Acquires C. Hoare & Co's Wealth Management Business
Cazenove Capital Management, the UK wealth manager of Schroders, has reached an agreement with C. Hoare & Co. to acquire its wealth management business.
C. Hoare & Co. is a London-based private bank with a 300-year history of providing banking services to high net worth and ultra-high net worth clients. Over the last decade, it widened its service offering into wealth management and has developed a high-quality business with approximately 1,800 clients and £2.2 billion of discretionary assets under management at the end of June 2016.
Peter Harrison, Group Chief Executive at Schroders, said: “C. Hoare & Co.’s culture of client focus and exemplary client service are a strong fit with Schroders. This acquisition of its UK wealth management business grows our business in this area. I am confident that the relationship will create long-term value and benefits for clients, shareholders and employees.”
Andrew Ross, Chief Executive at Cazenove Capital Management, said: “We believe the combination of our two businesses will bring significant benefits and enhanced opportunities for our clients. The complementary fit between our two firms, the strong shared service culture, long-term thinking and established heritage of both businesses make this an ideal match.”
Alexander Hoare, Partner and Director at C. Hoare & Co., said: “We have chosen Cazenove Capital, the UK wealth manager of Schroders, because our firms share established heritages and similar cultures with the same dedication to customer service. We are very proud of the wealth management business that we have built over the last decade and we are keen for it to continue to flourish. We look forward to an ongoing relationship with Cazenove Capital.”
Financial terms of the transaction were not disclosed and it is expected to complete in the first quarter of 2017.
CC-BY-SA-2.0, FlickrPhoto: RIccardo Cambiassi. Claudia Ripley, Ingrid Tharasook and Fabrizio Palmucci Join Jupiter
Jupiter has appointed three product specialists to support its UK equity, Asia and GEM equity and Fixed Income and Multi-Asset teams. Reporting to Katharine Dryer, who heads the product specialist team at Jupiter, these new hires will provide additional support to some of our growing investment strategies and bring the recently-established product specialist team to full capacity. All three will have taken up their positions at Jupiter by the beginning of the fourth quarter of 2016.
Claudia Ripley joins Jupiter to work across all our UK equity funds, with a particular focus on those managed by Steve Davies and Ben Whitmore. She has nine years’ UK equity product experience, seven of which were spent as the Lead Retail Product Strategist on the BlackRock UK Active Equity Team.
Ingrid Tharasook joins from Coutts & Co.’s investment strategy team to cover Jupiter’s range of global emerging market equity funds. Her previous experience as a sector specialist in emerging market fixed income and Asian (and Japanese) equities will complement the management styles of Jason Pidcock and Ross Teverson as they build on recent momentum. A fluent Brazilian Portuguese and Thai speaker who has lived across four continents and has nine years’ investment experience, Ingrid brings a truly global perspective to her new role.
Fabrizio Palmucci joins the Fixed Income and Multi-Asset team to support recent growth in this area. Fabrizio spent five years developing the Pimco Source partnership as the Head of Fixed Income Product Management team at Source. Fluent in Italian, Spanish and French, Fabrizio will have a particularly strategic role to play in supporting our distribution teams as we increase our European footprint. His 14 years’ experience encompasses product management credit analysis and bond trading.
Katharine Dryer commented: “We are delighted to have attracted three talented professionals to these new roles. They will help us develop our communications with clients and enable our fund managers to stay focused on generating performance. The work of Alastair Irvine with the Jupiter Independent Funds team and Tommy Kristoffersen on Cedric de Fonclare’s team has demonstrated the value the product specialist role can provide as a key link between the investment and distribution teams. My congratulations go to all of the new recruits.”
CC-BY-SA-2.0, FlickrPhoto: JosepMonter / Pixabay. Building a Case for Increased Infrastructure Spending
The U.S. presidential election is entering the homestretch and investors are gauging the potential investment implications of the candidates’ proposed plans. As I noted in my last blog, amid a bitterly fought campaign, one topic is drawing a fair amount of attention: increased infrastructure spending.
It has been a particular area of focus for both parties and even the Federal Reserve. It is a rare area of agreement between the two presidential candidates, suggesting that whoever wins the election will likely emphasize it in the next administration. Moreover, the phenomenon is not only in the United States, but in other developed countries. Are the stars aligning for significant increased infrastructure projects, and does this have implications for investors? Among the reasons that suggest they may be:
Monetary policy
Central bank actions have been one of the most influential forces in shaping global markets in recent years. Yet we remain in a low growth environment, which raises the question: “Has monetary policy run its course in the current cycle?” The lack of growth momentum and weakened fundamentals around the globe suggest so.
Economic need
Given low economic growth, as well as the weak state of the nation’s infrastructure, using federal aid to repair bridges and roads and other projects could be a means of increasing productivity and fostering economic growth. See the chart below. In addition, infrastructure spending could help lift labor participation rates thus narrowing the gap between labor mismatch and labor productivity.
Depending on the type of project, infrastructure has the potential to create a positive multiplier effect on markets from an economic perspective. In the short term, infrastructure projects could provide private sector growth and jobs, thus potentially leading to increased tax revenues and a boost in consumer confidence and consumption. As a recent report from the BlackRock Investment Institute suggests, an increase in government spending can add up to 2% to gross domestic product (GDP), depending on where in the economic cycle the spending occurs. (Not surprisingly, it is likely more effective when it comes in a recession.)
Low funding costs
Large scale central bank bond purchase programs have pushed yields to all-time low (Source: Bloomberg), and in many cases, negative. While this has created challenges for investors, particularly those who require income, the low interest rate environment means the cost to finance infrastructure projects through government debt is far less than in years past.
This renewed focus on longer-term fiscal policy measures like infrastructure is not unique to the United States. In July, Japan announced a new ¥28 trillion stimulus package, of which ¥13.5 trillion is earmarked for a variety of fiscal policy initiatives centering on public infrastructure projects such as upgrading port facilities and building new food-processing plants that help boost food exports.
Similarly, the UK, facing the possibility of an economic slowdown—or even its first recession since the financial crisis—appears ready to incorporate aggressive stimulus beyond monetary measures. Like the U.S., minimal public resources have been allocated to infrastructure over the past decade. Private sector infrastructure spending in the UK is also drying up as a result of uncertainty around Brexit. The number of contracts aimed toward infrastructure-like initiatives is down by 23% over the past year (Source: Office for National Statistics, UK, June 2016).
In short, a combination of factors have created a compelling case for infrastructure investment. Should these scenarios unfold, equity sectors and industries related to infrastructure activities like industrials or transportation in the U.S. specifically, may stand to benefit. However, the timing and level of impact remain to be seen. It is important to recognize that how infrastructure projects are funded can mitigate some of the multiplier effect. For the U.S. in particular, it is also important to recognize that whoever wins the election could still face a divided government, raising questions about how quickly a bill could get passed, and how large a bill it would be.
To gain exposure to global infrastructure companies, investors may want to consider the iShares Global Infrastructure ETF (IGF). For U.S. exposures, investors may consider the iShares Transportation Average ETF (IYT) or the iShares U.S. Industrials ETF (IYJ).
Build on insight, by BlackRock written by Heidi Richardson
Andrew Formica, Chief Executive at Henderson. Henderson and Janus Capital will be Merging
A new giant will join the global asset management industry. The businesses of Henderson and Janus will be combined under Henderson, which will be renamed Janus Henderson Global Investors and will continue to be a Jersey incorporated company and tax resident in the UK. The combined group will be a leading global active asset manager with AUM of more than $320 billion dollars and a combined market capitalisation of approximately $6 billion dollars.
The merger will take place via a share exchange, with each share of Janus common stock exchanged for 4.7190 Henderson ordinary shares. Henderson and Janus shareholders are expected to own approximately 57% and 43% respectively of Janus Henderson Global Investors’ shares on closing, based on the current number of shares outstanding. The merger is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.
Henderson and Janus CEOs will lead Janus Henderson Global Investors together.
Andrew Formica, Chief Executive of Henderson, said “Henderson and Janus are well-aligned in terms of strategy, business mix and most importantly a culture of serving our clients by focusing on independent, active asset management. I look forward to working side-by-side with Dick, as we create a company with the scale to serve more clients globally, as well as the strength to meet their future needs and the growing demands of our industry.”
Dick Weil, Chief Executive Officer of Janus, said “This is a transformational combination for both organizations. Janus brings a strong platform in the US and Japanese markets, which is complemented by Henderson’s strength in the UK and European markets. The complementary nature of the two firms will facilitate a smooth integration and create an organization with an expanded client-facing team and product suite, greater financial strength, and enhanced talent, benefiting clients, shareholders and employees.”
According to a press release, the merger promises increased distribution strength and coverage in key markets, including the US, Europe, Australia, Japan and the UK, as well as a growing presence in the Asia-Pacific region, the Middle East and Latin America. The company will have approximately 2,300 employees, based in 29 locations around the world.
Henderson shares currently trade on the LSE and ASX, while Janus shares currently trade on the NYSE, after the merger the new company plans to have the NYSE as its primary listing.
Janus’ subsidiaries, INTECH and Perkins will be unaffected by the merger. INTECH CEO, Adrian Banner, will continue to report to the INTECH Board of Directors and Perkins CEO, Tom Perkins, will continue to report to the Perkins Board of Directors.
CC-BY-SA-2.0, FlickrPhoto: 401 K. Have Quality Companies Become Too Expensive?
We often stress the fact that our investment methodology leads us to focus on high-quality companies. We define these as companies with a very sound balance sheet and specific competitive advantages that enable them to stand out from the competition and generate a higher profitability. In turn, this higher profitability translates into the generation of substantial free cash flow and consequently a strong self-financing capacity and a low debt ratio.
Among such quality companies, those which operate in low-cyclical sectors have been particularly popular with investors in recent months, even years. The time has now come to question whether these quality defensive companies (Nestlé, Reckitt Benckiser, Unilever, for example) may have become too expensive.
First the comment. The level of interest rates plays a significant role in any valuation model. The answer to the question of whether quality defensives have become too expensive will depend to a large extent on the assumptions used, especially with regard to the rate used to discount future earnings/dividends and the cost of equity. Clearly, with a very low discount rate (on the basis that interest rates are very low), practically any price can be justified. This is why equity valuation models – like the one used by the Federal Reserve which compares the earnings yield of equities (through the earnings/price ratio, the inverse of the price/earnings ratio) to the yield on 10-year government bonds – always reach the conclusion that equities are undervalued compared to bonds. This is not surprising when the yield on the US 10-year Treasury note is around 1.5%. The comparison between equities and bonds is even more favourable for European equities, which offer a higher earnings yield (are trading at a lower price/earnings ratio) and face even less competition from bonds which have near-zero yields. But obviously, the lower the interest rate used in the valuation model, the smaller the margin of safety will be and the more the investment will be at risk in the event of interest rates rising.
Now the observations.
1.- Using a discount rate that would have been considered appropriate in the past, before the central banks started to manipulate interest rates, e.g. a rate of around 9%, you come to the conclusion that defensive companies are in fact relatively expensive, although their valuation cannot be described as exorbitant. But more importantly, compared to the rest of the market, they are not more expensive than in the past. The outperformance of their share price reflects the outperformance of their earnings, in other words much better earnings growth (note that this is the case for quality defensive stocks as a whole. Some of these stocks have certainly seen an increase in their premium over the market. For others, their earnings growth is largely due to buying back their own shares, purchases often financed through debt). The following graph shows the price/earnings ratio of these stocks in relation to the market. It can be seen that the premium these companies are enjoying (in terms of the P/E ratio) remains in a range similar to that of the past. And it could be argued that in the current context, dogged by numerous economic and financial uncertainties, these companies should trade at a higher premium given that they are the main beneficiaries of low interest rates.
2. However, let us suppose that an investor who holds these companies in the portfolio decides to sell them because they are expensive. Then comes the question of redeploying the newly released funds. Currently the return on fixed-income investments (cash and bonds) does not compensatethe risk incurred. The investor could obviously decide to stay in cash and wait for a sharp price correction in these quality names. However, experience shows that this is a very chancy approach. Alternatively, our investor could buy shares whose valuation seems more attractive. But where to find that kind of share? In recent years, equities have generally become more expensive (at least in the developed countries). Although quality stocks are more expensive than the market as a whole (and quite rightly so), we have already noted that their premium over the market has not increased. And companies whose valuation at first sight seems more attractive are often in sectors that are seriously at risk in the current context, examples being banking or highly cyclical stocks. To invest in these sectors you need to have a confidence in the global economic outlook and the financial system that wedo not currently have.
3. As already noted, the current valuation of quality defensive stocks is high but not yet exorbitant. The corollary of this is that their expected return is lower than in the past but still reasonable, especially in a low-interest-rate context. As the price paid determines the return, it would be naive to think that when you are paying more for these companies than in the past, you could get the same return as in the past. So we need to lower our return expectations on quality companies. If their valuation goes on rising, there will even come a moment when the expected return becomes so low that investing in them no longer makes sense. But that moment has not yet come.
Guy Wagner is Chief Economist and Managing Director at Banque de Luxembourg Investments.
Andrea Di Nisio, photo: LinkedIn. Andrea Di Nisio Joins Unigestion as Head of Southern Europe Intermediaries
Unigestion, the boutique asset manager with scale announces three senior hires to its newly formed intermediary team. The team will initially have five members and Unigestion plans to grow this further as the firm increases its presence in intermediary markets. Their initial focus will be making Unigestion’s institutional investment expertise available to intermediaries in the Southern Europe, UK, Nordics, Switzerland and the US.
Simone Gallo joins Unigestion as Head of Intermediary Distribution. Simone will have responsibility for building the global intermediary channels focusing on wealth managers, multi-managers and sub-advisory mandates. Simone joins from Pictet Asset Management where spent six years as Senior Vice President in the Global Clients Group. Before this he was Executive Director at Goldman Sachs Asset Management in charge of the sales relationships across global accounts in EMEA. He started his career with Schroders Investment Management in 2001.
Andrea Di Nisio joins as Head of Southern Europe Intermediaries. Andrea’s main focus will be to build Unigestion’s presence in intermediary channels in Spain, Italy and Portugal. Andrea joins Unigestion from Dalton Strategic Partnership where from 2009 to 2016 he was the Partner responsible for promoting the firm and its funds to intermediaries across Southern Europe. Andrea started his career in 1998 at Schroders Italia in Milan and in 2001 joined the international team of Schroder & Co in London. He then moved to Cazenove Capital Management as a Fund Director responsible for wealth management and fund distribution in Southern Europe.
Lloyd Reynolds joins Unigestion as Head of Nordic and UK Intermediaries. Lloyd will lead the expansion in these markets, leveraging Unigestion’s institutional presence. Lloyd brings over 20 years of experience in distribution across Europe and Asia. Most recently he was with North Hill Capital. Prior to this Lloyd has held various international leadership roles for Goldman Sachs Asset Management, JP Morgan, Schroders Private Bank and Flemings.
Tom Leavitt, Managing Director at Unigestion commented: “It is exciting to have Simone, Andrea and Lloyd on board bringing their collective knowledge of the international intermediary markets. They will help us extend access to our strategies through these markets, sharing the benefits of our institutional quality strategies to fund selectors looking to grow and protect the assets of their clients through multi assets, liquid alternative and equity solutions. We welcome them all very warmly to the team.”
