Photo: 55Laney69. Safra Sarasin Acquires Leumi Luxembourg Unit
Banque J. Safra Sarasin has announced the acquisition of Bank Leumi Luxembourg’s private banking business, in a bid to expand its private banking presence in the region.
As a result of the transaction, Safra Sarasin will take over responsibility for Bank Leumi Luxembourg’s clients and relationship managers. Services of Bank Leumi had been tailored to Ultra High Net Worth and High Net Worth clients.
The agreement comes as a number of Israeli banks have announced their withdrawal from European private bank operations, due to, among others, profitability and fiscal compliance concerns. This includes Israel Discount Bank, which sold its Swiss unit to Hyposwiss private bank Genvève earlier this week.
Just as their international counterparts, the move to sell Israeli private banking units was also reinforced by the global crackdown on tax evasion. Last year, Bank Leumi had already settled with US authorities to pay a $400m fine for helping US account holders to evade taxes.
Jacob J. Safra, Vice Chairman of J. Safra Sarasin Group, commented: “This acquisition underlines our position as a consolidator in the European private banking market. Our capital strength and family ownership provides great flexibility to do such transactions. Bank Leumi’s Luxembourg business sits ideally within our strategic focus, providing tailor made solutions to clients.”
The acquisition is expected to be completed during the course of the first quarter of 2016, subject to regulatory clearance. The financial terms of the agreement were not disclosed.
Regulation allowing retiring defined contribution (DC) savers in the United Kingdom to invest their DC pots, not only to buy an annuity, will help underpin the growth of platforms in this evolving market, according to the latest Cerulli Associates’ European Defined Contribution 2015 report.
At least 60% of the fund platforms from the United Kingdom, Germany, and Sweden surveyed by Cerulli had more than half of their assets under administration (AUA) from DC pensions. This was nearly double the proportion (33%) of platforms surveyed that had more than half of their AUA from defined benefit (DB).
Cerulli found most asset managers surveyed are targeting platforms to some degree, to sell funds variously to UK and German DC savers this year. In the United Kingdom platforms are rivalled by consultants as asset managers’ most popular DC distribution channel, whereas in Germany insurers are comfortably the favorite channel.
Platform providers Cerulli spoke to for the report said that clients were attracted to the flexibility and clarity on charges. In the near term it will be the more financially literate investor and their financial advisors who use them. Over time platforms will need to develop products and services if they are to appeal to a wider clientele.
“According to one research manager at a UK platform provider, some 75% to 80% of fund managers’ new business flows are coming via platforms,” says David Walker, director of European institutional research at Cerulli and the author of the report. “Therefore managers need to seriously consider listing their funds on them,” he adds.
Platforms should not ignore the “institutional” end of the UK DC industry, where platforms can be used to help design DC default funds, for example. Platform providers should take note that, according to Cerulli research for this report, managers expect default funds to use non-mainstream investments more in future. If this happens, platforms may have to relax current strictures they have regarding fund dealing terms.
“It will challenge default fund designers, out to 2017, to fit more non-mainstream assets into defaults, but managers expect it,” says Walker. “But Europe’s DC fund platform industry will either need to give ground on frequent dealing stipulations, or risk thwarting asset managers’ default design expectations with regard to alternative assets,” he adds.
Foto: Historias Visuales, Flickr, Creative Commons. El crecimiento mundial será anémico en 2016 y 2017 pese al petróleo barato, los tipos bajos y el menor lastre emergente
Mark E. DeVaul, portfolio manager of North America Value Fund and a member of the Nordea’s investment team (through the firm The London Company), explains in this interview with Funds Society how to be a good value investor in these high volatile markets. Recent additions to the portfolio have come from multiple sectors including Consumer Discretionary, Industrials, and Consumer Staples.
US equities have experienced a strong rally in recent years. Investing with a value perspective requires discounts to be found. Is this possible in a more expensive stock market scenario?
US stocks have been strong since the bottom of the market back in March of 2009. Valuations have improved and the US economy is in much better condition compared to the depths of the great recession. It is more difficult to find great investing ideas today vs. 5-6 years ago, but we are still finding them. We attempt to purchase strong companies when they are trading at a roughly 30-40% discount to our estimate of intrinsic value. We calculate intrinsic value using a process we call Balance Sheet Optimization. Our goal is to build the investment thesis for each holding around the strength of the company’s balance sheet and not rely on future growth.
What return potential are you currently detecting for your portfolios, taking into account market prices? Has the safety margin tightened compared with before?
We don’t have a specific return goal each year. Our goal is to outperform the broader market over full market cycles (5-6 years) while maintaining more attractive risk characteristics (better downside capture, lower beta, lower standard deviation). Yes, the discount to intrinsic value is lower today vs. a few years ago.
Value management is characterised by patience and long-term convictions… Do you believe it is possible to maintain a buy&hold management approach in view of the current high volatility?
We believe it is an advantage to follow a buy and hold approach. Many investors have a very short time horizon. We think time is one of the few remaining market inefficiencies. We look at each company as if we were going to buy the whole firm. Our average holding period is five years. We build diversified portfolios of 30-35 holdings. Each holding is meaningful and can drive value to shareholders over a multi-year holding period.
In this regard, have you made any changes to your management approach as a consequence of the market volatility in recent years?
No, we have not made any changes to our investment approach because of recent volatility.
As regards sectors or companies in which you are currently detecting value, which sectors are you concentrating on?
We build our portfolios following a bottom up approach and pay little attention to sector weights. Our goal is to have a strong margin of safety in each holding. Recent additions to the portfolio have come from multiple sectors including Consumer Discretionary, Industrials, and Consumer Staples.
What impact could the Fed’s decision to raise interest rates have on your portfolios? Could the volatility that has been created be useful in any way?
The Fed’s timing of interest rate increases will not have much of an impact on our portfolio. We are aware of the risk and on the margin have stayed away from some of the sectors that investors may view more like bonds because of the high dividend yields (REITs, Telecom, Utilities). If rates begin to move higher, we take that into consideration as part of our balance sheet optimization approach in determining intrinsic value.
To what extent do you take into account macro considerations when it comes to making your investment decisions?
Our process is 100% bottom up so there is limited impact from macro considerations. That said, we are aware of what is going on at the macro level and try to avoid major headwinds when possible.
I imagine that you invest bearing in mind the fundamentals of the company. Do you think the exposure of US companies to China and other EMs will impact their fundamentals?
Exposure to China and other EMs may have some impact. In our large cap portfolio, roughly 30% of sales from the companies in the portfolio are generated outside the US. So we recognize there is some impact. However, the impact is fairly limited as we attempt to buy companies with very little growth expectations priced into the shares.
. Erste Asset Management Acquires Investiční Společnost České Spořitelny
On 18 November 2015 the Czech subsidiary Investiční Společnost České Spořitelny (ISCS) was merged into Erste Asset Management GmbH (EAM). This move will turn the wholly-owned subsidiary of EAM, which manages assets worth 7.9 billion euros, as of September 2015, into a branch office. “Starting with this step EAM continues to improve the product quality and expands the product range offered on the Czech market” said the firm on a press release.
Local expertise will still be actively used
The former Czech subsidiary is now legally a part of EAM, but will retain its registered office in Prague. ISCS will use the umbrella brand of EAM with immediate effect. “The merger will not change much for our Czech colleagues, because we will continue to rely on our local expertise and even hand over responsibilities to our colleagues regarding the whole EAM, for instance our equity management,” as Heinz Bednar, CEO of Erste Asset Management, explains. “We have worked towards this merger for more than a year, and we are now happy to have reached this step. At this point we can also show on a formal level what we are and have been: a strong team, regardless of the location.”
Investment area will be expanded
In preparation for the merger EAM already re-structured its investment area in March. Štěpán Mikolášek will be the head of the newly created equity management team of Erste Asset Management and thus be in charge of all equity activities across the entire Erste Asset Management holding. “The repositioning has created one single, cross-border team of equity specialists to which all experts will contribute their know-how regardless of where they are based,” Bednar points out.
Martin Řezáč, CEO of the Czech ISCS, sees a chance to strengthen the local service: ”The merger allows us to focus more strongly on the clients’ local interests. The common brand highlights our international company profile in the investment area.”
Photo by Christopher Bowns
. The A's that Acccording to Henderson, Move the Tech World
According to Alison Porter, portfolio manager with Henderson’s Global Technology Team, Apple, Alphabet (previously Google) and Amazon are three three key holdings “in a ‘winner takes most’ world.”
Following the release of the companies’ latest quarterly earnings results, Porter states that after the first quarter for Google as Alphabet, the company offers exposure to a number of powerful internet themes, including online video, programmatic advertising, paperless payments, mobile internet and several ‘other bets’ that could drive significant value in the future, including Nest (smart home appliances), its leading position in self-driving cars, Calico (life sciences) and Google Ventures (venture capital arm, which includes stakes in companies such as Uber). “In our view, the strength of Google’s position in mobile is underappreciated… We think investors will place a value on the company’s other ventures despite them currently being loss makers, and also award the core Google business a higher valuation.”
In regards to Apple, one of their main holdings, Henderson considers that the company “is currently valued as a ‘one product cyclical company’, which we believe undervalues the Apple eco-system.” Henderson expects sales growth of the iPhone 6 to slow from 28% in 2015 to around 6% in 2016. Nevertheless, they trust Apple will be able to take advantage of new markets.
When it comes to Amazon, better tan expected revenue and operating profit guidance consolidate Amazon’s dominance in its core businesses of ecommerce and cloud services − which are both large and rapidly growing markets where Amazon still has low market share. Henderson highlights Amazon Prime as an área of opportunity along with Amazon Web Services (AWS) is taking market share from traditional hardware companies such as IBM and EMC but now also increasingly from software companies such as Oracle.
“Technology tends to be a sector where the winner takes most market share and companies with the strongest barriers to entry such as Apple, Alphabet and Amazon are the most likely to benefit. The team is confident these three companies are well positioned in a low growth environment to grow profitably and reward investors.” concludes Porter.
You can read the full report in the following link.
Andrew Feltus, Director of High Yield and Bank Loans, is Portfolio Manager of Pioneer Funds – Global High Yield, Pioneer Funds - U.S. High Yield, and Pioneer Funds – Strategic Income. Courtesy Photo. Andrew Feltus, Pioneer Investments: The Fed Wants to Increase Rates, but is Afraid to Kill the Cycle
Despite having very limited public spending, the United States is the fastest growing developed economy. What has changed during the past year in the U.S. economy? Andrew Feltus, Director of High Yield and Bank Loans, is Portfolio Manager of Pioneer Funds – Global High Yield, Pioneer Funds – U.S. High Yield, and Pioneer Funds – Strategic Income. With extensive experience managing a wide range of debt securities globally, including emerging markets and foreign exchange, Feltus narrows in his focus to review the situation for the U.S. credit markets at the InvestmentSeminar “Embrace New Sources of Return” which was recently held in Miami by the fund management company.
“In the past year, the fall in energy prices has led to a change in consumer behavior. The ordinary citizen has used the money from gas savings to pay down their debts and increase their savings” says Feltus. Right now, the U.S. consumer has much more flexibility and a bigger cushion than in 2008. “Banks are also much more robust.”
On the other hand, employment and wage inflation are doing relatively well, positively influencing consumption and services, “which make up the bulk of the U.S. economy.”
Energy and Liquidity the Black-Spots of the Credit Market
The companies which have suffered are almost exclusively in the energy sector. “In this industry, there are defaults, job losses, and reduced earnings per share. This doesn’t only affect the companies directly related to the energy industry, but all of those which service it indirectly, especially those related to shale gas.” The plight of this sector has infected the whole high yield credit market in the U.S., which with its 600 bp spreads are discounting a default rate of 7.5%, when in fact the default rate is at 2.5% (ex-energy data, end of September).
“This really seems too much,” says Feltus. Although he also adds that, until it is clear where the oil price points to, they are not looking to increase their exposure to the energy sector, because “the valuation is very attractive, but the fundamentals are very uncertain.”
An additional problem, which affects the whole credit market, is liquidity. “Liquidity is trash these days,” points out Feltus. “The lack of liquidity is what is causing credit spreads outside the energy sector, but if the problem is solved, there is now an opportunity to enter.”
Is this Enough to Curb the Fed?
Feltus explains how, historically, the worst time for the credit markets is from 3 to 6 months before the Fed begins to raise rates, “but the trouble this time is that we have been postponing the expectations of the first rate rise for almost a year. The Fed wants to raise interest rates, but does not want to kill the cycle, which is pretty nice.” Feltus, like many other voices in the industry, believes that probably at this point the market would react well to the first hike as long as the message continues to be one of gentle rises.
He also points out that the QE program ended a year ago, and the Fed’s balance sheet has been contracting since, “so, on that side, there has been some ‘tightening’ of monetary policy.” Meanwhile, general inflation is under control, but it is true that as you break down the index, energy prices have a big effect. In fact, inflation in the service sector is slightly above 2% -the Fed’s target-. In any case, “the reality is that rarely in the Fed’s history -only twice- it has raised rates with the GDP growing below 4%, which is the current situation.”
Barbell Strategy to Extend Duration
Due to the economic slowdown seen outside of the United States, and inflation expectations falling to lows since 2008, the Strategic Income Fund team has decided to be less short in duration than previously, but through the purchase of TIPS –long-term bonds linked to inflation-, which should benefit from a normalization in inflation expectations. “There is no value in buying Treasuries right now, unless you’re considering a scenario of recession, something we do not see at this time,” says Feltus.
An effect that is repeated in the history of the Fed’s upward cycles is the flattening of the curve, with a much greater effect on the shorter half of the curve. Faced with these prospects, the team is using a Barbell strategy in the portfolio, with very short-term bonds on one side, and TIPS on the other, to lengthen the portfolio’s duration and neutralize this effect.
Finally, Feltus declares himself to be a great fan of the dollar. “We have less exposure to currencies other than the dollar than what we have had in our history.”
Photo: Ana Patricia Botín.. UBS (Italia) S.p.A. to Acquire a Business Concern from Santander Private Banking Italia, which Includes €2.7bn AUM
UBS Group AG announced today that its Italian Wealth Management entity UBS (Italia) S.p.A. has entered into an agreement to acquire a business concern from Santander Private Banking S.p.A. (SPB Italia), which includes €2.7bn assets under management, all of its private bankers and branch support staff. The transaction is expected to close in the first quarter of 2016, subject to regulatory approvals and other customary closing conditions.
Based in Milan, SPB Italia provides financial advice and investment solutions to high net worth individuals and family groups. In addition to its wealth management services, SPB Italia’s offering includes banking products and services, loan products, and mortgages. As of 30 September 2015, SPB Italia operates through 6 branch offices located in Milan, Varese, Brescia, Roma Napoli and Salerno.
SPB Italia’s business will be integrated into UBS Italia and will enhance UBS Wealth Management’s presence in the country.
“SPB Italia has a distinguished positioning in our country as a provider of world-class Private Banking services. This transaction is a natural fit with our current wealth management offering in Italy in terms of both business and culture,” said Fabio Innocenzi, CEO UBS Italia. “It also represents a perfect opportunity to grow UBS’s business and to further expand our market share in Italy. SPB Italia’s clients and Private Bankers will gain access to one of the world’s leading wealth management platforms with an excellent reputation in the marketplace. UBS’s clients will benefit from a wider range of banking products and financial solutions.”
UBS is one of the largest wealth managers in the world, giving access to a global banking platform while providing excellent local advice. UBS offers a global scale, world-class investment capabilities and a compelling value proposition for its clients.
UBS (Italia) S.p.A. is an Italian registered bank, subsidiary of UBS AG, running wealth management activities for private investors in Italy. UBS (Italia) S.p.A. is the parent company of Gruppo UBS Italia, comprising also UBS Fiduciaria S.p.A, operating in the country since 1996 and employing about 480 staff serving from nine branches located in Bologna, Brescia, Florence, Milan, Modena, Padua, Rome, Treviso and Turin. UBS (Italia) S.p.A. is ranked 6th and has a market share of 4% in the Italian Wealth Management market (source: Magstat).
Funds Society joins the world showing its support for France after the terrorist attacks suffered in Paris on November 13th. Our thoughts are with the French people, and specially with the families and friends of the victims of the attacks.
. Fund Society's "Fund Selector Summit Miami 2015" Event, Nominated for “Launch of the Year” at the PPA Connect Awards
PPA Connect Awards has shortlisted the Fund Selector Summit Miami 2015, held at the Ritz Carlton hotel in Key Biscayne and organized by Funds Society in collaboration with Open Door Media, for the “launch of the year” award The presentation of the awards to the winning finalists will take place on December 7th in London, where the community of professional events’ organizers granting the awards, have their headquarters.
Funds Society’s Fund Selector Summit was the first event organized jointly by Funds Society, an online reference publication for the US Offshore market’s professional investors and Spanish language magazine distributed quarterly in the United States, and Open Door Media, publisher of a magazine for professional investors in the UK and an experienced organizer of events for financial professionals, in several European countries.
The union of the two parties has shown itself to be a perfect tandem as 11 international fund management companies sponsored an event which was attended by more than 50 fund selectors in May 2015. Throughout the two days, meetings were held between small groups of buyside professionals and a fund manager from each of the sponsoring institutions. There was time for presentations, questions, coffees, talks, exchanging business cards, cookouts in the hotel grounds, and to enjoy an excellent presentation by Javier Santiso.
The celebration of Funds Society’s Fund Selector Summit 2016 has been announced for the 28th and 29th of April at the same venue, and organizers hope to repeat last year’s success.
Thanks to all the sponsors who supported the event for making this possible: Amundi, Carmignac, Goldman Sachs Asset Management, Henderson Global Investors, NN Investment Partners, Lord Abbett, M & G Investments, Matthews Asia, Old Mutual Global Investors, Schroders and Robeco.
Photos of the first day of last year’s event are available through this link and those of the second day through this other link.
CC-BY-SA-2.0, FlickrPhoto: James Jordan
. Credit Suisse: “The US Federal Reserve May be Able to Hike Rates in December 2015”
In his monthly Investment outlook, titled “Global economic stabilization more likelythan a further slowdown,” Björn Eberhardt, Head of Global Macro Research at Credit Suisse, states that the US FED may be able to hike rates in December 2015, while other central banks, such as the European and Japanese ones, may still announce further easing.
Eberhardt points that “The global economic outlook remains very uncertain. However, recent activity data on a wide range of economies has supported our expectation that the global economy is unlikely to slow further.”
Adding that the latest US data has also been relatively stable overall despite some signs of softening. Q3 GDP data is likely to show weaker growth compared to Q2, mainly due to weakness in trade. “Looking ahead, although business surveys have been weakening, consumer confidence remains very high, indicating that private consumption is likely to continue to be the main growth driver. And while payroll growth weakened in August and September, other labor market measures point to still very good conditions,” he says.
Based on solid domestic conditions – Eberhardt explains,the US Federal Reserve has good arguments for a first rate hike in December, “but the timing remains very uncertain. In our view, financial market pricing that virtually rules out a December hike has gone too far.”
Despite the fact that economic momentum in the Eurozone has, if anything, been somewhat more robust than in the USA Credit Suisse believes that the European Central Bank (ECB) may nevertheless have to announce further easing, “mainly because the outlook for Eurozone inflation remains very subdued and inflation expectations have weakened again.” As is the case in Japan. Eberhard believes further easing from both Central Banks might come as soon as this year.
Lastly, the expert states that when it comes to emerging markets and despite weak data, “the situation in major emerging markets has shown some signs of stabilization.”
