Donald J. Trump, the 45th President of the United States of America, was officially impeached on December 18.
He was accused of pressuring Ukraine President Volodymyr Zelensky to investigate Democrat’s Joe Biden and his son, Hunter.
Trump also wanted Zelensky to launch an investigation in which Ukraine, not Russia, would be fingered in interfering in the U.S. 2016 presidential election.
In return, President Trump would approve $400 million in military aid to Ukraine, which the small European country needed at the time.
The allegations of abuse of power by the President were brought forward by a whistleblower.
The impeachment process started on September 24, 2019, and concluded on December 18 with Trump’s impeachment.
Trump will be tried in by the Senate where his own party, the Republicans, are in control. He is unlikely to be removed from office. The voting so far has been on partisan lines. The President is demanding an immediate trial.
Trump is the third President in America’s history to be impeached. The other two before him are Andrew Jonhson in 1968 and Bill Clinton in 1998.
But how will Trump’s impeachment affect the stock market? Trump has on numerous occasions, measured the success of his presidency based on stock market performance.
Trump’s impeachment and the stock market
The stock market has not given attention to Trump’s impeachment. The S&P 500 – a stock market index that monitors the performance of the largest 500 companies listed on U.S. stock exchanges – was up 7 percent between the start of the impeachment process in September and Trump’s censure in December.
The S&P 500 was fluctuating positively as a result of a trade deal that Trump brokered with China.
Trump launched a trade war with China since coming into power. This has affected the stock market for some time. The possibility of an amicable deal is good news for investors.
During the early days of the impeachment process, President Trump warned that impeaching him would crash the stock market.
“If they actually did this the markets would crash. Do you think it was luck that got us to be the best Stock Market and Economy in our history? It wasn’t,” said Trump.
He further warned that his impeachment would leave “everyone poor.”
Clinton is the only U.S. president to be impeached in modern history. His impeachment in the late 1990s did not deter the stock market from climbing high.
In the case of President Richard Nixon who resigned in August 1974 before facing impeachment and removal from office, the stock market tumbled.
There is no yardstick or relevant history to predict how Trump’s impeachment affects the stock market.
However, the current trends show that the stock market might perform well after all. As was the case with Clinton’s impeachment.
For some reason, Trump’s impeachment may have failed to have an impact on the stock market because investors didn’t think it would change anything.
President Trump is still in office and will continue to behave as he has been doing since taking the oath of office on January 20, 2017.
Is it time to turn to safe-haven assets?
Investors turn to proven safe-haven assets in times of political instability. Trump’s impeachment is far from that.
The true impact of Trump’s impeachment on the stock market will be seen in the coming days. But it will unlikely wield any results different from what we have seen so far.
Trump’s presidency is nothing but a roller-coaster. And markets will fluctuate accordingly.
111 North Orange Courtesy photo, taken by Costar. Black Salmon Acquires Office Tower In Downtown Orlando
Black Salmon announced the acquisition of 111 North Orange in Orlando for $67.75 million. The 245,201-square-foot, ‘Class A’ office building is considered one of the most sought-after towers in the city’s central business district.
Set in downtown Orlando, the 21-story building is ideally surrounded by more than 500,000 square feet of walkable, street level retail, as well as new multifamily development, creating a true live-work-play environment. Ninety-four percent leased, notable tenants include Regions Bank, UBS, Geico,and co-working space provider Regus.
According to the Bureau of Labor Statistics, Orlando has led the nation in job growth for the past four years, a testament to its strengthening economy. While the region is often most associated with its robust tourism sector, job growth stemmed primarily from professional and business services, which accounted for more than 20,000 new jobs this year.
Black Salmon’s portfolio includes assets in major markets throughout the U.S., such as the San Francisco Bay Area, Phoenix, and Indianapolis. The firm’s investment strategy continues to focus on acquiring stabilized assets in high grow markets with an educated workforce, robust technology industry, and strong market fundamentals.
“Downtown Orlando has been on our radar since the firm’s inception, and we are so pleased to have identified this rare opportunity to own a landmark office tower in the area,” said Grant Peterson, Vice President of acquisitions with Black Salmon. “As we look to 2020, we aim to continue expanding our footprint with similar deals for our select group of investors.”
The expansion of high-speed rail service Brightline, soon to be Virgin Trains, to Orlando’s international airport is expected to further bolster the city’s already booming economy by facilitating new business growth and adding regional transportation options. Orlando is also home to the University of Central Florida (UCF), the largest university in the nation, and the Central Florida Research Park (CFRP), the fourth largest in the country.
Banco Santander International (BSI) is carrying out a series of changes in the organizational structure of BPI, its international private banking business, which is led by Jorge Rossell.
Under the helm of Alfonso Castillo -who is adding the area of Products and Investments to his current responsibilities over Commercial and Global Private Wealth-, there are new appointments to these three areas, Funds Society was able to learn from sources familiar with the matter.
The former Products and Investments area, which was led by Javier Martín Pliego, is being divided into two units: the Products area which will be led by Isidro Fernández, who will also continue serving as Head of Alternative Investments and Funds; and the Investments area, led by Manuel Pérez Duro, until now responsible for AIS at BSISA (Switzerland and Bahamas). Martin Pliego will remain in Santander Group but is leaving the unit.
Within the internal structure of the Investments area, Carlos Ruiz Antequera is to become Chief Investment Officer, incorporating the investment stragegy team. Verónica López-Ibor will lead the Discretionary Portfolio Management team andMiriam Thaler will take on the role as new head of Investments in BSISA (Switzerland and Bahamas).
The Commercial area, under the new leadership of Eugenio Álvarez, will also experience some notable changes: Juan Araujo will be the new Regional Director for Venezuela. He will be based in Geneva. In addition, Yolanda Gargallo and Borja Echanove are to become BSI Branch Managers in New York and Houston, respectively.
With these changes, which will become effective on January 1, the entity will seek to continue growing in the European and Latin American markets. Since the beginning of 2019, Rossell – head of BPI and CEO of BSI- has been looking to boost the group’s business. He reports to both Victor Matarranz, Head of Santander Wealth Management, and to the recently appointed, Tim Wennes, CEO of Santander in the US. Wennes took on the position at the beginning of this month, after Scott Powell left the firm to become COO of Wells Fargo.
On Wednesday, December 11, more than 100 executives from the financial sector in Miami and Latin America belonging to more than 70 companies attended the first FlexFunds Seminar Series in Miami.
The series of global seminars on securitization of assets organized by FlexFunds and held, among other cities, in Mexico, Dubai, Madrid, Singapore and Sao Paulo, had in its Miami edition speakers such as Daniel Kodsi, CEO of Participant Capital and Royal Palm Companies; Mario Rivero, CEO of FlexFunds and Colin MacKay, Responsible for the Americas of Intertrust Group.
According to Emilio Veiga, CMO of FlexFlunds, having taken the Seminar series to Miami was a wise decision, given the success of the event.
FlexFunds seminars provide asset managers, hedge funds and family offices with the best practices and latest trends in securitization of assets, an increasingly popular practice that is expanding to a variety of industries.
Photo: The White House. A Disappointing Deal, and a Healthy Economy
President Trump called it “amazing,” and U.S. Trade Representative Lighthizer said the China deal is “remarkable.” In my view, however, it is merely the best trade deal in the last 36 months of Chinese history, and it falls well short of two key objectives. Because the deal sets highly unrealistic goals for U.S. exports to China, the risk of disappointment and a return to tariff battles remains, so corporates in both countries are unlikely to feel secure enough to resume investment spending. Second, there are no signs that the two sides are preparing to use this pause in the tariff dispute to reconsider the poor direction the bilateral relationship is taking, towards decoupling and confrontation.
Despite this disappointing deal, the Chinese government seems relatively comfortable with the pace of economic growth and job creation, and is preparing only a very modest stimulus for 2020, designed to stabilize growth by mitigating the impact of the dispute with the U.S. and weaker global demand. I expect the consumer-driven economy to remain healthy next year, and the risks are largely on the upside: if the trade deal does lift the cloud of uncertainty, business sentiment will improve, leading to stronger CapEx spending and reduced pressure on wages. If the deal collapses, Beijing will implement a larger stimulus, to counter the negative impact on sentiment. The key downside risks next year are policy mistakes by Beijing; and if the trade deal fails, Trump could respond with dramatic efforts to contain China’s rise, which would be negative for sentiment.
Deal risks
Based on the few details provided so far, the deal doesn’t appear to represent a significant improvement on the current trade framework. Lighthizer said over the weekend that the 86 page agreement—which he described as “totally done”—will be signed in early January, and presumably more details will be available then.
I’m less concerned about the absence of breakthroughs than I am about the agreement’s highly unrealistic sales targets, which could set up the deal to fail, leading to a return to tariffs or even a full-blown trade war.
In an interview over the weekend, Lighthizer said that the Chinese government has committed, in writing, to dramatically raise the level of its imports from the U.S. “Overall, it’s a minimum of 200 billion dollars. Keep in mind, by the second year, we will just about double exports of goods to China, if this agreement is in place. Double exports. We had about 128 billion dollars in 2017. We’re going to go up at least by a hundred, probably a little over one hundred. And in terms of the agriculture numbers, what we have are specific breakdowns by products and we have a commitment for 40 to 50 billion dollars in sales. You could think of it as 80 to 100 billion dollars in new sales for agriculture over the course of the next two years. Just massive numbers.”
Massive, yes. But realistic? U.S. agricultural exports to China peaked in 2012 at US$26 billion, and none of the American agricultural experts I’ve consulted think it is possible to double that in the near future. My contacts in Washington say that the US$40 to 50 billion target was not based on a detailed assessment of China’s demand nor on the ability of American farmers to quickly expand output of soybeans and other crops. It was a politically expedient target.
The concept of quickly doubling the value of overall U.S. exports to China is equally dubious—even if the baseline is this year’s reduced level of US$88 billion for the first 10 months of this year. The historical peak was US$130 billion in 2017.
There are a few ways this could play out. First, China could buy record amounts of U.S. agricultural and manufactured goods, but well short of the targets set out by Lighthizer. Trump may be satisfied, claiming success because historical records were reached.
Second, failure to reach the sales targets may not be enough for Trump, despite the record purchases, and he will escalate the tariff dispute. That may lead Chinese officials to decide that further negotiations are pointless, leading to a trade war which damages both economies, although Beijing has far more resources to mitigate the impact.
Third, Washington may fudge the data to come closer to the sales target. We’ve heard talk, for example, of counting the sales of goods produced in third countries with American intellectual property, such as semiconductors made in Singapore and Taiwan, as U.S. exports.
(Never mind the silliness of asking the Chinese government to commit to purchasing a set amount of American goods, irrespective of market conditions, at the same time the U.S. is pressing Beijing to establish a more market-driven economy. It is also worth noting that to date, China has declined to comment publicly on the sales targets. That will presumably change after the deal is signed.)
The uncertainty of how this will evolve, and how Trump will respond, means that this deal is unlikely to reassure American and Chinese CEOs, who have been deferring CapEx in response to uncertainty over the bilateral trade dispute. Removing that uncertainty was the negotiators’ top job, and they appear to have failed.
I would be delighted to be proven wrong in early January, when the deal is signed and details are published. Maybe there will be a clever plan to explain how China can buy so much American stuff so quickly. Maybe the details will show that the deal is in fact so good that, combined with NAFTA 2.0, it made last Friday, in Lighthizer’s words, “probably the most momentous day in trade history ever.”
Despite the disappointing deal, China’s economy will remain healthy
I’d like to repeat a few important points from the October 18 issue of Sinology. I wrote that if the U.S. and China fail to conclude a trade deal, I will be very concerned about the longer-term relationship between the U.S. and China—the country which accounts for one-third of global economic growth, larger than the combined share of growth from the U.S., Europe and Japan. Failure to reach any deal would have a profound impact on the global economy. But, I will be less worried about the near-term impact on China, as the main engine of its growth— domestic demand—remains healthy, and Beijing has a significant store of dry powder it could deploy to mitigate the impact of an all-out trade war with Washington.
Last year, net exports (the value of a country’s exports minus its imports) were equal to less than 1% of China’s GDP. And the contribution from the secondary part of GDP, manufacturing and construction, has been declining. This will be the eighth consecutive year in which the tertiary part of GDP, consumption and services, is the largest part; last year, three-quarters of China’s economic growth came from consumption.
This is especially important right now, because the domestic demand story should continue to be fairly well insulated from the impact of the Trump tariff dispute.
Modest monetary policy changes
This is one of the reasons I expect monetary policy will be only slightly more accommodative next year, and I do not expect aggressive expansion of credit flows or dramatic interest rate cuts. There may be modest easing compared to this year, but the objective will be to stabilize growth in response to trade tensions with the U.S. and slower global demand, not an effort to reaccelerate growth. As has been the case this year, aggregate credit outstanding (augmented Total Social Finance) will likely expand faster than nominal GDP growth, but not to the extent in past years. Beijing is fairly comfortable with the pace of economic growth.
Less focus on deleveraging, more on risks
There will be less focus on deleveraging in 2020, but Beijing is likely to continue to take steps to reduce financial system risks. A modest boost to fiscal spending (see below) will push up the deficit a bit, but because this debt is all within Party-controlled institutions, the risk of a systemic crisis will remain very low. Chinese government economists recently told me they expect the fiscal deficit/GDP ratio to rise to 3% from 2.8%, and after a government that sets economic policy guidance, officials said the focus is on keeping the “macro-leverage ratio basically stable,” rather than on reducing that ratio.
I expect further consolidation of smaller banks as well as a continuation of this year’s experiments of selected defaults by state-owned and private firms, in an effort to push investors to price risk. I do not expect the government to relax their tight controls over off-balance-sheet (shadow) financial activity.
Modest infrastructure boost
Officials I met with in Beijing this month indicated that there will be a modest increase in infrastructure investment next year following this year’s surprisingly slow growth rate. But I do not expect this to return to the much higher levels seen a few years ago. Some of the infrastructure will be financed by an increase in “special construction bonds,” which may rise to about RMB 3 trillion from the current RMB 2.15 trillion. If this happens, it will support modestly stronger industrial activity and materials demand.
Residential resilient
Residential property should remain resilient, although I do not expect significant policy changes. The property market has held up better than expected this year, and I think the government feels that policy is about right: not too tight or too loose. Over the first 11 months of the year, new home sales by square meter are up 1.6%, vs 2.1% a year ago and 5.4% two years ago. New home prices in 70 major cities were up 7.6% YoY in November (basically in line with nominal income growth), compared to 10.8% a year ago and 6% two years ago. Inventory levels are reasonable. Residential property investment has been rising at a double-digit pace for 23 consecutive months, but that is likely to cool off a bit next year. The government continues to reiterate the policy that “houses are for living, not for speculation,” and there is no sign that the government will relax the current policies related to property.
Modest improvement in CapEx likely
Investment spending by private firms has been weak, largely due to uncertainty resulting from the ongoing Trump tariff dispute. I expect modest improvement next year: if the trade deal is successful, that will reduce uncertainty. If the deal fails, Beijing is likely to take policy steps to encourage capex spending.
The China consumer story should remain strong in 2020
This is important because the consumer and services (tertiary) part of the economy is the largest part, and last year accounted for 75% of China’s GDP growth. (Figure 4 shows the growth in per capita consumption expenditure, which includes a wider range of services compared to the retail sales data. Services now account for 50% of household consumption.)
A continuing outbreak of African Swine Fever has led to lower pork supply, which has pushed up the price of pork, China’s primary protein source. Headline consumer price inflation will remain elevated next year, driven entirely by pork. Core inflation, at 1.4% YoY now, should continue to be low, and inflation should not have a significant impact on consumer sentiment.
Although monetary policy will not have much impact on live pig supply, as was the case during previous hog disease outbreaks, Beijing will cautiously limit policy expansion so that higher food inflation will not change people’s inflation expectations and spread food inflation to other areas.
Pixabay CC0 Public Domain. Carlos Bastarreche, nuevo asesor externo de AEB y CECA para asuntos europeos
As a new decade looms ahead, let us take a peep into 2020 based on the trends observed over the last 18 months. The strong performance in bond and equity markets of 2019 have wiped away the sorry tale of investment markets just a year before. Much of this turn around can be attributed to a change in Central Bank policy, notably in the United States and Europe.
The disruption of 2018 has shown us that the road to monetary normalization is a sure way to hardship for asset markets. After 10years of world Central Bank accommodation, normalization could never be considered as just ‘watching paint dry’. In effect since 2009, Central Bank intervention has become too preponderant for it not to have an upsetting incidence on its way out. This point was clearly demonstrated in the Fall of 2018.
More of the same…
Looking into 2020, central bank accommodation is likely to be more of the same. But there are limits to this monetary approach. 2019 has revealed some of the undesired side effects of such a policy treatment. The US repo financing stress of September, as well as European bank profit warnings from negative interest rates are an indication of this collateral damage.
To counter balance these negative effects, central bankers have been pushing governments to engage in Keynesian fiscal stimulus. Japan has already announced its intention to go down this road with a 120 billion dollar package. In 2020, we could see a combination of continued monetary accommodation with fresh fiscal support in different parts of the world. Together, these interventions would join forces to juice assets markets even further, increasing the possibility of a financial ‘melt-up’.
With so much liquidity chasing too few investable assets, is this imbalance to be wished for? Not really. Ever higher asset markets funded by money printing and increased government deficits, is likely to bring back the great divide between holders of financial assets and the rest, invariably leading to social tension. This trend is already apparent with the unrest in Latin America, Europe, and the Middle East.
In addition, levitated markets require perpetual central bank intervention to sustain them. A highly valued financial system is inherently unstable and vulnerable to ‘Black Swan’ shocks. Therefore, markets could become even more monetary accommodation dependent. The persistent intervention by the Bank of Japan with its Quantitative Easing forever policy is already an example of this.
The Fixed Income world
The fundamental risks to fixed income instruments are Interest rate changes and credit default. Interest rates are unlikely to rise for the reasons already mentioned above. To add to this, monetary support gives the region implementing it a competitive advantage on the currency markets by keeping its value weak. In the current context of currency wars, it is increasingly improbable the accommodation policy of one Central bank will be modified all on its own.
Therefore, the central bank policy choices of 2019 are likely to continue into 2020. This could keep bond asset prices high and moving higher. As the returns from fixed income instruments remain meager, investors relying on the revenue stream from their capital investments will face an increasing conundrum, which could make the ‘chase for yield’ even worse next year.
Credit risk is likely to become an important investment theme for 2020. Up to now, many industrial economic models have been sustained by low interest rates, investor support and moderate growth. If the fiscal and monetary stimuli mentioned above where to be insufficient to prevent a generalized economic slowdown, low funding costs will not counterbalance losses in top line revenue for these same businesses. Investor support for weak problematic balance sheets could then disappear overnight.
Small is beautiful
Large credit funds in search of yield are desperately looking to invest. However, the fixed income instruments of quality issuers are highly sought after by every investor under the sun. Larger funds are having increasing difficulty in sourcing sufficient product in quality and quantity, under these circumstances. The result has been a tendency, on their part, to tiptoe into lower quality instruments or delve into niche markets. With an increasing probability of rising credit risk moving forward, due to a possible economic downturn, this new investment space is likely to be very uncomfortable place for the larger funds.
On the other hand, smaller credit funds have demonstrated a real competitive advantage to create value without taking on undue risk. Their size does not impose on them the sourcing constraint seen in larger funds. Therefore, their allocation can be made on their investment conviction. Their choice to acquire fixed income instruments is based on common financial sense criteria, rather than a mandate to accommodate a regulatory investment template. After all, this is how asset management should really function… Isn’t it?
Finally, the positive and negative impact of monetary and fiscal stimuli 2019/2020 requires management nimbleness to navigate through unknown consequences, in what are unchartered financial times. Only smaller funds have this flexibility still available to them.
Column by Steven Groslin, Executive Board Member and Portfolio Manager at ASG Capital
Foto cedidaAlberto D'Avenia, Managing Director y Head of US Non-Resident Business (NRB) y Latam Retail en Allianz Global Investors.. Alberto D’Avenia (Allianz Global Investors): “Para 2020, desplegaremos nuestro negocio y profundizaremos en nuestro enfoque de asesoramiento”
Alberto D’Avenia, Managing Director and Head of US Non-Resident Business (NRB) and Latam Retail at Allianz Global Investors, makes a positive balance of 2019. Throughout the year investor’s main concern has been to achieve returns, and preserving capital. D’Avenia considers that that objective has been fulfilled at Allianz GIobal Investors, where the work they do together with private bankers and financial advisors has been fundamental. This and more in the following interview with Funds Society.
What were the main worries that the investors had this year?
Generating income with capital preservation are in general the 2 main features that non-resident private client in the non-resident business require. The year has been positive even for moderate balanced portfolios, and the average low volatility has had the risk management component take a back seat like it always happens in those occasions, but risk management must keep playing a crucial role in a 2020 year that has the making of a more complex financial scenario.
And how did you manage it?
We have seen favour from clients in our more traditional fixed income and balanced solutions like Income and Growth built to this aim, but we have also worked with our distribution partners to introduce diversification solutions in the liquid alternative space, like our option-based Structured return, providing a favourable decorrelation from traditional markets and absolute return, all weather approach, that we believe will come in handy once volatility spikes.
For the next year (2020), what do you think that will be the principal events to consider? How can you take advantage of it or transform into an opportunity?
We position a trio of major economic and political factors as key events to monitor: US elections, trade developments and central banks liquidity – on a lesser extent, but still significant, we have a second trio made of oil supply, food-security fears and growing US-China competition which could create additional risks for portfolios. This in a 2020 that we see characterised by a deceleration in global growth (triggered by slower US and Chinese economies) and continued uncertainty about how monetary policy and politics will move markets.
These factors will offer a number of “risk-on/risk-off” movements, especially in an era where a single tweet can determine significant volatility shifts; in these occasions, beta returns are normally flat. Hence, risk management will be paramount. In this environment, investors should aim to keep their portfolios allocations consistent to their convictions and actively manage risk – not avoid it. These are, in fact, moments where Money weighted return (what clients are getting out of each own’ s investments) tend to differ from Time weighed returns (returns of investments “on paper”) because of trades dictated by fear and greed. The support of the private bankers and advisers will be paramount to consistent investment approach in those volatile phases, and this is why we keep investing in significant communication on topics like behavioural Finance and risk advisory with our dedicated unit risklab.
Investment opportunities in highly valued markets will be rarer and searching for cheaper ones that also generate return potential from dividends or income might be the right approach. Attractive returns can be pursued from less volatile dividend-paying stocks in value sectors such as energy and from themes that capture global, disruptive trends.
We will keep pursuing the benefit of alternative investments such as private credit, infrastructure debt and equity, and absolute-return opportunities tend to be less correlated to fixed income and equities over time, offering an additional source of diversification potential.
AllianzGI is also a recognised leader in ESG informed and integrated investments; we believe in the merits of long-term sustainability of companies that can be best assessed when incorporating ESG factors into investment decisions.
Choose carefully among over-owned US equities; consider undervalued European stocks and emerging-market debt; look to alternative investments for less correlated returns; keep up the hunt for income against a backdrop of low yields.
Finally, careful on passive investment – their backwards looking nature (indexes and funds tracking them are determined in the past) can be significantly tested by news headlines. They can be part of a general portfolio allocation, but in the light of an actively managed strategy set to invest with conviction
During 2019, which were the most popular funds or demanded by the investors?
As said before those favouring a more cautious approach to high yield like Allianz Short Duration High Income and Global Selective HY, those clearly aimed at a risk managed process to ensure a consistent income, like Income and growth and finally thematic investments, offering access to stories with long-term global growth potential, like Allianz Global Artificial Intelligence.
In this way, what do you think that will be the trend in 2020?
We do not believe private clients (and hence, our distribution partners) needs will change dramatically – probably, after 2019 good results, a more cautious approach will be required but still with income generation at the helm. Diversification and risk management will become even more important going forward.
During this year, did you implement some new services or solutions for the investors?
2019 has been a seminal year, after all our office in Miami has been up and running around summer, so we have invested in establishing our brand and its core value proposition: partnership approach oriented to advisory and consultative partner relationships, risk management support with our dedicated unit risklab, ESG integration in our investment process. As far as investment solutions go, we have positioned Allianz Structured Return (it is more a suite of solutions than just one fund, that is the pure portable alpha strategy) and we believe it will be a real game changer especially in high volatility scenario going forward. Same for our socially responsible solutions (SRI) which are available by the main platforms our partners work with, Pershing and Allfunds bank.
Do you have any plan or idea to develop new services for the clients?
If 2019 has been the year of fitting in the market, 2020 will see full deployment of our service model. We have ambitious plans of investing with our partners in our advisory approach, putting risklab, our ESG research and behaviour finance at the core of our offer, together with our best investment solutions.
As a company, what have been your main successes this year?
Our main goal this year has been positioning our brand in the full US non-resident and Latina America Wealth management markets, and our decision to open an office in Miami has been crucial to that. We have signed a number of new distribution agreements with US local independent and Latin America partners, and we have been able to increase the level of cooperation with those we were already working with. Due to our physical absence from the market, we were being looked at in terms of “best of” investment opportunities in our Ucit and while we are obviously thrilled to be able to provide the market with best in class funds, our partnership approach and the richness of above described solutions is now fully available to our partners, getting our relationships to the next level.
Younger, wealthier, and coming from Asia. The profile of typical buyers in the premium second home resort market is dramatically changing. According to the latest Luxury Portfolio International research, while the baby boomers are traditionally buying second homes more often, the new group under 40 is fueling the premium market, creating a spotlight opportunity for sellers. That younger crowd accounts for almost half of interested buyers or at least half of those looking.
“We believe the demand for premium units in the domestic and international resort market will continue to get stronger. We already see an influx of demand for branded residences with value-added services such as building maintenance, housekeeping, concierge facilities, etc.,” shares his insights on the research Daniel Kodsi, CEO of Royal Palm Companies, a leading South Florida developer. “As individuals increasingly become global citizens with diverse business interests, time is becoming a rare commodity. They want the most amenities in the world in one place.”
Another advantage of ownership resort property is holiday rental and investment yield potential. Now, 60-80% of buyers put their property in the rental pool, which is double what it might have been ten years ago. These rental programs tend to be a bigger driver in resort locations as those buying in cities tend to use them more regularly. It’s the right time to take advantage of this need by investing in mixed-use products providing the services and amenities of a full luxury hotel to the vacation residence users.
According to the latest report compiled by UBS and Campden Wealth Research, premium real estate gained the greatest traction in family offices portfolio this year, with allocations rising more than any other asset class, by 2.1 percentage points. That dynamic signals that most of these buyers are beginning to inherit substantial amounts of money from their parents and invest in real estate.
Where do millennial millionaires want to buy? In Florida, of course. The ‘sunshine’ state ranks among the top seven states (after California and New York) where young and wealthy buyers look for property, based on the most recent “A Look at Wealth” study by Coldwell Banker Global Luxury and data surveyor WealthEngine. Downtown Miami is a rising star on a global map. While New York and Los Angeles are stagnant, the Downtown population has increased by 40% since 2000, according to the local authorities. Last year, Miami broke tourism records – 16.5 million overnight visitors and 6.8 million day-trippers came through – and 2019 is likely to top those. All of this bodes well for the city’s hospitality industry.
The $4 billion mixed-use Miami Worldcenter is underway on almost 30 acres that are poised to become a magnetic destination for tourists and business visitors in the heart of Downtown Miami, with its impressive collection of historic landmarks, world-known museums, and waterfront parks. This is the most significant mixed-use development in the U.S. after New York’s Hudson Yards.
This year, PARAMOUNT Miami Worldcenter, a condo tower designed with a “residential Skyport” for a future of flying cars, has been completed and already roughly 90% sold to buyers from around the world – from Turkey, China, the UAE to Brazil, Venezuela, and Sweden. The next global debut at Miami Worldcenter is Legacy Hotel and Residences, with 278 branded condos above 255 hotel rooms, the city’s first enclosed rooftop atrium, and a first-of-its-kind medical and wellness center. Royal Palm Companies’ plan is to break ground in June and complete the building within almost three years. The tower will join a wave of new projects with rental options for buyers.
Photo: Pxfuel CC0. Stocks Are On Track for Solid 2019 Returns
The U.S. stock market started November with a sharp two-day rally sparked by a strong October jobs report that calmed recession fears. This set the stage for stocks to move higher for the month and to continue the 2019 series of record closing highs.
During the month, there were temporary sell offs from negative trade war related news but these were followed by positive headlines that moved stocks higher. On balance, improving trade negotiations, Brexit clarity, a resilient U.S. consumer and an accommodative Fed kept stocks on track for solid 2019 returns.
The M&A event catalyst for the three day pre-Thanksgiving spike in stock prices was ‘merger Monday’ when a flurry of large deals were announced including: Charles Schwab’s $26 billion transaction for TD Ameritrade, LVMH with a $16.2 billion deal for Tiffany, and drug maker Novartis in a $9.7 billion takeover of The Medicines Co. The global M&A volume wave that started in 2014, as measured in U.S dollars, continues to roll along with $2.73 trillion in 26,321 announced pending and completed transactions through November 30, 2019 versus $3.07 trillion in 30,225 deals in 2018 according to Bloomberg data.
Relatively unknown hotel operator Unzio Holdings (3258.T) was targeted with a rare domestic hostile bid from Tokyo travel agent H.I.S. Co (9603.T) in July. This catalyst has surfaced intense interest from prominent global private equity firms, banks, and hedge funds, all attracted to Unzio’s Japanese and other real estate properties selling at a discount, while also testing Prime Minister Abe’s efforts to boost shareholder returns for foreign buyers with revamped corporate governance and disclosure. The unprecedented cross-border hostile and friendly bidding war for Unizo heated up on November 24 when it said it had received six more buyout offers in addition to the deal proposed by Blackstone Group. More M&A activity to come…
Column by Gabelli Funds, written by Michael Gabelli
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To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:
GAMCO MERGER ARBITRAGE
GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.
Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.
Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.
Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.
Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476
GAMCO ALL CAP VALUE
The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.
GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.
Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155
Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.
Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reflect the manager’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.
Peter Stockall, courtesy photo. Peter Stockall se une a iM Global Partner, fortaleciendo su plataforma de distribución internacional
iM Global Partner, a leading investment and development platform focused on acquiring strategic investments in best-in-class traditional and alternative investment firms in the U.S., Europe and Asia, appointed Peter Stockall to lead sales in the US Offshore and Latin America region.
Peter, based in Miami, will enhance iM Global Partner’s international expansion, spearheading the business development efforts in this very important region within the Americas. He will offer US Offshore and Latin America investors access to a wide range of strategies managed by the outstanding partners of iM Global Partner, ranging from US equities to liquid alternative strategies. Peter will report to Jose Castellano, Deputy CEO and Head of International Business Development.
Castellano said: “I am delighted to welcome Peter to our international sales team to support our rapidly developing Latam and US Offshore platforms, which have already been in place for more than a year. His experience covering the Americas will be a valuable asset in helping to develop the operational distribution capability of our current and future U.S., European and Asian Partners.”
Peter has 16 years of experience working for leading asset managers. Before joining iM Global Partner, Peter was responsible for sales of the Carmignac Mutual Fund range in the US. He spent four years, between 2012 and 2016, as Offshore regional Sales Consultant for Pioneer Investments, where he was responsible for sales of offshore mutual funds and alternative investments to financial advisors across all channels in the Southeast, Caribbean, and Panama territories. Peter started his career at Merrill Lynch providing Financial Advisors with sales support and investment guidance in both New York City and Asia regions. Peter has also been part of the Oppenheimer Funds and Capital Group sales teams.
