Foto: Mike Beales
. Julius Baer aumenta su participación en Kairos en un 60,1%, hasta alcanzar el 80%
Julius Baer yesterday announced that the transaction to acquire an additional stake of 60.1% inKairos Investment Management for EUR 276 million (US$ 314,51 million) was completed on 1 April 2016, bringing the Group’s total ownership of Kairos to 80%.
Julius Baer first announced the transaction to increase its stake in Kairos by acquiring an additional 60.1% of the Milan-based companyin November 2015, following its initial purchase of 19.9% in 2013, and has since then received the relevant regulatory approvals.
The executive management of Kairos will remain unchanged and the transaction will significantly reinforce Julius Baer’s and Kairos’ long-term position in Italy and further fuel Kairos’ ambitious growth trajectory.
Kairos was established as a partnership in 1999 and today employs a total staff of over 150. The company is specialized in wealth and asset management, including independent best-in-class investment solutions and advice. As at 31 December 2015, Kairos’ assets under management had reached over EUR 8 billion (US$ 9,12 billion), up from approximately EUR 4 billion (US$ 4,56) billion when Julius Baer and Kairos started their strategic partnership in 2013.
The old adage says that “time in the market” is more important than “timing the market.” Anyone who needed a reminder of that truth got it in spades during the first quarter of 2016. Who would have thought, on the dark morning of February 12 with the S&P 500 Index down more than 10%, that U.S. equities would finish the quarter up 0.8%?
Only the very brave, or the very foolish. And that’s the point of the adage: As long as you remain convinced that underlying economic fundamentals have not changed, trying to call the bottom of a volatile market is just as misguided as panic selling into tumbling prices. The “W-shaped” market kicked off by China’s devaluation last August is the perfect exhibit to back up our philosophy of maintaining a long-term view, putting the headlines into perspective, staying diversified and looking for opportunities to buy on volatility.
Things were never as dark as they seemed on February 12, and despite the arrival of daylight saving time they are probably not as bright as they seem today. Purchasing Managers’ Indices, a key measure of industrial activity, have been positive but not exciting; GDP expectations have not improved meaningfully; deflation fears still darken Europe and Japan; and China is still muddling through. High-profile defaults in the energy and mining sectors appear priced in but will likely cause shocks when they materialize, nonetheless. U.S. corporate earnings are still struggling—when the first profits estimates for Q1 came in a week ago they revealed a drop of almost 12% year-over-year, which would be the biggest decline since the depths of the financial crisis.
Markets show signs that they recognize this. For sure, there have been extraordinary rallies in some unloved places. The Brazilian stock market is up 18% on the year, and more than 25% since its mid-February lows. The Brazilian real is up almost 9%. Emerging market currencies as a whole enjoyed one of their strongest rallies ever in March.
After falling precipitously, the price of oil has recovered to finish the quarter near where it began the year; this, in our view, should reduce the uncertainty around the deflationary impulse and the distress levels in the wider economy. There has even been some outperformance of value over growth stocks in the U.S. If sustained, that would represent a bullish reversal of a multiyear trend, which may suggest that investors expect a return to more broad-based economic growth and no longer feel compelled to pay a premium for the most visible earnings.
But not everything fits this script. Gold, considered by many a safe haven asset, has hung on to most of the 20% gain it made during the New Year turmoil. So far, value is leading growth only by a small margin, and the underperformance of smaller companies this year is not characteristic of a full-throttle rally. Where growth and deflation concerns are most acute, stock markets have not drawn the same “W” as they have in the U.S.: Germany is down 6% year-to-date, and both Japan and China are down more than 10% year-to-date.
Market participants are watching the fundamentals and saying, “show me the money.” They know the next leg up in equity market valuations depends upon improving profits in the second half of the year, and while we believe they are likely to get this after the recent weakness, they need more reassurance that the headwinds of the falling oil price and the rising dollar have eased. They want to see clearer evidence that the “Third Arrow” of Abenomics can translate into real economic results. They want to see some inflation in Europe. They want more certainty that China is not planning another surprise currency devaluation.
We’d like further evidence of stabilization and improvement in these areas before we add aggressively to risk, too—but we are also prepared to hold fast to our steady-but-cautious outlook when markets have their next tantrum, as they inevitably will. We know that “time in the market” is critical, because it is often hard to see the turn of the cycle until it is behind you.
Column by Erik L. Knutzen, featured on Neuberger Berman’s CIO insight
In the wake of a sharp recovery, equity market investors’ attention has been drawn to geopolitics. From the terrorist attack in Belgium, to President Barack Obama’s historic visit to Cuba, to the narrowing of the U.S. presidential field, newsworthy but largely noneconomic events have predominated. Post earnings season, without key data announcements, markets have lacked meaningful drivers and have been largely directionless, but without the turbulence that has often been seen recently.
Investors can be forgiven for pushing the pause button. In the opening five weeks of the quarter, the markets were characterized by fears of global deflation, apprehension over growth rates in the U.S. and China—and price volatility. At the time, we suggested that economic concerns were exaggerated. Indeed, reassuring consumer, manufacturing and housing trends in the U.S. and a rebound in oil prices, along with a modest increase in the renminbi’s valuation, helped ease fears and contributed to the market’s subsequent V-shaped recovery. On the monetary front, the market’s expectations for a pullback by the Federal Reserve on planned rate increases and the ECB’s easing actions reduced headwinds for risk assets and alleviated concerns about a damaging deflationary cycle.
In a sense, the relative market stability of the past week should be reassuring in the context of the global newswire. Investors have learned that geopolitical events, no matter how tragic or appalling in nature, need to be assessed in relation to economic impact. The terrible bombings in Belgium had an immediate but moderate effect on the markets. But only if such tragedies lead to meaningful changes in personal spending, business confidence and the like do they affect the broader economic picture.
A more positive narrative could be found in President Obama’s visit to Cuba—the first such visit by a sitting U.S. president since 1959. But, again, the economic significance is more tied to future developments: whether the current thaw between the two countries extends to a lifting of the U.S. embargo and the development of meaningful business relationships. Substantial disputes remain, most prominently on human rights, and we will be watching the situation with interest.
Finally, the turbulent U.S. election race is at long last narrowing, as Donald Trump and Hillary Clinton have solidified their front-runner status but continue to face rearguard competition from Ted Cruz and John Kasich, and Bernie Sanders. This is an important election, with real economic impacts for the U.S., particularly as they relate to the health care sector, infrastructure and tax policy (among other key flashpoints), as well as for our global trading partners. The unpredictable nature of this year’s process has been, to a degree, a headwind for equity markets. As the race continues to develop, and as we have a clearer sense of what the major candidates would seek to achieve in office, we may start to see market action reflecting the anticipated outcome. The situation bears watching, because, as we’ve said, fiscal policy is an important component in driving U.S. economic growth to a higher level. Monetary policy cannot alone solve the current growth problem.
More than likely, investor attention in the short term will move away from these situations as we start to see more market data that clarifies the Fed’s path on interest rates, economic growth and, ultimately, the outlook for earnings in the latter part of 2016. At that point, equities will have reason to get back into motion.
Neuberger Berman’s CIO insight column by Joseph V. Amato
Asset management companies with flexible bond products that outperform have a chance of reversing the recent run of outflows but fee cuts may be a decisive factor in tempting back investors, according to the latest issue of The Cerulli Edge – European Monthly Product Trends Edition.
Flexible bond products, a category which usually includes strategic and unconstrained bond funds, fell out of favor in 2015 after soaring in popularity the previous two years, partly on the perception that they were better able than other bond funds to cope with the U.S. Federal Reserve’s supposedly imminent rate rises, notes Cerulli Associates, a global analytics firm.
The entire bond market suffered last year, but funds with a substantial high-yield element were hardest hit. However, Cerulli believes that the policies of central banks can benefit flexible bonds. The European Central Bank has cut its main refinancing interest rate to zero and announced an extension of bond buying. With some yields already negative, value in European bonds is proving hard to come by. This strengthens the case for a fund to be as unconstrained as possible as it searches for alpha. If emerging market corporate bonds seem to offer better value than eurozone sovereigns, the fund can act accordingly.
“Flows for flexibles may take some time to come back and many will fall by the wayside,” says Barbara Wall, Europe managing director at Cerulli Associates. “However, stronger funds may benefit from the shakeout. The longer established ones with better past performances may be able to convince investors they can recapture the glory days. Their chances of doing so will be that much greater if they reduce charges, even if only temporarily.”
Wall points out that Goldman Sachs, PIMCO, and M&G, which charge in the 1.4% to 1.7% range, look expensive given recent negative returns, especially when compared with the likes of Artemis and BNY Mellon, which charge well under 1%. She adds that some funds should consider ditching their performance fee, even though this has been largely irrelevant given the losses.
Accuity, the leading global provider of risk and compliance, payments and know-your-customer solutions, announced on Wednesday that it is opening an office in Miami to serve new and existing clients in Miami, Central America, Mexico, Colombia, Venezuela, the Caribbean and Gulf countries.
Accuity is part of Reed Business Information (RBI), which is in turn is part of RELX Group, a world leading provider of information solutions, listed on the London and Amsterdam Stock Exchanges.
The opening of Accuity’s Miami office is in response to the firm’s rapidly expanding business in Central and Latin America. It reflects Accuity’s strategy in LATAM, which has been to grow its Sao Paolo office to meet demand in the South of LATAM region (SOLA) and grow its Miami base for Northern LATAM and the Caribbean. Accuity has more than 200 clients in LATAM and predicts continuing growth across the region as a whole – across the breadth of Accuity’s payments, risk and compliance solutions. Being in Miami will enable Accuity to enhance its service levels to new and existing regional clients who already include some of the region’s leading financial institutions.
Hugh Jones, President and CEO of Accuity, said: “The opening of our Miami office brings us closer to our Central and Latin American customers, many of whom have branches in Miami. We see Miami as a financial services hub for the region and we look forward to forging ever stronger relationships with the financial services community there. Our local team, now based in Miami, will work closely with our Sao Paulo office to leverage our deep Brazilian market experience. Together, they will build on Accuity’s reputation for improving operational efficiency and protecting our financial and corporate clients against sanctions and compliance violations.”
Accuity’s new office is located at: 1101 Brickell Avenue, 8th Floor, South Tower, Suite #102. Miami, FL, 33131, USA.
According to Jodie Gunzberg, Global Head of Commodities and Real Assets at S&P Dow Jones Indices, March saw the biggest comeback in commodities.
St. Patrick’s Day didn’t just have a pot of gold at the end of the rainbow, but had basically the whole commodity basket. The S&P GSCI that represents the world’s most significant commodities, ended March 17th with a positive total return year-to-date for the first time in 2016, up 1.9%.
The index reached its highest level since December 10th, 2015, and gained 18.8% since its bottom on January 20th, 2016. This is the most the index has ever increased in just 40 days after bottoms.
Further, now in March, 23 of 24 commodities are positive. This is the most ever in a month with one exception when all 24 commodities were positive in December 2010. It is also the fastest so many monthly returns of commodities changed from negative to positive, making a comeback from November 2015 when just two commodities were positive.
Now, only aluminum is negative in March, down 3.1%. However, its roll yield recently turned positive that shows more scarcity (that is very rare for aluminum,) indicating it may turn with the rest of the metals. Especially if the U.S. dollar weakens, the industrial metals tend to benefit most of all commodities. That says a lot about their economic sensitivity given all commodities rise with a weak dollar.
According to Axa IM‘s credit market monthly review, the strong rebound in credit since mid-Feb has legs to run further. Greg Venizelos from the Axa Research & Investment Strategy team writes that the improvement in US macroeconomic data and the stabilisation in both the oil/commodity markets and the Chinese risk premia, have brought some respite to global risk. “Credit spreads saw a material tightening as a result, from levels that were arguably overdone in the context of global growth and credit fundamentals. Since 11 February, US High Yield (HY) has transformed itself from the worst performing market within developed market credit to the best performing, matching our early February call for HY to outperform investment grade (IG). Looking ahead, while it’s reasonable to expect a consolidation in the broader risk rally after a very strong run, we think that credit spreads can continue to tighten and HY spreads can compress further vs IG in the near term.
The rebound in US HY has been nothing short of spectacular, with the overall index returning 7.2% since 11 February, led by an increase of c.20% in energy and c.16% in metals and reaching 1.3% YTD
Venizelos notes that “the rebound in energy is, of course, from a very distressed level.” Indicative of the brutal correction earlier in the year, energy remains the worst among the biggest HY sectors year-to-date, down by 2.9%.
The outperformance of HY over IG that we advocated in early February has materialised and we see scope for this HY/IG spread compression dynamic to run further. While IG spreads have clearly widened YTD, HY spreads have remained relatively contained.
As a result, the US HY/IG spread ratio has compressed from 4.2x in mid-December 2015 to 3.6x currently.”We think that there is room for further compression in spreads, pushing the spread ratios towards the ‘low 3s’ in US and below 3.5x in euro. One technical hindrance to further spread compression for US HY, in particular, is that the US HY index spread has tightened markedly vs x-asset volatility, from 100bps (+3.7) in late January to -38bps (-1.5) currently, implying that the compression momentum could be due a pause for breath.”
From a seasonality perspective, Venizelos noted that, on average, March tends to be a month of positive returns for HY credit and flat-to- negative returns for IG credit. HY credit has already met and exceeded this seasonal pattern, with US HY at 2.8% month to date, which is above its March ‘average plus one standard deviation.’ “This suggests that the current run rate of HY performance is unlikely to be sustained over the entire month. Indeed, while the tail risks that have dogged global risk until early February have receded, credit investors may begin to fret about more mundane risks, like excessive supply in primary markets and insufficient new issue premiums, which could hinder credit spread performance,” he concludes.
Foto: Jonathan Mueller
. UBS Wealth Management Americas y UBS AM lanzan un servicio de externalización de CIO
UBS Wealth Management Americas and UBS Asset Management announced the launch of UBS Outsourced Chief Investment Officer (OCIO), a new service to address the needs of institutional clients and those who serve on investment committees at institutions such as religious organizations, pension funds, foundations, endowments, alumni associations and charities. This program combines UBS’s consulting experience and investment heritage, providing clients the ability to retain portfolio oversight while delegating investing decisions to experienced managers.
“Outsourcing investment decisions to aknowledgeable and dedicated discretionary consultant, rather than relying on those within the organization who have differing responsibilities, can better help organizations accomplish their missions,” said Peter Prunty, head of UBS Institutional Consulting. “UBS OCIO has the institutional skills and asset management expertise to work on behalf of clients to help them achieve their investment goals, giving clients more time to focus on their organization’s objectives.”
“In partnering with our colleagues in Wealth Management Americas to deliver a compelling OCIO offering, we are focused on enabling clients to concentrate on what matters to them and their organization,” said Frank van Etten, Head of Client Solutions for UBS Asset Management. “We have complemented the institutional offering of a global asset management organization with the accessibility of a local financial advisor who understands each particular client’s needs.”
The improved governance and shared fiduciary responsibility that OCIO provides can help clients better manage risk. OCIO also moves many administrative burdens from the client to UBS through a disciplined process that keeps clients focused on results. In addition, Institutional Consultants deliver regular performance reports and economic and market intelligence to help keep clients updated and on track.
When they write the final history of central banks and the global financial crisis, the six weeks from January 29 to March 16, 2016 will be a prominent late chapter.
We went from the Bank of Japan’s (BoJ) surprise adoption of a negative interest rate to the Federal Reserve finally giving ground to market bearishness, with yet another game-changing intervention from the European Central Bank’s (ECB) “Super” Mario Draghi in between. Not coincidentally, the S&P 500 Index rallied 11% from its lows during the same period. Central banks have been looking into the abyss of spiraling negative rates and all-out currency war over recent months—and the last two weeks saw them pull back from the edge.
My colleagues and I have discussed how corrosive negative rates could be for banks and, potentially, for the financial system at large. On top of this, benefits from resulting currency weakness were always likely to be outweighed by slow global growth, rising import costs and other countries entering the fray. Markets felt instinctively uncomfortable: The BoJ’s decision sparked a punishing fortnight for risk assets and a backlash from domestic savers and consumers. If ever a monetary easing announcement backfired, this was it.
Discussion spread well beyond Neuberger Berman, in a tone that I would describe as modestly critical.
Central banks themselves have been part of the conversation, sometimes in public (think of the normally dovish New York Fed President Bill Dudley describing talk of negative rates in the U.S. as “extraordinarily premature” on February 12) and sometimes behind the scenes. At the ECB’s policy announcement and press conference on March 10, a new consensus seemed to be revealed.
The irony is that the ECB did cut its deposit rate again, to -0.40%. It took some of the sting out by extending liquidity to banks at the same rate for five years, and also expanded its quantitative easing program and added corporate bonds to the securities it could purchase. Risk markets liked the news and the euro dived. But Draghi’s comments during the press conference were the real story: “We don’t anticipate it will be necessary to reduce rates further,” he said. He acknowledged the danger that would pose to banks and confirmed a shift “from rates instruments to other, nonconventional instruments.” Suddenly the headline wasn’t negative rates anymore, but the “nonconventional” stuff. Markets really liked that—and the euro soared.
When the BoJ held rates steady five days later, despite a gloomy economic assessment, and added measures to shield banks from its negative rate, that fit the new consensus.
And the Federal Reserve last week? In holding rates and revising its rate projections substantially downward, it finally responded to what markets had been asking for (via their pricing of risk assets and Fed Funds futures) after months trying to break free of those expectations.
But it fit the consensus in other ways, too. In 2015, the roadmap for the Fed’s policy trajectory was unclear: a bit about China and global conditions, a bit about U.S. employment and inflation, but not much about how it was all related. Last week, the message was crystal: We can’t consider U.S. prospects without taking account of global conditions. Despite very modest Fed policy moves so far, U.S. financial conditions have tightened significantly. Why? Because of U.S. dollar strength. And why is the dollar so strong? Because slowing growth led to aggressive monetary easing and weaker and weaker currencies in the rest of the world.
With the ECB and the BoJ choosing more direct stimulus over the rates-and-currencies channel, however, many believe the dollar is unlikely to rise much further from here. The resulting loosening of U.S. conditions may give the Fed wiggle room for its two hikes in 2016. This is what the Fed gains from the new consensus. With Thursday’s core inflation print surprising to the upside, is it possible that Fed Fund futures, which responded to the Fed announcement by lowering the implied probability of a hike in June, are now behind the curve?
We’ll see. The past two weeks have seen a major transition in central bank philosophy, and possibly a renewed sense of coordination. So far, markets have been euphoric at this turn away from the abyss and back towards some kind of “normality.” How this normality ultimately plays out remains an open question.
According to the latest BofA Merrill Lynch Global Research report, conducted from March 4-10, 2016, average cash balances are down to 5.1%, from a 15 year-high of 5.6% in February. While the three top most crowded trades are Shorting Emerging Markets, Long US dollar and Shorting Oil.
“With cash levels now slightly above their 3-year average, investors no longer are sending the unambiguous buy signal we saw last month,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch.
During March investors made a strong rotation of positioning into industrials, energy, materials and Emerging Markets, with the biggest monthly jump in allocation to commodities on record. Also, allocation to real estate/REITS experienced its second highest month in survey history.
The survey also noted that investors have flipped their views on credit, with a net 15% believing high yield will outperform high grade in March, versus a net 13% favoring HG in February. Net overweight positions in equities improved.
Regarding the US Monetary Policy, the vast majority of fund managers still expect no more than two Fed hikes in the next 12 months, while a record net 35% think global fiscal policy is still too restrictive, and “quantitative failure” is seen as one of the biggest tail risks.
According to Manish Kabra, European equity and quantitative strategist, “global investors are trimming their extreme regional views and cite ‘quantitative failure’ as the biggest tail risk. However, they remain the least bearish on Europe.” Europe is seen as relative winner as European cash allocations dropped to average levels, and the region remained the most preferred globally; EUR now seen as cheapest since April 2003. Japan has fallen further out of favor as allocation to Japanese equities declines to a 22-month low of net 15% overweight, down from net 24% overweight in February, whereas in Emerging Markets, Chinese growth expectations jump to 4-month highs but a net 26% of investors still expect a weaker Chinese economy over the next 12 months.
