Foto: Picharmus, Flickr, Creative Commons.. Casasús: "Lo que estamos viviendo en las bolsas tiene que ver con China y con la propia dinámica del mercado"
Calamos Investments announces the launch of the Calamos Focus Growth ETF one of the industry’s first actively managed equity ETFs.
“Our decision to offer an active equity ETF – particularly at this early juncture in the market’s development – is right in line with our history of anticipating the needs of investors and offering innovative solutions to satisfy those needs. From our convertible strategy launched in 1979 to our market neutral income strategy launched in 1990 and our long/short strategy in 2013, Calamos has always been a leader in developing innovative solutions that help our clients navigate the evolving investment landscape. To that end, we believe actively managed ETFs represent an investment option whose time has come,” said John Calamos, Sr., CEO and Global Co-CIO of Calamos Investments.
“Active equity ETFs are a logical extension of our long-held belief in active management and enable us to serve investors who prefer the ETF product structure and appreciate the benefits of transparency. CFGE offers ETF investors a way to access a similar strategy to that which is available in a mutual fund format, and reflects Calamos’ commitment to the actively managed ETF space,” said Gary Black, Global Co-CIO of Calamos Investments.
The Calamos Focus Growth ETF leverages the firm’s 25-year history investing in growth companies, and features a portfolio consisting of stocks which we believe offer the best opportunities for growth. The portfolio selection process stresses company fundamentals including a global presence, strong revenue and earnings growth, solid returns on invested capital and lower debt-to-capital levels. The fund also utilizes active management, blending investment themes with fundamental research.
BLI – Banque de Luxembourg Investments S.A., the asset management company of Banque de Luxembourg, has reorganised its fund distribution team. Lutz Overlack has been appointed new Head of Sales and Matthieu Boachon will be Sales Manager for Benelux.
With immediate effect, Lutz Overlack (46), previously Sales Director for Germany, Austria and Switzerland, will be Head of Sales for all BLI’s distribution network. The sales team, Simonetta Cristofari (Italy), David Córdoba (Spain) and Matthieu Boachon (Benelux) will report directly to Lutz. “Our objective is to further professionalise our fund distribution: Lutz has a great challenge ahead of him!,” says Guy Wagner, managing director of BLI. “With the support of our local employees we will strengthen our specific target-oriented activities in each distribution country.”
Lutz Overlack adds: “The client will remain at the heart of our day-to-day business – client satisfaction is our priority. I am looking forward this new challenge and to working with my colleagues from different countries.” Prior to joining a German subsidiary of Banque de Luxembourg in 2003, Lutz worked at Bankhaus Lampe and American Express Asset Management Since 2010, he has been Sales Director at BLI.
Matthieu Boachon is new Sales Manager for Benelux
A new member in the distribution team is Matthieu Boachon (28) who will be sales manager for Benelux. To date, the native French worked in BLI’s fund selection team. He joined BLI in summer 2010, after graduating with a Master of Science in Finance from the IESEG School of Management in Lille. „Matthieu is a “homegrown” addition to the sales team – he has the advantage of having started his professional career at BLI right after finishing his studies”, says Lutz Overlack. “Thanks to his experience in fund selection, he has excellent knowledge of the investment methodology and is in close contact with the fund managers and analysts. Furthermore, he is able to transmit our investment approach abroad. Matthieu will now switch his job to start in the area of sales, and we wish him all the best for his new challenge!”
Lyxor builds on the success of a dedicated €275 million European senior debt fund launched in July 2013 and brings to the market a commingled European senior debt fund, the Lyxor European Senior Debt Fund. The fund is an AIFMD-compliant fund (SICAV-SIF) domiciled in Luxembourg.
The fund invests mainly in floating rate senior secured loans issued by European companies to finance acquisitions and corporate growth. The Fund will provide investors with exposure to a market that is characterized by increasing loan issuance numbers so far this year and that continues to feature attractive pricing characteristics and a competitive risk-return profile.
“By investing in European loans, investors get exposure to high yielding debt with a floating rate income profile that ranks at the top of the capital structure of the issuer”, said Thierry de Vergnes, Head of Debt Investments at Lyxor. “The current issuance dynamic of the market will enable Lyxor to build a well-diversified portfolio of European loans.”
The fund will target a return of 3M Euribor + 5.5% to 6.5% per year before fees over 6 to 8 years. This will include quarterly income distributions (targeting 3M Euribor + 4.5% to 5% before fees) for distributing share classes.
Lyxor manages senior debt portfolios for over €600m in assets under management in funds, CLO and advisory mandates.
Foto: Arild Vågen. El FMI alerta de la vulnerabilidad de algunos mercados emergentes a la política monetaria de EE.UU.
Historically, for every 100 basis points (bps) that the interest rates go up in the United States, they increase 40 to 70 in advanced economies and 100-150 in the rest of the world. The IMF forecasts US short-term rates, currently at zero, of 4% in 2018, while long-term rates, now at 2.8%, will reach that year their equilibrium at close to 5%. Therefore, the emerging markets must brace for a significant tightening of their financial conditions.
That is the view of the IMF’s Department of Financial and Monetary Affairs, José Viñals, who spoke in Miami on Monday in the LSE Global Pensions Program, organized by the London School of Economics, Santander Asset Management and Novaster.
Viñals did not hide his worries over the expansion of credit in China and other emerging markets. The former ‘number two’ of Spain’s central bank said that “the fragility of the business sector in Asia and Latin America worries the IMF.” That compounded with the lack of reform in some big emerging markets, such as Brazil.
As long as the exit from the extremely accommodative US monetary policy goes according to the IMF’s ‘central scenario’, serious tensions should be avoided. Viñals reminded (not remembered) the audience -made by one hundred of pension fund managers and government regulators, most of them Latin American- that in fact, the emerging markets managed to avert a crisis last summer, when Ben Bernanke’s bad communications about the ‘tapering’ made “everyone” feel confused and the market had several weeks of high volatility. So the emerging markets’ ability to escape the crisis and fix their problems should not be underestimated.
This time the risks are bigger than in 2014, partly because central banks have had to choose between inflating assets and letting the economies fall into depressions and deflation. The choices were so stark that there is very little to argue against what the central banks have done.
However, those policies’ consequences are clear. With their liquidity injections, “central banks have compressed volatility [in the financial markets] in an extraordinary manner”. The former deputy governor of the Bank of Spain explained that “when interest rates and volatility are low, investors take extraordinary risks.”
Viñals remarked that “everybody who has made investments” in what he called “heterogeneous assets” has “made money” this year, in spite of the fact that the “economic news, the ‘surprises’ have been relatively bad”. To Viñals this is a conundrum: “How is it possible that the financial markets are so optimistic while the economic news that we have had lately are not so good?” As a consequence, volatility has dropped around the world–using the IMF models–to levels not seen since 2007, right before the financial crisis struck.
Getting out of that situation is not impossible, but will require good steering and some luck. Counties that are dependent of foreign capital, have little margin of fiscal maneuver, or have weak financial systems can feel the brunt of the change of the monetary conditions.
CC-BY-SA-2.0, FlickrFoto: Blue and Red Tower Block, Kowloon, por Austronesian Expeditions. Sector inmobiliario en China – Separando la realidad de la ficción
In analyzing China, we often disaggregate numbers for real estate/property and investment. We do this because this reveals that whereas income in China—measured as a percentage of GDP—is keeping pace, consumption appears to be falling when measured by that metric. Another reason to differentiate this analysis is that when most Chinese purchase a residence, they either pay cash or take out a mortgage for less than 50% of the property value. Contrast this with the U.S., where private individuals typically take out mortgages for over 80% of property value.
Unlike in the U.S., where—in the robust pre-crisis real estate market—individuals could secure stated-income, no-doc loans, in China it is not at all easy to obtain a mortgage. Because of this, rising real estate investment usually engenders markedly decreased consumption. So the market movement of house prices has a different economic impact in each country.
When house prices fall in China, the economic impact is felt more through a “negative wealth effect,” whereas in the U.S., the primary impact is usually a credit crunch in which consumers struggle to pay down debt. And Chinese consumers seem able to withstand negative wealth effects well. For example, in recent years, the value of China’s A-share market (A-shares are Shanghai- and Shenzhen-listed equities denominated in renminbi) fell by about 70% from peak to trough as China absorbed the impact of the global financial crisis, thereby “wiping out” some US$2.5 trillion of nominal wealth—in a country with a US$8 trillion GDP.
But this negative wealth effect appears to have had only a minimal effect on consumption. China’s GDP growth has slowed from 10% – 11% to 7% – 8% primarily as a consequence of weak demand in China’s primary export markets in the U.S. and Europe. Today, loans in the banking system are collateralized by land prices, but to get a significant fall in land prices in such a fast-growing economy would seem to require a huge shock to productivity.
This article is part of the report “China—Separating Fact from Fiction”, published by Matthews Asia. You may access the complete report through this link.
Foto: Wheat by Martin Abegglen. ¿Quién sacará mayor provecho a la cosecha record de grano prevista para 2014?
Corn, soybean and wheat prices fell sharply during the second quarter of 2014 as American farmers planted more acres and yield prospects now hold great promise after near-perfect weather over the past few months. Corn prices are now at the same levels as August 2010, shortly after a severe drought hit Russia and large parts of Eastern Europe. Wheat prices are also back to levels of the summer of 2010, although slightly lower prices in January 2014 could be seen, before concerns around South American production drove the market higher.
According to the last Commodity & Resources Indicator by Investec, Mother Nature has assisted with favorable climatic conditions before, during and after plantings, which are expected to result in record yields. Although spring arrived relatively late and therefore shortened the window for pre-planting nutrient application, US Corn Belt farmers have acquired a lot of high speed machinery over the past five years which means faster and more efficient fertilization and pesticide programs.
All in all, we have seen near-perfect weather conditions that could mean record yields. However, the key pollination period is still ahead of us. On the current 14 day forecast, we should have enough daytime heat to support plant growth and enough night-time ‘coolness’ to ensure pollination. Investec believes that US yields per acre of corn harvested can rise surpassing the last record set in 2009.
If achieved, this will be a testimony of the very good climatic growing conditions but also of the technological advances. In this sense, the US is far ahead of the rest of the world and their lead is increasing. The informational advantage that will come with the analysis of ‘Big Data’ in their industry could be significant. Weather, soil and inputs data canbe combined to build yield optimization tools. During the growing season, information about the condition of the crop obtained from pictures and plant samples, gathered by drones, will be used to do corrective pesticide and fertilizer application. This will help farmers to achieve the full potential of the crop on a more regular and consistent basis.
Over the coming months, if things go according to plan and we see the large US grain and oilseed crop harvested in the autumn, the world should be well supplied with key food commodities such as corn, wheat and soybeans. Investec highlights several industries and regions that will benefit from this situation:
Storage will be full and owners of infrastructure assets in the supply chain should be very profitable. Premium pricing should be possible for traders who have silo and port capacity once the glut of product is distributed to domestic and international markets.
In addition, industries that use these commodities as inputs in their production such as the feed industry, animal protein producers, food ingredients and ethanol, should experience a tailwind from reduced costs.
Countries that import grains and oilseeds in regions such as the Far East, the Middle East and North Africa, will benefit from these lower prices. They may look to use the opportunity to replenish their inventory levels, in which case overall demand may be stronger than currently estimated for the next 12 months.
You may access the complete report through this link.
As part of mutual efforts to continue to strengthen business relationships between Luxembourg and China, the Association of the Luxembourg Fund Industry (ALFI) and the Asset Management Association of China (AMAC) have signed a Memorandum of Understanding (MoU) designed to deepen the collaboration between the two associations.
The agreement focuses on developing activities to create mutually beneficial opportunities for the fund industries in both countries. Luxembourg is the second largest investment fund industry in the world after the United States and a valuable partner for the Chinese asset management industry in its strive to diversify internationally.
The agreement was signed in Beijing by Mr Marc Saluzzi, Chairman of ALFI and Sun Jie, Chairman of AMAC on the sidelines of a financial mission to China led by the Luxembourg Minister of Finance, Pierre Gramegna.
The cooperation will focus on three main areas covering regular communication, information sharing and member services and will include:
Exploring the possibility to implement joint programmes, such as meetings, visits and seminars;
Mutual assistance and the exchange of information relating to regulatory frameworks and investor protection practices for the funds industry; and
Exploring opportunities for mutual membership referral and organising professional development events for members.
“We are very pleased to have signed this agreement with AMAC, a true strategic partner for ALFI. We look forward to exchanging details about our expertise and best practices for the benefit of all our and AMAC’s members. In the future, as Chinese asset managers may wish to extend their activity outside of China, Luxembourg will constitute an ideal gateway into and beyond Europe. Luxembourg is indeed the leading worldwide domicile for cross-border asset management activities,” said Mr Marc Saluzzi, Chairman of ALFI.
“This agreement is a win-win for both industry associations and is testimony to the growing ties between Luxembourg and China. This collaboration will ensure that the asset management industry in China has world-class standards,” said Mr Sun Jie, Chairman of AMAC.
Proponents of investing in distressed debt abroad can point to several advantages. First, foreign debt, especially in emerging markets, can have greater upside. Competition is less intense due to the higher level of research required. As a rule, buyers of debt exhibit a local country bias, preferring to buy issues of local companies that they know. This bias creates more liquidity in developed markets, which have deeper institutional markets. Foreign markets are much thinner, especially as credit quality declines. Local institutional buyers, such as pension funds, face legal restrictions that prevent them from investing in distressed debt. Hedge funds and absolute return investors are less plentiful. The shortage of investors results in a greater liquidity premium and more opportunities for adding value through research and exploiting the mispricing of debt. Second, covenants in bond indentures are often stronger. Investment banks demur from underwriting and investors balk at buying deals without extra protections, either in the form of additional security or restrictions on company behavior. Lastly, credit rating agencies penalize companies for country risk. An investor simply receives better credit quality for the same credit rating by investing abroad.
The Pitfalls
Detractors point to the complexities of investing abroad. Because markets are thin, liquidity dries up when markets are under duress and may not exist when an investor needs it. Currency risk necessitates knowing the denomination of a company’s revenues, expenses, and liabilities, which may be in different currencies and lead to a deterioration of profitability when one currency appreciates. Understanding a foreign culture and the local market can be a challenge. Legal systems are slower and often favor the local debtor. Corruption is a concern, leading to the disappearance of funds and unpredictable legal outcomes. Insiders often dominate corporate boards, limiting independence and affecting the quality of corporate governance. Labor laws may guarantee wages, pensions, and severance payments, effectively subordinating creditor claims to the claims of workers. The bottom line is a more difficult decision with many more variables, many of which are unknowable, and greater uncertainty.
The Anecdotal Evidence of Credit Spreads
What does the evidence tell us about the relative value of foreign markets? Most evidence is recent and anecdotal. Relative credit spreads offer the best metrics. BCP Securities surveyed emerging market credit spreads relative to those of the United States in January 2010. In Mexico, Brazil, and Chile, BBB credits traded at slightly tighter credit spreads than did comparable issues in the United States. In Brazil and many other emerging markets, the same pattern of tighter credit spreads held true for BB issues. But once credit quality deteriorated to B, emerging market issues traded wide of U.S. issues by 100 to 300 basis points, depending on the country. The conclusions are a lack of demand for distressed debt and investor concern about bankruptcy risk in emerging markets.
Two Models of Corporate Restructuring
The United States and foreign markets follow two different models of corporate restructuring. In the United States the restructuring process is well-defined. Bondholders and the debtor have the option of negotiating an out-of court restructuring or seeking resolution in bankruptcy court. An out-of-court restructuring usually takes the form of a distressed exchange, which grants the debtor extra time or reduces debt in exchange for additional collateral or equity. Bankruptcy filings are costly but prioritize debtor claims according to seniority in the capital structure and allow the debtor to operate under the protections of the bankruptcy court until the emergence from bankruptcy. In either case the outcome usually includes a reduction in debt, a rationalization of the capital structure, and a transfer of the equity ownership of the company from the shareholders to the debt holders.
In foreign markets, especially in emerging markets, the process is more opaque. Equity ownership rarely changes hands. Rather debt holders agree to extend or restructure debt, usually outside of bankruptcy, without gaining equity. Private ownership, especially by wealthy families, is much more common as opposed to public equity. Families are loath to surrender control or grant minority stakes. The bankruptcy process abroad is slower and more uncertain. From the creditor perspective, the poster child of the failed foreign bankruptcy is the case of Altos Hornos de Mexico, which has gone through three unsuccessful negotiations and ten years of bankruptcy. Three times the controlling shareholder reached a restructuring agreement with creditors and three times he withdrew his support at the last minute to continue operating the company as he pleased with negligible court supervision.As a result, negotiations occur outside of bankruptcy with the equity holder holding the advantage at the negotiating table. For the debtor, the reasons to resolve the default and restructure the debt are reputational and the desire to access the debt markets in the future.
The difference in process can lead to outcomes uncommon in the United States. Creditors may gain the right to appoint independent directors while the board is the exclusive preserve of shareholders for domestic companies. During tender offers foreign law often negates the right of smaller bond holders to hold out and demand payment of their bonds on the original terms, allowing debtors to cram down all debt holders at the same time. The concept of equitable subordination, which protects creditors against shareholders using debt purchases to manipulate the bankruptcy, does not exist. Holding company/subsidiary guarantees are less meaningful.
The Strategy of Successful Investors
Despite the minefield of potential issues, many investors succeed in investing abroad. What are their secrets? First, they ask the age-old questions about the viability of the business and the competence of management. No amount of financial engineering will rescue a business from bad management and poor execution while good management will take advantage of what opportunities exist. Next, successful investors evaluate the incentives and character of management and the controlling shareholders. Distressed companies fall into two groups: those with morally corrupt ownership and those with concerned, responsible owners going through a tough period. Successful investors spend a great deal of time shunning the former and seeking the latter. Country risk is another component. The objective is to find a good company when a country is in trouble. If the company is well-run, it should survive the hard times and appreciate in value once the economy recovers. The ability of the government to support the private sector is another factor. A country with deep foreign currency reserves has greater ability to support industry than a country that does not. Lastly, the successful investor prefers a just and efficient legal system in order to fairly balance the rights of creditors and shareholders.
Thomas P. Krasner is Principal and Portfolio Manager at Concise Capital
From left to right, David McCombie, Michael Hoyos, and Jay Lipsey. Courtesy photo. McCombie Group Relies on Club Deals to Provide Value Added Services to its Clients
McCombie Group began as a consulting firm, advising High Net Worth Families with their direct private equity investments, although over the years, the collaboration with those Family Offices which they serve has led them, without losing sight of their origins, to focus on club deals in order to provide their clients with added value, as David McCombie, founder and CEO, explained in an interview with Funds Society.
At McCombie, they believe that in addition to contributing with good investment advice to the growth and preservation of their client’s capital, they can also assist it through “good business deals to which the Family can provide their expertise. “Undoubtedly, club deals, especially between high net worth families are other routes which increasingly contribute to define their investment strategies, and which also offer them control and potential value.
To that end and for a while now, McCombie has been organizing bimonthly breakfast meetings to which several families are invited in order to exchange ideas and projects; these are always private and confidential affairs. Attendees bring to the table those businesses or opportunities which they have come to know through their business and contact networks in order to assess their feasibility and interest and add synergies.
“Finding a good business is hard, and on average it may take 18 to 24 months to close a deal, but good opportunities arise from this kind of ‘show & tell’… especially through the experience of those people present,” McCombie said.
The proposals are many and varied and the executive knows that it is not just a matter of putting the business or opportunity on the table, but that the project must be matched with the right investor; McCombie also co-invests with the family or families, so that their capital contribution adds greater confidence to the operation. “We do not offer any business deal in which we are not going to contribute money,” he said.
Likewise, he pointed out that finding a good business is difficult, and more so if you are looking for one or more families to add value to the operation. Unless that is the case, they do not push the project because at McCombie they are convinced that in order for the investment to come to fruition, it must be made on the strategic investor’s side.
The executive emphasized that the investment is much more conservative than that of a traditional private equity company, with lower risks but in good companies which guarantee capital preservation. As to which sector they are aimed at, McCombie explained that they focus “on the least exciting industries in the business world, but where there is less competition and more affordable prices.”
For the company, families have much more value to bring to the table in these club deals than in private equity or than in traditional investment arrangements, because, unlike traditional private equity, to be sold over a period of a few years, the project here involves a longer term. “Sometimes, forcing a sale does not make sense… it’s much easier to buy than sell… We are thinking of building a platform that lasts decades. It must be done right, built well, and contemplated on a long term basis.”
Since its founding, McCombie Group has worked with over 20 families; most of them are Latin American, although they would like to gradually distribute that weight 50/50 with American families. The company, located in Miami, offers services which span the life cycle of the investment, from its study and analysis of agreements, negotiation strategy, due diligence, and company monitoring, to business development and consulting.
Photo: JLPC. Sun Life Financial Introduces Roland Driscoll as Head of International Sales
Sun Life Financial has appointed Roland Driscoll as the new Global Head of International Sales (Investments) for its Bermuda-based SLF International business unit (SLF International).
Through our SLF International business unit, Sun Life Financial provides offshore financial solutions specifically designed to meet the objectives and concerns of affluent and high-net-worth individuals residing outside of the United States, Canada or Bermuda. The SLF International investments sales teams and field offices in Dubai, Panama and Singapore will report to Roland.
“Under Roland’s leadership, the sales team will continue to represent and position our investment solutions for affluent and high-net-worth clients to the international financial advisor community with commitment, enthusiasm and certainty,” said Mark Rogers, Vice-President, International Investments Distribution, SLF International.
Andrew Darfoor, Senior Vice-President and General Manager, SLF International added: “We believe our integrated customer proposition, encompassing investment and intergenerational wealth transfer solutions, has huge potential for growth in all our markets. Roland brings a vast array of experience with him and will form an important part of the senior distribution team responsible for seeking out new growth opportunities and ensuring we are delivering a first class proposition to advisers and customers.”
With over 25 years of sales, distribution and offshore experience, Roland joins Sun Life from Old Mutual (Bermuda) Ltd., where he spent the last six years as Senior Vice-President, Global Distribution. Prior to Old Mutual, Roland was at JP Morgan Chase & Co. for over 20 years where he was involved in international sales management in a number of senior roles. Roland holds a Bachelor of Business Administration in Finance from Hofstra University and an MBA from Pace University.
