CC-BY-SA-2.0, FlickrFoto: Patrick Feller. ¿A qué se debe el rally de los bonos?
U.S. Treasuries rallied last week, pushing yields to new 2014 lows – but why did it happen? According to the blog followPioneer.com, by Pioneer Investments, war fears seem an unlikely explanation: gold and oil were well-behaved, and equities were flattish. U.S. economic fears couldn’t explain it – the data wasn’t bad – but low Eurozone GDP growth might have contributed. The trading desk buzz is that we’re seeing a short squeeze – there just aren’t enough bonds to go around.
Pioneer Investments thinks that domestic services may be starting to put upward pressure on core CPI and PPI. There’s little inflation visible in globally traded goods (import prices are down 0.3% year over year (y/y) and export prices are up 0.1%). Headline CPI rose 0.3% in April; core rose 0.2%. April CPI was up 2.0% y/y, while core was 1.8%. Nevertheless, the methodology used to calculate PPI has changed. The old Producer Price Index has been “PPI total final demand”. Let’s call it “new PPI”. New PPI rose 0.6% in April, far above expectations. Core was up 0.5%. Headline new PPI was up 2.1% y/y. Excluding food & energy, it was up 1.8% y/y. This is not just food and energy inflation—it’s also in the core. Sam Wardwell, CFA, Senior Vice President and Investment Strategist at Pioneer Investments notes that Alan Greenspan had this to say: “I don’t know whether or not that is other than a blip, but if inflation is beginning to pick up, it’s got to start somewhere, and it usually starts the way we’re looking at it.”
Jordi Comas, CEO at Andbank.. Andbank Aspires to be within the Top 5 Private Banks in Latin America in the Next Decade
Since 2008, when Andbank’s management was put into the hands of Jordi Comas, CEO, and Tubau Ricard, managing director, the bank has gone from being centered in Andorra to its internationalization, leading to a significant leap in Spain and Latin America, undoubtedly driven by the legislative change in the Principality of Andorra. This change has shifted Andorra from being a tax haven, with bank secrecy as its greatest asset, to becoming a low tax jurisdiction; a situation which has forced Andbank to find markets abroad in which to continue growing.
In addition to Spain, Andbank now has a presence in Luxembourg, Switzerland, Monaco, Bahamas, Miami, Mexico, Panama, Brazil and Uruguay, and it intends to continue to grow as long as good opportunities arise. It should be remembered that in 2008 only 5% of its business came from Latin America, whereas currently the region represents a third of its total business.
Last year, the bank grew an average of 30% in each Latin American country in which they are present. With a clear commitment to becoming a highly diversified bank and within the strategy set by Andorra, Comas declared that in seven to ten years time, the bank aspires to be within the top 5 private banks in Latin America, where they not only have set a goal of growth, but also to add value.
During an interview with Funds Society, Comas reviewed the banking institutions’ progress, the results achieved during the 2013 financial year, submitted at the beginning of May, as well as Andbank’s plans for 2014, when the bank hopes to continue with the growth rates registered last year. In 2013, the bank’s profit grew by 13.3% in comparison to 2012; this was due primarily to the consolidation of its private banking model and to the strong development of its international business.
Likewise, clients’ assets under management grew by 22% in the previous year to reach €13,5 billion, (about US$18,5 billion). The group’s international area represents almost 60% of the clients’ resources, and the bank maintains a high solvency ratio of 20.69%.
Comas said that, despite the “dramatic environment registered at the economic and taxation levels”, 2013 was a good year for the bank and hoped to continue to grow at the same rate in the coming years.
It should be remembered that in 2013 Andbank reinforced its presence in Spain with the acquisition of Inversis Bank’s private banking business, an operation which allowed Andbank to add another €4.5 billion in one stroke to the €1 billion raised during its first year in Spain, where they arrived in early 2012 with the purchase of Medivalor, a small securities brokerage agency.
Implementing the Inversis platform model in Latin America
As for its plans for Latin America, where they’re still committed to continued and strong growth. Comas commented that they plan to implement the Inversis platform model to Latin America, where it’s difficult for the average investor to access products that are only available to the large investor and only through the larger banks. The CEO stressed that they will be paying particular attention to Mexico and Brazil, where “there’s no online platform which brings together third party products.” Comas stresses that the organization not only aims to do private banking, but also to democratize it given the region’s “very clear potential”.
As to whether they will continue with its acquisition policy and its partnerships with other firms as they have been doing in recent times, the company’s CEO clarified that they don’t regard neither of those operations as an incorporation of assets, but as a way to attract talent. “That’s why we find it so difficult to make acquisitions.”
Currently Andbank aims for continued growth in the 10 jurisdictions in which it operates and, should opportunities present themselves, Comas has no doubts that they will pursue them. “We are acquirers by nature, especially in Latin America, and especially in Miami, Mexico and Brazil, where we believe we have to make a strong commitment to growth.” It should be noted that earlier this year, the bank acquired the Miami firm, Swiss Asset Advisors, led by Michael Blank who, together with his team, joined Andbank’s Miami office.
“We don’t put a ceiling to our growth. Our limit is to find excellent professionals who want to join our project. We try to recruit the best … Our goal is to grow soundly and with the best people,” stressed the CEO, who insisted on Latin America’s importance for the group’s business.
In this respect, the CEO referred to Uruguay’s example, where they are present through a representative office in Punta del Este, which was recently joined by a team from HSBC. For Comas, the Southern Cone is a very important region because it is an area of great development, in the same way as Miami and Panama. Comas explained that a number of bankers have recently joined Andbank Panama, and the same has happened in the Bahamas, where earlier this year the bank also changed their head office, appointing Juan Iglesias, from Julius Baer as the CEO in charge.
With ‘mutual recognition’ of investment products between Hong Kong S.A.R and the People’s Republic of China set to transform these markets, regulators and market participants need to consider the conditions that will allow the benefits of this impending policy to take full effect for the region’s growing exchange traded funds market. Rex Wong, Managing Director within BNY Mellon‘s Asia Asset Servicing business, describes the market infrastructure, product developments and aspects of investor education that are needed to bring about the full potential of mutual recognition for exchange-traded funds (ETFs).
“There’s great potential for mutual recognition to make life easier for ETF promoters and drive product design and development as they expand their footprint in the Asia-Pacific region. But success in building the ETF market in China and sustaining product development also requires changes in local market infrastructure and, most importantly, regulatory reforms.
“Today, Hong Kong and China together account for around 35% of total ETF assets under management (AUM) in the region, with Japan accounting for approximately 45%. The Asia-Pacific ETF market as a whole is seeing growth of 15%-20% annually. Once the right structures are in place, we expect the ETF market in Hong Kong and China to outpace the growth of the broader Asia-Pacific region. Mutual recognition may accelerate the growth, leading to AUM in Asia-Pacific’s ETF market to grow by as much as 50% to reach US $250 billion by 2016 from its base of roughly US $165 billion today.
“We start from the premise that mutual recognition cannot be viewed in a vacuum. It will exist as part of – and because of – the success of other efforts that the Chinese government has put in place to liberalize its financial sector and facilitate cross-border capital flows. The pillars of this system include the expansion of the Renminbi Qualified Foreign Institutional Investor (RQFII) program, raising investment quotas for RQFII holders, opening new asset classes to foreign investors, such as interbank debt, and free trade zones.
“All of these programs need time to develop in order to create the right environment for ETF promoters to take full advantage of mutual recognition. In the interim, mutual recognition will mostly benefit mutual funds, as the market infrastructure requirements are less complex than for ETFs.
“However, I believe we will see some ETF developments in the early days of mutual recognition, especially in the area of China A-share ETF products listed in China thanks to the continued interest of Asian investors in the country’s domestic market. In the medium term, investors will also be able to access more diverse asset classes including international equities, bonds and commodities. That will give them an exchange-listed option to gain exposure to global markets and other asset classes that do not currently exist today in their home market.
“But these are modest developments, essentially low hanging fruit. New market infrastructure is needed in order for China’s ETF market to reach a stage of development that resembles the big ETF markets in Asia-Pacific, which are Japan, Hong Kong and Korea.”
Promoting ETF liquidity and enhancing the ease of currency transfers
“First, we need to see more broker-dealers act as ETF market-makers and their active participation to provide liquidity is essential to the survival of ETFs. The ETF market making business in China is relatively new. However, many global broker-dealers already have a presence in Hong Kong, and can step into this role if regulation so permits it. They can bring their global trading platforms and expertise, and promote the development of this sector in China.
“Second, an ETF that uses multiple active market makers that can access multiple liquid alternative hedges in addition to its basket would make it easier for the ETF to attract assets and to survive in the ETF space. There needs to be a diverse range of futures and options and a liquid derivatives market for ETFs. This will be an important inducement to market-makers as it allows them to hedge their exposure for the products in which they are providing liquidity.
“Third, removing restrictions on short-selling of ETFs would lower the cost that market-makers face and improve their ability to provide liquidity in the market.
“Finally, there needs to be a more streamlined process for transferring RMB across borders to make it more of a real-time process. This point is crucial. Restrictions on and delays in RMB transfers can prevent fund managers from investing in the underlying index shares. This introduces the risk that ETFs will suffer ‘tracking error,’ which can undermine their appeal, especially to institutional investors. A system for real-time RMB transfers or enhancement to the existing cross-border transfer process will alleviate this pain point and really allow the industry to take full advantage of mutual recognition.”
Achieving the full benefits of mutual recognition
“Once the regulatory and infrastructural foundations are in place, the market will be able to support a greater number of ETFs and investment styles covering a variety of industry sectors, asset classes and investment strategies.
“We are seeing some innovative products today, like fixed income, sector, style, gold, cross-exchange and cross-border ETFs in China, but enhanced infrastructure, on the back of regulatory reforms, will really allow the market to develop further. Korea has been very progressive and has seen products such as inverse and leveraged ETFs come to market and we have seen Japan follow suit. Nevertheless, unless the current regulation is relaxed, we will not see the same level of innovation in China or Hong Kong.
“While regulatory reforms remain the key to the development of Asia’s ETF market, investor education will play a vital role. The ETF promoters can foster wider and deeper usage of ETFs by showing how they facilitate asset allocation and portfolio building. And with trading in China’s domestic markets dominated by retail investors, fund sponsors need to encourage institutions to see ETFs as instruments that can be used both tactically and strategically. Institutional and retail participation will be critical for the ETF market’s growth.”
As summer approaches, employees are busy planning long-awaited vacations. But a new Robert Half survey shows 39 percent of workers won’t use all the paid vacation time they’re given. The reasons: 38 percent are saving days in case they need them later, while 30 percent fear falling behind at work.
The national study was developed by Robert Half, the world’s first and largest specialized staffing firm, and conducted by an independent research firm. It is based on 436 telephone interviews with U.S. adults working in an office environment.
Workers were asked:“Do you typically use all of the paid vacation days you are provided by your company?” Their responses:
Yes
58%
No
39%
Don’t know/no answer
3%
Workers who answered “no” were asked: “What is the primary reason you don’t use all of your vacation time?” Their responses:
You want to save time in case you need it
38%
Too much work – you don’t want to fall behind
30%
You don’t like to take time off or vacations
12%
Don’t get any vacation time
10%
Your manager would frown upon it
3%
Something else
7%
“Whether you’re a vacation ‘saver’ or ‘spender,’ it’s important to have balance,” noted Paul McDonald, senior executive director of Robert Half. “All work and no play doesn’t just lead to burnout — it also erodes creativity, since stepping out of your routine frequently sparks innovation,” he said. “Fresh perspective is useful in just about any profession.”
McDonald added that managers should lead by example when it comes to saying “bon voyage” to the office. “Supervisors should encourage their teams to take a break and recharge, especially their top performers, who are often the most aggressive vacation savers and most susceptible to burnout. The best way to do this is by taking time off yourself,” he said.
Geopolitical risk and weather have been underpinning commodity prices at large since the start of the year. If the Ukraine-Russia tensions would abate certain segments within commodities like Energy, Precious Metals and Agriculture increasingly may face headwinds. Speculative positioning in WTI crude and Brent crude oil is still very high currently and at risk of reversal, according to ING IM. Within Precious Metals already, the trend in non-commercial net length is down. ING IM increased the underweight Gold (to -2). With ETP gold holdings turning South again and other arguments still in place (global cycle pulse, upward real yield pressure, still high non-commercial positioning, leveling off of Chinese physical demand,..) ING IM sees downside in gold prices.
Speculative length in Agriculture also is high, in particular in Corn. Some colder than normal US weather has delayed corn plantings somewhat. With some US weather normalization expected, US corn plantings will likely catch- up. US Corn acreage may be underestimated. ING IM is increasing its underweight to -2 (from -1).
In the background the theme of a developing El Nino weather pattern has been building. Typically El Nino leads to drought in SE Asia/ Australia and excessive rain in Western South America. Australian drought could hurt local wheat production substantially. Chinese demand for US wheat could rise in such a scenario and global and US wheat balances tighten. Soybean prices could also benefit from South American (Brazil) crop losses.
On the other hand, ING IM states that US Corn production typically outperforms under El Nino. By moving Wheat and Soybean to +1 against Corn -2 ING IM introduces some El Nino optionality in its portfolios.
You may access the full report in the attached pdf file.
Investcorp has announced that David Walsh has joined the firm’s Hedge Funds business. In his new role with Investcorp, Mr. Walsh’s responsibility will be to identify and source emerging hedge fund talent, and to structure and develop relationships with these managers. He will report directly to Nick Vamvakas, Head of Investcorp’s Single Manager Business. Investcorp’s Single Manager Business establishes strategic relationships with emerging managers, providing them with seeding and acceleration capital in addition to distribution and business support.
Commenting on the strategic hire, Lionel Erdely, Head and Chief Investment Officer of the Hedge Funds Group at Investcorp, said, “David has been identifying and working with early stage hedge fund managers for years in his prior roles. We believe his background will enhance our capabilities in identifying and sourcing new hedge fund talent early in their life cycle. His addition is a boost to our seeding and emerging manager program as we work to execute on our plans to significantly grow our investment universe.”
Before joining Investcorp, Mr. Walsh served as a senior member at UBS as part of their Capital Introduction Group, where he was actively involved in all aspects of the prime brokerage business – including originating prospects, sales, and relationship management. Earlier in his career, he helped UBS develop and structure products to provide investors access to alternative investments through the investment bank’s Funds Derivatives Group.
Investcorp is a leading provider and manager of alternative investment products. The Investcorp Group has offices in New York, London, the Kingdom of Bahrain, the Kingdom of Saudi Arabia and Abu Dhabi. Investcorp has three business areas: corporate investment in the US, Europe and the Gulf, real estate investment in the US and global hedge funds. As at December 31, 2013, Investcorp had $11.3 billion in total assets under management.
The Federation of European Securities Exchanges (FESE) has announced that Judith Hardt, Director General, will step down from her role on 23 May.
Judith Hardt has been with FESE since 2005 and has led the organisation through a number of high profile mandates such as the development of the Code of Conduct on Clearing and Settlement for which Judith Hardt was nominated ‘lobbyist of the year’; the review of MIFID to reverse some of the negative impacts of MIFID I and developing industry thinking to improve SME financing. In addition, there have been numerous other regulatory initiatives in which Judith Hardt has helped the FESE steer through review and implementation.
During Hardt’s tenure FESE has become more focused and more effective in promoting the value of regulated exchanges through its activities across numerous mandates and improved interaction with actors in the financial and political landscape within Brussels and abroad.
FESE will commence a selection process to identify a successor.
Christian Katz, President of FESE said “I would like to thank Judith Hardt for all her hard work and tireless dedication to the Federation and our industry over the past nine years. FESE is now more organized and focused due to Judith’s leadership. On behalf of the Board and the entire Membership of the Federation we wish Judith Hardt well in her new endeavours”.
Judith Hardt said “After nearly 10 years at FESE and with the successful outcomes of MiFID II for exchanges, I believe that now is a good time to explore new opportunities. I immensely enjoyed leading this association during a fascinating period of fundamental regulatory overhaul and industry consolidation. I have also been privileged to work with incredible staff. I know that the dedication of the FESE team will ensure a seamless transition”.
The Federation of European Securities Exchanges (FESE) represents 41 exchanges in equities, bonds, derivatives and commodities through 21 full members from 30 countries, as well as 2 Observer Members. FESE is a keen defender of the Internal Market and many of its members have become multi- jurisdictional exchanges, providing market access across multiple investor communities. FESE represents public Regulated Markets. Regulated Markets provide both institutional and retail investors with transparent and neutral price-formation. Securities admitted to trading on our markets have to comply with stringent initial and ongoing disclosure requirements and accounting and auditing standards imposed by EU laws.
At the end of 2013, FESE members had up to 8,950 companies listed on their markets, of which 8% are foreign companies contributing towards the European integration and providing broad and liquid access to Europe’s capital markets. Many of our members also organise specialised markets that allow small and medium sized companies across Europe to access the capital markets; 1,478 companies were listed in these specialised markets/segments in equity, increasing choice for investors and issuers.
Photo: Tuxyso. LarrainVial Signs an Agreement with U.S. Authorities to Adopt FATCA
LarrainVial has signed an agreement with the Internal Revenue Service (IRS), the U.S. tax authority, to adopt the FATCA law (Foreign Account Tax Compliance Act), from the date of agreement.
The agreement with the IRS, an institution homologous to the Internal Revenue Service (SII) of Chile, was signed voluntarily by LarrainVial last Friday and before the expected legal time limits. The FATCA rules, which were adopted in 2010 by the U.S. Congress, begin to fully take effect and be obligatory for all financial institutions as from July 1, 2014.
The signing of this agreement is part of the cooperation agreement that the governments of Chile and the United States signed on March 5 to facilitate the implementation of U.S. legislation known as FATCA.
The agreement signed by Larrain Vial with the Internal Revenue Service, includes different LarrainVial Group companies, among which are LarrainVial Corredora de Bolsa (LarrainVial Brokerage); LarrainVial Administradora General de Fondos (LarrainVial General Funds Management); LarrainVial Activos Administradora General de Fondos (LarrainVial Assets General Funds Management), and its subsidiaries in Peru and Colombia.
The FATCA legislation provides for all financial institutions, including Chilean ones, the obligation to cooperate with the IRS by periodically sending information on the accounts or financial products of United States taxpayers (as such term is defined in the rule itself). The account information to be shared with the Internal Revenue Service shall apply only for those who meet that definition, informs LarrainVial.
The main benefit of having signed this agreement is that LarrainVial customers will not be exposed to sanctions by the U.S. tax authority, such as 30% withholding tax, which is the maximum penalty imposed by FATCA regulations.
Photo: Ardfern. Santander will Sell Part of its Custody Business in Spain, Mexico and Brazil
Spain’s major bank will not restrict itself to selling part of its asset management business, as it did last year when it sold 50% of the business to Warburg Pincus and General Atlantic funds for US$1.3 billion.
Furthermore, according to the daily publication “Expansion”, the bank plans to dispose of half its custodial and depository business. Once again, one of the buyers is the equity fund Warburg Pincus, which, together with other partners, is apparently close to grabbing a 50% share of that business. According to the Spanish newspaper, the sale will initially affect the Global Custody & Securities Services business in Spain, Mexico and Brazil, but could later be extended to other countries. Besides those three markets, Santander has custody and depository business in Chile, Argentina and Portugal.
According to market sources consulted by Expansion, Santander’s division responsible for providing securities’ settlement, custody, and administration services, could be valued at between €0.5 and €1 billion.
Gaining muscle at the global level
Although the sale of 50% of Global Custody & Securities could be considered the first step out of the asset custody business, Expansion points out, citing market sources, that the bank’s intention could be quite the opposite, since the bank could be looking for partners which allow it to grow, especially outside Spanish borders, to become a strong player globally.
Following the sale, the bank could guarantee its partners liquidity over the medium term through an IPO, the same formula which the bank has used with Santander Consumer, Santander Consumer USA went public earlier this year, and which it also used with its asset management division. According to Expansion, the other option would be for the bank to sell the other half of its custody business to other international groups such as BNP Paribas, BNY Mellon or State Street.
The impact of regulation
One of the reasons why some companies are planning to sell their custody and depository businesses is the new regulation: UCITS V will increase the depositories’ costs and responsibilities. In this regard, UCITS V regulates three issues: the depositary liability regime; the content of the custody function in respect of the different types of financial instruments and of the function of supervision; and the requirements to act as depositary and the conditions under which this role may be delegated to sub-custodians.
As Ramiro Martinez, director of Gomarq Consulting, explained to Funds Society, the proposal introduces a new harmonized system of “quasi-strict liability” which deems the depositary liable if the assets are lost in custody (including assets transferred to a third party in sub-custody), replacing them with others of the same type or value. For the expert, this new liability regime “significantly increases the risk of the depository role and forces depositors to increase their control and will therefore increase their costs (and will probably involve additional capital requirements for the provision of this service). This will require specialization and the pursuit of economies of scale to absorb cost increases,” says Martinez.
That is why the experts are referring to a certain activity of sales of this business amongst those institutions which do not consider it core business, and its concentration among institutions which have enough financial muscle globally to meet the new requirements.
A few days ago, FIFA spoke out about investment funds in the soccer world, as it intends to regulate them as another vehicle at the service of clubs and players. The web site Iusport.com reports that FIFA approved a circular dated May 12, declaring itself in favor of regulating mutual funds, rather than banning them.
Despite FIFA’s approval, UEFA continues to disapprove of investment funds in the world of soccer. By means of this circular, FIFA seeks a solution to the conflict and the regulation of investment funds in order to provide legal assurance, transparency and clarity as a means of alternative funding for clubs, and to eliminate the current irregularities.
In the circular, signed by Jerome Valcke, FIFA’s general secretary, the sporting association explained that they have commissioned two studies to CIES and CDES in order to develop a final proposal. The aim is to raise the issue during the next FIFA Congress in Sao Paulo in mid-June.
Titled “Summaries & Comments of the Study on the Ownership of the Economic Rights of Players by Third-parties”, the circular begins by admitting that the matter of the ownership of the economic rights of players by third-parties has occupied an important place in discussions led by FIFA within the international soccer community, and that its competent committees have included it in their agendas in order to find an effective formula for addressing the issue.
FIFA also maintains that discussions about it have shown that so far, the soccer community has not established a common front to tackle the problem effectively, though apparently most stakeholders recognized that such practices may pose a threat to the integrity of soccer tournaments.
Given the complexity of this phenomenon and the strategies employed in various regions to regulate it, FIFA, as it had notified, commissioned two studies with the general purpose of gathering information on the ownership of the economic rights of players by third parties and about various aspects of this practice, which, in turn, would provide more data to support discussions and initiatives. The two studies have brought together a number of views on the subject from stakeholders in the soccer world, as well as its impact on the soccer sector in general.
FIFA’s primary objective is to tackle this problem from a solid foundation which takes into account all aspects related to this practice, so that it is possible to provide adequate and fair solutions within the framework of a well documented participatory process which includes the stakeholders within FIFA’s competent bodies.
Should you wish to learn more about it you can consult the circular, which is attached in a document.
