Wikimedia CommonsPaquin también se une al Comité de Gestión de Banca Global y Soluciones de Inversión. . Lyxor AM nombra consejero delegado a Lionel Paquin
Lyxor Asset Management has announced the appointment of Lionel Paquin as CEO. He replaces in this position Inès de Dinechin who will leave the Group.
He joins as well the Management Committee of the Global Banking & Investor Solutions division.
Mr. Lionel Paquin was previously the Head of Lyxor Managed Accounts Platform since 2011. He has also held the position of Chief Risk Officer and Head of Internal Control at the firm, and was a member of Lyxor Executive Committee since September 2007.
Prior to this, Mr. Paquin has served as Managing Director and Principal Inspector of the “Inspection Générale” at the Societe Generale Group since June 2004. Mr. Paquin began his career in 1995 in the French Ministry of Finance as a high-ranking civil servant and held several positions within this Ministry.
Mr Lionel Paquin is a graduate of Ecole Polytechnique (1993) and ENSAE (1995).
Kevin Loome, cogestor del Henderson Horizon Global High Yield Bond Fund. Perspectivas favorables para la deuda high yield
High yield bonds have had a reasonably strong start to the year, particularly considering the fallout within the equity markets. For example, in January, the S&P 500, the index of leading shares in the US was down 3.5% over the month. In contrast, US high yield bonds, as represented by the BofA Merrill Lynch US High Yield Master II Total Return Index have returned 0.7% in US dollar terms.
A similar phenomenon exists in Europe where the MSCI Europe Total Return Index is down 1.8% in euro terms versus a rise of 1.0% in the BofA Merrill Lynch European Currency High Yield Total Return Index.
Driving the positive performance in high yield has been the decline in yields on core government bonds. Bond prices move inversely to directional moves in yields, so when yields fall, prices rise. The yield on the 5-year US Treasury fell more than 20 basis points in January whilst the yield on the 10-year US Treasury fell more than 30 basis points. This is important for the high yield markets because this is the maturity part of the yield curve around which high yield securities are priced.
The other major influence on bond prices is credit risk: this reflects individual corporate strengths together with broader macroeconomic forces on an issuer’s capacity to meet their repayment obligations to bondholders. There is a danger that investors may extrapolate the recent weakness in some of the economic data statistics such as the soft non-farm payrolls growth in the US as less an aberration (related to harsh winter weather) and more of a turning point signalling loss of economic momentum. Our view is that the temporary weakness in developed market economic data will abate.
More concerning has been the weakness in emerging markets where slower Chinese growth and volatility in emerging asset prices (partly due to liquidity draining from emerging markets in response to the US Federal Reserve tapering its asset purchases) has led to negative sentiment towards emerging market debt and equities.
So far, the emerging market fallout has not led to contagion to credit markets, although there have been outflows from Exchange Traded Funds (ETF). In the past, we have seen that during bouts of volatility, the ETF market has been a lot more closely correlated with equity markets than the cash bond high yield market.
This suits us because we are primarily invested in cash bonds from developed market issuers. In fact, fund flows support the notion that in volatile times, investor preference is for bonds over equities. The global mutual fund data flows from BoA Merrill Lynch for the first five weeks of 2014 show an outflow from equity funds and positive flows into bond funds, with government bonds, investment grade corporates and high yield all benefiting. The exception is emerging market debt, which remains in outflow.
Flows can be notoriously volatile, however, and our focus is on the cues that drive medium to long-term performance – valuations, fundamentals and liquidity. On all three factors, we believe the outlook for high yield bonds remains fair.
Valuations within high yield remain attractive. On a historical basis, metrics are marginally rich but only slightly above historical averages. On a relative basis, high yield bonds continue to look inexpensive when yield spreads are set against government bonds, investment grade bonds and expected default rates.
At the fundamental level, corporate earnings have been good. By 12 February 2014, almost 76% of S&P 500 companies that had announced earnings in the most recent reporting season had beaten expectations and the companies we talk to are generally upbeat. What we do not want to see, however, is optimism spilling over into shareholder-friendly/bondholder-unfriendly corporate behaviour. We have noticed, particularly in the US, which is at a more advanced stage in the economic cycle to Europe, a tick-up in more aggressive uses of high yield issuance proceeds, such as for acquisitions. However, as the chart shows more aggressive uses of proceeds (red shadings) are still far below the danger levels of 2005-7.
In terms of liquidity, the outlook remains encouraging. There is approximately US$25 billion of new US high yield issuance in February and that calendar is spread across bonds of different sizes, industries and credit ratings. Such breadth is usually a sign of a healthy market.
For now, our expectations are unchanged that global high yield can generate mid-single digit total returns in 2014, although the strength of that figure will depend on the quality of security selection. For our part, we continue to favour single B and CCC high yield bonds, and some of the smaller issuers where we believe fundamental research is able to identify value.
Kevin Loome, co-manager of the Henderson Horizon Global High Yield Bond Fund
Brickell World Plaza, where Deutsche is based in Miami. Former Barclays’ Executives Canalda, Meyerhans, Muñoz and De La Lama Join Deutsche Bank in Miami
Deutsche Asset & Wealth Management has signed on four former Barclays W&IM professionals to join their team in Miami. Diego Canalda, Roman Meyerhans, Narciso Munoz and Diego De La Lama joined Deutsche Bank Securities at the end of last January, as bank sources confirmed to Funds Society.
This move by Barclays conforms to the new strategyof reducing the complexity of certain business areas, which was made public in September 2013. Since then, and as part of this strategy, the division of W&IM Barclays is proceeding to reduce the number of regions, among which are those of Latin America and the Caribbean, in which it provides services to clients. Last September, Barclays announced the closure of 100 private banking centers, five booking centers, and the downsizing of its workforce worldwide.
Two years earlier, in 2011, the British company threw itself entirely into increasing its client base in Latin America and the Caribbean, and hired a number of U.S. professionals for the task, including Narciso Muñoz, amongst others.
Canalda, with over 15 years’ experience, assumed the post of Managing Director. Before joining Barclays Wealth in Miami as director in 2008, he worked at Lehman Brothers for ten years.
Meanwhile, Muñoz, CFA with 20 years’ experience in the financial sector, worked at HSBC Private Bank International before joining Barclays Wealth Management in Miami in October 2011. Muñoz, part of the group who joined Barclays at a time when the British bank was firmly committed to boosting its Latin American business, joins Deutsche Bank Securities as Director.
De la Lama, also from Barclays W&IM, will assume the duties of Assistant Vice President. De la Lama has also worked at HSBC Private Bank, UBS Wealth Management and Intercam Securities.
Deutsche Asset & WM provides service to 180,000 clients from 130 offices in APAC, Europe and the Americas. It has 298,000 million dollars in assets under management from private banking clients, and the company employs 900 professionals dedicated to private banking and high-net-worth clients.
Income investors generally look at reliable yield stocks or firms with the ability to grow their dividend over time, or some combination of the two. By definition, according to Stephen Thornber, fund manager at Threadneedle, this either means investing in businesses that can generate plenty of cash to return to shareholders over time or in companies that can become decent and dependable dividend payers in the future. Neither of those, he highlights, are a bad place to be. “It does require a long-term perspective, however, and consequently you won’t usually find income investors following the latest investment fads.” Thornber lists the following ten reasons to invest in global equity income:
1. Equity income investors take a long-term perspective.
3. Income strategies have outperformed strong-performing equity markets in the last few years. But remember that dividends (and dividend growth) drive total real returns from equities – and could become even more important in a low growth/low return world.
4. Income stands up as an investment approach in its own right.
Burns Supper organized by Aberdeen in Miami. Aberdeen Commemorates the Scottish Tradition by Holding a "Burns Supper" in Miami
For the third consecutive year, Aberdeen Asset Management organized its characteristic “Burns’ Supper” in Miami last week. The firm’s clients who attended the event enjoyed an evening in which the whiskey and the bagpipes were followed by the toasts to the eighteenth century Scottish poet Robert Burns, which was the aim of the occasion.
Gary Marshall, who until this year headed Aberdeen Asset Management for the Americas, acted as “master of ceremonies” in the purest Scottish tradition. Marshall will soon return to the UK to continue to develop management tasks for the firm, while David Steyntakes overtakes as managing director of the Aberdeen Asset Management team in the Americas region, as was reported by the company in late 2013.
Aberdeen Asset Management has its corporate headquarters in the city of Aberdeen in northeastern Scotland, where its roots date back to 1875, although the current asset management company was established in 1983.
“I am delighted to witness how Aberdeen’s presence in Miami is reinforced year after year, thanks to the support of an excellent team and of course, thanks to your support as clients,” explained Gary Marshall to his guests. “Once again we gather on a date close to January 25th, the birthday of Scottish poet Robert Burns, to resume this tradition which is an important part of Scottish culture, and essential to our overall corporate identity.”
“Aberdeen has closed 2013, by, amongst other achievements, becoming the first European independent asset manager in terms of assets under management listed on the stock exchange, following SWIP’s acquisition, with over half a trillion dollars in assets under management, of which more than 75 billion are in the Americas region.”
During the dinner, which included the traditional Scottish “haggis”, the guests enjoyed a Whiskey Tasting commented by Nicholas M. Pollacchi, Whisky Master, who has worked as Public Relations’ Director at The MacAllan and The Glenrothes, two prestigious Scottish distilleries. Since 2010 he has his own company, The Whisky Dog, which organizes whiskey tasting events in the U.S.
Several members of Aberdeen’s team in the U.S, London, and Scotland, both of the commercial division and of its investment team accompanied the guests during the cocktail and dinner, which was enlivened by Piper Robert Ritchie, Canadian born piper of Scottish origin and a resident of South Florida since 1956.
Rodrigo Nuñez Aguilar. Natixis Global AM nombra nuevo director de Cuentas Globales para Latam y EE.UU. Offshore
Natixis Global Asset Management (NGAM) has announced the appointment of Rodrigo Nunez Aguilar as Director of Global Key Accounts, Latin America and U.S. Offshore.
Nunez Aguilar, based in New York, will manage U.S. Offshore and Latin America fund distribution sales teams and focus on strengthening NGAM’s relationships with cross-border fund distributors in the United States and in Latin America. He will report to Sophie del Campo, head of Latin America for NGAM International, and Ed Farrington, head of U.S. Offshore Sales.
“Rodrigo will play a critical role in linking our existing U.S. Offshore business to our growing presence in Latin America,” said Hervé Guinamant, President and Chief Executive Officer of Natixis Global Asset Management – International Distribution. “Latin America is one of the fastest growing fund markets in the world, and we know that our unique approach to portfolio construction will strongly resonate.”
Nunez Aguilar has over 17 years of asset management industry experience, most recently as head of funds and advisory sales for Latin America and U.S. Offshore at Barclays. He previously served as New York-based executive director for Latin America and U.S. Offshore Distribution at Morgan Stanley Investment Management and in roles at ING Barings and Bank Boston.
Nunez Aguilar holds an MBA from the Leonard N. Stern School of Business at New York University and a B.A. in economics from the Universidad Catolica Argentina. He holds FINRA Series 7 and 63 licenses and is a CFA charterholder.
During my last research trip in November, we visited mostly consumer-facing companies in Japan where we took the opportunity to pose two key questions to the management teams we met. The first was—“Are you planning to increase prices for products or services after Japan’s consumption tax hike (scheduled for April)?” And secondly: “Will you raise employee wages?”
To our surprise, many of the firms we met with said it would be difficult to increase prices for their products or services. While they seemed concerned about the rising costs of imports due to the weakening yen, they were also wary of meeting resistance from their customers, or possibly losing customers to competitors who may keep prices more stable. They also said they were quite reluctant to increase base salaries for their employees, noting that they would first need greater confidence that a more permanent, fundamental turnaround was occurring in Japan’s economy.
Opinion writer and Waseda University Professor Norihiro Kato has argued that Japan’s younger generations, those who came of age after the bursting of the country’s economic bubble, have never known what a booming economy feels like. They have not experienced inflation or rising wages. “They are accustomed to being frugal,” he wrote in The New York Times. “Today’s youths, living in a society older than any in the world, are the first since the late 19th century to feel so uneasy about the future.”
I suspect a similar trait has been embedded somewhat into parts of corporate Japan, especially in consumer-facing companies. Like Japan’s younger generations, many Japanese companies also have not experienced rising prices, regular wage increases and investments rather than savings over the last two decades; some firms may have experienced only the same sense of frugality and caution as the youth in its society.
Shaking this mentality of a deflationary environment may be key to what some parts of Japan Inc. need to help boost its economy. The central bank can overcome this obstacle by sticking to its guns on its monetary policy, creating expectations of higher nominal GDP. Fortunately, since the beginning of this year some larger Japanese companies have already announced wage or price increases. Also, some recent statistics in Japan, such as an increase in the consumer price index and the availability of jobs (measured as the ratio of job offers per job seeker), may pressure companies to raise wages. We hope to see more signs that Japan appears to be finding a virtuous cycle of economic recovery and growth.
Kara Yoon, Research Analyst at Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Giordano Lombardo, Group Chief Investment Officer at Pioneer Investments, opens this month’s CIO Letter quoting Marcus Aurelius: “Look beneath the surface; let not the several quality of a thing nor its worth escape thee”. The subject of this letter is risk. An extract of the main risks that may break the support for risky assets, according to Lombardo, follow. You may access the complete document through the attached pdf file or through this link.
Walking on a Tightrope (Amid the Credibility of Central Banks and the Risk of Crisis)
The first month of the year has confirmed the main scenario presented in our latest Outlook: developed countries’ economies are gathering momentum and Central Banks retain accommodative monetary policies, extending support for risky assets. However, there is no shortage of reasons for being careful going forward.
Emerging Markets stand out as the weakest spot, as most investors refrain from entering countries with high current- account deficits (Argentina, Turkey and other Asian countries are again under the spotlight) or with political uncertainties putting the skids on overdue economic reforms.
None of the sources of volatility spotted recently has dramatically changed our constructive view on risky assets, especially equities. However, in this letter, I believe it is worth focusing on the main risks that may undermine our investment strategy, notably a change in investors’ expectations on monetary policies and the deflation, particularly in Europe:
– The main risks to an investment strategy favoring risky assets are a change in investors’ expectations on monetary policies and deflation in Europe. Playing with market expectations is not an easy task. In our view, the FED is walking on a tightrope and the risk of disappointing the markets is not negligible.
– The second main risk to our base scenario is deflation. Deflation is hardly a healthy condition for the economy: it tends to defer consumption and investments, to aggravate the debt burden and dampens economic growth as a result. Being in a low inflation/disinflation scenario or in outright deflation can make a significant difference for financial markets. Equities tend to anticipate the deflation, thus proving how important is the role of expectations and the credibility of the Central Bank.
The place where the deflation risk appears to be more tangible is Euroland. In the Eurozone, the drop of inflation below 1% hides a high dispersion in individual data.
The ECB needs to decide what is the lesser evil: avoiding deflation in the periphery, while allowing for some inflation in the core, or sticking to an “anti- inflationary” orthodoxy, which is going to kill the hopes of an economic recovery. We believe that the market has not fully realized nor priced the risk that the ECB has no plan to counter deflation and that political disagreement will lead to a prolonged standoff on the course of action.
Another source of risk to our global scenario is a marked slowdown in the world economy, coming from increasing turmoil in Emerging Markets, as we briefly mentioned. As we have seen, the risk is that they become “victims” of a change in the US monetary policy.
You may access Pioneer Investment’s full CIO Letter through this link or by accessing the pdf attached at the top left corner of this page.
Foto cedidaCaroline Maurer, Manager del fondo Henderson Horizon China Fund
. ¿Dónde vemos China en el Año del Caballo?
With further policy details provided by the central government in 2013, we see 2014 as the year for actual implementation. With the focus now shifted from politics to the economy, we believe that economic growth, forecast at a lower rate than 2013 at 7.5% for 2014, is likely to be more stable given better macro-economic management.
Given the more stable growth rate, we believe that there are reasons to continue staying positive on the China market.
The new government led by President Xi Jinping has set a positive groundwork for reform by communicating growth targets and reiterating the government’s commitment to change. Following the release of comprehensive reform plans after the 3rd Plenum meeting in November 2013, there has been a general uplift in overall sentiment. We feel that this level of transparency has done much to boost the confidence of people and better manage their expectations. We also have more confidence in the government’s execution capabilities to push for a wider scale of reforms as power is now more centralised. Not only is Xi Jinping the current president, but he is also Head of China’s Communist Party (CPC) and chairman of the country’s Central Military Commission.
The latest reported audited local government debt of 17.9tn RMB (end June 2013) is manageable, but has been an overhang for the market. Potential opening up of the municipal bond market will provide the local governments with a new source of long term financing outside of the traditional bank loans. This would help ease market concerns on duration mismatch of debt terms and infrastructure project cash flow generation cycles. Other measures to deleverage such as privatising government owned assets (eg: infrastructure, natural resources mining rights and state owned enterprises) are also positive to drive the improvement of operating efficiency. Lining up the interest of management and shareholders is likely to improve Returns on Equity (ROE) and benefit minority shareholders.
Apart from the traditional investment into roads, railways and ports, we are seeing incremental demand into the city mass transit system, drainage network, gas power plant, hospitals and other environmental protection areas. The process of local government deleveraging may put some pressure on project financing in the short term, however is expected to be mitigated in the longer term. We expect investment into infrastructure to remain stable in 2014.
The Chinese government is looking to aid income redistribution by increasing the number of regions that will have pilot programs privatising the residential land of farmers. Rural residences account for over half of the Chinese population and improving the wealth level of these residences may benefit domestic consumption.
As seen from the chart above, the dispersion between corporate earnings and PE has gone wider over the past three years. Market consensus is between 10-15% of corporate earnings growth in 2014 and we see further potential upside given the more positive business sentiment. The market has potential to rerate and we remain constructive, looking out for potential trading opportunities, as market valuation at below 10x 2014 estimated P/E still looks cheap. Valuation gaps between sector/names have been getting wider with “old economy” names such as China Communication Construction, Weichai Power and banks trading at 5-10x PE; and “new economy” names such as Tencent and Wantwant trading at 20-50x PE range.
The strategy for 2014 is to continue being focused on stock picks in quality growth sectors. The key sectors we favour are Consumer Discretionary, IT, New Energy, Selective industrials and Non-banking Financials. In the past year, we have seen the easing of overcapacity in the industrial sectors which occurred as a result of credit boom post financial crisis. We may start seeing supply cuts in industries such as cement, steel, paper due to a tightening of environmental standards and less capacity expansion in the past 12-18 months as companies had poor profitability. This will help improve the utilisation rate and profitability of cyclical industries especially for industry leaders.
Conclusion
There is likely to be some near term volatility as a result of tackling the accumulating debt risks of local governments and implementation of financial liberalisation amongst other reforms. Recently released PMI data slowed to 50.5 for the month of January 2014, but we feel that this is likely due to the Chinese New Year effect and is better to wait for February data before analysing this in depth.
With China’s reform plan taking shape, we believe that there is long term value to be found. The volatile market sentiment would allow us the opportunity to build up positions in stocks that we have identified as being attractive in the longer term.
Realistically due to the large scale nature of some reform projects, implementation will expectedly take some time. However this is to be expected and from an investment standpoint, we would much rather the government take time to lay the foundations right.
Caroline Maurer, Manager of the Henderson Horizon China Fund
Alfred Slager, profesor de Pension Fund Management en TiasNimbas Business School de la Universidad de Tilburg, Holanda. Factor Investing y su implementación: ‘Todos los caminos llevan a Roma’
Robeco recently interviewed Alfred Slager, professor in Pension Fund Management at the TiasNimbas Business School at the University of Tilburg, the Netherlands. Alfred Slager wrote the research paper “Factor Investing in Practice: A trustees’ Guide to Implementation” together with Professors Kees Koedijk and Philip Stork. This paper concludes that factor investing can take several forms: “But eventually – all roads lead to Rome.”
What is the background to this second research paper?
Factor investing has been much talked about, but so far we have little information on how it can be implemented. A follow-up paper was therefore needed to assemble the knowledge and experience of funds that have already started using factor investing in order to help other funds find their own way of implementing this investment strategy.
When we started our first study, it soon became clear that we were dealing with two separate questions. The first of these focuses on how factor investing is developing. This is the theoretical angle, which we dealt with in our first paper. The second asks how exactly institutional investors apply factor investing, and this is the subject of our second paper.
What surprised you most in this paper?
That there are different ways of implementing factor investing. Little was known about the practical aspects before we started our study (e.g. about incorporating factor investing into your investment process – managing it – the role of the regulator).
Why is factor investing in the limelight now?
Two simultaneous signals triggered this interest. First, the big financial crisis of 2008/2009; diversification turned out to be more of a problem than expected, which caused this and other basic investment principles to become important items on everyone’s agenda. How can we fix things to ensure we emerge stronger from the next financial shock?
Second, pension funds have become more critical about the role of active management. Pension funds, while willing to pay for the skills of a portfolio manager, are not prepared to do so to achieve factor-based returns that they could also generate in their portfolio by other means. Factor investing contributes to the discussion of the role of active management.
What is your own experience of the way pension funds look at factor investing?
There are funds that implement factor investing and feel that it contributes positively to their portfolio composition. They may use factor-based benchmarks, for instance. Other funds are still watching from the sidelines. They see factor investing as a kind of black box. But they, too, would like to strengthen their portfolio and diversify more effectively.
Why are Dutch and Scandinavian investors ahead of the pack in this area?
They have large amounts of institutional capital and a long-term investment horizon. But they also want to control the risks of negative shocks more effectively in the short term. In addition, Dutch and Scandinavianfunds emphasize transparency, cost control and well thought-out investment processes. Finally, they focus strongly on investing scientifically.
Will all institutional investors apply factor investing in future?
We will see this increasingly in many different variants. Something for everybody. What all these investors have in common is their desire to combine stable and enhanced diversification with new opportunities for returns.
Which other professional investors will decide to use factor investing?
I wouldn’t be surprised to see foundations, associations and private wealth funds applying factor investing.
There is a barrier to this, however. We are turning away from our familiar equities and bonds. Term spread and liquidity premium are concepts that are more abstract, and also harder to explain. On the other hand, a factor portfolio can be seen to ensure more stable returns.
What different methods of implementing factor investing are there?
In our research paper we discuss different variants. Institutional investors often implement factor investing in stages.
They may initially decide to use the first variant, the so-called ‘risk due-diligence’ method. Without immediately adjusting the portfolio, they consider exposure to different factors. You can use asset allocation to increase or decrease your exposure. An analogy would be a health scan.
The second variant entails making a more conscious choice to use factors for strategic asset allocation. In this case, you adapt your investment style and benchmark to these factors. Factors that are not used in your traditional investments can be applied to alternatives. The third variant is the most logical one. For this, you base your entire portfolio on factor premiums. However, there are only a few parties that currently do this.
What are the three biggest obstacles to implementation for institutional investors?
Firstly, the language of factor investing is an obstacle. It is less concrete, and the terms are less well known.
Secondly, there is the implementation issue of re-balancing; incorporating this effectively into investment processes requires a major effort by investors. And a third obstacle is that these are new and complex investments for many managers. It’s not really in the spirit of our times to try out new and challenging things.
What are the main differences between these approaches?
The difference lies in how rigorously you wish to implement factor investing. You can apply different variants. But whatever option you choose, you will be fully aware of what is happening in your portfolio.
What do the regulators think about factor investing?
There are positive and negative aspects. A robust portfolio is a positive aspect. Increased transparency of costs is another. Factor investing gives pension funds a better idea of what they do and don’t pay for.
There is also a clear negative aspect from the regulator’s point of view. The notion of being in control produces potential conflicts between the regulator on the one hand and the manager or pension fund on the other. There is much to regulate. In operating terms, this raises the bar somewhat for those who wish to start factor investing. However, practical experience has already demonstrated that there are many feasible ways to implement this strategy. Professional investors will therefore increasingly be allocating to factors in future.
