Foto: Biliwander, Flickr, Creative Commons. ¿Qué opinan los gestores sobre China?
Invesco has expanded its suite of low volatility products by launching the Invesco Low Volatility Emerging Markets Fund. Managed by Invesco Quantitative Strategies (IQS), the strategy will seek to outperform the MSCI Emerging Markets index over the long term with a lower risk profile.
“Invesco continues to provide investors alternative beta solutions such as actively managed low volatility strategies that have the potential to deliver higher risk-adjusted returns and help to preserve wealth during stressed market cycles,” said Donna Wilson, Director of Portfolio Management for IQS. “Managing volatility can help investors diversify their equity allocation beyond the traditional active and passive benchmark-centric strategies”.
Wilson follows: “Equity market risk is generally high compared with other asset classes, especially when considering emerging markets equity. We will seek to achieve a competitive long-term return while targeting a level of total risk (volatility) lower than the market index by relaxing traditional benchmark-centric constraints (e.g., country/sector exposures, market capitalization, and style). This creates a very broad opportunity set, allowing us to seek out securities with the most attractive risk/return profile”.
With approximately 24 billion dollars in assets under management, IQS has been offering actively managed global and regional low volatility strategies since 2005, primarily to institutional investors. On July 31, 2013, Invesco transitioned two long-standing US and Global Core Equity retail funds managed by IQS to focus on lower volatility and higher yield.
Low volatility strategies can be attractive for investors looking for potential risk reduction or return enhancement while maintaining exposure to the equity markets. Invesco already offers a passively managed approach to low volatility investing that seeks to track low volatility indexes, with Invesco PowerShares.
Photo: Keith Allison. You Missed the US Equity Fat Pitch. Now What?
Nearly five years after the panic of March 2009, when stock prices dropped to the lowest levels in recent history, the U.S. equity markets have returned to the range of fair value. At around 1,800 the S&P 500 Index is trading at about 16.5 times estimated 2013 earnings, priced for a fair rate of return in the long run of between 7 and 9% – in line with historical averages. As such, the equity markets look neither cheap nor overvalued.
This poses a quandary for those investors – institutional as well as retail – who missed the massive rally off that 2009 low (the “Fat Pitch,” to use a baseball analogy) and with it a whole generation of investment gains. “If we buy U.S. equities now, are we setting ourselves up to buy at the top?” they may be asking themselves. “And if we don’t get in, will we miss yet another Fat Pitch?”
In attempting to answer that question we start with the premise that the investment landscape around the world is in much better shape than it was in the dark days of 2008 and 2009. As bottom-up stock pickers we do not attempt to make macroeconomic and geopolitical forecasts. But we do believe that the U.S. economy is relatively well placed when compared to the rest of the world. Consider:
House prices have recovered sharply from their dramatic decline six or seven years ago.
Gas prices continue to fall as crude oil drops further below its recent peak.
The employment situation is improving even if the upward trend remains sluggish.
The Fed’s injection of liquidity into the system through quantitative easing has clearly benefitted major financial institutions. They have been able to boost their capital while at the same time credit quality has improved and non-performing loans are falling.
Further, we do not believe the U.S. equity market has formed a bubble as it did between 1998 and 2000, with the exception of a few highly priced small and mid cap stocks. The U.S. bond market, on the other hand, does look to be artificially inflated as the likelihood of higher rates increases.
Set against these favorable factors is the continuing disagreement in Washington over U.S. fiscal policy which has done significant damage to business confidence. Rather than increase capital expenditure on plant and equipment, and research and development, major corporations are opting to return cash to shareholders by way of buybacks and dividends. This lack of expenditure is one reason why GDP growth in the U.S. is running below trend.
Extract from a white paper by Robeco Boston Partners published in January 2014
Ken Hsia, portfolio manager at Investec.. Globally Focused European Companies Offer Pockets of Value for Stock-Pickers
European equities have risen on a turnaround in economic sentiment in the region and global tailwinds from the US and Japan. Yet whilst European equities are not as glaringly cheap as they were, pockets of value do persist. Globally focused European companies have driven recent equity returns in the region, and European-centered businesses that have survived and which are able to exert pricing power in what are now less competitive market segments are likely to benefit. It is the market view of Ken Hsia, European Equity Portfolio Manager and member of the Investec Global 4Factor Equity.
Where is Europe in stock market terms?
Europe’s economy appears to be slowly recovering. The recovery is still fragile and the disparity between countries is stark, as highlighted by France, which saw its PMI slip to 48.0 in November 2013. Meanwhile, gross domestic product (GDP) per capita for many major European economies, except Germany, are still some way below 2007 pre-crisis levels.
Yet whilst European equity markets have risen over the past two years, only a few stock markets have exceeded their 2007 peaks, and the MSCI Pan Europe Index is still 30% off peak levels. It is not surprising that Denmark and Switzerland, home to some of the highest quality companies, have breached previous stock market peaks.
What are the drivers of opportunity?
Global winners
A closer analysis of the MSCI Europe Index reveals that the biggest constituents are global leaders such as Nestlé, HSBC, Roche Holdings and Vodafone. These companies have a global revenue footprint that is not heavily influenced by their European operations. These global businesses are numerous, not exclusively large cap, and are often not well known outside their area of expertise. They remain a compelling reason to invest in European equities.
Improved margins
There is great scope for margin improvement in Europe. In tandem with global growth, we are seeing signs that European earnings are improving. This is attributable, in part, to some industries taking action to tackle low capacity utilization by implementing rationalization plans, taking out costs and stripping out excess capacity, so that supply becomes balanced with demand. The end result is often fewer competitors, which is good for the survivors.
Deleveraging
Low capacity utilization remains an issue in many European markets. As a result, and as profitability improves, Investec believes we will see deleveraging of corporate balance sheets as the need to invest will remain tempered. Deleveraging has the impact of transferring value from debt holders to equity holders, but should share buybacks occur this has the dual effect of enhancing return metrics and showing good capital discipline, which generally sees investors mark the company’s shares up.
Relative valuation
European equities were trading at a 15% discount to developed market equities in 2012. Strong market movements have since narrowed the gap substantially and on a forward P/E basis European equities definitely look more fairly valued in aggregate. However, Investec believes that compared to history, on a P/BV basis, European valuations can lift from here, especially as Europe already ranks well on returns and risk.
What are the risks?
The most obvious risk is instability in the euro zone. However, there is no evidence of this presently. A central assumption surrounding our investment case is stability in the region (and indeed globally). We continue to see bond yields of those countries with stretched public balance sheets fall indicating investors are becoming ‘less stressed’.
Macroeconomic risks are still a factor – for example we are somewhat wary of the re-rating of certain southern European stocks we have seen during 2013. We believe a disciplined evidence-based investment approach should ensure one gets the balance between conviction and more hopeful optimism right. The biggest risk is the gradual withdrawal of stimulus by the US Federal Reserve and the influence that has on all markets. In this environment, our view is that a bottom-up stock-picking approach is beneficial given its focus on company-specific risk over market risk.
Deutsche Bank announced it has reached the USD 100 million commitment target for Global Commercial Microfinance Consortium II, a first-ever fund to support the growth of microfinance institutions (“MFIs”) that pursue a high level of client care, transparency of operations and pricing, and product innovation.
Consortium II’s goal is to encourage and facilitate a renewed focus on client service and product innovation in microfinance, while continuing to develop the field of social investing. To date, Consortium II has supported more than 30 client-focused MFIs operating in Eastern Europe, Latin America, and Asia. In addition to loan capital, Consortium II borrowers have access to technical assistance to improve customer service and achieve Smart Campaign certification for the Microfinance Client Protection Principles, which aims to embed client protection practices into the institutional culture and operations of the microfinance industry.
Consortium II also provides new opportunities to invest in social enterprises in the fields of healthcare, education, energy, agribusiness and technology that operate at the base of the economic pyramid. Consortium II has already disbursed a USD 2 million loan to the Indian School Finance Company.
Consortium II represents a partnership with investors who share a focus on responsible microfinance, including AXA France VIE, AXA Germany, Calvert Foundation, CNP Assurances, Développement international Desjardins (DID), Everence Community Investments, KfW, Left Hand Foundation, Money in Motion LLC, Overseas Private Investment Corporation (OPIC), State Street, Swedish International Development Cooperation Agency (SIDA), Storebrand and University of Denver’s Daniels College of Business.
“Global Commercial Microfinance Consortium II aims to provide access to much-needed capital for microfinance institutions that make customer service a priority,” says Jacques Brand, Chief Executive Officer, North America, Deutsche Bank.
Wharton Research Data Services (WRDS), the data research platform and business intelligence tool for corporate, academic and government institutions worldwide, has announced the winners of the Southern Finance Association (SFA) Best Paper Award for Empirical Research. Andy Naranjo, Bank of America Associate Professor; Jongsub Lee, Assistant Professor; and Stace Sirmans, Ph.D. student, all from the Department of Finance, Insurance & Real Estate in the Warrington College of Business at the University of Florida, were recognized for their research paper, The Exodus from Sovereign Risk: Sovereign Ceiling Violations in Credit Default Swap Markets. The paper examines how private sector firms can delink from sovereign risk. WRDS presented the award to the researchers at the Southern Finance Association conference on November 22, 2013.
In the aftermath of the global financial meltdown, firms’ abilities to raise capital have been impacted dramatically by sovereign risk. In credit default swap (CDS) markets, Naranjo, Lee and Sirmans found that geographic location of holdings and cross stock listings impacted a firm’s ability to delink from sovereign risk and maintain better credit ratings than those more closely linked to sovereign risk. Their findings can help investors determine actual risk in CDS markets, especially in this post-crisis stage. In addition, credit agencies could utilize CDS data – including sovereign linkage, firm location and location of assets – to determine credit ratings faster and more accurately than by relying purely on sovereign ceiling violations data.
“WRDS has a long and strong commitment to the research community, and we are constantly adding datasets and resources to support researchers and serve academic, corporate and government users better,” said Robert Zarazowski, Senior Director of WRDS. “For WRDS, advancing the field of academic research is a win for everyone.”
The researchers relied on Markit CDS Datasets, which are available through WRDS. Their research adds significantly to existing explorations of sovereign ceiling violations; international linkages and the impact of cross listings; and the role of local market characteristics and country-specific rules on credit risk. The scope of data collection necessary to conduct research for the paper was complex, including micro-details on country-specific rules for over 2,300 firms in 54 countries.
Wikimedia CommonsPhoto: Yorick Petey. Carmignac Gestion Group Appoints European Equities Team in London
Carmignac Gestion Group has appointed a new four-man European equities team, headed by Muhammed Yesilhark. The team is based in the London branch of the Group and will assume management of EUR1.6 billion of European funds: Carmignac Grande Europe, Carmignac Euro-Patrimoine and Carmignac Euro-Entrepreneurs. Muhammed and his team previously managed a large European equity portfolio for four years at SAC Global Investors’ London office, with a strong track record.
“We’re bringing on board a talented team under Muhammed Yesilhark’s leadership to underscore our commitment to generate strong investment performance in European equities. The objective is to raise our European funds to first quartile. Their experience in long-short management will help us to perform in all market conditions and will complement our risk management. Muhammed Yesilhark and his team will also contribute to the firm by originating investment ideas for use across the Carmignac Gestion Group funds range”, says Carmignac Gestion Group’s Founder and Chairman, Edouard Carmignac.
Muhammed Yesilhark started as an analyst at Lazard in Frankfurt. He then helped to build York Capital’s hedge fund business for five years before joining SAC in 2009. He studied Finance and Management at the European School of Business in Reutlingen. Muhammed will run the Carmignac Grande Europe fund and the long-short Carmignac Euro-Patrimoine fund.
Muhammed will co-manage the small and mid-caps Carmignac EuroEntrepreneurs fund with Malte Heininger who has been working with him for more than three years and is a former investment banker at Morgan Stanley. Malte graduated from ESCP-EAP in Paris.
The team also includes two analysts: Huseyin Yasar joined Muhammed’steam in 2011 from Goldman Sachs’ M&A division, and graduated from the European School of Business in Reutlingen and from Dublin City University. Saiyid Hamid worked for three years at Private Equity firm TA Associates, and graduated from Harvard Business School before joining Muhammed’s team at SAC in 2013.
Wikimedia CommonsJosé Darío Uribe. Photo: Bank of the Republic, Colombia. José Darío Uribe appointed Chair of the BIS Consultative Council for the Americas
The Board of Directors of the Bank for International Settlements (BIS) has appointed José Darío Uribe as Chair of the BIS Consultative Council for the Americas (CCA). Mr Uribe is Governor of the Bank of the Republic, Colombia.
Mr Uribe’s appointment is for a term of two years as from 9 January 2014. He succeeds Agustín Carstens, Governor of the Bank of Mexico, who has chaired the Council for the last two years.
The CCA comprises the Governors of the BIS member central banks in the Americas.It was established in 2008 to facilitate communication between these central banks and the BIS Board and Management on matters of interest to the central banking community in the region.
The BIS Representative Office for the Americas, located in Mexico City, provides the Secretariat for the CCA.
My last visit to Beijing happened to coincide with the Communist Party’s Third Plenum Meeting. General business sentiment was just as upbeat as it had been earlier last autumn. But through my discussions with different businesspeople, I came away with a distinct new optimism over the leadership’s more market-oriented stance on policies.
To give an example of the new administration’s improved focus on marketplace best practices, let us look at policies that have impacted China’s toll road operators. As car ownership has grown with rising incomes, China’s toll road industry has experienced consistent growth in recent years. However, in 2012, major toll road operators were negatively affected by a government policy enacted by China’s former administration that mandated toll exemptions on all major Chinese holidays.
Besides contributing to severe traffic congestion on the country’s main roads, the holiday policy failed to stipulate any compensation measures to offset losses that toll road companies would have to endure. While China’s new administration has maintained the toll exemption policy for major holidays, immediately after taking office, new government officials began working with the industry to offer compensation that may help offset any related losses. During my trip, I got the sense that toll road operators are generally pleased by the new administration’s understanding of their concerns.
The current leadership seems very committed to reducing government intervention in the economy. One of the highlights that came out of the Third Plenum communique is a government endorsement for the market to play a more “decisive” role in allocating resources. In addition, the new administration will further deregulate sectors that have traditionally been dominated by large state-owned enterprises (SOE). It plans to adopt an approach to allow private investments in most industries unless they are on the official list of industries restricted from private and/or foreign investment. The government also promised to simplify business registration and approval processes and level the playing field for non-SOE companies to better compete.
While I am encouraged to see an ambitious reform package coming from China’s new leadership, the key to the country’s future success will lie in implementation. Counter to the new initiatives (and not long after the Third Plenum meeting), several cities in China rolled out some administrative measures that aimed to curb increasing local housing prices. Different localities may continue to struggle with more market-friendly reforms, but in general, we are hoping the broad business environment in China will gradually move in the direction of a market-oriented economy. If so, non-SOE companies could become major beneficiaries of this long-term trend.
Henry Zhang, CFA, Portfolio Manager 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.
Giorgio Pradelli . EFG Internacional nombra a Giorgio Pradelli co-CEO
In order to allow John Williamson, CEO of EFG International, to devote more of his time to the development of the five regional private banking businesses, as well as investment and wealth solutions, Giorgio Pradelli, Chief Financial Officer, will in future focus on EFGI’s operational and risk platform and additionally take on the role of Deputy CEO. This applies with immediate effect.
The composition of EFGI’s Executive Committee remains unchanged, although the reporting lines of the Chief Operating Officer, Chief Risk Officer and Group General Counsel transfer from John Williams on to Giorgio Pradelli.
“Since joining us in June 2012, Giorgio has made a significant contribution to the conclusion of our busiess review, in particular the strengthening of our capital position and overall risk profile. His promotion to Deputy CEO is well deserved and allows for a clear focus of responsibilities within the executive team to support our objective of controlled, profitable growth”, says John Williamson, Chief Executive.
Photo: Mailer. Falcon Private Bank to Sell Hong Kong Branch to EFG Bank
Swiss wealth management boutique Falcon Private Bank announced that it has reached an agreement to introduce its clients and certain employees of its Hong Kong branch to EFG Bank, the Asia business of the international private banking group EFG International.
Following a strategic review, Falcon Private Bank has decided to exit its Hong Kong private banking business and sharpen its emerging markets focus on the Middle East, Africa and Eastern Europe. The Hong Kong branch will be liquidated upon completion of this process. Falcon Private Bank’s Singapore branch will continue serving as a private banking hub in Asia.
“Our strategic ambition is to become a leading emerging markets private bank focusing our business exclusively on markets where we have a sharp competitive edge”, according to Eduardo Leemann, Chief Executive Officer of Falcon Private Bank.
