Wikimedia Commons. Pimco and Source Launch an Actively Managed Covered Bond ETF
Pimco and Source have launched the PIMCO Covered Bond Source UCITS ETF. The product offers a way to invest in the covered bond market, combining the advantages of an ETF with Pimco’s approach to active management. PIMCO Covered Bond Source UCITS ETF is managed by Kristion Mierau, senior vice president and head of Pimco’s European covered bond portfolio management team. Pimco has existing assets under management of over EUR 130 billion in the asset class.
The PIMCO Covered Bond Source UCITS ETF is traded on Deutsche Börse and has a first year annual management fee of 0,38%. Distributions are paid monthly. In addition, Pimco has entered into a cooperation with Clearstream, giving investors the possibility to order shares of an ETF through Clearstream’s Vestima platform as a mutual fund with daily fixing. This is a ‘first’ for Vestima and PIMCO.
HowardChan, vice president and product manager for PIMCO’s European ETF products, says: “We have designed this product as a unique solution for a wide range of investors who seek access to the covered bond market, combining Pimco’s active approach to covered bonds with the intra-day pricing and daily portfolio holdings transparency of the ETF vehicle.” Source CEO Ted Hood says: “We are delighted to grow our product offering in partnership with PIMCO, adding to our fixed income ETF suite”.
Why covered bonds?
Covered bonds have traditionally been unique to Europe, first issued in Germany and then followed by other European countries but increasingly they are being issued outside Europe. “This expanding investment universe creates new opportunities for investors and fulfils their increasing demand for ‘safe assets’,” said Mr. Mierau. “In the current low interest rate environment, covered bonds offer attractive risk-adjusted yields and are potentially a compelling alternative to broad European government bonds, as the asset class has historically provided higher returns with lower volatility and lower sensitivity to changes in market yield levels.” At current spread levels, covered bonds also offer investors a more attractive and secure way to gain credit exposure than unsecured senior bank debt, according to him.
For certain institutional investors, covered bonds offer additional advantages from a regulatory perspective. Banks benefit from the treatment of covered bonds as lower risk-weighted assets (RWA) under Basel III. Covered bonds are also considered “liquid assets” under the new Basel III liquidity regulation (LCR). Insurance companies can benefit from the privileged treatment of covered bonds under Solvency II.
Wikimedia CommonsRaimundo Martín is looking for a niche for the opening of the company in Latin America.. Mirabaud AM Seeks its Niche in Latin America and Aims to Reach EUR 1bn in Spain
Raimundo Martín commences the new year 2014 aiming to increase recognition for Mirabaud Asset Management, the firm which he manages in Iberia and Latin America, beyond the private banking business for which the Swiss group Mirabaud is mainly known. This recognition will open the doors of the Spanish and American markets, which he defines as “very competitive” and in which he has been working to position his company for about a year and a half. Although ambitious, Martín faces this challenge with the same blueprint which identifies Mirabaud, a long-term vision which allows him to proceed patiently but firmly. “It is important to define our company clearly and position ourselves accordingly,” he explained during an interview with Funds Society.
Therefore, he defines his firm’s current status within the Spanish market as “in the process of positioning” and is aware that it needs time to assert its funds’ track record in order to reach a “decent market share” in about three years, which he places at EUR1 billion in terms of assets. And all in a scenario in which the fund industry “will continue to grow but it will take years to return to pre-crisis levels.”
Meanwhile, he is looking for a niche for the opening of the company in Latin America. “The Latin American market is very large and offers excellent and varied opportunities. We are exploring them, and when we find them, we will work on them and employ all the necessary resources,” he said. Although this development is still in its infancy, and Martín does not as yet have an asset target in figures or any offices instituted, he can already speak of a twofold strategy.
On the one hand, Mirabaud AM steers towards established markets such as Chile, Peru and Colombia, working with insurance companies and fund managers already investing their pension fund portfolios abroad. The management firm is about to sign a contract with a local representative for these three countries. On the other hand, to markets where their boutique nature and their flexibility allow growth, such as Panama or Uruguay, where they work directly with agencies which place customized orders and for which Mirabaud AM creates private label products. Overall, it has much to do with family offices and private banks, because it fits in with the business of their own group.
And finally, he is analyzing the Brazilian market and potential partnerships with local management firms, after ruling out Mexico, where he thinks there is no place for his company yet. In these markets, in addition to asset management, he is also offering consulting services.
Investors’ Appetite
“Investors in the region have an increasing need to invest abroad, and wealth creation has outgrown the narrow local markets. Therefore, they need better tools to invest externally,” he explains; this provides an opportunity for institutions that offer both interesting products and knowledge on how to invest or manage the risks. According to Martín, the appetite in the region is mainly directed towards high yield debt funds and emerging markets, while in markets like Panama, private banks prioritize the preservation of capital.
In Spain the demand is slightly different, with investors seeking exposure to the Spanish stock market or convertible bonds, but also to high yield, while the interest for emerging markets is gradually returning. In fact, Martín believes that 2014 will be a good year for stocks (including Spanish) and more complex for bonds, although the high yield offers are attractive thanks to coupons. He also believes that it is the right time to enter emerging markets after the sharp correction suffered, with active management looking for quality companies. The directional alternative management (the option of the management company) is also interesting at the moment, since historically, own products have captured 80% of the market rises to 30% of market falls.
The Advantages of Being Boutique
In recent years the company focused on its product range in order to concentrate on those which add value: Spanish, Swiss and British equities (with local managers) and also emerging and global equities. In fixed income it opted for high yield and convertibles and has recently launched a strategic asset allocation in fixed income fund, which had a very good reception; having hired renown managers from large institutions such as BlackRock, Aviva or Crédit Agricole to manage those products, “automate everything, but for the rest you need talent,” he argues, hence the company’s continued recruitment policy. Mirabaud AM thus fulfilled its wish to combine the advantages of a boutique, in terms of flexibility, customer proximity and independence, with management teams which in the past belonged to large fund managers.
Martín believes that the firm’s presence in Luxembourg as well as its boutique nature with the support of a private bank with 200 years of history will help to achieve their objectives both in Spain and Latin America. The acceptance of that boutique nature has been very positive in markets such as the Spanish. “Following the financial crisis, independence, transparency and a customer-minded approach are highly valued,” he said, adding that in Spain there is room for these institutions.
Martín envisions a market in which there is room for both the large management companies and the boutiques, while there will be consolidation moves in the medium-sized institutions. As for international management companies in Spain, he firmly believes that some of these companies, regardless of size will no longer establish offices, but many will register their products and will have local distributors (as is the case in Chile for example). “The institutions which are distributors of third party funds, will not only represent small and medium sized institutions, but large companies also,” he predicts.
Wikimedia CommonsFoto: WhiteCat, Flickr, Creative Commons. Apollo Global Management cierra su fondo insignia de private equity en 17.500 millones
Apollo Global Management, together with its consolidated subsidiaries, “Apollo”, has announced that it held the final close of its current flagship private equity fund, Apollo Investment Fund VIII, L.P., on December 31, 2013 with USD17.5 billion of commitments from third party investors.
Fund VIII will seek to continue Apollo’s history of successful value-oriented and contrarian private equity investing to achieve superior risk-adjusted rates of return across all economic cycles. Apollo’s private equity funds have focused on three primary types of transactions including distressed investments, corporate carve-outs and opportunistic buyouts.
“We are very grateful for the overwhelming support for Fund VIII, which includes significant commitments from a preeminent global investor base consisting of both longstanding existing limited partners as well as many new investors. Fund VIII benefited from the support of a diversified group of investors, including many public pensions, sovereign wealth funds, corporate pensions, endowments and foundations, funds of funds and high net worth investors”, says Leon Black, Chairman and Chief Executive Officer.
In demonstrating an alignment of interest with its fund investors, Apollo and affiliated investors, including senior professionals, committed approximately USD880 million of additional capital to Fund VIII.
Apollo’s previous flagship private equity fund, Fund VII, which was raised in 2008, has generated annual gross and net internal rates of return of 38% and 29%, respectively, from its inception through September 30, 2013.
Apollo’s private equity segment had assets under management of approximately USD43 billion as of September 30, 2013, and 92 investment professionals around the world.
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.
