Wikimedia CommonsFoto: Robert Swier. Headwinds mount for emerging markets
One of the victims of the market correction are emerging market assets. They suffer from outflows due to less favourable carry trade opportunities and weak Chinese data. More structural issues rise to the surface too, however. ING Investment Management have underweight positions in both emerging market equities and debt.
Indiscriminate selling has been seen in those areas of financial markets that have seen the largest capital inflows in recent years, with corporate credit, emerging market debt and “stable growth” equity sectors as obvious victims. Parts of these market segments had clearly come over-extended on the back of relentless investor inflows during the last two years and could have been expected to correct at some point.
Growth differential between EM and DM is narrowing
Pressure on emerging markets is mounting
In the current environment, emerging market assets are vulnerable as investment flows into the region are likely to weaken due to market concerns of early tapering of quantitative easing (QE) by the Fed and a narrowing interest rate differential (‘carry’). Moreover, we also see more fundamental weakness threatening emerging market assets.
In the developed world, we have seen more structural change since the outbreak of the global financial crisis, which creates room for positive growth surprises compared to the emerging world. The combination of better economic data in the US and disappointing growth in China is clearly negative for emerging markets. Growth in EM in the past years has been driven primarily by Chinese demand and carry trade related flows. Both sources of growth are coming under more pressure now; the former because of increasing evidence of the structural slowdown in China and the latter because of increasing market nervousness about the Fed’s QE policy.
To view the complete story, click the document attached.
Wikimedia CommonsBy Paulo Miranda. Rebuilding Europe
For several quarters now, forecasters, analysts and the media have been steadily churning out disaster scenarios about Europe. Whilst the region is still plagued by some deep-seated problems, the markets seem to have factored them in and risk premiums on some assets have dropped, according to UBP’s research.
New foundations
Financial markets have begun to pick up and are probably right to be optimistic because the trend in the economy seems to be reversing: monthly indicators are showing better data than expected, such as falling unemployment in Spain and a rebound in corporate sentiment. Besides, the policy mix (the combination of budgetary and monetary policies) is shifting and the spiral of recession should now be reversible.
“Perhaps it is time to reassess our view of Europe and adopt a more positive outlook. Because even though credit is still frozen in the eurozone, the reforms implemented since 2008 and the determination shown by some governments – especially in the periphery – are paving the way out of the recession and towards a rebuilding of Europe” says Patrice Gautry, UBP’s Chief Economist. He lists five crucial steps in this revival:
If budgetary policy-makers loosen their austerity, they can make some room for growth to take hold, provided this is combined with structural reforms, a sharp fall in long rates and the prospect of budget harmonisation;
The current debate on taxation will most likely force Europe’s governments to consider some more daring reforms, which would be positive for the region in the long term;
With the US regaining competitiveness through its new-found shift towards energy independence, the future of Europe depends more than ever on its re-industrialisation. Reforms, resulting in lower labour costs and higher productivity, have already enabled some countries to regain market share;
Combining this rebound in productivity with a comprehensive economic policy for an integrated zone should allow the eurozone to avoid a Japanese-style “lost decade” and the threat of deflation;
Lastly, the ECB is taking a more aggressive stance. What is needed now is new lending stimulus, which would encourage demand and further cut refinancing costs, thereby reducing the debt service burden for all economic actors.
A medium-term investment opportunity
“This battery of measures for lifting Europe out of recession is very positive. However, both analysts and the market remain sceptical, which is creating an opportunity”, remarks Alan Mudie, Chief Investment Officer at UBP. He adds: “Given this we prefer equity markets, and more specifically European and Japanese stocks, which have great potential”. Portfolio strategy will therefore be built on the following seven pillars:
Equity markets should continue to benefit from this favourable environment, especially as there should now be inflows from the fixed-income segment;
More specifically, European equities – which have further to climb to get back to their pre-crisis highs – remain undervalued compared to US equities; within the eurozone our focus is on companies which are positioned to profit from the recovery;
European convertible bonds also offer a more attractive performance outlook than their US peers;
Given the macroeconomic data and the current climate, the euro still looks overpriced and a decline would be a windfall for the eurozone: we prefer the dollar;
In bonds we recommend the shortest maturities with a focus on corporate credit. However, given the reforms being undertaken in the eurozone’s periphery, the time has come to reassess the opportunities available in peripheral sovereign bonds, such as Italian ones;
The current environment is less propitious for safe-haven assets, but gold has not lost all its appeal for the medium term, and remains an excellent shield against central banks’ monetary excesses;
Lastly, alternative investments should benefit from the slight uptick in volatility and the lower correlation between asset classes, which reflect improving confidence and a return to normal on the markets; this environment is well suited to long/short and global macro strategies.
Foto cedidaFoto: Maria Elena Isaza. Maria Elena Isaza Joins Schroders as an Offshore Sales Director
Schroders has announced that Maria Elena Isaza has joined their team as an Offshore Sales Director, based in Miami.
Maria Elena joins Schroders from Goldman Sachs Asset Management and will be responsible for providing intermediary sales coverage of our suite of offshore products to the Southeastern US and the Caribbean, with emphasis on the Miami-area international markets.
She has built an impeccable track record of adding value and has a stellar reputation for building strong interpersonal relationships with advisors over her 15 years of industry experience in investment and wealth management.
Prior to Goldman Sachs, Maria Elena began her career at Merrill Lynch. She had various roles within Merrill Lynch including Loan Officer, Business Analyst for the Latin America Divisional Management team and Assistant Sales Manager for Merrill Lynch Miami International Complex. Maria Elena was selected to join the Managed Solutions Distribution Group as Managed Solutions Latin America Specialist where she was primarily responsible for sales and training of financial advisors on fee-based advisory platforms. She was then promoted again to Managed Solutions Divisional Marketing Manager for U.S. Southeast Division
Isaza graduated with a Bachelor degree in Business Administration in Finance from Florida International University.
The Dreyfus Corporation, a BNY Mellon company, announced this thursday that it has launched the Dreyfus Opportunistic Emerging Markets Debt Fund, an actively managed mutual fund. The fund’s objective is to seek to maximize total return by investing across emerging market debt asset classes including local and hard currency denominated debt issued from government, government-related and corporate issuers.
“We have seen a great deal of investor interest in finding ways to leverage the expanding opportunities and higher economic growth rates being experienced in many emerging economies,” said Dreyfus President Charles Cardona. “The difficulty arises in gaining access to these markets or possessing the necessary research capabilities to navigate these opportunities. Dreyfus Opportunistic Emerging Markets Debt Fund looks to address these issues by providing professional money management and institutional access to help investors benefit from the growth occurring within the capital markets of emerging economies.”
The fund, which is sub-advised by Standish Mellon Asset Management Company, is managed by Alexander Kozhemiakin, managing director of emerging market strategies and senior portfolio manager responsible for managing all emerging market debt portfolios at Standish and Javier Murcio, portfolio manager and senior sovereign analyst.
“The investable universe of debt issued in emerging market countries has grown substantially in size and breadth over the last 30 years,” Kozhemiakin said. “Emerging market debt, once predominately issued in U.S. dollars by government entities, has expanded to include hard and local currency denominations issued by sovereign, as well as corporation issuers. We employ an investment process that looks to take advantage of this expanded opportunity set by identifying shifts in country fundamentals and consider the risk-adjusted attractiveness of currency, issuer and duration returns for each emerging market country.“
“Using these inputs,” Kozhemiakin concluded, “We seek to identify the best opportunities on a risk-adjusted basis across emerging market debt instruments (including those issued by sovereign, quasi-sovereign and corporate issuers), currencies, and local interest rates.”
Franklin Resources, which operates as Franklin Templeton Investments, announced that it has acquired the remaining 80% stake of alternative investments specialist Pelagos Capital Management, to become a 100% equity stakeholder. Franklin Templeton acquired its initial 20% equity stake in Pelagos in 2010.
William Yun, CFA, executive vice president, Franklin Templeton Alternative Strategies, said “We’ve developed a strong relationship with Pelagos since our initial investment in 2010 and after seeing growing interest from investors in alternative investment strategies, we are pleased to announce the completion of this acquisition.”
Pelagos, an independent investment advisor founded in 2005 by Stephen Burke and John Pickart, is based in Boston, MA. Pelagos’ mission is to create alternative investment solutions that seek to enhance overall returns and lower portfolio volatility. Pelagos manages three distinct alternative investment capabilities including a commodity strategy, a managed futures strategy, and a hedge fund replication strategy.The Pelagos team implements an investment process highlighted by a top-down approach to global macroeconomics, quantitative focused models based on fundamental analysis, disciplined multi-level risk controls, and institutional-quality implementation and transparency.
Pelagos’ commodities and managed futures strategies are currently available as underlying investments within the Franklin Templeton Multi-Asset Real Return Fund, the Franklin Templeton Allocator Fund Series (Conservative, Moderate, Growth), and Franklin LifeSmart Retirement Target Funds, all of which are managed by Franklin Templeton Multi-Asset Strategies.
Franklin Templeton Alternative Strategies oversees the company’s specialized and alternative investment businesses globally. In addition to Pelagos, these businesses include:
The multi-asset strategies and customized portfolios of Franklin Templeton Multi-Asset Strategies;
The integrated hedge fund product solutions of K2 Advisors, in which Franklin Templeton holds a majority stake;
The emerging markets private equity and mezzanine finance capabilities of Darby Private Equity;
The global property and real asset offerings of Franklin Templeton Real Asset Advisors; and the company’s asset management joint ventures in China and Vietnam.
Fueled by global recovery in the equity and real estate markets, the investable wealth of the world’s High Net Worth Individuals (HNWIs) rebounded in 2012, growing by 10 percent to reach a record high of $46.2 trillion, after declining 1.7 percent in 2011, according to the World Wealth Report 2013 (WWR), released today by Capgemini and RBC Wealth Management. One million individuals joined the global HNWI population, which reached 12 million, reflecting an increase of 9.2 percent.
North America reclaimed its position as the largest HNWI market in 2012 after being overtaken by Asia- Pacific the year prior. North America’s population of 3.73 million HNWIs surpassed Asia-Pacific’s 3.68 million, while its HNWI wealth reached US$12.7 trillion, above the US$12.0 trillion in the Asia-Pacific region.
Global investable wealth growth was led by HNWIs in higher wealth bands, with ultra-HNWI expanding in wealth and number by approximately 11 percent, following declines in 2011.
All regions experienced strong growth in HNWI population and wealth except Latin America, which led growth in 2011, but faltered in 2012 due to slow GDP growth and challenged equity markets.
Record wealth levels achieved despite cautious HNWI investing approach in 2012
HNWIs remained cautious in 2012, highlighting a pronounced focus on wealth preservation in the Global HNW Insights Survey introduced this year in the WWR3, based on feedback from over 4,400 global HNWIs. Despite recent market improvements, one-third (33 percent) of HNWIs are more focused on preserving, versus just 26 percent on growing, their wealth.
Global HNWI wealth is forecast to grow by 6.5 percent annually over the next three years
Asset allocation trends followed the preservation trend, with almost 30 percent of HNWI wealth held in cash and deposits. Regional differences were clear with equities taking up the largest portion of North American HNWI portfolios (37 percent), while HNWIs in Latin America and Asia-Pacific (excluding Japan) preferred real estate (30 percent and 25 percent of portfolios respectively).
HNWI trust in Wealth Management industry grows
Global HNWI confidence in the wealth management industry has improved, with 61 percent having a high degree of trust in both wealth managers and their firms in early 2013, up four and three percentage points respectively from last year. Increased trust and a cautiously upbeat economic outlook contributed to 75 percent of HNWIs feeling confident about generating future wealth. At the same time, HNWIs expressed a low level of confidence in markets and regulators, with fewer than half having a high level of trust in each (45 percent and 40 percent, respectively).
Future outlook cautiously upbeat, led by Asia-Pacific
Looking forward, with the ongoing economic recovery providing an environment of reduced risk and improving investor confidence, global HNWI wealth is forecast to grow by 6.5 percent annually over the next three years. This is in contrast to the sluggish 2.6 percent growth since the financial crisis in 2008. The Asia- Pacific region, which is projected to grow at one and a half times the global average at 9.8 percent, is expected to lead global growth.
By High Contrast. The biggest Contrarian Play in the Market Today is Assets Linked to China
Investors are returning to Europe as they retreat from emerging market and Japanese equities, according to the BofA Merrill Lynch Fund Manager Survey for June.
Equity Allocations Increased
Investor confidence has risen in the past month in spite of market instability and a 2.5 percent fall in world equities over the survey period. A net 56 percent of global investors believe the world economy will strengthen over the coming year, up from a net 48 percent in May. Equity allocations increased. A net 48 percent of asset allocators are overweight equities, compared with a net 41 percent in May.
Pobabilities of a Hard Landing in the Chinese Economy Grow Fourfold
But while allocations to the eurozone and U.S. rose, investment in global emerging market equities fell to their lowest since December 2008. A net 9 percent of asset allocators are now underweight emerging market equities – the first underweight reading since 2009 and down from a net 3 percent overweight reading last month. Investors now identify a China hard landing as the greatest tail risk – more of a concern than eurozone sovereigns or banks. A net 31 percent of regional fund managers say that China’s economy will weaken in the coming 12 months, compared with a net 8 percent expressing that view in May.
Allocations to commodities have also reached a record low with a net 32 percent of asset allocators holding underweight positions.
Optimism builds within the eurozone
Equity allocations increased month-on-month across 13 of the 19 sectors assessed in Europe. The greatest positive swings came in telecoms, financial services, banks and chemicals. A net 3 percent of European investors are now overweight Telecoms, compared with a net 24 percent underweight in May. A similar net underweight position was wiped out in financial services over the month. A net 18 percent of respondents are now overweight banks, after the market was net neutral a month ago.
Signs of great rotation from bonds resurface
Furthermore, expectation of higher long-term yields has reached the highest level recorded by the survey since 2004. The proportion of the global panel forecasting higher long-term rates in 12 months’ time leapt to a net 81 percent from a net 55 percent last month. Only 4 percent of the panel sees rates falling. At the same time, the proportion forecasting higher short-term rates also soared, up to a net 43 percent from a net 14 percent in May.
Fear that Abenomics – Japan’s three-pronged stimulus plan – will fail has become investors’ second-largest tail risk after China and interrupted the strong run in Japanese equities. The proportion of asset allocators overweight Japanese equities has fallen to a net 17 percent from May’s seven-year high of a net 31 percent.
Wikimedia CommonsBy Thomas Wolf. Terrafina Shareholders Approve Purchase of Industrial Properties from Kimco Realty
Shareholders from Terrafina, a Mexican real estate investment trust advised by Prudential Real Estate Investors, approved on wednesday the purchase of a portfolio of Mexican industrial properties from Kimco Realty and its joint venture partner, American Industries, for about $600 million, the company announced today.
Terrafina announced on May 23 that it had signed an agreement with Kimco to purchase the portfolio, which consists of 87 properties totaling about 11 million square feet that are occupied by a diverse range of multi-national tenants. The facilities are predominantly for light manufacturing in the automotive, aerospace and consumer goods sectors.
Terrafina, which expects the transaction to be completed by the third quarter of 2013, will pay for the portfolio through existing credit facilities and the assumption of the existing debt on the portfolio.
Terrafina is a Mexican real estate investment trust formed primarily to acquire, own, develop and manage real estate properties in Mexico. Terrafina’s portfolio consists of attractive, strategically-located warehouses and other light manufacturing properties throughout the central, Bajío and northern regions of Mexico.
Terrafina, which is advised by Prudential Real Estate Investors, owns 146 real estate properties, including 132 developed industrial facilities with a collective GLA of approximately 19.8 million square feet and 14 land reserve parcels. With the addition of this portfolio, Terrafina grows to 233 properties with more than 31 million square feet of industrial space, making it the largest owner of industrial assets in Mexico, based on gross lettable area (GLA).
Wikimedia CommonsPhoto by Ritz Carlton of Santiago in Chile. LarrainVial Setting up a Fund to Purchase Three Luxury Hotels in Chile
LarrainVial has been working with large investors since the last month of May, in order to present them with its new product, the Hotel Investment Fund. With it, the company hopes to raise US$100 million to buy three well-known hotels in Chile: the Ritz Carlton, Crowne Plaza and the Intercontinental, as reported by Diario Financiero newspaper, citing sources familiar with the matter.
Seemingly, according to the same sources, the agreements to buy the aforementioned hotels have already been closed, and thus the fund will need to have all the capital raised by the end of July, although 50% of the money has already been committed.
Furthermore, the newspaper adds that the project managers, the same currently controlling the Hotel Intercontinental, would put down US$20 millionwhilst 30 would come from other investors. The fund, which is looking to invest close to US$230 million, would therefore already dispose of 140 million in financing.
As far as the current valuation of the above-mentioned establishments is concerned, the Intercontinental is valued at US$112 million, whilst the Ritz and the Crowne Plaza would suppose a disbursement of US$63 and US$53 million respectively.
Apart from these three hotels, there may be interest in acquiring a fourth or even a fifthone, although this would take place in the second phase of the fund, which in turn would mean a further increase in capital. The names being whispered are Marriot and the W.
The Meridia Capital investment fund – which also has hotels in Paris, Mexico and Brazil – paid US$86 million when it bought both hotels in Chile five years ago; about 30 million less that what the LarrainVial fund now contemplates paying for them.
Finally, the newspaper highlights that 80% of the management company, which will additionally offer resources, will be in the hands of the current Intercontinental partners: Oscar Biderman, founding partner and the hotel’s Controller, as well as Jorge Breitiling, also a shareholder, and the current General Manager, Rolando Uauy. Alongside them will be the partners of the private equity boutique Gamma Capital, with 20% of the management.
Foto cedidaPicture by Rokk Miami. RokkMiami, the Seed to Turn Miami into a Technological Hub
For some time now, Miami has been working to turn itself into a first class centre capable of housing the numerous technology and innovation companies that seek, amongst other things, a more attractive fiscal environment and a cheaper real estate market where they can establish their businesses.
Businessmen, professionals from the education sector, political leaders and Miami associations have joined forces to create an ecosystem to attract entrepreneurs who might find the city’s surroundings ideal for establishing their operations. The group, meeting some weeks ago in the setting provided by RokkMiami, a LAB Miami project, is set on converting Miami into a city vibrant in ideas and initiatives, and into a new leading technology center.
At RokkMiami, held at the head offices of Lab Miami in the Wynwood neighbourhood, 140 business owners, including entrepreneurs and investors, met in order to put the city on the sector’s map. This initiative follows the path set out by Rokk3rlabs, founded 13 months ago by a group of 20 startups from Miami, which share the same long-term vision, precisely looking to build an ecosystem capable of attracting innovation and new companies to the city.
The group believes that the arrival of wealthy people from Latin America could also been benefitted from, as many are currently considering where to locate themselves. Competing with Miami are Atlanta, Dallas, Houston and Los Angeles, also in the arrivals’ sights, which is why RokkMiami calls for action to not miss out on the opportunity. “We must build an environment to attract them and to ensure that they stay in the city.”
The group has been working on this for months and is planning to invest more effort in it, even though there are others who believe Miami will not have sufficient power to attract all the necessary talent. They argue that, amongst other things, the lack of a strong university in the area will not favor the initiative, albeit that it gets the firm support of the Knight Foundation at Miami University.
