Foto cedidaPhoto: Nicholas Cowley. Think growth potential: think Colombia & Peru
Colombia and Peru may be best known for being among the world’s largest producers of specialist coffee, but for more discriminating investors they have much more to offer. These two resource-rich countries have a collective population of around 76 million and demographic trends that point to strong population growth, declining dependency ratios, and a rising middle class. Independent central banks and relatively few populist policies by governments have meant that inflation has been successfully brought under control, in contrast to nearby Brazil and Argentina (figure 1).
Figure 1: Tamer inflation thanks to more effective government policy
Source: Bloomberg. Consumer prices inflation, year-on-year change. Monthly data from December 1993 to May 2013 (Peru to March 2013).
Strong economic growth has greatly improved government finances in both countries, enabling them to embark on ambitious and much-needed infrastructure investments. Befitting of emerging market countries, red tape will hold up some of these projects, but such is the volume of these plans that they should underpin growth for the rest of the decade. The creation of the Pacific Alliance, along with Chile and Mexico, will reduce trade barriers, enabling better integration into the global economy. A successful conclusion to peace talks with the FARC guerrillas would further reduce security concerns that have blighted Colombia’s recent past and prompt an additional catalyst for investment in the country.
Chile is often held up as the success story in the region and the policies of Colombia and Peru are aimed at replicating this success. With per capita gross domestic product (GDP) approximately less than half that of Chile, the potential of Colombia and Peru is clear to see. Encouragingly for investors, the capital markets in both countries are exhibiting improving liquidity and corporate governance. The first place to look would be the financial and consumer sectors, where low penetration of financial products and formal retail alongside rising income levels point to significant growth potential over the long term.
While we believe Colombia and Peru both offer attractive growth potential, we are currently overweight Peru and underweight Colombia in our portfolios, as we find more attractive valuations in Peru. In Peru our largest overweight is toconstruction & engineering services business Graňa y Montero (2.3%) and shopping mall and supermarket operator InRetail Peru (0.8%). In Colombia, we have an underweight holding in oil major Ecopetrol (1.1%) and an overweight position in oil and gas producer Gran Tierra Energy (0.9%).
By the Emerging Market Equities team at Henderson Global Investors
Threadneedle Investments has appointed Matthew Evans to the role of UK Small Cap Fund Manager, starting early October 2013. Matthew has 12 years of experience investing in UK smaller companies. He will work closely with James Thorne, UK Small Cap Fund Manager, and will report to Simon Brazier, Head of UK Equities at Threadneedle. The Threadneedle UK small and mid-cap team manage a total AUM of £1.44bn out of a total of £16.7bn in UK equities.
Simon Brazier Head of UK Equities commented: “Our UK equities investment team is one of the strongest in the industry. Our robust product range is supported by a proven track record, active idea sharing and teamwork. Matthew’s appointment further strengthens our UK small and mid-cap expertise and I am confident that with his experience and expertise in this asset class, the team will continue to deliver out-performance for our clients.”
Matthew was previously a senior UK Small Cap Fund Manager and worked within a team managing £950m at Legal & General Investment Management.
Wikimedia CommonsFoto: Traroth. El equipo de commodities de JP Morgan, el mejor en derivados, petróleo y productos
Energy Risk magazine recently named JP Morgan its Derivatives House of the Year, saying that the firm was a “colossus in the global commodity derivatives market,” and adding that “the bank continues to make rivals jealous,” despite tighter regulations and decreased hedging activity in some corners of the market.
To go along with that recognition, the magazine also awarded JP Morgan its Oil & Products House of the Year prize, singling out its role in keeping a Philadelphia refinery complex open, producing oil products and keeping 850 employees at work. The magazine called it one of the largest deals ever transacted. As part of the transaction, JP Morgan is supplying the refinery with crude oil and will acquire the products produced for the next three years.
The complexity of the oil refinery deal, Energy Risk said, “underscores the varied strengths of JP Morgan’s oil team and is a key reason why the bank wins this year’s Oil and Products House of the Year award.”
In giving the Derivatives House award, Energy Risk identified the long-term natural gas hedge the firm did for a Houston, Texas-based energy company. The company is in the process of building a Louisiana facility that would make it the first to be able to export liquefied natural gas from the contiguous United States. JP Morgan participated in raising the financing, acting as joint lead arranger and co-bookrunner. “But the bank also brought something else to the table,” Energy Risk said, “a large and complex hedge for the gas required by the terminal for export.”
Wikimedia CommonsBy: Aloft Hotels (www.starwoodhotels.com). Aloft Brings Something Different in Taste in Style to Cancun
Starwood Hotels & Resorts Worldwide, Inc and Promotora TIIM today announced that Starwood’s Aloft brand made its debut in Cancun, Mexico. Aloft Cancun is ideally located in the Hotel Zone, adjacent to Cancun Center, the city’s convention and exhibition center, and walking distance from dining, shopping and nightlife.
Aloft provides travelers with high style, forward-thinking technology and a vibrant social atmosphere. Pioneering initiatives in music, design, and technology have positioned Aloft as a must-have brand for the next generation of travelers. Aloft Cancun offers a total sensory experience, combining style with 177 loft-like rooms featuring nine-foot ceilings and oversized windows to create a bright, airy environment.
“This opening is also an important step for Starwood as it marks our 25th hotel in Mexico and the entrance of our eighth brand in the country. Furthermore, it allows us to continue to build on the momentum of the Aloft brand in Latin America,” said Osvaldo Librizzi, Co-President the Americas.
The Aloft brand made its debut in Latin America in 2011 with the opening of the Aloft Bogota Airport, followed by Aloft San Jose in Costa Rica three months later. Currently, there are eight Aloft branded hotels in operation or in development in the region, including the Aloft Panama, which will open in June. Aloft Merida and Aloft Guadalajara are slated to open in 2014, and Aloft Asuncion and Aloft Montevideo will open their doors in 2015.
Aloft Cancun is located along the main avenue of Cancun, Boulevard Kukulcan, only 25 minutes away from the International Airport, 15 minutes from downtown and walking distance to several key entertainment places, including the city’s famous white-sand beaches. With more than 70 hotels in 10 countries, Aloft has changed the hotel landscape everywhere from Baltimore to Beijing to Bogota to Brussels – and everywhere in between.
Wikimedia Commonsby Imágenes aéreas de México. Mexico Receives 12 New ETFs
WisdomTree Investments, announced that an additional 12 equity ETFs have been listed on The Mexican Stock Exchange, making a total of 22 the products they have in that country.
“We are pleased to cross-list an additional 12 ETFs on the Bolsa Mexicana de Valores and further expand WisdomTree’s exposure in Mexico and our relationship with Compass Group Holdings S.A.,” said Jonathan Steinberg, WisdomTree CEO and President.
Five of the twelve joined the SIC (Global Market in the BMV) on May 31st, while the other seven did so on June 12th.
The newly listed and previously listed funds are:
WisdomTree SmallCap Dividend Fund (DES)
WisdomTree Europe SmallCap Dividend Fund (DFE)
WisdomTree Equity Income Fund (DHS)
WisdomTree MidCap Dividend Fund (DON)
WisdomTree Total Dividend Fund (DTD)
WisdomTree Dividend ex-Financials Fund (DTN)
WisdomTree MidCap Earnings Fund (EZM)
WisdomTree Asia Pacific ex-Japan Fund (AXJL)
WisdomTree International SmallCap Dividend Fund (DLS)
WisdomTree International LargeCap Dividend Fund (DOL)
WisdomTree International Dividend ex-Financials Fund (DOO)
WisdomTree DEFA Fund (DWM)
WisdomTree LargeCap Dividend Fund (DLN)
WisdomTree Japan SmallCap Dividend Fund (DFJ)
WisdomTree Emerging Markets Equity Income Fund (DEM)
WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
Wikimedia CommonsPhoto: mattbuck. Investors moving out of income generating assets
Markets have been hit by profit taking, to a large extent caused by increased uncertainty about future monetary policy and not by global growth worries. Remarkable is that growth oriented, cyclical assets have outperformed defensive and income generating assets recently. Are we witnessing a new trend?
According to ING IM’s MarketExpress, quite remarkable are the different directions in which the different segments of the financial markets have been moving in the past few weeks. We saw a big sell-off in Japanese equities, which is not very surprising after the strong rally of the past months. Other equity markets in developed economies declined relatively moderately. Furthermore we have seen a sharp rise in ‘safe’ government bond yields, while credit spreads tightened.
Increased uncertainty
The question is off course how these movements can be explained. Indeed, uncertainty has increased on the back of rising doubts about the Japanese policy experiment, the future of emerging market growth models and the implications of future unwinding of quantitative easing policies in developed markets, particularly in the US. We do however not believe that the recent bout of profit taking is caused by a general reduction of risk appetite driven by worries over global economic growth. In that case, we should have seen lower equity markets, higher credit spreads and lower safe government bond yields across the board.
Shift in investor preference
We see signs of an important shifting undercurrent in investor preference whereby investors are gradually shifting from income generating assets towards growth oriented assets. This seems to have started late April and persisted during the recent market correction. Contrary to the first four months of the year, cyclical sectors largely outperformed defensive sectors in the equity markets in May. Next to defensive equity sectors, also other previously popular “yield” plays like real estate equities and fixed income assets came under significant pressure.
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In recent years the spotlight has turned on the lack of women directors on company Boards, with David Cameron writing to FTSE 350 companies in 2011 asking them to set out targets for the proportion of female directors they will have on their Boards by 2015 and encouraging FTSE 100 businesses to achieve 25% female representation by 2015, according to the british firm Bestinvest.
The focus on Board representation has been given impetus by the work of the ‘30% Club’, a group of company Chairmen and leading asset managers, founded by Helena Morrissey, CEO of fund company Newton.Yet new research from leading private client group Bestinvest has revealed that while only around 17% of current FTSE 100 company directors are female, women are considerably more under represented when it comes to the fund management profession that invests in these businesses.
Bestinvest estimates that only 5% of retail investment funds, such as unit trusts and OEICs, are managed by female fund managers. Bestinvest’s assessment is based on analysis of the five largest Investment Management Association sectors which show that the percentage of funds run by women ranged from just 2% in the UK Equity Income sector to 7% in the UK All Companies sector. The research included funds which have a female co-manager.
The remaining three IMA sectors under scrutiny had equally low figures, estimated as 6% in the Global sector, and 5% in both the Corporate Bond and Mixed Investment 40% -80% sectors. Despite the gross under representation of women in the fund management industry, the profession nevertheless has some exceptional role models according to Bestinvest.
Using its proprietary research database of fund manager career records, Bestinvest has identified a number of women fund managers which the firm singles out for having delivered a combination of index beating returns over their long careers and consistency of performance by beating their benchmarks in the majority of individual months.
Despite production volume increasing six percent, 2012 marked only the second year over the past decade that global mining revenue did not increase, according to Mine 2013: A Confidence Crisis, the 10thedition in PwC’s installment on the global mining industry. This publication highlights industry trends based on data from the top 40 mining companies.
According to the report, the growing disconnect between the performance of the mining industry’s share prices, commodity prices, and the broader equity markets continued in 2012. Net profits dropped to $68 billion, a 49 percent decrease from 2011. In addition, market capitalization fell for 37 of the top 40 companies, totaling a loss of over $200 billion. Mining stocks fell slightly in the last year, but stocks have been hit in the first four months of 2013 with nearly a 20 percent decline. Meanwhile, shareholders are calling for change from the top, resulting in half of the CEOs at the 10 largest global mining companies being replaced since April 2012.
“In the rush to build new production capacity, productivity suffered and the full potential of these investments haven’t been recognized, contributing to a lack of investor confidence,” said Steve Ralbovsky, U.S. mining leader at PwC. “Well-positioned mining companies have responded by returning cash to shareholders while setting the stage for stronger future upside by reducing operating costs and increasing productivity of their existing core assets.”
As miners attempt to rebuild the market’s confidence, capital expenditures are being tightened. Forecasted capital expenditures for 2013 have already been reduced by 21 percent compared to 2012, dropping to $110 billion. At the same time, project hurdle rates have increased with some of the top 40 companies stating that only projects with a return above 25 percent will be pursued. Even with cost containment initiatives well-underway, a strategic, thoughtful approach to rebalancing capital spends should not have a negative impact on miners’ ability to meet the continued demand for their products, according to PwC.
Long-term global fundamental demand remains intact, but the ongoing uncertainty in advanced economies has shifted the industry’s center of gravity. Emerging and developing markets have become the world’s growth engine and mining companies have taken a keen interest in staking their claim to these regions. Half of the industry’s 40 largest miners by market capitalization have the bulk of their operations in emerging countries to capitalize on demand. At the same time, China remains the dominant force in driving demand, consuming 40 percent of global metal production.
Wikimedia CommonsPhoto: Pablo Trincado. Chile Applies New Measures to Improve the Transfer Between Pension Funds
A series of measures to improve the mechanism for transfers between pension funds made by members of the Chilean AFP system was announced on Wednesday by Solange Berstein, Chile’s Superintendent of Pensions.
Bernstein stressed that the measures do not include any particular course of action to restrict the freedom which affiliates have to move their pension savings from a particular fund to another, although there will be new measures of information and other regulations in order to better address mass transfers.
The objectives of these measures, said Solange Berstein, are three:
That members who take an active strategy of changes among funds are well informed of how this affects the profitability of their pension savings
Establish greater fairness amongst those who transfer between funds
Provide management flexibility to the E Fund’s portfolio in a scenario of mass fund transfers
The superintendent stressed that pension funds are intended for the finance of pensions, thereby being a long-term investment. She added that Law permits free choice between five Funds which offer different options of expected return and risk and a “default portfolio ” for each age group, with certain restrictions on the funds in which the member can stay when that member is either close to retirement or has already retired.
“The selection of a fund should be a well- informed choice which is consistent with the characteristics of the affiliate in respect of at least, the investment horizon, risk preferences, other sources of funding for the retirement stage and their health,” she added.
After the crisis of 2008, and recently even more so, there has been a significant increase in fund transfers. In view of that, the Superintendent decided to draw up a Technical Note, which is published on the website of the Superintendence, and analyzes the results, in terms of profitability, of the fund transfers made in 2008 by members in different circumstances, showing twelve months of following induced strategies (case study of “F & F-Felices y Forrados,” an advisory firm that has caused most of the fund transfers thus motivating regulatory review).
Using data from member’s actual accounts, results were conclusive that, in general, transfers in these scenarios have not been favorable for members. In addition to the mostly negative effects observed on the members themselves, it also advises of the potential negative effects to passive members and to the operation of the domestic capital market.
The measures adopted are explained below:
Information: Profitability Information Screen
Regulation: Pro-rated basis in mass fund transfers- The prorated proposal is directed towards providing equal treatment to all members who instruct a fund transfer on the same day, as all members in that situation will be transferred in proportion to the total number of fund transfer applications.
Regulation: Liquidity Funds for the E Fund – This measure proposes that the E Fund may invest in investment vehicles with a low component of restricted instruments (up to 10% in restricted instruments for each vehicle). These liquidity management funds will be limited to 10% use of the Fund. According to the Superintendence, the measure will facilitate the search for foreign investment vehicles which allow for the accommodation of E Fund investments in times of high inflows. It was approved last week by the CTI and is under consultation on its website.
Yves Raymond, Gustavo Lozano, Jaime Lázaro y Salvador Sandoval this Tuesday in Mexico. BBVA Bancomer Signs an Alliance with Pioneer Investments for their BBVANDQ Fund
Looking to generate differential yields over the benchmark through active management, BBVA Bancomer announced in Mexico City on Tuesday that it has entered into an alliance with Pioneer Investments, an investment management company with over 85 years experience and a presence in 27 countries, for advisory services in their BBVANDQ international equity fund.
Yves Raymond, Stock Market fundamental analyst at Pioneer Investments, told Funds Society that taking a bottom-upprocess approach, they will recommend that BBVA Bancomer, keep between 30 and 40 shares in this fund, with a maximum concentration of 20% per sharebut looking for a differential of 1% to 3% against their benchmark weight in the NASDAQ index. Raymond added that his preference for the technology sector is because valuations are below historical, making them “too cheap to pass up.” The management said they will establish weekly communication with the Mexican bank, which may be increased as necessary.
Meanwhile, Salvador Sandoval Tajonar, director of BBVA Bancomer Private Banking, stated during the breakfast presentation that they will continue analyzing alliances with leaders like Pioneer that “will allow us to bring the best product to supplement BBVA Bancomer’s supply. Bringing the world to Mexico.” While Pioneer’s Gustavo Lozano said they are very happy to provide these advisory services, the first since entering the Mexican market late last year.
As for the investment funds’ market in Mexico, Jaime Lazaro Ruiz, CEO for BBVA Bancomer Asset Management, said that it experienced positive development, achieving a growth of 6.88%, or 95 billion pesos so far this year, and reaching 1.5 trillion pesos (approximately US$115 billion) at the end of May. “The overall outlook at the end of this year 2013 is that the industry reaches our initial forecast with an increase of 10-12% in 2013.”
BBVANDQ, which will be actively managed, offers diversification opportunities offering exposure to companies “that intensively use and produce technology in an environment in which it is increasingly in demand” and which have 40% of their income outside the U.S. allowing access from Mexico to the growth which is being experienced in emerging markets, which offers Mexican investors high efficiency on tax matters.
