Global ETFs and ETPs suffered record net outflows of US$16.77 billion in August after gathering near record net inflows of US$45.26 billion in July, according toETFGI’s Global ETF and ETP industry insights report. ETF and ETP assets have declined from the July record high of US$2.17 trillion to US$2.11 trillion at the end of August 2013. There are now 4,938 ETFs/ETPs, with 9,932 listings, from 211 providers listed on 57 exchanges.
“Investors’ concern and uncertainty over the impact on markets of a potential military conflict in Syria and when and how the Fed will begin QE tapering caused investors to net withdraw US$16.77 billion from ETFs/ETPs in August” according to Deborah Fuhr, Managing Partner at ETFGI.
In August, Equity ETFs/ETPs experienced the largest net outflows with US$13.62 billion. North American/US equity ETFs/ETPs experienced the largest net outflows US$16.60 billion, followed by emerging market ETFs/ETPs with US$5.12 billion, while European equity ETFs/ETPs gathered the largest net inflows with US$5.09 billion.
In August, fixed income ETFs/ETPs saw net outflows of US$5.23 billion. Government bond ETFs/ETPs experienced the largest net outflows with US$3.65 billion, followed by inflation with US$772 million, and high yield with US$618 million, while government/corporate bond ETFs/ETPs gathered the largest net inflows with US$208 million.
Commodity ETFs/ETPs saw net outflows of US$911 million. Precious metals ETFs/ETPs experienced the largest net outflows with US$1.08 billion.
Year to date through end of August 2013, global ETFs/ETPs have gathered net inflows of US$133.44 billion which is below the US$141.71 billion gathered at this time last year.
Vanguard ranks first based on August net inflows with US$3.54 billion, and first in year to date net inflows with US$39.71 billion. ProShares ranks second based on August net inflows with US$1.61 billion and sixth in year to date net inflows with US$5.17 billion. Nomura, the seventh ranked provider by overall assets, ranks third for net inflows in August with US$1.23 billion and ranks 12th with year to date inflows of US$3.09 billion. Meanwhile iShares, which ranks first based on overall assets, suffered net outflows of US$5.23 billion in August and ranks second in year to date inflows with US$27.24 billion. SPDR ETFs, which ranks second in overall assets, suffered US$19.24 billion of net outflows in August and US$7.44 billion of net outflows year to date.
Matthews Asia’s investment team members regularly travel across Asia to conduct research. Between meeting with management teams, touring factories and catching flights from one destination to the next, we do, on occasion, need to eat. Sometimes it’s room service at midnight while typing up meeting notes, other times we may try some local food. For me, as a ramen lover, the growing number of ramen restaurants across Asia has been a real treat. Apparently, I’m not alone in that thought.
Recently, one of my favorite ramen chains from Japan, Fukuoka-based Ichiran, opened its first overseas branch in Hong Kong. Ramen fans from far and wide lined up for as long as four hours for a taste. With its ease of doing business, proximity to Japan and influx of regional tourists, Hong Kong is quickly emerging as a hub for Japanese ramen restaurants seeking growth overseas. Other cities across Asia are seeing a similar trend. I even found “tonkotsu” or pork bone ramen in Jakarta, even though the population is mostly Muslim.
Ramen’s roots obviously stem from China and Chinese noodles. In the late 1800s, as Japan opened its ports to international trade, Chinatowns started to spring up across the country, bringing with them their culinary culture. The word “ramen” itself was immortalized when the late Momofuku Ando, the inventor of instant noodles, named his first product Chicken Ramen in 1958. Since then, ramen, both instant and traditional, has been enjoyed by billions of people worldwide.
As I pondered the reasons for ramen’s popularity, my conclusion was that flexibility is likely the key. Ramen can come in any size, shape or format as long as there are noodles and some kind of broth. Noodles can come in different shades of yellow and white, fresh or fried, thick or thin, wavy or straight. The broth can vary from pork to chicken to fish, with any combination of vegetables, seaweed, herbs and spices. Not to mention all the different toppings; I’ve seen soft-boiled eggs, peas, bamboo shoots or kimchi and even shaved parmesan cheese. The lack of a rigid formula gives a lot of freedom to those seeking something new, bringing a constant wave of menu innovations.
Ramen is one example of how cultures across Asia have influenced each other over the course of history. As one food industry executive used to say, “Good ramen can cross borders. No one is unhappy about eating good tasting food.” I couldn’t agree more. And as ramen outlets continue to pop up across the region, this development makes my travels at least more delectable.
Column by Kenichi Amaki, Portfolio Manager, 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.
. Fibra Inn Signs Binding Agreement to Acquire Its First Hotel in Mexico City
Fibra Inn, a Mexican real estate investment trust specializing in the hotel industry serving the business traveler, announced the signing of a binding agreement to purchase the Holiday InnMexico Coyoacan hotel.
The purchase price of this hotel is Ps. 468 million ($35 million), plus Ps.46.6 million in taxes and acquisition expenses. The price includes a 1,500 m2 lot, which is utilized for customer parking for groups and events arriving via bus; these rooms may be used for future room expansion. This acquisition will be paid in cash from proceeds derived from the initial public offering that took place on March 13, 2013 and has a stabilized cap rate of 9.5% calculated based on the amount of the total investment including acquisition expenses.
The Technical Committee approved this acquisition on August 29, 2013, which will represent 12% of the value Fibra’s portfolio. In accordance with Fibra Inn’s by-laws, the Technical Committee must approve acquisitions exceeding 5% of the total equity value, while the Shareholders’ Meeting must approve acquisitions that exceed 20%.
The Holiday Inn Mexico Coyoacan is Fibra Inn’s first hotel in Mexico City, which will increase its diversification and national presence. The hotel is located in Calzada de Tlalpan and has a steady client base from the government sector with a high demand for rooms and event space. There is potential growth stemming from demand in the southern portion of the city from companies within the television, laboratory, hospital and financial sectors. Fibra Inn has a sales office in Mexico City with a solid client base to strengthen its position at this hotel.
The Holiday Inn Mexico Coyoacan is a full-service hotel with 214 rooms. It has ample capacity to meet the high demand for event services with 11 conference rooms, as well as guest rooms that can be converted into event rooms in order to accommodate up to 1,800 people. It is located 20 minutes from the Mexico City International Airport, 5 minutes from Coyoacan and 15 minutes from downtown Mexico City. During 2012, the occupancy rate was 65%, ADR was Ps. 1,002 and the RevPar was Ps. 652. Of 2012 total hotel revenue, 43% corresponded to revenue from event room rentals and 6% from sales of food and beverage revenue; in addition to room revenue.
This hotel will be operated by Fibra Inn’s Hotel Operator. With this acquisition, Fibra Inn owns 18 hotels with a total of 3,336 rooms, 300 of which are under construction.
Photo: Diego Delso. Loomis Sayles Welcomes New Head of Emerging Markets
Loomis, Sayles & Company announced that Peter Marber has joined the company as head of emerging markets investments. Peter’s responsibilities will encompass emerging markets fixed income and equity investing. He will report to Jae Park, chief investment officer.
Peter joins Loomis Sayles from HSBC Global Asset Management. He held several roles during his tenure within HSBC’s emerging markets group including chief business strategist, global head of emerging markets debt, and portfolio manager. Prior to its acquisition by HSBC in 2005, Peter was founding partner, senior portfolio manager and chief investment strategist for The Atlantic Advisors. Peter was also president of the emerging markets subsidiaries at Dresdner Kleinwort (formerly Wasserstein Perella) and he began his career at UBS. He has been a faculty member at Columbia University since 1993, teaching at the Business School and School of International and Public Affairs, and has also taught at John Hopkins and Universidad Francisco Marroquin in Guatemala City, Guatemala.
Peter assumes leadership in an emerging markets product team that includes portfolio managers David Rolley, Eddy Sternberg and Peter Frick, and emerging markets senior credit strategist Elisabeth Colleran. The team is supported by over a dozen emerging markets specialists who work within Loomis Sayles trading or sovereign, credit, equity and quantitative research groups.
“As emerging markets have grown in importance we have continued to add investment professionals focused in this area. Peter’s depth of experience and expertise will help ensure we bring the full power of our firm’s resources to bear in identifying emerging markets investment opportunities for our clients’ portfolios,” said Jae Park.
Loomis Sayles has recently added four key EM resources, including Bianca Taylor, emerging markets senior sovereign analyst; Celeste Tay, Asia sovereign analyst; Li Ping Yeo, Asia senior credit analyst; Nada Oulidi, emerging markets senior bank analyst.
Foto cedidaMike Kerley, PM of Henderson Horizon Asian Dividend Income Fund. Is the Yield Trade Over?
The US Federal Reserve’s plan to gradually reduce its bond-buying programme, combined with a significant move higher in US 10-year treasury yields, has prompted investors to rethink allocations based on low growth, low interest rates and high liquidity. This has led to increased volatility across a number of asset classes, including Asian equities, which have fully participated in the downturn. Is this the first indication that the yield trade has run its course?
The sell-off in US treasuries has been understandable but the case is less clear for equities. Although the valuations of equities are impacted by expectations of long-term interest rates, the attraction for most income seekers is the comparison of dividend yield with the rates available for cash on deposit. Comments made recently by Ben Bernanke suggest that short-term interest rates are likely to remain low for some time, given the still weak (but improving job market) and low inflation and as a result the appeal of dividend yield over cash is still very much in place.
Asia also offers some distinct advantages over other equity income strategies. With the yield from some traditional sources compressed to unattractive levels, we believe that dividend growth will become an increasingly important driver for income strategies. Underlying economic growth is expected to remain robust, especially compared to the anaemic recoveries seen in most western economies. This should provide superior earnings growth and hence higher dividend growth over time. The structural argument is even more compelling. Asian companies have changed in the last 10 years and now share similar characteristics to their western peers. Capital expenditure is more rational and as a result cash generation compares favourably with companies in the US and Europe. This excess cash has been used to pay down debt and now many companies sit with net cash on their balance sheets. In the years to come we expect more and more shareholder enhancing announcements such as special dividends, share buybacks, and capital reductions. Most importantly, we think regular dividend distributions will rise because pay-out ratios (the percentage of net profit paid out as dividend) are at record lows.
The chart below shows how dividends across Asia have failed to track earnings over the last three years as companies have been reluctant to increase dividend distributions in a volatile period. This illustrates how immature the dividend theme is in the region but it is encouraging to see the number of companies that have raised dividends in the last nine months given a more benign global environment. With companies continuing to accumulate cash we believe this more positive trend will continue and the gap between earnings and dividends will close. We would not be surprised to see dividend growth outstrip earnings growth in Asia over the next five years.
Source: Bloomberg, Monthly data rebased to 100 from 29.07.05 to 31.07.13.
In addition to the changes in the corporate sector, we believe government policy and increased maturity will drive structural demand for yield. Asian consumers currently hold significant levels of cash, mainly held in bank accounts on deposit. As the penetration of financial services such as insurance and wealth management increases over time and government initiatives improve the social safety net, the need to hold cash will recede. As this money gradually finds its way to more sophisticated savings vehicles, the need for yielding assets will increase significantly.
In summary, we believe the recent weakness in Asian markets is an opportunity to acquire the region at valuations that look compelling compared to history and relative to other equity markets. The positive story for Asian income remains in place both from a cyclical and structural standpoint. Short-term interest rates are likely to stay low for some time ensuring that the premium of dividend yield over cash rates remains attractive. The yield trade is not over, it’s just cheaper than it was!!!
Mike Kerley is manager of the Henderson Horizon Asian Dividend Income Fund
Driehaus Capital Management announces the launch of the Driehaus Event Driven Fund as of August 26, 2013. A new liquid alternative offering, the mutual fund seeks low correlations to major asset classes while providing lower volatility than the S&P 500 Index with superior risk-adjusted returns.
The fund will be managed by K.C. Nelson, who leads the Driehaus Long/Short Credit Team. Mr. Nelson and his team currently manage distinct event-driven trading strategies in their long/short credit funds. According to Mr. Nelson, “We have found that event-driven trades often exist because of the complexity of the capital structure, the nontraditional nature of the investment opportunities, or the unwillingness of investors to participate in trades with binary outcomes. We believe this creates opportunities for positive asymmetric returns with low correlations to the equity and credit markets.”
Trades within the Driehaus Event Driven Fund will have a defined catalyst that will unlock the value of the trade in the near to intermediate term. “By combining the credit, equity and derivatives resources across our firm, we’ll identify opportunities globally to source mispricings in long, short and arbitrage trades based on hard catalysts, such as product launches, earnings releases, restructurings, and corporate actions,” said Mr. Nelson.
While the event-driven space has been a significant segment of the alternatives universe for more than two decades, relatively few liquid alternative event-driven funds are available to investors. “We believe investors will appreciate access to a liquid and transparent vehicle for a strategy that offers a differentiated market exposure,” said Rob Gordon, President and CEO of Driehaus. “We also expect investors to take comfort knowing that the fund is offered by a firm that has proven itself in the liquid alternative space and is managed by a team with significant experience with event-driven trades.”
BBVA Compass announced thatGabriel SanchezIniesta has been named its new chief information officer following Sergio Fidalgo’s appointment as Spain-based head of Applications & Architecture for BBVA Group.
Until now, Sanchez Iniesta served as BBVA Group’s Multichannel Technologies director. A native of Madrid, he was responsible for developing the multichannel architecture BBVA developed in many countries across its global footprint and the core banking platform it currently uses in Spain. He came to BBVA Group in 1997 following several years with Accenture.
Fidalgo, who was in charge of BBVA Compass’ Technology and Support Services unit for five years, successfully led a major transformation of the bank’s legacy technology into a core banking platform that enables real-time transactions. American Banker called it an “epic” project and “one of the largest bank core overhauls in the U.S.,” while one analyst told the Houston Business Journal it had the makings of a “game changer” for the banking industry.
Sanchez Iniesta inherits that ground-breaking platform and is well-positioned to lead the next phase of the bank’s technology growth, which will focus on multichannel banking, said BBVA Compass President and CEO Manolo Sanchez.
Wikimedia Commons. James Boyne deja su puesto de COO en Calamos Investments por la filantropía
Calamos Investments, announced the planned departure of James Boyne, President and Chief Operating Officer, effective September 30, 2013. Until that time, Mr. Boyne will act in an advisory role and assist the company in the orderly transition of his duties and responsibilities.
Boyne joined Calamos Investments in April 2008 and served in a number of executive positions since then. He has decided to pursue a leadership position in the non-profit sector, focusing on the betterment of children and young adults. Boyne and his family will be relocating to Steamboat Springs, Colorado.
“I appreciate Jim’s leadership during his tenure at the firm and wish the best to him and his family,” said John P. Calamos Sr., Chairman, Chief Executive Officer and Global Co-Chief Investment Officer.
The firm does not plan to replace the role of President and COO, and Boyne’s responsibilities will be assumed by other senior leaders at Calamos, including the firm’s Executive and Operating Committees.
Foto cedidaBen Wallace & Luke Newman de Henderson. Seeing Things in absolutes
Fear and greed have been powerful motivators over the past few years, with investors gripped in turn by panic about the health of the global economy and optimism that central banks have done enough to promote growth. From concerns about the burden of government debt in the western world, to the US ‘fiscal cliff’ leading up to the start of 2013, whichever way the pendulum has swung, investors have followed.
The past few months, however, have seen the steady emergence of a different trend. We first saw it at the start of 2012, when stocks were pricing almost entirely on market sentiment. At that time, the importance of economic newsflow far outweighed the detail of individual stocks. Since then, share pricing correlations have steadily fallen and the dominant macro-economic themes that have driven investors to buy or sell over the past few years are no longer overshadowing stock-specific drivers to quite the same degree.
Source: Bloomberg, CBOE S&P500 Implied Correlation Index (indicating the expected average correlation of price returns of the stocks that comprise the S&P500 Index), as at 7 August 2013
A market where prices move in tandem, such as we saw in the period prior to 2012, limits the opportunities for stock-pickers like us to generate active returns. The lower the correlation in share price movements, the greater the opportunity to find stocks capable of generating higher or lower returns than the market average. This gives room for independent stock characteristics to play a bigger role, providing more opportunities to generate profits from long and short stock-picking ideas.
It can be something of a challenge to overcome some investors’ ingrained preference for bond funds, particularly for those who lost money in the post-Lehman Brothers crash (15 September, incidentally, marks the five-year anniversary of when the company filed for bankruptcy). Bond markets have come under abnormal and sustained pressure in recent months, however, as markets consider the implications of the US Federal Reserve’s plan to start pulling back on its $85 billion per month bond-buying programme.
This has left investors looking for other options for their money in a low growth, low interest rate world. Absolute return funds, which are generally considered to sit somewhere between a bond fund and an equities fund in terms of potential risk are, in our opinion, an attractive halfway house.
For our Absolute Return strategies, the long and short books are equally important and, as always, the key is getting the right mix of holdings. It is an intrinsic part of our management style to be very proactive in scaling positions on the fund. The portfolio is divided into our core long book and a tactical short book, which allows us to move quickly when responding to market events, or when looking to exploit what is a diverse investment universe. Our willingness to utilise this flexibility to adjust the net and gross position has enabled us to generate consistent positive returns, while helping to preserve capital and minimise volatility.
January 2013 marked the first time in some years that we moved the gross exposure above 100%, a statement of confidence that it was a sensible time to put investors’ capital to work. At the time we took some material long positions to more defensive areas of the market that displayed very safe and secure dividend-paying characteristics, such as HSBC and Vodafone. HSBC in particular seemed very well positioned, with a recent dividend increase suggesting that future earnings might be quite good.
Financials has been quite a busy area for us in 2013, across both long and short books, given the sector’s sensitivity to economic data and monetary policy. Central banks have taken extraordinary measures in the past couple of years, directing the risk-free rate to help restore confidence in the economy and to make other asset classes more attractive. While we would not ordinarily choose to go long in miners, a number of resources stocks also seem unduly out of favour, given management changes and improvements in capital expenditure.
The fall in share pricing correlations hopefully marks an end to what has been a lingering hangover from the financial crisis, at least for the time being. In a perfectly efficient market, all investment decisions would be based on rational and measurable factors, with share price volatility driven primarily by the fundamentals of individual companies. Markets certainly aren’t perfect, but in this environment, we believe that an actively managed long/short strategy with an absolute return focus can play an important role for cautious investors.
Vincent Oswald, cofundador de Azure Partners. (Foto cedida por Azure. Los fondos de fondos de microfinanzas, “una inversión de atractivos retornos”
Azure Partners’ team offers one of the longest track record investing in microfinance and combines a total of 24 years of direct microfinance field experience combined with solid entrepreneurial background. For the co-founders of Azure Partners, Jack Lowe and Vincent Oswald, launching funds of funds was a natural step after managing the largest microfinance debt fund at BlueOrchard Finance from 2004 to 2008.
As explained byOswald, in an interview with Funds Society, microfinance provide an excellent investment case:
De-correlated investment
Stable returns and low volatility
Fast growing markets
Access to the real and informal economy
Vast social impact
Azure Partners, a swiss based investment advisor specialized in microfinance, advises two microfinance funds of funds:
– Azure Global Microfinance Fund (AGMF) is the first fund of funds managed by professional from the microfinance investment industry. It offers a diversified exposure to different investment funds with specific microfinance strategies, from traditional debt funds, to balanced debt and private equity funds, to Private Equity funds.
– Azure Microfinance Private Equity Fund (AMPEF) which aims to focus on investing in strong locally managed microfinance Private Equity funds focused on specific countries or regions with a hands on approach. The fund will combine 20% co-investments with 30% secondary purchases and 50% primary funds to deliver strong returns to our investors.
Respect to its investment process, Oswald said that they have a 5 steps investment process. “In comparison to more traditional fund of funds, we also conduct Due Diligence of underlying Microfinance Institutions in our portfolio, especially for Private Equity funds. This is a key part of our analysis and a clear added value to the decision process”.
Asked if the fund has a charitable side, the co-founder of Azure reply that investing in microfinance has a vast impact. “By its activity and type of clients, Microfinance generates an impact for millions of micro-entrepreneurs in the countries where we invest in”.
“We do not see the fund as charitable, as it delivers a credible financial return to its investors. However, we pay high attention to our investments social impact. Therefore, we developed our own Social Performance rating to analyze the funds we invest in and include it in our investment decision process”.
He also explained that they have atop-down / bottom-up approach in selecting their investment opportunities. “Usually, debt funds offer a worldwide exposure to microfinance markets and we focus in choosing the best one for the fund”.
He added that regarding the regional and private equity funds, they perform region and country analysis in order to chose the country, which will fit the investment allocation and diversification requirement of the funds. “We will then look for opportunities in these regions/countries. The fund managers looking for investors in their funds also directly contact us”.
Oswald explained that their fund is focus on microfinance activity only and in that sense, is very sector focus. Each product they advise has its own specific regional, country and single fund exposure limits.
At the end of June, AGMF had 6 investments positions, presenting indirect access to 169 Microfinance Institutions in 48 countries, providing financial services to more than 670.000 micro-entrepreneurs in the world. “For AMPEF, we are in fund raising mode and we plan to make 10 to 15 investments”.
In terms of sales policy, “for AGMF we use a combination of banking platforms (large banks promoting our fund to their clientele) and fundraising companies with a geographic focus. For AMPEF, we have signed a number of fundraising agreements also with geographical focus. We obviously also use our personal networks acquired through our years of activity in the investment world but we do not internalize investor relations or fundraising”.
AGMF has currently more than $6M of AuM and is expected to reach over $20 million by the end of the year. For AMPEF they are looking to raise $100 million in the course of two years.
Oswald believes that compared to other similar funds, “the funds of funds in microfinance offers a differentiated investment strategy to deliver attractive returns while managing the risk efficiently. It provides an active regional and country allocation, an exclusive access to secondary opportunities, access to smaller more innovative funds, access to regional funds, access to opportunities dedicated only to microfinance investors. In that sense, it’s an ideal product for an investor seeking a global exposure to the microfinance investment universe”.
They invest only in funds, holdings or SPVs. They do not do direct investments into Microfinance Institutions except co-investments. The YTD performance of AGMF is 0.92%, which represents 2.21% annualized. The back tested performance presents a 5% – 6% net return in USD once the fund will reach its target size. For AMPEF they are targeting a relatively net return to investors.
