Esteban Morgan has joined DAVINCI Trusted Partner as Sales Manager for Argentina, the financial services firm’s founders, Santiago Queirolo and James Whitelaw, confirmed to Funds Society.
Morgan will be responsible for serving the Argentine clients of DAVINCI, a company that currently distributes the strategies of two international asset managers: Allianz Global Investors and Jupiter Asset Management.
“It is essential for us to have a local presence in Argentina. It is a strategically important decision that reinforces our commitment to our clients and allows us to continue with our growth plans in the region. Additionally, the pandemic continues to make travel difficult, so we are excited to bring Esteban on board so that we can be closer to the advisors who have always been with us,” explained Queirolo, Managing Director of DAVINCI Trusted Partner, at the company’s Montevideo headquarters.
Morgan holds an Economic degree from Universidad Torcuato Di Tella (Buenos Aires) and in 2018 he approved the master’s in finance courses from the same university. In 2019 he performed satisfactorily the Level 1 exam from the CFA Program. With more than 8 years’ experience in the financial sector, Esteban started his career in the Portfolio Personal’s commercial team (PPI).
Recently he worked as a VP in the Santander Argentina Investment Banking team participating in the execution of multiple structured finance transactions including syndicated loans, debt capital markets issuances, export & agency finance loans and corporate finance for main banks clients. This year he was appointed as responsible for leading Sustainable Financing alternatives, advising clients in green loans certification and compliance with ESG standards.
Meanwhile, the firm maintains its international expansion plans in the other relevant Latin American markets. “We have restructured our team to deepen our presence in key markets such as Chile, Peru, Colombia, Panama and Brazil. As health protocols allow, we will begin to visit our clients and present Jupiter Asset Management’s strategies,” explained Whitelaw, Managing Director of the firm created a year ago.
CC-BY-SA-2.0, FlickrSantiago de Chile y Cordillera de los Andes. ,,
Aberdeen Standard Investments (ASI) has announced this week that it has signed a partnership agreement with Excel Capital (XLC) to strengthen its presence in the Latam wholesale market, after more than 10 years of “fruitful joint collaboration” in the institutional Latam market.
The asset manager has highlighted in a press release that as a result of this deal, Excel Capital will support its wholesale efforts in Argentina and Uruguay with immediate effect, and Chile, Colombia and Peru, effective October 1st2021.
With employees in more than 40 locations worldwide, ASI currently manages a total of 629.4 billion dollarsof assets on behalf of governments, pension funds, insurers, companies, charities, foundations and individuals across 80 countries (as of 30 June 2021). Its full range of solutions span equities, multi-asset, fixed income, liquidity, sovereign wealth funds, real estate and private markets.
The US Offshore market and the Latam Wholesale markets are covered by ASI´s US Offshore and Latam Wholesale Team led by Menno de Vreeze, split between Miami, New York and Brazil and which has been covering the region for many years. “Indeed, in the last years, the team has been building a great foundation on the Wholesale side in LATAM with signing many agreements and already raising considerable assets”, says the press release.
Launched in 2015, and with clients’ assets of 4,355 million dollars currently invested (as at the end 2020), XLC is a company dedicated to mutual fund distribution private equity placements throughout Latam (ex-Brazil). Over the last years, it has been building a strong Latam Wholesale team, co-led by Jose Tomas Raga and Macarena Leon, and has achieved great success with raising assets for some international asset management companies in Chile, Colombia and Peru.
“We are very excited about this new partnership agreement with XLC which comes following a great momentum achieved in the last years in the LATAM wholesale market for us. For that reason, we deem now the time has come to go to the next level and strength our footprint with a local Sales team on the ground to further raise our profile”, commented Menno de Vreezewho is responsible for the US Offshore and Latam Wholesale Market.
In his view, the XLC team has “strong credentials and reputation” in that market, and will work very closely with their US Offshore team in the US to deliver “a world class service” to existing clients and prospects. “Besides, XLC has been already working for many years successfully with us on the institutional side in Latin America with my colleague Linda Cartusciello (Senior Business Development Manager)”, he added.
Meanwhile, Gaston Angelico, Managing Partner of Excel Capital, said that they are “proud” that ASI continues to trust them as their strategic partner in Latam to further develop its asset management business, now giving them the opportunity to work together in the wholesale market, in addition to the already-existing institutional relationship.
“This deeper and stronger partnership with ASI is a core business to XLC, as our strategy is focused on providing highest possible quality sales service to regional clients and investors, direct client support through local teams and offices in each of the countries that we cover, as well as facilitating access to all the best-in-class products that ASI offers”, he concluded.
Lastly, Cristian Reynal, Managing Director of Excel Capital pointed out: “When I learnt we’d be distributing ASI funds, I immediately decided to take the leap. Their well-known brand and wide range of products has been a recipe for success in the territory. As a competitor in the past, I often came across their emerging market debt funds as well as their Asian/Chinese equities’ strategies. I’m glad to be on the same team now!”.
Pixabay CC0 Public Domain. China y Estados Unidos impulsan el crecimiento y la recuperación del sector del lujo
After a year in which the only increase in consumption was recorded in the upper part of the luxury consumer pyramid, whose market share doubled compared to the previous year, the global market is gradually recovering and is estimated to return to pre-pandemic levels by 2022, according to the “True-Luxury Global Consumer Insight”, a report by Boston Consulting Group and Altagamma.
Their conclusions show that thepushcomesaboveallfromUSconsumers, whose luxury purchases have restarted more quickly than expected, thanks to the strong government support, and from Chinese consumers, who confirm the trend towards the repatriation of purchases, started during COVID-19.
This recovery is due to a “rebound effect”: the desire for luxury increases in post-pandemic. In this sense, the report shows that spending expectations of high-end consumers in the 12 months are generally positive: the consumers’ feeling is slightly oppositefor personaland experiential luxury, with the first one expected to benefit from domestic consumption, and experiential luxury forecasted to be increasingly supported by abroad spending.
MillennialsandGen.Zaretheother growth drivers and will account for 60% of total consumers by 2025. Among the major trends in consolidation: the increasing virtualization of luxury (new digital tools for engaging the consumer), the polarization of values between Western and Eastern styles, an omnichannel-centered distribution system and a growing attention towards the values of brands, in terms of environmental sustainability and inclusiveness.
“The report shows positive signs for 2021, beyond expectations. China and especially the US are driving growth with more than a third of international consumers planning to increase spending on high-end goods and experiences, including travel. The sector has shown solidity and quickly captured the new socio-cultural trends. Sustainability is certainly one of these, but the strong virtualization of the luxury experience is also striking, as highlighted by the success of sales in livestreaming and by gaming, a sector that reached the value of $178 billion in 2020”, says Matteo Lunelli, President of Altagamma.
If Europeans are cautious about domestic spending and more pessimistic about foreign spending for the next 12 months, US and Chinese consumers stand out for their optimism, placing themselves as potential growth drivers of the personal luxury market in the near future.
“Americans are back” comments Sarah Willersdorf, Managing Director and Partner at Boston Consulting Group. In this sense, she points out that US consumers are bullish on both domestic and abroad luxury consumption expectations, showing Americans are poised to regain their importance in the Global Luxury market. Such renewed optimism is expected to produce a share increase versus pre-covid forecasts of +2-3 p.p., estimated at 19-21% by 2025.
“Consumers from China are also planning to increase their spend but also continuing to repatriate it, with an acceleration here as well versus pre-pandemic estimates in terms of share, amounting to +3-4 p.p., to reach 43-45% in 2025. Brands will need to take a strategic stance towards these two consumers clusters that, besides diverging tastes in terms of style, entail different implications in terms of marketing and distribution footprint investments”, she adds.
The report highlights that virtualization of luxury is an increasingly defined reality that can pose great opportunity of additional revenues stream for the brands. “Particularly gaming: amongst the 39% of consumers who have claimed to be aware of the existence of virtual online games that involve a luxury brand, 55% of them state to have bought in-game items. Amongst them, 86% state to have then purchased the corresponding physical version”, it says.
Other trends that stand out are the boost of social and live commerce (i.e. livestreaming), with the interactions between customersandbrandsbecomingincreasinglydirectand digitally focused; and clienteling 2.0, the importance of the “human” touch. “Compared to last year, a personalized “touch” remains key for consumers when reached across all digital and physical avenues by a brand, confirming the need for brands to create a more 1-1 relationship with the customer across all touchpoints”, concludes the report.
Corporate moves continue in the global asset management industry. The Goldman Sachs Group has announced that it has entered into an agreement to acquire the Dutch asset manager NN Investment Partners (NN IP) from NN Group N.V. for approximately 1.6 billion euros (1.87 billion dollars), consisting of a base purchase price of 1,515 million.
This amount doesn’t include a ticking fee and excess capital of 50 million euros to be distributed in the form of a dividend before completion, so the final figure could rise to €1.7 billion. The transaction is expected to close by the end of the first quarter of 2022, subject to regulatory and other approvals and conditions, reveal the statements released by both firms.
As part of the agreement, NN Group and Goldman Sachs Asset Management will enter into a ten-year strategic partnership under which the combined company will continue to provide asset management services to NN Group.
The combination of the complementary investment capabilities of NN IP and Goldman Sachs will create a full suite of asset management products that can be offered to clients through the distribution networks of both parties. At the same time, NN IP has highlighted that its “leading position” in responsible investing will strengthen Goldman Sachs Asset Management’s sustainable investment strategy, product offerings and client solutions.
A stronger European business
NN IP is a leading European asset manager based in The Hague, Netherlands, with approximately $355 billion in assets under supervision and $70 billion in assets under advice. It offers a broad range of equity and fixed income products, with a strong ESG integration across its business. Besides, it is a top-ranked ESG manager in Europe and 75% of its assets under supervision are ESG integrated. With a heritage dating back almost 175 years, NN IP employs more than 900 professionals in 15 countries and combines the use of data and technology with fundamental analysis in its investment processes.
NN IP’s employees will join Goldman Sachs Asset Management following the closing of the transaction and both firms expect that the Netherlands will become a significant location in GSAM’s European business. “We believe that their expertise will strengthen our fund management and distribution platform across retail and institutional channels in Europe and support us in delivering long-term value to clients”, said Goldman Sachs in its press release.
In their view, NN IP is highly complementary to their existing European footprint and will add new capabilities and accelerate growth in products such as European equity and investment grade credit, sustainable and impact equity, and green bonds.
Goldman Sachs has $2.3 trillion in assets under supervision globally, and this transaction will bring assets under supervision in Europe to over $600 billion, aligning with the firm’s strategic objectives to scale its European business and extend its global reach.
As a result of the agreement, Satish Bapat will step down from his role as a member of the Management Board of NN Group. He will continue to lead NN IP in his role as CEO.
A strategic partnership
Meanwhile, the combination with Goldman Sachs gives NN IP a broader platform to accelerate its growth and further improve the offering and service to its clients. It will also allow NN Group to continue its cooperation with NN IP and to benefit from the strengths and complementary product propositions of Goldman Sachs.
As part of the agreement, GSAM will enter into a long-term strategic partnership agreement with NN Group to manage an approximately $190 billion portfolio of assets, reflecting the strength of the business’ global insurance asset management capabilities and alternatives franchise.
The partnership will establish Goldman Sachs as the largest non-affiliated insurance asset manager globally, with over $550 billion in assets under supervision, and the acquisition will provide a foundation for further growth in the firm’s European fiduciary management business, building on the success of its platform in the United States and United Kingdom.
“This acquisition allows us to accelerate our growth strategy and broaden our asset management platform. NN IP offers a leading European client franchise and an extension of our strength in insurance asset management. Across their offerings they have been successful in integrating sustainability which mirrors our own level of ambition to put responsible investing and stewardship at the heart of our business. We look forward to partnering with the team at NN IP as we focus on delivering long-term value to our clients and our shareholders”, commented David Solomon, Chairman and CEO of Goldman Sachs.
Meanwhile, David Knibbe, CEO of NN Group, pointed out that they have a “longstanding and successful” shared history with NN IP. “We value this strong and constructive relationship that we have and we look forward to further building on it in a new form. This transaction brings together two international asset managers, each with many decades of investment experience. We have found a strong and professional partner in Goldman Sachs, providing an environment in which our NN IP colleagues can continue to thrive, while the combined investment expertise and scale will enhance the service offering to their clients, including NN Group”, he added.
The U.S. equity market set a record high during the last week of July with the benchmark S&P 500 index closing higher for the sixth consecutive month, overriding fears of rising inflation and a potential slowdown in economic growth.On July 19, the U.S. Business Cycle Dating Committee announced that the COVID-19 induced two month U.S. recession from March to April of 2020 was the shortest on record, putting the 1980 February to July recession in second place.
Upcoming key events include Fed Chairman Powell’s keynote speech at the Jackson Hole Economic Symposium on this year’s theme “Macroeconomic Policy in an Uneven Economy,” on Aug. 26, which follows the July jobs report that came out on August 6th. Goldman Sachs economists “expect the Fed will first hint that it intends to decrease the size of its $120 billion monthly asset purchases at its September meeting, formally announce tapering in December, and begin tapering in early 2022.” Chairman Bernanke’s 2013 ‘taper tantrum’ statement that the Fed “could in the next few meetings take a step down in its pace of purchases” started a five-day, 40 basis point rise in the 10-year UST yield to 2.6% and 5% drop in stocks.
GAMCO’s Private Market Value (PMV) with a Catalyst™ stock research ideas highlighted as ‘stock picks’ during BARRON’S 2021 Midyear Roundtable, published in the July 19, issue, were: CNH Industrial (CNHI) that recently purchased Raven Industries (RAVN), a leader in precision-agriculture technology, Mexico’s TV network Grupo Televisa (TV) popular with the Spanish-speaking population, Deutsche Telekom (DTE) with a valuable stake in T-Mobile US (TMUS), Vivendi (VIV) a play on music streaming, ViacomCBS (VIACA) a restructuring play, Liberty Braves Group (BATRA) with John Malone at bat, Madison Square Garden Sports (MSGS) with James Dolan up, and Traton (8TRA) a truck maker spun out of Volkswagen with 25% of the Class 8 truck market in Europe, and now in the U.S. via its purchase of Lisle, Illinois based Navistar Inc.
Looking to M&A, Willis Towers Watson (WLTW) and Aon (AON) mutually agreed to walk away from their all-stock, $30 billion merger. Willis Towers Watson agreed to be acquired by Aon in March 2020 and terms of the deal called for Willis Towers shareholders to receive 1.08 shares of Aon for each share. In June, the U.S. DOJ filed suit to block the deal even though the European Commission had already granted conditional regulatory approval after the parties had agreed to sell overlapping business units that generated billions of dollars in revenue. Following efforts to negotiate additional divestitures to mollify the DOJ, an impasse was reached with the regulator and the parties opted to continue as separate companies. Willis Towers Watson received a $1 billion termination fee from Aon as a result, and will use the funds to buy back $1 billion of its stock. The unexpected move resulted in spreads widening on other mergers in sympathy.
Although this was a shock to the M&A market, we believe conditions are strong for continued strength building off of the record $2.8 billion from the first half of the year. Favourable dynamics remain in place, including historically low interest rates, accommodating debt markets, substantial dry powder held by private equity firms and management teams looking to better compete in an overall evolving global marketplace. While more deals do not necessarily translate to outsized returns, it, coupled with these various drivers, certainly provides for an encouraging landscaping and backdrop for investment opportunities within a portfolio like ours.
Rounding out our outlook with the convertibles space, the global convertible market saw some weakness in July, weighed down by a few large Chinese issuers. While some of these issues are now more attractively priced, we continue to view them cautiously. July was also the worst month for new issuance globally in nearly two years with only $3.4 billion of convertibles pricing. We are confident that issuance will pick back up as companies exit quiet periods around earnings and we approach typically busier fall months. The fundamental reasons for increased convertible issuance are still quite intact with low interest rates, increasing equity prices, and favourable tax environments available to most potential issuers.
To summarize, GAMCO continues to expect more deals — mergers, spinoffs, and other forms of financial engineering. Stocks should continue to do well with politicians spending to ensure a good economy for the midterms, and convertibles are an appealing way to stay invested in equities with the benefit of asymmetric risk exposure.
___________________________________________
To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:
GAMCO MERGER ARBITRAGE
GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.
Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.
Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.
Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.
Class I USD – LU0687944552 Class I EUR – LU0687944396 Class A USD – LU0687943745 Class A EUR – LU0687943661 Class R USD – LU1453360825 Class R EUR – LU1453361476
GAMCO ALL CAP VALUE
The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.
GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.
Class I USD – LU1216601648 Class I EUR – LU1216601564 Class A USD – LU1216600913 Class A EUR – LU1216600673 Class R USD – LU1453359900 Class R EUR – LU1453360155
GAMCO CONVERTIBLE SECURITIES
GAMCO Convertible Securities’ objective is to seek to provide current income as well as long term capital appreciation through a total return strategy by investing in a diversified portfolio of global convertible securities.
The Fund leverages the firm’s history of investing in dedicated convertible security portfolios since 1979.
The fund invests in convertible securities, as well as other instruments that have economic characteristics similar to such securities, across global markets (but the fund will not invest in contingent convertible notes). The fund may invest in securities of any market capitalization or credit quality, including up to 100% in below investment grade or unrated securities, and may from time to time invest a significant amount of its assets in securities of smaller companies. Convertible securities may include any suitable convertible instruments such as convertible bonds, convertible notes or convertible preference shares.
By actively managing the fund and investing in convertible securities, the investment manager seeks the opportunity to participate in the capital appreciation of underlying stocks, while at the same time relying on the fixed income aspect of the convertible securities to provide current income and reduced price volatility, which can limit the risk of loss in a down equity market.
Class I USD LU2264533006
Class I EUR LU2264532966
Class A USD LU2264532701
Class A EUR LU2264532610
Class R USD LU2264533345
Class R EUR LU2264533261
Class F USD LU2264533691
Class F EUR LU2264533428
Disclaimer: The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.
Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reflect the manager’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.
At a time when interest rates are either ultra-low or even negative, positive inflation-adjusted returns are in short supply. To achieve them, bond investors have turned to strategies that have the flexibility to invest in different types of fixed income, the most popular of which are multi asset credit (MAC) and absolute return fixed income (ARFI).
Both have plenty to commend them. But they should not necessarily compete for investors’ capital.
We would argue that it doesn’t have to be a case of one or the other. In fact, combining the two can improve a bond portfolio’s diversification and increase its overall risk-adjusted returns over the long run. That’s because MAC strategies tend to do particularly well when interest rates and bond spreads are stable, while ARFI portfolios outperform during periods of credit stress or when interest rates are volatile.
Universe and diversification
For a start, MAC strategies tend to have a tilt towards high yield rather than investment grade bonds. This helps them perform especially well when market volatility is low and yield spreads between corporate and government bonds are narrowing. Their overall credit investment remit, however, can be very broad; some portfolios include investments in private debt and loans. This means MAC strategies traditionally offer greater diversification than a direct allocation to high yield credit. It is the freedom to allocate capital across credit sectors that gives portfolio managers the opportunity to secure excess returns. Not only can they shift between investment grade and high yield, but also within those broad sectors into loans, subordinated bank debt and more.
By comparison, the ARFI universe tends to be, by design, much broader, embracing the full fixed income toolkit; the investment styles and the sources of excess return or ‘alpha’ are more diverse than for MAC strategies. In many cases such portfolios also invest in credit, but often do so alongside currencies, interest rate products and derivatives. Probably the most common feature of ARFI strategies is the incorporation of capital protection/risk mitigation trades. The aim here is to improve risk-adjusted returns, but it also means that absolute return strategies tend to lag during bull markets in credit spreads.
ARFI strategies also use all the investment tools available, including derivatives, to manage risk – keeping the desired exposure while hedging out unwanted risk – across the full spectrum of fixed income sectors. This makes ARFI strategies less sensitive than MAC strategies to the overall direction of the credit market. For example, an ARFI strategy can protect against the risk of inflation and rising rates by taking a negative duration position.
As ARFI strategies usually have a lower allocation to high yield debt than MAC portfolios, they tend to have lower solvency capital requirements (SCR), making them more attractive as investments among insurance companies that are subject to Solvency II regulations.
The differences between the two strategies mean that correlation of the returns generated by ARFI and MAC strategies tends to be relatively low, and certainly much lower than between the returns of the different funds within the MAC universe (see Fig. 1). Combining the two strategies could thus offer diversification benefits compared to investing in just one.
Liquidity versus returns
As a rule of thumb, credit investments and emerging market bonds tend to be less liquid than developed market sovereign debt and currencies. Thus, MAC strategies – which invest heavily in such assets – are usually less liquid than their ARFI counterparts, particularly if they have allocations to loans or private debt. This makes the risk of a sharp drawdown – or a sizeable peak to trough capital loss – more significant for the MAC strategies. This is particularly challenging during periods when market liquidity evaporates, as was the case in March 2020 and December 2018 (see Fig. 2). This is also the case even when comparing the top quartile MAC strategies with Pictet’s Absolute Return Fixed Income strategy.
On the flip side, by capturing this liquidity premia, MAC strategies tend to deliver higher returns, on average, than their ARFI peers over the course of a market cycle.
For a typical MAC strategy, up to 80 per cent of performance would be attributed to movements in yield spreads. By comparison, Pictet’s Absolute Return Fixed Income strategy aims to diversify the sources of return evenly between spreads, rates and currencies. By doing so, Pictet targets a liquid portfolio at all times.
The source of return also tends to be different, with MAC taking a more bottom-up approach and ARFI tending to place more emphasis on top-down, macroeconomic factors in portfolio construction. In our ARFI strategy, for example, only about 10 per cent of overall performance comes from security selection.
Manager diversification matters
One downside of the ARFI approach is the fact that the strategies are not homogenous, and success is highly dependent on manager skill. Due diligence is thus paramount. The same can also be said of MAC, where return dispersion within the universe is similarly high.
Both are dependent on portfolio managers’ timing when rotating between different investments. In fact, this is arguably more important for MAC strategies given that such portfolios concentrate investments in a narrower range of sectors and are less liquid.
Best of both worlds?
Despite their differences, MAC and ARFI vie for the same type of investor – one who is looking for a flexible approach that generates returns even in the current climate of low yields and low credit spreads. Yet, there are enough differences for the two types of strategies to be complementary. MAC can offer access to more exotic and less liquid securities that offer the prospect of higher yield. A well-balanced ARFI strategy, meanwhile, can harness strong macroeconomic trends while reducing risk and yet still delivering positive real returns.
By combining the two and selecting the managers that play to each strategy’s strengths, investors can thus achieve better risk adjusted returns than by focusing on either one in isolation (see Fig. 3).
Written by Andrés Sánchez Balcázar, Head of Global Bonds team at Pictet Asset Management.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
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Pixabay CC0 Public Domain. Los inversores de los mercados emergentes esperan el momento adecuado para hacer uso del efectivo
Emerging market (EM) investors are holding high levels of cash in their portfolios, waiting for markets to stabilize before investing in higher-yielding assets, according to HSBC. Its latest quarterly EM Sentiment Survey found that 45% of investors polled have in excess of 5% of their portfolios in cash and 59% don’t expect to deploy it over the next three months.
“Emerging market investors are waiting for the right time to invest because the markets have been gyrating wildly over the past two months. Only last month, the US Federal Reserve turned more hawkish and the focus was on rate rises and tapering and this month the pendulum has swung completely the other way as investors worry about the continued impact of COVID on growth”, said Murat Ulgen, Global Head of EM Research at the firm.
The survey -the fifth of its kind in a series first launched in June 2020- was conducted between 8 June 2021 and 23 July 2021 among 124 investors from 119 institutions representing 506 billion dollars of EM assets under management.
The poll shows that around half of investors are neutral on the prospects for EM countries over the next three months, although 40% are now bullish, up from 34% in the first quarter of the year. Risk appetite (measured on a scale from 0 to 10 where 10 means the greatest willingness to take risk) also rose modestly to 6.17 from 6.04
EM investors are, however, becoming less optimistic on the growth outlook for EM countries over the next 12 months and have, therefore, also downgraded their inflation expectations. The proportion who are optimistic on growth dropped to 60% in the most recent survey, down from 89% at the end of last year, and those expecting inflation to rise dropped to 59% from 77% at the end of the first quarter.
Rates, the biggest concern
Nevertheless, a clear majority of investors (56%) still expect to see higher policy rates across EM countries with many central banks, including those of Brazil, Russia, Hungary and Mexico, already having hiked rates in 2021. “The feeling among investors is that while the growth outlook is dimmer and inflation is less of a concern than at the beginning of the year, EM countries will continue to hike rates because they are trying to pre-empt Fed tightening and avoid a repeat of the taper tantrum we saw in 2013-2014,” commented Ulgen.
The prospect of tightening by the US Federal Reserve was cited by more respondents as a concern than any other issue, ahead of inflation and COVID-19. This is encouraging investors to focus on economies with rapid rate increases. In this sense, Ulgen pointed out that when you fear that global rates are going to rise, “you’re going to be looking for a higher risk premium to invest in the emerging markets as insulation against tapering”.
With expectations for further rate rises in EM countries, 40% of survey respondents expect EM FX to appreciate against the US dollar, up from 22% in April. Those expectations tend to be most bullish in countries that are frontloading rate hikes, notably Russia and Brazil. Similarly, the poll results suggest investors are seeking a higher risk premium in fixed income as well, citing Russia (22% of the total), Nigeria (13% of the total) and South Africa (12% of the total) as the top three markets with a more favourable outlook in local currency debt.
While Asia remains the most favoured investment destination, the net sentiment has declined as investors are focusing on countries that are benefitting from the rise in commodity prices, including Latin America, Middle East and Africa.
Lastly, engagement with environmental, social and governance (ESG) investing continues to rise, with 45% of respondents now running an ESG portfolio either directly indirectly, up from 30% in June 2020. Climate change, inequality, and minority shareholder protection remain the top three ESG concerns respectively.
Foto cedidaNathalie Wallace, nueva directora global de inversión sostenible de Natixis Investment Managers. Nathalie Wallace, nueva directora global de inversión sostenible de Natixis Investment Managers
Natixis Investment Managershas appointed Nathalie Wallace as Global Head of Sustainable Investing, effective 1st September. She will report to Joseph Pinto, Head of Distribution for Europe, Latin America, Middle East and Asia Pacific, and will be based in Boston.
In a press release, the asset manager has revealed that, in her role, Wallace will be responsible for driving the firm’s ESG commitments across its distribution network, its affiliate managers and through its participation in industry-wide initiatives. She will also focus on supporting clients on their ESG journey from early stage integration to allocation to impact investing. “ESG is at the heart of the strategic ambitions of Natixis IM, which targets to have 600 billion euros of its AUM, equivalent to around 50% of the total, invested in the sustainable or impact investing category by 2024.
Wallace joins from Mirova US, where she was Head of ESG Strategy & Development. She earned her bachelor’s degree at the Institut Supérieur de Gestion Business School in Paris, France and is a Certified International Investment Analyst (CIIA). She served as French Foreign Trade Advisor from 2014 to 2020 and is a member of the CFA Institute’s ESG Technical Committee.
“Having most recently worked at Mirova, our dedicated sustainable investment affiliate, Nathalie, with her deep knowledge and long industry experience, is ideally placed to lead our strategy to support clients in their journey to align their ESG beliefs with their investment goals, and to help us further our contribution to the transition to a more sustainable global economy”, commented Tim Ryan, CEO of Natixis IM.
Foto cedidaRobert Sharps, asumirá como CEO de T.Rowe Price en 2022. Rob Sharps
T. Rowe Price has recently announced key leadership transitions. Its CEO and chair of the Board of Directors, Bill Stromberg, will retire on December 31, 2021, after 35 years at the firm. In a press release, the asset manager has revealed that Rob Sharps, its current president, head of investments, CIO and a member of the firm’s Management Committee, will succeed him as of January 1.
Sharps will then become president and CEO, take over as chair of the Management Committee and join the Board of Directors. He joined T. Rowe Price in 1997 as an equity analyst and his role and influence have broadened in recent years as he has taken a more active role in corporate strategy, product development and key client relationships. Before becoming head of investments and group CIO, Sharps was co-head of Global Equity, the longtime portfolio manager of the US Large-Cap Growth Equity Strategy, and portfolio manager of the former US Growth & Income Equity Strategy.
“I am honored to be the next CEO of T. Rowe Price and am grateful for the confidence that both Bill and the Board have placed in me. T. Rowe Price is well positioned to execute on significant opportunities ahead, and I am excited to lead our business forward and continue helping our clients achieve their financial goals”, he said.
Alan D. Wilson, lead independent director, highlighted that Stromberg has been a remarkable leader and highly effective CEO: “He has deftly navigated the firm through a period of significant change and disruption in the industry. Under his leadership, significant investments in our investment, distribution, product, operations, technology, and corporate function teams have helped the company deliver strong results for clients and take advantage of strong markets to grow assets under management, revenues, earnings, and dividends”, he added.
Lastly, Stromberg commented that, over the course of hist 20-year partnership with Rob, he has consistently demonstrated his abilities as “a talented investor, a principled decision-maker, and an accessible and impactful leader of people and processes”.
Additional leadership transitions
The firm has also announced other changes in senior positions. Specifically, Céline Dufétel, chief operating officer (COO), chief financial officer (CFO), and treasurer, will be stepping down, but she will serve in an advisory role until August 31, 2021, “to ensure a seamless transition”. Jen Dardis, currently head of Finance, will take over her roles and join the Management Committee.
Besides, Eric Veiel, currently co-head of Global Equity, head of U.S. Equity, and chair of the U.S. Equity Steering Committee (ESC), will become head of Global Equity, as of January 1, 2022. At that time, Josh Nelson, currently associate head of U.S. Equity, will become head of U.S. Equity and chair of the U.S. ESC and will join the Management Committee.
On September 9th at 6:30 p.m. (Miami time), Funds Society will be partnering with MFS and Ninety One to host a fundraiser for the victims of the collapse of Champlain Towers South at the Surfside condominium. This terrible tragedy has touched the South Florida community in its heart, and unfortunately, we all know someone who has been affected. The Miami asset and wealth management industry is pulling up an effort to raise US$50,000.00 for the victims.
The event will be held at the Rusty Pelican and all proceeds will be donated to Global Empowerment Mission, which is collecting for three distinct funds whichsupport the residents themselves, a general program on the collapse, and the relocation efforts for the survivors who lived in the building. We invite you to take a look at the programs through this link.
Corporate and individual sponsorship opportunities are still open and we truly hope to engage the key players in the South Florida financial industry to support this effort.
So far, the event is supported by the following sponsors:
Diamond Sponsors: Funds Society, MFS and Ninety One
Gold Sponsors: AXA IM, Janus Henderson, Schroders, Insigneo, Bolton Capital and Jupiter.
Silver Sponsors: RWC and Natixis IM.
If you would like to participate in the event either as a corporate sponsor or as an individual, please contact Elena Santiso at elena.santiso@fundssociety.com or Alicia Jiménez at alicia.jimenez@fundssociety.com. Please consider contacting us to participate in this event.
Tragedy
On June 24th, a collapse occurred at the Champlain Towers South building in the Surfside condominium that left 98 people dead. With the exception of the first few hours following the collapse, no other survivors were ever uncovered.
As reported by Agence Press in Miami, search teams spent weeks dealing with the hazards of the rubble, which included an unstable portion of the building that was still standing, a recurring fire, and Florida’s oppressive summer heat and storms.
On July 23rd, the Miami-Dade Fire Department’s search and rescue team withdrew from the site and announced at a press conference that the search was officially over. A few days later, the identity of the last missing person was confirmed, bringing the death toll to 98 and concluding that there were no more bodies amongst the rubble.
