Marisa L. Hernández, courtesy photo. Marisa L. Hernández to Join BigSur Partners
Marisa L. Hernandez will assume the role of Chief Operating Officer at BigSur Partners effective March 18.
In a statement, the company told Funds Society: “Marisa is a highly accomplished investment professional with 19 years of experience across asset classes, industries and regions. We are delighted to have an executive of her talent and seniority join our leadership team, as we are position BigSur for the next leg of growth given an exciting set of opportunities in the wealth management business.”
Hernandez joins BigSur after a successful career as an equity analyst and Co-Portfolio Manager at prestigious finance organizations in New York. She worked at asset manager Neuberger Berman for the last 12 years, where she most recently served as Senior Vice President. She was previously an equity analyst at UBS Securities. Before coming to the U.S., Marisa was an entrepreneur in her native Uruguay where she founded and managed a construction company.
Hernandez holds a Civil Engineering degree from the University of Uruguay, a post-graduate certificate from the University of Padua (Italy), an MBA from the MIT Sloan School of Management and is a CFA Charterholder.
Wikimedia CommonsPhoto: B137 . Climate Change: Risk for Florida Real Estate
Florida has been identified as a US states that will be under threat from global warming. Future challenges come in the form of more intense hurricanes and tropical storms, sea-level rises and extreme heat. “Of the total of 4.2 million US citizens that live at an elevation of less than 1m 20, 2.4 million of them live in South Florida. By 2045, nearly 64,000 homes in Florida face flooding every other week, with roughly half in South Florida and 12,000 in Miami Beach alone.” Points out Victoria Scalongne, Senior Real Estate Analyst at Indosuez.
Although these predictions depend on how high sea- levels are modelled to rise by the end of the century, in her opinion, it is clear that the housing market and infrastructure of the low-lying peninsula stands a very big chance to be negatively impacted during the course of the life-time of a mortgage taken out today (30 years).
In Miami, a property on or near the water currently fetches a premium and the cheaper real estate in the metro can in general be found on higher ground further inland. “With sea levels rising, this pricing scenario is likely to be inversed in the medium term, with higher ground fetching a premium. Whether it’s climate change, fashion, or real estate returns, developers have been reported to be buying up properties in lower value, higher elevation locations like Little Haiti, redeveloping them and letting them out at increased rents.” She mentions adding th (Scientific American). The median list price for all homes in this neighbourhood increased by 35% from January 2018 to January 2019, while the same indicator stayed flat for Miami Beach over the same period and only increased by 8% for Miami as a whole (Zillow). In Key Biscayne, on the other hand, the median list price in December 2015 was USD2.3 million, by January 2019, this stood at USD 1.54 million, a 33% drop.Florida ha sido identificada como un estado de los Estados Unidos bajo la amenaza del calentamiento global. Los desafíos futuros se presentan en forma de huracanes y tormentas tropicales más intensas, el aumento del nivel del mar y el calor extremo.
En Miami, una propiedad en o cerca del agua actualmente cuesta una prima y las propiedades inmobiliarias más baratas en la zona en general se pueden encontrar en terrenos más altos en el interior. “Con el aumento del nivel del mar, es probable que este escenario de precios se invierta en el mediano plazo”, comenta Scalongne añadiendo que ahora, los desarrolladores están comprando propiedades de menor valor, en lugares de mayor elevación como Little Haiti, reurbanizándolas y dejándolas a precios más elevados.
Según su investigación, el precio de lista promedio para todas las casas en este vecindario aumentó en un 35% desde enero de 2018 hasta enero de 2019, mientras que el mismo indicador se mantuvo estable para Miami Beach durante el mismo período y solo aumentó en un 8% para Miami en su conjunto. En Key Biscayne, por otro lado, el precio de lista promedio en diciembre de 2015 era de 2,3 millones de dólares, mientras que para enero de 2019, era de 1,54 millones, una caída del 33%.
The Florida housing market has traditionally not only been driven by local demand, but by retirees, people escaping cold regions, job seekers and the ebb and flow foreign investors (mainly South American concentrating on the condo market). It has also historically been quite a volatile housing market, relative to other locations. Scalongne notes that although this cycle has not been characterised by overbuilding as in period preceding 2006 (see chart above), and fundamentals are sound, any downturn in the real estate sector will have a profound impact on the economy, as the real estate sector is estimated to represent around 15% of US GDP. “Anyone thinking of investing in the short term has to think that we are in late cycle conditions, and anyone investing in the long term cannot ignore the potential negative impact that climate change could have on this part of the world. Instead of “location, location, location”, the new real estate motto could in the future be “elevation, elevation, elevation.” She concludes.
Didier Saint Georges, Managing Director and Member of Carmignac’s Investment Committee. / Courtesy Photo . Didier Saint Georges (Carmignac): “My Greatest Fear is What will Happen to Debt Once Economic Growth Slows Down”
In mid-2018, the IMF warned that, for the first time in history, global debt had reached 225% of world GDP. Due to central banks’ QE, global debt is today more than three times higher than the level of 20 years ago. The staggering level of debt is not a minor issue, as was pointed out by Didier Saint Georges, Carmignac’s Managing Director and member of its Investment Committee, during an informative meeting in Paris. “My greatest fear is what both public and private debt will do when economic growth slows down.”
In his opinion, the main difference today between strong countries and weak countries is precisely that: their debt. In the US, for example, private debt is low, but public debt is very high. In total, 72 trillion dollars, which is not only a record amount, but which surprises considering the country’s continued economic growth and its very low unemployment rate. But Saint Georges warns: “The problem is global, and the cycle is changing.”
From this perspective, sovereign bonds have become safe-haven assets for Carmignac, with priority over the Asian and European debt against the US bond. Meanwhile, corporate debt markets continue to be penalized, especially in the high-yield segment. “In developed country bonds, we have a history of convergence and the spread is reflected by the risk undertaken by the investor,” explains Saint Georges.
In fixed income investment, however, there is an asset that has become especially relevant in recent times: Liquidity. “Cash” trades bullish while waiting for better opportunities in the market, but the expert acknowledges that this also comes at a price. “We are concerned about the cost of liquidity and growth,” he says.
Is there opportunity in Italian Bonds?
In Italy, investors are faced with the dilemma of undertaking political and economic risk in exchange for a high return potential. For some it’s worth it, for others, not so much. According to Saint Georges, “there is nothing to worry about in the short term, in bonds of short durations, but we should be more cautious with those with long durations. The issue with Italy is not political, it’s purely economic.”
The big issue, however, is if the market starts to fear a recession. “The economy’s current performance doesn’t warrant that fear, except for the high debt. The markets, however, may be sensitive to a recession,” he adds.
Brexit and globalization
According to Saint Georges, “Brexit will be bad for everyone even if a negotiated agreement is reached” and, in the case of a “hard” option, he believes that the potential victims are Germany and France. “The referendum voters forgot to think about their pocket and made an emotional decision,” he says. Investors, he adds, are quite worried and have started 2019 thinking just the opposite than they did in early 2018, in panic mode.
The backdrop is rebellion towards globalization, which according to Saint Georges, is what has made China grow strong and has benefited Italy, France and Germany. However, “even though globalization is facing more and more difficulties at the political level, as an economic catalyst it is too strong to retreat from. There is a certain rejection against globalization. My fear of that is that it was globalization which drove China’s strong growth, in turn benefitting Italy, France and Germany. However, it is too strong to retreat from now.” He concludes.
Wikimedia Commons Roque Calleja. Roque Calleja Moves Back to NY as Head of BlackRock Alternative Specialists (BAS) for Latin America
Roque Calleja will move to New York next April, as Head of BlackRock Alternative Specialists (BAS) for Latin America. In this role he will work closely with Sara Litt, who has been a member of the BAS Latin America team since 2016 and will report to Armando Senra, Head of Latin America at BlackRock.
In his new position, Calleja will be responsible for strategy and fundraising for BlackRock’s alternatives platform working closely with Latin American institutional and wealth clients across hedge funds, private equity, real assets and private credit.
Calleja has worked for BlackRock in Mexico since 2014, first as vice president and since 2017 he has been co-director of the Institutional Business together with Giovanni Onate, who will lead the business individually when Calleja leaves. According to an internal memo to which Funds Society had access, “During this time, BlackRock has become the leading asset manager for active mandates in Mexico and one of the leading asset managers for local and international alternative investments… This appointment reflects BlackRock’s continued focus on alternatives as a strategic growth area and the growing demand from clients across the region for alternative assets.”
Serna added: “Latin American clients are increasingly relying on alternative investments as a critical component of their asset allocation in order to build resilient, diversified portfolios that can enhance long-term returns. BlackRock’s alternatives platform offers clients unparalleled breadth across alternatives asset classes, a global footprint, and robust sourcing capabilities, which combined with our risk management platform positions us well to deliver to clients best in class alternatives solutions.”
Calleja joined BlackRock in 2009 as a member of BlackRock’s iShares business in Iberia. He later moved to New York where he supported BlackRock’s Latin America and Iberia business and was responsible for managing the retail offshore wealth business. He has a BA degree in business administration and a Master’s degree in Business Strategy from the Francisco de Vitoria university in Madrid, Spain. He also holds a master’s degree in alternative investments and Hedge Funds by the Instituto de Estudios Bursatiles (IEB) university in Madrid.
BlackRock’s alternatives platform currently manages over $172 billion in client assets and comprises a global team of over 800 investment professionals sourcing and structuring both direct and fund investments.
Photo: Shenandoah National Park. 201 Global Asset Managers Can Now Try to Woo Mexican Pension Funds
It is official, Afores can now invest in international mutual funds. The meeting and authorization of the Risk Analysis Committee (CAR) that international managers, afores and the regulator have been waiting for since 2017, has already taken place and, as a result, the guidelines by which afores can invest in mutual funds with active strategies can be consulted in only 12 pages.
In summary, in order to be elegible the manager should have at least 10 years of experience managing investment vehicles or investment mandates, as well as at least 50 billion dollars in assets under management. The same amount that applies to managers looking for an investment mandate. According to the CAR document, this requirement, which is fulfilled by the 201 largest asset managers in the world, can be modified by the Investment Committees of the Pension Funds by “considering criteria such as the experience of the administrator in the management of assets in the international markets of the strategy object of investment, the performance of the Fund, as well as additional criteria determined by their own Investment Committees.”
The fund in particular must have at least 2 years of operation since its inception and more than 100 million dollars in assets. In addition to being open funds of an Eligible Country for Investments and having a benchmark.
Although the guidelines do not indicate that the daily composition of the funds should be known, a condition with which several players were not comfortable, they do mention that the net value of the assets of the fund should be known daily.
The fund itself may use derivatives to reduce costs, manage liquidity, marginally facilitate the replication of the index or sub-index or for risk management but not to increase returns, leverage or synthetically replicate the benchmark.
In addition, to preserve the active nature of the strategy, investment in other funds or ETFs will not be allowed.
This resolution marks a milestone in the way Afores can invest and has been in the process for several years, as well as the increase of the 20% limit on investment in foreign securities, which the CONSAR confirms that they are still working to achieve. For this to change, there needs to be change to the law, which is now underway, but without a doubt, the approval of the investment in international funds will change the market in Mexico and the way of investing the afores, for the benefit of the workers.
Wikimedia CommonsInterior del Palacio de Bellas Artes de México. The CERPI Boom in Mexico Should Continue in 2019
The total assets under management of the Mexican Pension Funds, AFOREs, reached 179.274 million dollars in January 2019, of which 10.774 million dollars belong to structured investments in just over 100 instruments, that is, 6.01% of the resources are invested in Development Fiduciary Securitization Certificates (CKDs) and Investment Project Fiduciary Securitization Certificates (CERPIs) that reached 741 million dollars through 19 issues at the end of January 2019. In the accumulated of the year (to February 22), two more were added raising 48 million dollars.
The potential amount of these CERPIs can reach 5.776 million dollars considering the maximum amount of the series A issue (capital calls) and the maximum amount of the issuance of additional series contemplated by CERPIs.
The CKD has allowed the Afores to participate in private equity through a mechanism listed on the stock exchange since 2009.
The AFOREs through the CKDs and the CERPIs, have participated in infrastructure projects, energy, real estate developments, forestry projects, private equity investment in companies, as well as financing.
The CERPIs emerged in 2016 as a complement to the CKDs that allow resources to be collected from funds and companies to invest in a wide range of projects.
The CERPI seeks to solve many of the limitations of the CKD, to have:
A more flexible capital call structure,
Most appropriate corporate governance requirements (the technical committee does not have to approve investments), and
Minor disclosure requirements.
Between 2016 and February 22, 2019, 21 CERPIs have been placed. In 2016, the first CERPI was born, the MIRA issuer, a real estate company focused on the development of mixed uses in Mexico. In 2018 there were 18 CERPIs and in the first two months of the year (until February 22) two more were added (Blackstone and Spruceview). The boom observed since 2018 is due to the fact that in January 2018 the regulation was relaxed to allow investment in CERPIs that finance projects outside the national territory in up to 90% of the issue.
The possibility of co-investing with the AFOREs in national and international projects has attracted internationally recognized firms such as:
Blackrock. Investment management company established in 1988 and is the largest asset management company in the world with 5,315.409 million euros according to the firm Investment & Pensions Europe, IPE
Blackstone. He was born in 1985. He manages assets for 361.000 million euros (place 49 in 2018 according to IPE).
KKR. American firm with more than 40 years of experience and with managed assets exceeding 140.622 million euros (place 131).
Partners Group. Founded in Switzerland in 1996. It manages 61.936 million euros (place 174).
Lexington Partners. He is one of the largest independent administrators in the world focused on secondary transactions of private capital and co-investments. Since 1990, Lexington has raised more than 38.000 million dollars according to the placement prospectus (page 172), among others.
In addition to the diversification there is a transfer of knowledge from global investment managers to the AFOREs for their joint participation in investment projects. Among the CERPIs that are in the approval process of the financial authorities are:
Acon LATAM Holdings which is a diversified investment fund of private capital that operates in the United States, Mexico, Brazil and Colombia;
Paladin Realty Administrador (PALADINCPI) a trust owned by Paladin Realty Management, a private equity fund manager focused on real estate investments;
HarbourVest Partners Mexico a subsidiary of the fund manager that was created in 1982; HarbourVest Partners.
Grupo Agricultura, Agua y Ambiente, a subsidiary of Renewable Resources Group (RRG), an asset management company with a focus on agriculture and other sustainable resources; among others that are in process according to information from the Mexican Stock Exchange.
It can be expected that this boom will continue in 2019.
Wikimedia CommonsCourtesy photo. Over Seven Million Delinquencies
A decade ago, during the financial crisis of 2008-2009, more than 5.5 million Americans were unable to pay their car loan instalments and were more than 90 days late with their payments. Now there are more than seven million people in the United States who can’t pay their car loans, seemingly illogical in the current situation of economic growth and very low unemployment (4% compared to 10% in 2009).
Around 86% of Americans use a private car to get to work. This gives you an idea of how important it is to have a car in most parts of the United States and why most people prioritise payment of their car loans over their mortgage.
As a result, some economists warn that these loan default figures published by the New York Federal Reserve Bank could be just the tip of the iceberg when it comes to problems in the economy and that we could find ourselves in a situation similar to that of the subprime mortgage crisis.
Some significant data: 90% of the value of new vehicle sales is paid through a financial instrument (a loan or a lease); The total outstanding car loans in the USA is more than a trillion; the number of new loans for vehicle purchases in 2018 was $584 billion (the highest nominal figure in 19 years); according to sector reports, the average price of a new car is approaching $36,000, while the average family income in 2018 was $62,000; the average length of a vehicle purchase loan has grown to 64 months.
At first sight, all these figures can sound alarming and reminiscent of the 2008-2009 financial crisis. However, as with any statistical data, we need to put them in the appropriate context and look at the whole picture. To do this, it is important to emphasise that, despite the fact that the absolute number of defaults has increased, the non-performing loan ratio ended 2018 at 4.5%, below the 5.3% peak reached in 2009. Another key factor in evaluating the situation of vehicle loan debt is the quality of the creditors: new loans were mainly granted to people with a higher credit score, which means that 30% of outstanding car purchase loans were given to borrowers with the highest credit score.
Neither should we ignore the fact that the increase in the absolute number of loans is due to the good health of the economy and has gone hand-in-hand with an increase in car sales, meaning that the percentage of financed purchases has remained relatively stable. Finally, we need to put into the context the size of the vehicle purchase loan market (just over a trillion dollars) by comparing it to the mortgage debt market ($12 trillion).
It is undeniable that, by analysing all the figures in-depth, we can reach conclusions on the unequal access to economic growth for certain population sectors (for example, the increase in non-performing loans in the population under 30, a sector also overburdened by student loans) or on the need for infrastructure to facilitate public transportation. However, it seems unreasonable to assert that an increase in non-performing vehicle loans is leading us to the threshold of a global financial crisis such as that of 2008-2009 caused by the selling of subprime mortgages.
Photo: maxpixel CC0. The Fed is Looking to Prepare a Plan to Stop Reducing its Balance
The Federal Reserve, which at its meeting on January 29 and 30 decided to keep the reference rate unchanged, said in its minutes, published this Wednesday, that there is greater concern about the risks to the economic growth of the US and that it is open to preparing a plan to stop reducing its balance.
The FOMC continued with the message that it would be “patient” to decide when and how to adjust policy to a growing set of risks, including the slowdown in growth in China and Europe, Brexit, trade negotiations and the effects of the five-week shut-down of the United States government, pointing out to a wait and see aproach about how the economy unfolds with the current policy, indicating that for now it has suspended interest rate increases.
The minutes also show that they are prepared to be more flexible in reducing their overall balance, made up of a 4 trillion dollars portfolio of bonds and other assets: “Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year.” they point out.
Pixabay CC0 Public DomainPamjpat. Asian Countries Dominate When It Comes to Passport Power in 2019
Japan goes into the new year holding 1st place on the Henley Passport Index, with citizens enjoying visa-free/visa-on-arrival access to 190 destinations. In a further display of Asian passport power, Singapore and South Korea now sit in joint 2nd place, with access to 189 destinations around the globe. This marks a new high for South Korea, which moved up the ranking following a recent visa-on-arrival agreement with India. Germany and France remain in 3rd place going into 2019, with a visa-free/visa-on-arrival score of 188.
The US and the UK continue to drop down the Henley Passport Index — which is based on authoritative data from the International Air Transport Association (IATA) — and now sit in joint 6th place, with access to 185 destinations. This is a significant fall from the 1st place position that these countries held in 2015. Denmark, Finland, Italy, and Sweden now hold joint 4th place, while Spain and Luxembourg are in 5th. As they have done for much of the index’s 14-year history, Iraq and Afghanistan remain at the bottom of the ranking, with access to just 30 visa-free destinations.
Turkey’s recent introduction of an online e-Visa service has resulted in some interesting changes to the overall rankings. As of October 2018, citizens of over 100 countries (including Canada, the UK, Norway, and the US) must apply for an e-Visa before they travel to Turkey, instead of being able to do so on arrival. While this specific change means that a number of countries have dropped slightly in the rankings, it does not alter the overwhelmingly positive effect of the wider global tendency towards visa-openness and mutually beneficial agreements. Historical data from the Henley Passport Index shows that in 2006, a citizen, on average, could travel to 58 destinations without needing a visa from the host nation; by the end of 2018, this number had nearly doubled to 107.
Dr. Christian H. Kälin, Group Chairman of Henley & Partners and the inventor of the Passport Index concept, says this latest ranking shows that despite rising isolationist sentiment in some parts of the world, many countries remain committed to collaboration. “The general spread of open-door policies has the potential to contribute billions to the global economy, as well as create significant employment opportunities around the world. South Korea and the United Arab Emirates’ recent ascent in the rankings are further examples of what happens when countries take a proactive foreign affairs approach, an attitude which significantly benefits their citizens as well as the international community.”
Citizenship-by-investment countries consolidate their respective positions
As in 2018, countries with citizenship-by-investment (CBI) programs continue to hold their strong positions. Malta, for instance, sits in 9th spot, with access to 182 destinations around the world. St. Kitts and Nevis and Antigua and Barbuda hold 27th and 28th spot respectively, while Moldova remains in a strong position at 46th place, with citizens able to access 122 countries. A recent agreement signed between St. Kitts and Nevis and Belarus, due to come into effect in the coming months, will further strengthen the St. Kitts and Nevis passport, and enhance the travel freedom of its citizens.
Dr. Juerg Steffen, the CEO of Henley & Partners, says: “The enduring appeal of investment migration programs shows that more and more people are embracing alternative citizenship as the best way to access previously unimagined opportunities and improve their passport power. Additionally, it is no surprise that countries are increasingly looking to launch CBI programs, which attract talented individuals and bring enormous economic and societal benefits.”
You can consult your country’s position in the following link.
Photo: Onsen. Multi-Asset Funds did Not Work in 2018 because they Largely Replicated what Advisers Were Doing Themselves
Multi-asset funds failed to protect investors from the impact of volatile equity markets in 2018, according to the Natixis IM Global Portfolio Barometer.
Adviser portfolios delivered negative returns across all regions, driven by falls in equity markets. But the analysis of investor portfolios in seven markets, conducted by the Natixis Portfolio Research & Consulting Group, found that multi-asset funds did not provide diversification as expected, and instead had very high correlations to adviser portfolios. This suggests multi-asset funds largely replicated what advisers were doing themselves.
Equities were the largest contributor to negative returns in all regions, costing around 3-5% on average – except in Italy, where advisers had much lower equity allocations. However, multi-asset funds were the second largest detractor, costing 0.5-2% on average, and particularly affecting France, where these funds have traditionally been very popular.
Alternative investments, like real estate and managed futures, were more resilient to volatility than traditional asset classes, but still contributed marginally to portfolio performance at best, due to lacklustre performance and low allocations. Real assets contributed little except in the UK, where property funds were a positive contributor to portfolios.
Matthew Riley, Head of Research in the Portfolio Research and Consulting Group at Natixis IM, commented: “It’s natural for investors to seek shelter from volatile markets by diversifying portfolios, but it is clear from our analysis that, in 2018, the majority of multi-asset funds fell short and largely failed to diversify, which only added to portfolio losses”.
“Our findings show that investors really need to look more closely when selecting a multi-asset fund, ensuring that the fund is aligned with their investment objective. This due diligence should include checking the fund’s correlation to their existing portfolios, as well as to bonds and equities, to make sure it will improve the risk-return profile of the portfolio.”
Italy showing most resilience to volatile markets
In stark contrast to 2017, advisers in all regions suffered negative portfolio performance in 2018 with the impact of falling equity markets and muted fixed income returns taking their toll. Italy was the most resilient market, with estimated losses of 3.2% for the average adviser portfolio, due to a much lower allocation to equities. Advisers in Italy had an average equity exposure of just 20%, while the UK and the US had a more bullish stance, with equity weightings of over 50% in moderate risk portfolios.
Currency risk continues to weigh on portfolios
In 2017, the Global Portfolio Barometer revealed the impact of currency risk on performance. And, while slightly reduced, it remained an important factor in 2018, benefitting European investors compared to their US counterparts. Currency moves remain an often overlooked area of risk, but when considering a more internationally exposed portfolio, not paying attention to it can have a significant impact on overall returns. For instance, in 2018 a European investor allocating to US equities would have experienced a small positive return of 0.3% in euro terms – a US investor would have lost 5%.
The quest for true diversification continues…
In short, the findings of the Global Portfolio Barometer highlight the impact that the return of volatility had on markets and investor portfolios, with portfolio risks potentially rising from the extraordinarily low levels seen in 2017. Multi-asset funds simply failed to provide diversification, which should be food for thought when considering the relationship between diversification, risk and returns in adviser portfolios.
