Pixabay CC0 Public DomainPhoto: LinkedIn. Vijay C. Advani Will Be Joining TIAA Global Asset Management as President and COO
Effective December 31, 2016, Co-President Vijay C. Advani will be leaving Franklin Templeton to join TIAA Global Asset Management as president and chief operating officer. As a result of this change, current Co-President Jennifer M. Johnson will continue as president. There are no current plans to replace Advani’s co-president position.
Johnson, who has been with the firm for 28 years, has a proven track record of managing all major aspects of the business. She has worked in senior leadership positions since 1995 and was named co-president of Franklin Resources in 2015. Prior to that, Johnson served as executive vice president and chief operating officer since 2010, and has also previously served as the company’s chief information officer.
As president, Johnson’s responsibilities will include overseeing all divisions of the business with the exception of Finance, Human Resources, Legal, Corporate Communications and Templeton Global Macro, which will report to the CEO and Chairman, Greg Johnson. Johnson will work closely with her fellow Executive Committee members, including Greg Johnson, Ken Lewis, chief financial officer, Craig Tyle, general counsel, and the company’s three investment heads: Michael Hasenstab, chief investment officer of Templeton Global Macro, Chris Molumphy, chief investment officer of Franklin Templeton Fixed Income Group, and Ed Perks, chief investment officer of Franklin Templeton Equity. The Executive Committee is comprised of seasoned individuals, each with over two decades of industry experience and more than a decade with the firm.
According to a press release, Franklin Templeton, “as a firm, we are committed to ensuring continuity of our services and remain focused on our goal of delivering competitive and consistent results for our shareholders and clients around the world.” And promises to communicate any additional updates regarding this matter in a timely manner.
Will this be the year when China exceeds growth expectations, Brexit turns into Bremain, the Mexican peso soars and Italian banks turn out to the best performing equity asset class?
Saxo Bank, the online multi-asset trading and investment specialist, has today released its annual set of ‘Outrageous Predictions‘ for the year ahead.
Continuing in the tradition of making a selection of calls aimed at provoking conversation on what might surprise or shock the investment returns in the year ahead this year’s predictions cover a range of scenarios, including a Chinese growth rebound, an Italian bank rally, Brexit giving way to Bremain and the EU’s willingness to change in the face of populist backlash, among others. The Outrageous Predictions should not be considered Saxo’s official market outlook, it is instead the events and market moves deemed outliers with huge potentials for upsetting consensus views.
Steen Jakobsen, Chief Economist at Saxo Bank, commented: “After a year in which reality has managed to surpass even seemingly unlikely calls – with the Brexit surprise and the US election outcome – the common theme for our Outrageous Predictions for 2017 is that desperate times call for desperate actions.
“With change always happening in times of crisis, 2017 may be a wakeup call which sees a real departure from the ‘business as usual’, both in central bank expansionism and government austerity policies which have characterized the post-2009 crisis.
“As some of our past outrageous predictions have turned out to be far less outrageous that at first thought, it is important that investors are aware of the range of possibilities outside of the market consensus so that they can make informed decisions, even in seemingly unlikely market scenarios.”
It is in this spirit that we release Saxo Bank’s Outrageous Predictions for 2017:
China GDP swells to 8% and the SHCOMP hits 5,000
China understands that it has reached the end of the road of its manufacturing and infrastructure growth phase and, through a massive stimulus from fiscal and monetary policies, opens up capital markets to successfully steer a transition to consumption-led growth. This results in 8% growth in 2017, with the resurgence owing to the growth in the services sector. Euphoria over private consumption-driven growth sees the Shanghai Composite Index double from its 2016 level, surpassing 5,000.
Desperate Fed follows BoJ lead to fix 10-year Treasuries at 1.5%
As US dollar and US interest rates rise in increasingly painful fashion in 2017, the testosterone driven fiscal policy of the new US President leads US 10-year yields to reach 3%, causing market panic. On the verge of disaster, the Federal Reserve copies the Bank of Japan’s Yield Curve Control, by fixing the 10-year Government yield at 1.5%, but from a different angle, effectively introducing QE4 or QE Endless. This in turn promptly stops the selloff in global equity and bond markets, leading to the biggest gain for bond markets in seven years. Critical voices are lost in the roar of yet another central bank-infused rally.
High-yield default rate exceeds 25%
With the long-term average default rate for high yield bonds being 3.77%, jumping during the US recessions of 1990, 2000 and 2009 to 16%, 10% and 12% respectively, 2017 sees default rates as high as 25%. As we reach the limits of central bank intervention, governments around the world move towards fiscal stimulus, leading to a rise in interest rates (ex Japan), thus steepening the yield curve dramatically. As trillions of corporate bonds face the world of hurt, the problem is exacerbated by a rotation away from bond funds, widening spreads and making refinancing of low grade debt impossible. With default rates reaching 25%, inefficient corporate actors are no longer viable allowing for a more efficient allocation of capital.
Brexit never happens as the UK Bremains
The global populist uprising, seen across both sides of the Atlantic, disciplines the EU leadership into a more cooperative stance towards the UK. As negotiations progress, the EU makes key concessions on immigration and on passporting rights for UK-based financial services firms, and by the time Article 50 is triggered and put before Parliament, it is turned down in favour of the new deal. The UK is kept within the EU’s orbit, the Bank of England hikes the rate to 0.5% and EURGBP plummets to 0.7300 – invoking the symbolism of 1973, the year of UK’s entry into the EEC.
Doctor copper catches a cold
Copper was one of the clear commodity winners following the US election; however in 2017 the market begins to realise that the new president will struggle to deliver the promised investments and the expected increase in copper demand fails to materialise. Faced with growing discontent at home, President Trump turns up the volume on protectionism, introducing trade barriers that will spell trouble for emerging markets as well as Europe. Global growth starts weakening while China’s demand for industrial metals slows as it move towards a consumption-led growth. Once HG Copper breaches a trend-line support, going back all the way to 2002 at $2/lb, the floodgates open and a wave of speculative selling helps send copper down to the 2009 financial-crisis low at $1.25/lb.
Huge gains for Bitcoin as cryptocurrencies rise
Under President Trump the US fiscal spending increases the US budget deficit from $600 billion to $1.2-1.8 trillion. This causes US growth and inflation to sky rocket, forcing the Federal Reserve to accelerate the hike and the US dollar reaches new highs. This creates a domino effect in emerging markets, and particularly China, who start looking for alternatives to the fiat money system dominated by the US dollar and its over-reliance on US monetary policy. This leads to an increased popularity of cryptocurrency alternatives, with Bitcoin benefiting the most. As the banking systems and the sovereigns of Russia and China move to accept Bitcoin as a partial alternative to the USD, Bitcoin triples in value, from the current $700 level to $2,100.
US healthcare reform triggers sector panic
Healthcare expenditure is around 17% of GDP compared to the world average of 10% and an increasing share of US population cannot pay for their medical bills. The initial relief rally in healthcare stocks after Trump’s victory quickly fades into 2017 as investors realise that the administration will not go easy on healthcare but instead launches sweeping reforms of the unproductive and expensive US healthcare system. The Health Care Sector SPDF Fund ETF plunges 50% to $35, ending the most spectacular bull market in US equities since the financial crisis.
Despite Trump, Mexican peso soars especially against CAD
The market has drastically overestimated Donald Trump’s true intention or even ability to crack down on trade with Mexico, allowing the beaten-down peso to surge. Meanwhile Canada suffers as higher interest rates initiate a credit crunch in the housing market. Canadian banks buckle under, forcing the Bank of Canada into quantitative easing mode and injecting capital into the financial system. Additionally, CAD underperforms as Canada enjoys far less of the US’ growth resurgence than it would have in the past because of the longstanding hollowing out of Canada’s manufacturing base transformed from globalisation and years of an excessively strong currency. CADMXN corrects as much as 30% from 2016 highs.
Italian banks are the best performing equity asset
German banks are caught up in the spiral of negative interest rates and flat yield curves and can’t access the capital markets. In the EU framework, a German bank bailout inevitably means an EU bank bailout, and this comes not a moment too soon for the Italian banks which are saddled with non-performing loans and a stagnant local economy. The new guarantee allows the banking system to recapitalise and a European Bad Debt Bank is established to clean up the balance sheet of the eurozone and get the bank credit mechanism to work again. Italian bank stocks rally more than 100%.
EU stimulates growth through mutual euro bonds
Faced with the success of populist parties in Europe, and with the dramatic victory of Geert Wilders far-right party in the Netherlands, traditional political parties begin moving away from austerity policies and favouring instead Keynesian-style policies launched by President Roosevelt post the 1929 crisis. The EU launches a stimulus six-year plan of EUR 630 billion backed by EU Commission President Jean-Claude Juncker, however to avoid dilution resulting from an increase in imports, the EU leaders announce the issuance of EU bonds, at first geared towards €1 trillion of infrastructure investment, reinforcing the integration of the region and prompting capital inflows into the EU.
The whole publication “Outrageous Predictions for 2017” and more details can be found here.
Foto cedidaPhoto: Mark Mobius, Executive Chairman of Templeton Emerging Markets Group / Courtesy photo. Mark Mobius: Emerging Markets Take-Off Again, and the Main Reason is the Internet
Franklin Templeton began investing in emerging markets in 1987 with a USD 100 million fund. Today, it manages over USD 26 billion in emerging market strategies. Mark Mobius, Executive Chairman of Templeton Emerging Markets Group and architect of this expansion, talks to Funds Society in an interview from which a fundamental idea emerges: technology, especially if it’s internet-related, is transforming emerging countries by pushing them to a new Era of growth that is revolutionizing the way we invest in these markets.
The average growth of the economy in emerging markets is 4.5%, as compared to 2% in developed countries. According to Mobius, this gap will continue to expand, and to understand why, we must look beyond mere demographic reasons, and the key is in technology.
“The Internet’s massive penetration in emerging markets has caused these countries to take a technological leap, maximizing productivity and overtaking the developed ones. For example, in China, the importance of online shopping is such, that they have devised an online payment system far superior to all traditional payment systems used by banks. Even in Africa, we see similar examples, like M-Pesa, created by Vodafone in Kenya, a pioneer in money transfers using mobile phones. “
M-Pesa (M for mobile, and Pesa, for the word money in Swahili) is a means of payment by cell phone that includes transfers and microfinance, and which has extended from Kenya and Tanzania, where it was launched in 2007, to South Africa, India, Egypt, Lesotho, Ghana, Mozambique and several countries in Eastern Europe.
China can be just as innovative, or even more so, than the United States
Alibaba, the Chinese “Amazon”, in its last “Singles Day” had revenues of USD 17.8 billion, compared to the USD 5 billion spent in the United States on Black Friday plus Cyber Monday. The Chinese market is huge, and Internet activity is the norm. “China accounts for 10% of the global internet traffic, as compared to 4% for the United States,” says Mobius, “and it’s not just about applying the law of large numbers, technological innovation is cutting edge.”
An example of local technology is WeChat, owned by TenCent Holdings, one of the companies held by Templeton’s Emerging Global Strategy. This app is the Chinese answer to Whatsapp and Snapchat and has more than 700 million users, mostly in China, although it is also used in India or even in Latin America. In the big cities in China, it has a penetration of over 90% and its uses go far beyond those in Whatsapp, as it is used to close business appointments, order food in restaurants, call a taxi, transfer money, etc. WeChat’s estimated ARPU, or average revenue per user is USD 7, seven times that of Whatsapp, which, as we may recall, was acquired by Facebook in 2014 for USD 22 billion.
China has its own Silicon Valley in Shenzen, a city in the south of the country. “A lot of talent based in Silicon Valley comes from China and India. If Trump applies very stringent immigration regulations, some of this talent will have to return to their countries of origin,” says Mobius,” something that would be very damaging to the tech industry in the United States.”
Chinese technology is being exported to other emerging markets
China’s telecommunications equipment industry, for example, has achieved very sophisticated but cheaper technology than its European competitors, Ericsson and Alstom. China is also willing to provide financing to emerging markets that need to invest heavily in infrastructures. Mobius describes how its team noticed an unexpected decline in capex in telecommunications equipment in Argentina. When analyzing the situation, they saw that the investment in infrastructures had fallen because the acquired telecommunications equipment was cheaper, and Chinese. “Although the price was lower, the service was excellent, as the Chinese company had transferred 100 engineers to Argentina to implement the equipment.”
Smaller companies offer the greatest opportunities
According to Mobius, China is a more liquid market, and the opportunities are huge, especially now with the connection between the Hong Kong and Shanghai markets, which has provided access to smaller companies, whereas before you could only invest in large caps. That said, India has a higher rate of growth. “The potential in India is higher since it starts from a lower base. There are 4,000 listed companies, and even though there is more research now than when I started investing in emerging markets, not many more than 100 are covered. There are still a lot of opportunities that can be exploited if you have an investment team in the ground, especially in the field of small caps, and also in private equity. “
The advantage of having local teams extends to all the markets in which Mobius invests. Franklin Templeton has a strategy that invests in smaller companies in emerging markets, that has had particularly strong performance this year. The asset management firm is also present in the field of private equity in emerging markets through specialized vehicles. In this area, Mobius noted, “We focus on companies that are close to going public, preferably within a three to five year time frame”.
The other force for change mentioned by Mobius is political: emerging markets are veering politically towards more orthodox governments, promoting pro-market reforms. “Greater freedom in these countries leads to an increase in social movements and demonstrations, which are sometimes violent, but which also promote change,” adds Mobius.
Does the FED rate rise pose a risk to emerging markets?
In addition to the reservations caused by Trump’s rise to power, which, to a certain extent, have slowed down the flow towards emerging markets, there are a number of factors that worry investors. The behavior of these markets in a raising rates environment is number one on the wall of worries for many investment professionals. Mobius believes in the case of emerging market equities, history shows all kinds of behavior in periods of rate hikes by the FED, “there is no correlation,” Mobius points out. In fact, in his opinion, it may be positive for the markets because US savers will feel more secure seeing their pensions are yielding something, and will be less reluctant to invest in more risky assets such as emerging markets equities.
Argentina and Brazil, a winning tandem
Templeton is a value-based asset manager, and this year, this approach has benefited the emerging market strategies managed by Mobius, obtaining returns that generally beat their benchmarks comfortably. But there are also other factors that explain this good behavior.
The main one is the overweight of the technology sector, including internet-related stocks, the cornerstone of development in emerging markets. “We were late to the internet because, as value investors, we found it difficult to find companies with good earnings, but now we do find them, especially in China.”
Investing in a couple of heavily undervalued Brazilian banks has also had a positive impact on Templeton’s equity strategies. Brazil, along with Thailand, are positions that Mobius has been overweighed for a long time. This year, both markets have worked very well. In addition Argentina is one of the countries whose change is more plausible, according to Mobius, who is very positive about its prospects. “We would like to see more privatizations of state-owned companies and more issues, but on the whole, Argentina has a terrific profile for investing.”
Wikimedia CommonsPhoto: Pixabay, Creative Commons CCO.. European Retail – Having to Adapt to Digital Disruption
All business has to respond to change. For the retail sector they have to cope with annual changes in fashion and at least in northern Europe the weather. Structural changes in shopping habits and property have moved much of the consumer activity from the high street to out of town shopping centres but now digital disruption is creating a huge challenge for the sector. Traditional store portfolios with large fixed costs associated with long leases on property are no longer as attractive. The competitive landscape is changing with competition from the likes of Amazon, who with huge buying power puts deflationary pressure on prices. Many traditional retailers are suffering and struggling to refine their business model to cope with these challenges in an overall weak environment where overall fashion retail is barely growing.
As is often the case challenges also present opportunities reflected here in market share changes. Location of sales outlets remains an important selling point but now the location includes websites and social media. This has profound implications for capital allocation, stock control, supply chain logistics, brand, advertising and promotion and most aspects of the business. Many of the key elements of success – a clear identity with customers and a value proposition remain important but these now have to be fused with a digital offer and the logistics to support this distribution channel. For many this means a radical change in the store portfolio to fewer larger flagship stores and less small stores. The impulse purchase once made via the store on the way home can now be made as easily by flicking through the web on a smartphone on the train home.
Several European businesses have taken advantage of these changes to boost their own position and find new areas of growth. Inditex is a successful traditional retail company headquartered in Spain, offering affordable fashion that has adapted while keeping several distinctive aspects. Unlike many who focus extensively on cost in the supply chain, Inditex has sacrificed some cost for proximity of supply and with that faster turnaround times to respond to fashion changes. This model results in fewer discounts, faster moving lines, as well as a good combination of central information, control and local store manager autonomy. They have extended this to the internet and integration with the physical store portfolio in the way they have incentivised staff and collection options for customers. Having taken their time to consider and launch their digital offering, they can now reduce investment in physical stores and with that capital intensity while still driving top line growth.
Zalando is a new challenger, based in Germany, created for the digital age. They grasped the importance of logistics and a scalable platform to create the network effect so common with digital offers. Their offer is all via the web and they host others’ products where they can literally deliver both the products and the shop windows in a better manner than many established brands. According to Zalando, they can deliver to over 80% of Europe within two days. For a sector with little overall growth they are growing sales in excess of 20% pa.
In Germany, Deutsche Poste has grown out of the postal service in the country into a broad logistics and delivery company. The mix of businesses face challenges – most obviously traditional delivery of letters is in decline but they also deliver parcels and have a strong infrastructure to do so. All these internet purchases have to find their way to the end consumer and this offers a solidly growing business that is strong enough in their own territory to compete with Amazon.
Companies are the place where we see adoption of new technology and techniques to run their business and to meet customer needs and wants. They have to adopt and change to survive but this remains part of the life blood of a growing dynamic economy.
Pixabay CC0 Public DomainFoto: Lifeofbreath. Una corrección, no un probable punto de inflexión
According to Marlène Hassine-Konqui Head of ETF Research and their Barometer, European ETF Market flows increased in November 2016. Net New Assets (NNA) during this month amounted to EUR4.3bn, above the year to date average of EUR3.7bn. Total Assets under Management are up 10% vs. the end of 2015, reaching EUR497bn, and including a limited market impact (+2.2%). ETF flows experienced a great rotation from fixed income to equities and from emerging to developed equities. The pick up in developed equities was mainly focused on US and European underlyings, following Trump’s election.
Equity ETFs saw 11-month record high inflows at EUR7.6bn. US equity ETF flows accelerated at EUR3.6bn, mainly during the days following the US election. European ETFs saw a significant trend reversal at EUR 2.5bn, though they still haven’t made up for the huge outflows observed earlier in the year. Global developed equities also benefited from increased investor confidence with EUR1.7bn of inflows. The confirmation from the Fed of the next interest rate increase triggered some outflows from emerging markets at EUR1.3bn, mainly on broad and Asian ETFs. Within Smart Beta, the value style continued to see high interest with EUR621M of inflows together with some flows on the low vol factor, while Minimum Volatility ETFs continued to see outflows in this more risk-on environment. Overall, Smart Beta flows reached EUR614M this month.
Fixed income flows saw a trend reversal with outflows of EUR3.3bn following 16 months of inflows. These outflows mainly concerned government bonds from both developed and emerging countries at -EUR1.3bn and -EUR1.9bn respectively, having been negatively impacted by changes in interest rate expectations following the US election. Flows on investment grade corporate bonds also saw a halt with EUR319M of outflows following 9 months of positive flows, and a one year average of EUR1.2bn, likely reflecting investor doubts on a QE extension. On the other hand, due to increased inflation fears in the market after the US election, inflation-linked ETFs continued to see inflows at EUR284M, mainly on US TIPS. Inverse strategy ETFs which benefit from interest rate increases (double short bund or UST) also saw significant interest with inflows of EUR248M, a one year record high as both US and European interest rates rebounded on expectations of a rate hike by the Fed and a change in US fiscal policy.
Pixabay CC0 Public DomainPhoto: PS Photography / Pexels. Other Financial Assets Allowed the Afores to Minimize Mark to Market Loses
After the triumph of Donald Trump, financial markets show in the last 30 days: an upward shift in the US Treasury bond yield curve that reflects increases of up to 50 basis points (bp) along the curve. In the case of the Mexican bond curve, there is an increase that is between 50 and 107 bp between November 8th and December 8th. For example the Mexican bond that matures in 2024 (m24), that is in eight years, its effect is equivalent to a reduction in its price of 6%. The m24 raised 106 bp in that period.
In contrast, in the same period, there has been a rise in the international stock markets not only because of the movement in the exchange rate (Mexican peso/dollar), which moved in the last month 11%, but also driven by the expectations generated for Trump’s triumph. The Dow Jones industrial average rose 18% in pesos (11% explained by the movement in the exchange rate and 7% by the movement of the stock index). Other indices such as the Russell bring a 27% direct yield in pesos in the last month; while the ETF of financials in the United States (XLF) registers a 31% increase in pesos.
When reviewing the yields of the Siefore Basic 2 that are the Siefores that concentrates the largest number of resources (36%) of the 5 Siefore, you can see how different the results have been. Sb2 assets are worth $49 billion USD and in the last 30 days they had a mark to market loses of 1.7%, that means $ 826 million USD: 4 Siefores perform above average (Inbursa, Profuturo, Coppel and Azteca); two are in the average (Principal and MetLife); while 5 Siefores bring a performance below (XXI-Banorte, Banamex, Invercap, Sura and PensiónISSSTE), where the benefit or impact is different in each case.
Given these results we can see that the Afores that were diversified not only between fixed income, equities and other assets; had less investments (duration) in long bonds and had a diversification between local and foreign securities.
If 100% of the portfolio had been invested in the m24 bond, the result for the month would have been -6.3% in pesos; If 100% had been in the Mexican Stock Exchange index, the result would have been -4.4% in pesos; If 100% had been in dollars the yield would have been 11% in pesos; If it had been in the Dow Jones industrial index the yield would have been 18.4 in pesos and if it had been invested with foreign exchange coverage would have been only 7% in pesos.
These examples considered non-diversified investments where everything is invested in one asset class. This exercise is complicated by incorporating the regulatory limits where in the case of SB2 it is allowed to invest 25% in equity, where only 20% may be foreign securities; only 30% is allowed in foreign currency and the most important thing is that all investments can not exceed a Value at Risk (VaR) of 1.1%.
Due to the characteristics of the portfolios and the investment regime it seems that it is difficult to avoid negative returns without incurring the concentration in an asset class in periods such as that experienced in November, where there is a negative perception of the market and investments in Mexico.
When looking at these results, what emerges is the need to increase the percentage of equity, increase the limit of foreign securities and it is necessary to raise the limit of Value at Risk (VaR), because any increase in these
Pixabay CC0 Public DomainPhoto: NASTER. Robo-Advisors May Now Include Active Funds in their Offering
ifund and fundinfo have launched Digital-Advisor, a cloud-based, expert system for fund selection.
The tool scores active and passive funds based on scientific criteria derived from up-do-date and in-depth research on a wide range of success factors. It analyses data about fund houses, fund managers, and their investment processes, then combines the results with an investor’s preferences and convictions to instantly generate a list of recommended mutual funds and ETFs.
Fund analysts can use Digital-Advisor to obtain a short-list of attractive funds which they can evaluate in greater detail with fund managers. Banks can use the plug-in within their advisory services to rapidly identify funds that best reflect the CIO’s current view and customer specific requirements. Robo-Advisors may now for the first time include active funds in their offering.
Jan Giller, Head of Marketing and Sales at ifund and fundinfo said, “Digital-Advisor is the first expert system that evaluates both active and passive funds based on many years of research and scientific evidence, then combines the results with individual investor preferences and emotional convictions. Thanks to this unique technology, funds can be selected far better than with the usual past performance-related data.”
Digital-Advisor takes advantage of years of due-diligence performed on an ongoing basis by fund experts at ifund based in Switzerland. Thousands of active and passive funds have been analysed in a highly structured manner so that their information may be systematically evaluated and scored by Digital-Advisor. By constantly monitoring the legally relevant aspects of each fund such as business scope of the fund house, ownership, legal terms, guidelines for the fund, employment of derivatives and leverage, etc., the tool also ensures that customers and advisors fulfill the regulatory requirements at all times.With Digital-Advisor, investors can invest in funds that meet specific criteria such as fund house profile, investment style, sustainability, and manager experience; the tool takes investor’s personal preferences and convictions into account. Digital-Advisor may be used as a stand-alone tool, or embedded into existing investment advisory solutions via APIs.
Aberdeen Asset Management has made a number of appointments to strengthen its global distribution platform.
John Campbell will join Aberdeen in early January as Global Head of Strategic Clients reporting to Campbell Fleming, Global Head of Distribution. His role will be focussed on how Aberdeen works even more closely with its largest clients to help them achieve their financial goals. Aberdeen has a specific programme for its largest clients and John will look to build on this strong base.
John is a well-respected financial services leader, having led the Scottish financial community through the 2008 crisis as Chairman of Scottish Financial Enterprise. He has spent the last 16 years at State Street, most recently as Business Head of Global Services UK, Middle East and Africa. John was awarded an OBE in 2008 for services to the financial services industry.
Jeff Klepacki will also join early in the New Year as Head of Distribution – Americas reporting to Bev Hendry and Campbell Fleming. The U.S. is home to half of the world’s wealth and is of strategic importance to Aberdeen. John will provide vital leadership for Aberdeen’s distribution efforts in the Americas where the Group already manages around $65 billion.
Jeff brings with him a proven 23-year track record of leadership in financial services with world class organisations including Capital Group, Delaware Investments and Allianz Global Investors.
Separately Antony John, former chief executive BNP Paribas Investment Partners/FundQuest, and Richard Pursglove, who has held senior distribution roles at a number of companies, will join on a consultancy basis to work with senior management on driving forward Aberdeen’s distribution strategy.
Campbell Fleming, Global Head of Distribution at Aberdeen Asset Management, comments: “I am delighted that Aberdeen will be able to draw on the experience and expertise of John, Jeff, Antony and Richard. It says a lot about Aberdeen that we are able to attract individuals of such high calibre. Aberdeen is one of the few global asset managers to offer such a comprehensive range of investment capabilities from equities and fixed income through to property, alternatives and multi-asset portfolios. We’ve got to map these to the specific needs of our clients. The whole team globally is going to be focussed on doing this and these new appointments will really help those efforts.”
We take a bullish long-term stance on few sectors around the world — healthcare in Asia ex Japan is one. A combination of key regional factors—including demographics, urbanization and existing infrastructure gaps—all point to sustainable growth. Additionally, the competitive position of the region’s domestic healthcare providers, including local barriers and a low cost base enable future growth in export and service outsourcing.
We believe that the long-term potential of Asia ex Japan’s healthcare sector and the competitive advantages that Asian firms enjoy over global peers portend a key long-term opportunity for investors.
Why Healthcare in Asia is primed for expansion
Asia ex Japan’s ageing population, rising urbanization and lack of medical infrastructure coupled with nascent health insurance systems provide powerful impetus for long term growth. Asia already represents 60 percent of the world population. In fact, some of the region’s countries—such as Korea, Thailand and China—have rapidly ageing demographics, which will lead to a population comprising almost 1 billion aged 65 and older in Asia by the year 2050, according to the United Nations (World Population Prospects: The 2015 Revision). We believe the demand for medicine and healthcare services in Asia ex Japan can only increase.
Rising urbanization and better living standards will also amplify healthcare demands in Asia. As countries in Asia urbanize, their GDP per capita will improve, leading to an increase in healthcare spending relative to GDP. By means of comparison, healthcare spending in relation to GDP in the US, Germany and Japan in 2014 was 17%, 11% and 10%, respectively. Asia ex Japan on the other hand, was only spending 4 – 7% of GDP on healthcare in 2014, according to the World Health Organization. As these countries converge towards the same level of economic development as the US, Germany and Japan, their healthcare spending in relation to GDP will undoubtedly advance.
Finally, existing infrastructure gaps in Asia ex Japan presents a need for investment in medical infrastructure, such as hospitals, beds, healthcare professionals and medical equipment to meet rising demand, that will spur spending in other healthcare segments. In addition, healthcare insurance is still at an early development stage in Asia ex Japan. The region is at a crucial juncture in how it provides healthcare to its citizenry and the imminent shift from out-of-pocket to public/private insurance funding will further accelerate healthcare spending.
Asian healthcare firms have a competitive advantage
We believe that Asian healthcare firms can fully capture the growth in their home market, and that some firms may even gain market share outside Asia ex Japan.
Healthcare is largely influenced by local culture, distribution and regulation. For example, understanding traditional medical treatment in countries like China is critical and not easy for non-local players. Distribution is also extremely complicated throughout the region with no one-model-fits-all solution due to the area’s geography, size, culture and languages. Also, regulations—such as the drug approval process— differ in each country and frequently change, which makes it difficult for foreign players to keep up.
In most Asia ex Japan countries, affordability remains a key issue in healthcare. The strongest and best positioned healthcare companies can leverage their lower cost structure, such as for labor, to gain an advantage over their international peers.
The Opportunity in Asia ex Japan Healthcare
Asia’s healthcare sector has retreated in 2016, largely due to a combination of temporary, cyclical factors (such as sector rotation from healthcare to energy/material) and temporary price corrections (in particular, in the India generic pharma sector). Our view is that the recent market adjustment does not undermine the fundamental long-term growth story for Asia healthcare and that the mid-to-long-term investment thesis of the sector remains intact.
As a result, we consider the drawdown in Asia ex Japan’s healthcare sector as an investment opportunity for long term investors like ourselves.
Peter heads the Asian ex-Japan equity team at Nikko AM Asia.
Pixabay CC0 Public DomainCourtesy photo. Nils Bolmstrand: New Head of Nordea Asset Management
Nordea has appointed Nils Bolmstrand new Head of Nordea Asset Management, the largest asset manager in the Nordics.
“Nils Bolmstrand is the right person to maintain the very strong momentum and development of Nordea Asset Management. He has the competencies and experience within the asset management business, and he has strong leadership and personal skills,” Snorre Storset, head of Nordea Wealth Management says.
Nils Bolmstrand, 44, comes from a position heading Nordea Life & Pensions, and he has previously held managerial positions within Nordea Asset Management and the asset management-division of Skandia and Old Mutual. He starts in his new position on January 1st, 2017.
Nordea Asset Management is year-to-date number 1 in Europe in attracting new assets and has during the last 4 consecutive years been among top 10 in Europe of best-selling asset managers. Since 2011 60 % of Nordea Asset Management-sales have been to clients outside Nordea. Nordea Asset Management has total Assets under Management at EURO 215 billion end of third quarter 2016.
Johan Nystedt has been appointed acting Head of Nordea Life & Pensions, he will retain his position as Head of the Swedish Life & Pensions-organisation during the period as acting Head.
