CC-BY-SA-2.0, FlickrPhoto: Michael Gil
. Luxembourg Launches First Green Exchange in the World
The Luxembourg Stock Exchange (LuxSE) becomes the first stock exchange globally to introduce a platform for green financial instruments: Branded Luxembourg Green Exchange (LGX). Access is limited to issuers who comply with stringent eligibility criteria. The platform aims to set a new benchmark for the rapidly evolving green securities market.
Commenting on the launch of LGX, Robert Scharfe, CEO of LuxSE, said: “New issuance of green securities has taken off since COP21. There is a real desire for change. The green market has enormous potential but this needs to be matched by interest from investors. By setting strict standards for green securities, LGX aims to create an environment where the market can prosper. The upcoming COP22 event will focus on preparations for the Paris Agreement to enter into force. With LGX, a dedicated platform for both issuers and investors, we are granting the solution for financing green projects.”
Only 100% green
LGX gathers issuers that dedicate 100% of the raised funding to green investments. It is home to the majority of the 114 green bonds listed on LuxSE, worth over $45 billion. LGX marks the first time that a stock exchange requires green securities to adhere to strict eligibility criteria, including:
Self-labelling as green or equivalent (e.g. climate-aligned). The issuer has to clearly state, during the application process, the intended green nature of the security.
Use of proceeds. Need of a clear disclosure that the proceeds are exclusively used for financing or refinancing projects that are 100% green, according to the GBP or CBI eligibility taxonomy.
Ex-ante review and ex-post reporting. Issuer’s commitment to provide both independent external review and ex-post reporting – a requirement unprecedented on the market.
“Ex-post reporting is far from being the market standard. The bold decision to introduce it as an entry requirement stems from our ambition to be able to guarantee that securities on LGX are genuinely green. Such reassurance is what investors seek as they increasingly expect issuers to be crystal clear about the use of proceeds,” the CEO added. Access to LGX is banned for securities on the excluded categories list comprising of, but not limited to: nuclear power production; trade in CITES; animal testing for cosmetics and other non-medical products; medical testing on endangered species; fossil fuels. The LGX concept has been developed in line with best practices set out by Climate Bonds Initiative, International Capital Market Association (ICMA) and World Wildlife Fund (WWF). LGX has its own logo – a colour variation of the standard LuxSE trademark. “An issuer who does not meet LGX eligibility criteria can still list on our markets, but the ‘bar is higher’ for entry to LGX. Having said that, we encourage issuers to go further than the minimum requirements and really leverage this platform to create new standards on the quality of communication with investors,” Robert Scharfe added.
Green market is our duty
With over $42 billion in new issuances globally, 2015 was another record year for labelled green bonds. As estimated by the Climate Bonds Initiative, in 2016, the green bonds issuance will reach $100 billion. The already thriving green bonds sector received an additional boost after the COP21 conference in Paris last year during which 195 countries agreed on keeping the rise of global temperature below 2 degrees Celsius. The International Energy Agency estimates that the world needs $1 trillion a year until 2050 to finance a low-emissions transition. The market for green finance is growing fast, and yet it represents an almost invisible fraction of overall capital market funding.
CC-BY-SA-2.0, FlickrPhoto: Jaime Silva. Amundi Creates Dedicated Platform for Real and Alternative Assets
Amundi is launching a single platform bringing together its capabilities in real and alternative assets (AI) in order to become one of the leading alternative asset managers in Europe.
Real estate, private debt, private equity, infrastructure and alternative multi-management are now all part of an integrated business, bringing together 200 investment professionals in origination, structuring and management, responsible for EUR 34bn in assets (as at 30th June 2016). Amundi aims to double its funds under management in real and alternative assets by 2020.
Amundi’s track record in alternative assets includes 40 years’ experience in real estate, a leading position in credit management and a pioneering approach in infrastructure, where it has partnered with EDF. The new business grouping will help Amundi develop these areas of expertise to serve investors’ needs for performance and diversification.
According to a press release, Amundi believes that with low correlation to traditional assets, AI strategies have an illiquidity premium which is attractive as we face long- term low interest rates and sustained equity volatility. 38% of institutional investors envisage reallocating part of their portfolio to private debt, 44% to infrastructure, and 51% to private equity.
Pedro Antonio Arias, Amundi’s Global Head of Real and Alternative Assets, said: “We have been meticulously building our capabilities over recent years by attracting skilled teams from diverse backgrounds. Our aim is to further develop our capabilities based on the EUR 34bn we already manage in this area, and to be a leading European player in real and alternative assets.”
Through this new platform, Amundi will offer institutional and individual investors the opportunity to invest directly in real assets with dedicated solutions or via collective solutions with co- investment or multi-management funds.
Eric Wohleber, Amundi’s Head of Real & Alternative Assets Sales, added: “Amundi’s power, infrastructure and financial strength are all major advantages allowing us to give European and Asian investors transparent, institutional-quality investment solutions in real and alternative assets.”
CC-BY-SA-2.0, FlickrPhoto: Thiago A.. A Matter of Time
Of all the arrows in an investor’s quiver, among the most powerful is time. Yet many asset managers and owners don’t fully grasp how powerful an impact time can have on investment decision-making and outcomes.
As a society, we’re moving at an ever faster pace – in business and in life – taking less time to do things that perhaps should take more. The need for immediacy can be all consuming. And technology certainly feeds that appetite, with its invaluable contribution to speed and efficiency. But technology can distort an investor’s sense of the time needed to allow skill and discipline to play out or manage risk when they have to take more of it. Many believe they are being efficient with their time by measuring numerous data points and reacting to them more quickly. But are they really? With so much information at their fingertips, investors and asset owners need to start distinguishing between check points and decision points.As an industry, we need to think carefully about why time matters to investors. We believe time allows skill, expertise and discipline to have the greatest impact on investment outcomes. It offers a meticulously researched investment thesis a chance to bear fruit. It favors thoughtful decision-making over reactive trading or chasing the latest fleeting trend. If investors are not taking the time to do good research – to identify value, good governance and a sustainable business, they are not investing responsibly.
Perhaps most importantly, time may allow investors to take risks more intentionally and manage them more effectively. In an environment such as we see today — in which investors must take three times the risk they did 20 years ago to earn the same returns — patience is essential. That’s true despite the angst investors might feel when taking on more risk. They need to curb the urge to micro-measure performance and make changes, which offers only a false sense of control at best.
It’s time to step back and help investors understand why, when used properly, time can be a valuable asset in getting to their desired outcome. Ultimately, the conversation isn’t about managing time. It’s about using time to manage wisely.
Carol W. Geremia is President of MFS Institutional Advisors, Inc. Co-Head of Global Distribution.
Citi Private Bank Continues to Build out Latin American Team - courtesy photo. Citi Private Bank Continues to Build out Latin American Team
Citi Private Bank announced that Nicolas Schmidt-Urzua has joined as a Managing Director and Head of the Multi-Asset Trading & Advisory team for Latin America. Mr. Schmidt-Urzua will be based in New York and report to Lisandro Chanlatte, Head of Investment Counselors for Latin America; and Adam Gross, Head of Multi-Asset Trading & Advisory for the Americas. In this capacity Mr. Schmidt-Urzua will be responsible providing complex trading solutions to the firm’s most sophisticated Capital Markets clients, including Active Traders and continuing to segment the bank’s client coverage model. “Nicolas has over 15 years of trading expertise, working with clients in Latin America and Europe. Acquiring the best talent to provide top tier coverage, content and execution underscores our commitment to our clients in the Latin American region,” said Mr. Chanlatte.
Mr. Schmidt-Urzua previously served as Head of the Global Investment Opportunities (GIO) for Latin America (excluding Brazil) at J.P. Morgan Private Bank. Prior to his GIO role in Latin America, Mr. Schmidt-Urzua held a similar position as the GIO Head in Geneva where he was responsible for building a $40 million revenue business for clients. Prior to J.P. Morgan he worked as an Investment Advisor with Credit Suisse in New York and Miami. Mr. Schmidt-Urzua holds an MBA from the Thunderbird School of Global Management, a B.S. in Business Engineering from the Universidad de Chile, as well as a Diploma in International Trade & Commerce from the University of California, Berkeley.
“Citi Private Bank is strongly committed to Latin America. This coupled with Citi’s institutional capabilities and open architecture investment platform, enables Citi to remain at the forefront as the key partner of choice for the most sophisticated families in the region,” said Mr. Schmidt-Urzua.
With $374 billion in global assets under management, Citi Private Bank includes 49 offices in 15 countries, serving clients across 139 countries.
CC-BY-SA-2.0, FlickrPhoto: 2Tales
. SS&C Acquires Wells Fargo's Global Fund Services Business
Wells Fargo Securities, the investment banking and capital markets business of Wells Fargo & Company, announced that SS&C Technologies Holdings, a global provider of financial services software and software-enabled services, has agreed to acquire its fund administration business, Wells Fargo Global Fund Services (GFS). Pending regulatory approvals, the transaction is expected to close in the fourth quarter. The terms of the transaction were not disclosed.
GFS administers more than $42 billion in alternative assets, covering a wide range of complex strategies traded by global portfolio managers including fixed income, credit, distressed, structured credit, macro, equity, commodities, CDO, CLO, private equity, private debt, real estate and hybrid structures. Wells Fargo’s fund administration business services its clients through its global network of offices in, Hong Kong, London, New York, Minneapolis and Singapore.
“We believe GFS clients will benefit from SS&C’s industry-leading position, proprietary technology and depth of expertise in fund administration,” said Dan Thomas, head of Institutional Investor Services at Wells Fargo Securities. “Wells Fargo Securities will continue to provide financial solutions to our alternative asset manager clients in core areas such as Prime Services, Futures and OTC Clearing and Futures Execution.”
As part of the acquisition, SS&C will acquire GFS’ operations and team members in New York, Minneapolis, Singapore, Hong Kong and the United Kingdom. Wells Fargo will work closely with SS&C to provide GFS clients a seamless experience and continuity of services. Additionally, Wells Fargo will continue to provide access to its suite of financial products and services to GFS clients after closing.
“Wells Fargo’s Global Fund Services is well known for its expertise in administering real estate equity and credit strategies. The acquisition of GFS will create a compelling advantage for our customers as they access and manage sophisticated asset classes,” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “This transaction will expand our capabilities in the global fund market, reinforcing SS&C at the forefront among fund administration and extending our strong cloud-based platform for future growth.”
“Joining with SS&C will allow us to dramatically accelerate our global growth plans and pace of innovation,” said Chris Kundro, head of GFS. “SS&C’s innovations in cloud, mobility and fund technology are transforming investment management. This acquisition will create even more value for our customers and will benefit employees as they become part of one of the largest and most reputable fund administrators.”
CC-BY-SA-2.0, FlickrPhoto: Images Money
. Standard Life Investments to Reopen the Suspended UK Real Estate Fund
Standard Life Investments has announced its intention to reopen the suspended UK Real Estate Fund (and associated feeder funds) from 12.00 noon on Monday 17 October 2016.
The SLI UK Real Estate Fund was one of a number of funds to suspend trading on 4 July 2016. This decision was taken in order to protect the interests of all investors in the Fund following an unprecedented level of redemptions.
They subsequently implemented a controlled and structured asset disposal programme in order to raise sufficient liquidity to meet future redemptions and work is ongoing to ensure the Fund is well positioned for markets in the long-term. “We now believe the commercial real estate market has stabilised and that the adequate level of liquidity achieved will allow the suspension to be lifted.” Standard Life stated on a press release.
By lifting the suspension, dealing in the Fund and Feeder Funds, purchases and redemptions of shares, will return to normal on 17 October 2016, with the first valuation point being 12.00 noon on that date. Dealing instructions to purchase or redeem shares will be accepted from Wednesday 28 September 2016, in a written or faxed format only, ahead of the fund re-opening.
Providing advanced notice will enable investors in the fund to make any preparations required ahead of the re-opening.
David Paine, Head of Real Estate at Standard Life investments said: “In the immediate aftermath of the EU referendum result redemptions from retail investor property funds increased dramatically whilst property transactions reduced significantly. During the period of suspension the fund has been able to restore liquidity through an orderly disposal of assets. We are pleased with the progress made and the removal of the Market Value Adjustment, and able to announce the reopening of the fund next month. The Standard Life Investments UK Real Estate Fund invests in a diverse mix of prime commercial property. Its lower risk positioning should therefore be beneficial for performance at times of market stress and uncertainty and continues to offer a stable and secure income, with a distribution yield of 4.04%*. In our opinion, as the search for yield intensifies within a world of low interest rates and nominal growth, the outlook for UK commercial real estate returns and income remains attractive.”
CC-BY-SA-2.0, FlickrPhoto: John Bennett, Head of European Equities. John Bennett: No Ordinary Cycle in Europe
In this interview, John Bennett, portfolio manager of Henderson European Absolute Return Fund and Head of the European Equities, explains his view about european equities and the influence of the central banks policies in the stocks markets.
Do European equities offer value?
I’ve always been wary of the value versus growth thing. I think these are convenient labels. Value is in the eye of the beholder. For me, value is about the price you pay for cash flow. What I would say about value is that the old definition of value and growth no longer applies, because this is no ordinary cycle. This has not been an ordinary cycle since the financial crisis. It cannot be an ordinary cycle because of the debt mountain that built up. We are still dealing with the threat of debt deflation – that is really what central bankers are fighting.
In the old days of buying value, you might have looked at cement, banks, steel, cars or aluminium – traditional value sectors. This is not a good idea now, because of deflationary risks, and because of central banks’ response to deflationary risks, namely the QE experiment. You have overcapacity in so many industries that you used to call value. Until we get a change in the inflation dynamic, this probably won’t change.
Are European banks rightly unloved?
Banks have been the poster children of the value trap. Value is never in a ratio. Fund managers have become inured to the many calls from strategists on the sell side who have suggested that it is time to buy the banks. It has been a spectacularly wrong since 2008 because the banking model has been severely disrupted, if not broken, by QE.
What are your post-Brexit concerns for Europe?
I have been less worried about the FTSE 100 and the UK economy than the European periphery in the immediate aftermath of Brexit; because of course Britain flexed its currency, devaluing sterling significantly. I worried about the effects of that more on the European periphery, an already fairly uncompetitive area, where the euro has arguably been too strong since it was launched.
The euro in my view has been too weak for Germany and too strong for everyone else. I thought it was wrong that people were panicking on UK house builders, for example. I haven’t said ‘panic about the periphery’, rather ‘worry about the periphery’. I think it’s a patient that is still healing. Recent GDP numbers from Italy hasn’t been that good, which threatens Italian Prime Minster Matteo Renzi in the upcoming referendum – yet another noisy political event in Europe. I doubt I’ll ever stop worrying about the economies in the periphery.
How is the healthcare sector performing?
Pharma hasn’t really participated in the defensives rally. At best pharma has been dull; in some cases worse than dull. I went into 2016 thinking that this was a year for stocks, not markets. I was trying to say I’m not convinced that this would be an ‘up’ year for market indices. So far, unless you have been based in sterling, you haven’t had an up year in European equities. I would extend that to say even stocks not sectors (from stocks not markets). So, we have nuanced our pharmaceuticals view to say it is not just so much about buying the whole sector. You are now seeing clear stock dispersion within pharma, with pricing pressure in some clinical areas in the US.
Look at the news from Sanofi on its diabetes insulin product. And look at the news from Novo Nordisk. Yes; pricing is beginning to be a problem in the US – a headwind for some pharmaceutical companies, but not all. Where I take an issue with the ‘one size fits all’ approach was that, if you have innovative medicine meeting unmet clinical needs, you will have pricing power. This is why our names are big names in pharma like Roche and Novartis, and also Fresenius in healthcare. I think stock dispersion is back, even within sectors.
CC-BY-SA-2.0, FlickrPhoto: Martin Fish. Investment Fund Assets Worldwide See 4% Increase in Q2 2016
The European Fund and Asset Management Association (EFAMA) has recently published its latest International Statistical Release, which describes the developments in the worldwide investment fund industry during the second quarter of 2016.
The main developments in Q2 2016 can be summarized as follows:
Investment fund assets worldwide increased by 4 percent in the second quarter of 2016. In U.S. dollar terms, worldwide investment fund assets increased by 1.4 percent to stand at USD 42.3 trillion at end Q2 2016.
Worldwide net cash inflows increased to EUR 206 billion, up from EUR 154 billion in the first quarter of 2016.
Long-term funds (all funds excluding money market funds) recorded net inflows of EUR 217 billion, compared to EUR 192 billion in the first quarter of 2016.
Equity funds recorded net outflows of EUR 17 billion, against net inflows of EUR 50 billion in the previous quarter.
Bond funds posted net inflows of EUR 130 billion, up from net inflows of EUR 72 billion in the first quarter of 2016.
Balanced/mixed funds registered net inflows of EUR 58 billion, up from net inflows of EUR 35 billion in the previous quarter.
Money market funds continued to register net outflows in Q2 2016 (EUR 11 billion), compared to net outflows of EUR 38 billion in Q1 2016.
At the end of the second quarter of the year, assets of equity funds represented 39 percent and bond funds represented 22 percent of all investment fund assets worldwide. Of the remaining assets, money market funds represented 12 percent and the asset share of balanced/mixed funds was 18 percent.
The market share of the ten largest countries/regions in the world market were the United States (47.1%), Europe (33.8%), Australia (3.8%), Brazil (3.6%), Japan (3.5%), Canada (3.1%), China (2.7%), Rep. of Korea (0.9%), South Africa (0.4%) and India (0.4%).
CC-BY-SA-2.0, FlickrPhoto: ecosistema urbano
. J.P. Morgan Launches First Active ETF
J.P. Morgan Asset Management recently launched its first alternative and actively managed ETF, the JPMorgan Diversified Alternatives ETF (JPHF). The ETF provides investors with diversified exposure to hedge funds strategies including equity long/short, event driven and global macro strategies.
JPHF was designed and is managed by Yazann Romahi, CIO of Quantitative Beta Strategies at J.P. Morgan Asset Management. A pioneer in hedge fund beta investing, Romahi created the ETF with the support of a team of 17 investment specialists who have been focused on beta philosophy research and development for more than a decade. In addition, the team manages over $3.5bn of assets in alternative beta with this ETF being the latest extension of their offering.
JPHF aims to democratize hedge fund investing by providing investors with institutional quality hedge fund strategy in a cost efficient, tradeable ETF wrapper. The ETF can serve as a core component of a portfolio’s alternatives allocation. The bottom-up approach results in a purer capture of the hedge fund exposure and better diversification than traditional hedge fund replication strategies, as it employs strategies that have true low correlation to traditional markets.
“In the past, alternative investments have been an exclusive option only accessible by a small portion of investors; however, JPHF now makes these investment vehicles available to a wider array of investors,” said Robert Deutsch, Head of ETFs for J.P. Morgan Asset Management. “Alternative beta strategies provide investors with true diversification with attractive liquidity, transparency and cost.”
With the launch of JPHF, J.P. Morgan Asset Management’s Diversified Return ETF suite features nine product offerings. J.P. Morgan manages more than $120bn in alternatives globally.
CC-BY-SA-2.0, Flickr. New Leak of Offshore Files from The Bahamas
While most uses for offshore companies and trusts are legitimate and the International Consortium of Investigative Journalists (ICIJ) does not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly, their publication causes much scandal for those involved.
The latest revelations published by ICIJ reveal fresh information about a series of offshore companies in the Bahamas with the offshore activities of prime ministers, ministers, princes, convicted criminals, the UK’s Home Secretary Amber Rudd, and Neelie Kroes, a prominent former EU commissioner.
The Bahamas, which once sold itself as the “Switzerland of the West,” is a constellation of 700 islands, many smaller than a square mile. It is one of a handful of micro nations south of the United States whose confidentiality laws and reluctance to share information with foreign governments gave rise to the term “Caribbean curtain.”
Mossack Fonseca, the law firm whose leaked files formed the basis of the Panama Papers, set up 15,915 entities in the Bahamas, making it Mossack Fonseca’s third busiest jurisdiction.
In the case of Kroes, the former senior EU official, the records show that she was director of Mint Holdings, from July 2000 to October 2009. The company was registered in the Bahamas in April 2000 and is currently active. However, Kroes, through a lawyer, told ICIJ and media partners that she did not declare her directorship of the company because it was never operational. Kroes’ lawyer blamed her appearance on company records as “a clerical oversight which was not corrected until 2009.” Her lawyer said the company, set up through a Jordanian businessman and friend of Kroes, had been created to investigate the possibility of raising money to purchase assets – worth more than $6 billion – from Enron, the American energy giant. The deal never came off, and Enron later collapsed amid a massive accounting scandal.
The Bahamas has not signed the global treaty that helps countries share tax information. The OECD, the treaty’s governing body, calls it the “most powerful instrument against offshore tax evasion and avoidance.” In August, the number of participants hit 103, which includes tax havens and some of the world’s poorest countries.
Details from the Bahamas corporate registry, along with those of the Panama Papers and the Offshore leaks, are available to the public at the searchable ICIJ Database.
