. HMC Capital Hired Diana Roa as Head for Colombia
Diana Roa is the new head of HMC Capital in Colombia. Following her departure from Alianza Fiduciaria, a Colombian asset management company where she was Head of Alternative Investments; Diana Roa has now joined HMC Capital, the Latin America financial services and advisory firm founded by Felipe Held and Ricardo Morales.
Diana also led the Alternative Investments of AFP BBVA Horizonte before it was sold to AFP Porvenir. She has a MBA from Grenoble Ecole de Management, in France and has an engineer degree from Universidad de Los Andes in Colombia.
The main purpose of her role is to open the new office of HMC in Bogota, and lead the expansion of the firm into the Colombian market. They are targeting different areas of businesses including local asset management funds, international Alternative strategies and Asset Managers. She has the local expertise, knows the regulation in depth and used to manage more than 20 funds with almost USD 1 billion in AUM, involving 100 different counterparties, mainly Colombian investors, both private and institutional.
Diana started on February 1st 2016 and is based at HMC office in Bogota, Colombia.
CC-BY-SA-2.0, FlickrPhoto: Julia Rubinic
. FinCEN Takes Aim at Real Estate Secrecy in Manhattan and Miami
The Financial Crimes Enforcement Network (FinCEN) today issued Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash”for high-end residential real estate in the Borough of Manhattan in New York City and Miami- Dade County. FinCEN is concerned that all-cash purchases – i.e., those without bank financing – may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. To enhance availability of information pertinent to mitigating this potential money laundering vulnerability, FinCEN will require certain title insurance companiesto identify and report the true “beneficial owner” behind a legal entity involved in certain high-end residential real estate transactions in Manhattan and Miami-Dade County.
With these GTOs, FinCEN is proceeding with its risk-based approach to combating money laundering in the real estate sector. Having prioritized anti-money laundering protections on real estate transactions involving lending, FinCEN’s remaining concern is with the money laundering vulnerabilities associated with all-cash real estate transactions. This includes transactions in which individuals use shell companies to purchase high-value residential real estate, primarily in certain large U.S. cities.
“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address. These GTOs will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.”
Under specific circumstances, the GTOs will require certain title insurance companies to record and report to FinCEN the beneficial ownership information of legal entities purchasing certain high-value residential real estate without external financing. They will report this information to FinCEN where it will be made available to law enforcement investigators as part of FinCEN’s database.
The information gathered from the GTOs will advance law enforcement’s ability to identify the natural persons involved in transactions vulnerable to abuse for money laundering. This would mitigate the key vulnerability associated with these transactions – the ability for individuals to disguise their involvement in the purchase.
FinCEN is covering certain title insurance companies because title insurance is a common feature in the vast majority of real estate transactions. Title insurance companies thus play a central role that can provide FinCEN with valuable information about real estate transactions of concern. The GTOs do not imply any derogatory finding by FinCEN with respect to the covered companies. To the contrary, FinCEN appreciates the assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors.
The GTOs will be in effect for 180 days beginning on March 1, 2016. They will expire on August 27, 2016.
Courtesy photo. BNY Mellon Announces Lisa Dolly as the Next Chief Executive Officer of Pershing
Pershing announced that Lisa Dolly has been named as the company’s new chief executive officer, effective February 16, 2016.
Dolly, currently the firm’s chief operating officer, succeeds Ron DeCicco, who after a long and distinguished 45-year career with Pershing, has decided to retire from his role as chief executive officer of Pershing. As part of the leadership transition, he will serve as an executive advisor over the next year working closely with Dolly, Pershing’s executive committee and key clients.
“We’ve selected a very capable and committed leader at a time when Pershing is in a strong position,” said Brian Shea, BNY Mellon vice chairman and CEO of Investment Services. “For the past three years, Lisa has been an exemplary chief operating officer and in her new role as Pershing’s CEO, I am confident that she will lead the company to continued success.”
“I also want to recognize and thank Ron for being an outstanding leader, consistently putting the good of our clients, the company, the industry and the well-being of employees as his highest priorities”, said Shea. “Ron has been a strong, highly effective and responsible leader and we have been extremely fortunate to have had him as CEO and now as an executive advisor.”
Dolly is a member of Pershing’s executive committee and BNY Mellon’s Operating Committee. Over her 25-year career at Pershing, she has held numerous leadership roles prior to becoming Pershing’s COO. She was responsible for the firm’s Managed Investment business and Lockwood Advisors, Inc., managed global operations, and served as chief administrative officer overseeing a number of internal and operational functions. Dolly has served as chairperson of the Securities Industry and Financial Markets Association (SIFMA) Operations and Technology Steering Committee and has served on cross-industry committees with DTCC. In addition, she volunteers her time with the 30% Club mentoring aspiring professional women.
An announcement of Dolly’s successor as chief operating officer of Pershing is expected in the coming weeks.
CC-BY-SA-2.0, FlickrPhoto: Janus Capital. Bill Gross: “Don’t Go Near High Risk Markets, Stay Safe and Plain Vanilla”
The BoJ’s surprise move to take interest rates into negative territory this month helps Bill Gross continue its case against ultra-low interest rates policies. “How’s it workin’ for ya?” He writes in reference to central bankers.
The US Federal Reserve, the European Central Bank and the Bank of Japan, “they all seem to believe that there is an interest rate SO LOW that resultant financial market wealth will ultimately spill over into the real economy. I have long argued against that logic and won’t reiterate the negative aspects of low yields and financial repression in this Outlook. What I will commonsensically ask is ‘How successful have they been so far?’… The fact is that global markets and individual economies are increasingly ‘addled’ and distorted,” says the former Bond King at PIMCO and now part of Janus Capital Group.
In its February’s outlook, Gross lists the main distortions of recent monetary policy:
Venezuela – bankruptcy just around the corner due to low oil prices and policy mismanagement. Current oil prices are (in significant part) a function of low interest rate central bank policies over the past 7 years.
Puerto Rico – default underway due to overspending, the overpromising of retirement benefits, and the inability to earn adequate investment returns due to ultra-low global interest rates.
Brazil – in deep recession due to commodity prices, government scandal and in this case, exorbitantly high real interest rates to combat the effect of low global interest rates, and currency depreciation of the REAL. No country over time can issue debt at 6-7% real interest rates with negative growth. It is a death sentence. In the interim, the monetary authorities deceptively issue, then roll over more than a $100 billion of “currency swaps” instead of selling dollar reserves in an effort to hoodwink the world that there are $300 billion of reserves to back up their sinking credit. This maneuver effectively costs the government 2% of GDP per year, leading to the current 9% fiscal deficit.
Japan – 260% government debt/GDP and climbing sort of says it all, but there’s a twist. Since the fiscal (Abe) and the monetary (Kuroda) authorities are basically one and the same, in some future year the debt will likely be “forgiven” via conversion to 0% 50-year bonds that effectively never come due. Japan will not technically default but neither will private investors be incented to make a bet on the world’s largest aging demographic petri dish. I’m tempted to say that “Where Japan goes – so go we all”, but I won’t – it’s too depressing.
Euroland – “Whatever it takes”, “no limit”, what new catchphrases can Draghi come up with next time? It’s not that there’s a sufficient recession ahead, it’s just that the German yield curve is in negative territory all the way out to 7 years, and the shaky peripherals are not far behind. Who will invest in these markets once the ECB hits an effective negative limit that might be marked by the withdrawal of 0% yielding cash from the banking system?
China – Ah, the dragon’s mysteries are slowly surfacing. Total debt/GDP as high as 300%; under the table capital controls; the loss of $1 trillion in reserves to support an overvalued currency; a distorted economic model relying on empty airports, Potemkin village housing, and investment to GDP of 50%, which somehow never seems to transition to a consumer led future. Increasingly, increasingly addled.
U.S. – Well now, the U.S. is impervious to all this, is it not? An 85% internally generated growth model that relies on consumption which in turn, relies on job growth and higher wages, all of which seems to keep on keepin’ on. Somehow, though, even the Fed seems to have doubts, as in last week’s summary statement, where for the first time in 15 years they were unable to assess the “balance of risks”. “We need some time here to understand what is going on”, says Kaplan from the Dallas Fed. Shades of 2007. The household sector has delevered, but the corporate sector never did, and with Investment Grade and High Yield yields 200-1000 basis points higher now, what does that say about future rollover, corporate profits and solvency in many commodity-sensitive areas?
“Our finance-based global economy is transitioning due to the impotence of monetary policy which has always, and is now increasingly focused on the elixir of low/negative interest rates. Don’t go near any modern day Delos Romans; don’t go near high risk markets, stay safe and plain vanilla. It’s not predetermined or guaranteed, but a more prosperous outcome should be somewhere around the corner if you do.” He concludes.
CC-BY-SA-2.0, FlickrPhoto: Tambako The Jaguar. Lyxor Named “The Leading UCITS Hedge Fund Platform”
Lyxor was named “The Leading UCITS Hedge Fund Platform” at the Hedge Fund Journal Awards 2016 held in London last week. This accolade highlights Lyxor’s outstanding accomplishments in the field of Alternative UCITS.
By the end of 2015, Lyxor grew its assets under management to $2bn across 8 alternative UCITS fund and is the 6th largest provider of Alternative UCITS funds. Lyxor’s Alternative UCITS Platform achieved a progression in assets of more than 30% vs. 2014 (and 450% vs. 2013). HFM Week also recently distinguished Lyxor as the 3rd platform with the highest growth in the industry last year (with net new assets of $504m in 2015).
Since the end of 2014, Lyxor has expanded its Alternative UCITS range with the launch of several new managers, including Capricorn Capital Managers with a long/short equity program focusing on global emerging markets, Chenavari’s European-focused long/ short credit strategy, and Och-Ziff with a Long/Short US equity fund. The firm is eyeing the addition of a further managers in 2016 and will look to add strategies that are currently not present or under-represented on the platform
. Julius Baer Announces Final Settlement with the U.S. Department of Justice Regarding its Legacy U.S. Cross-Border Business
Julius Baer announced that it has reached a final settlement with the DOJ in connection with its legacy U.S. cross-border private banking business. This settlement is the result of Julius Baer’s proactive and long-standing cooperation with the DOJ’s investigation. The two Julius Baer employees indicted in this context in 2011 have also taken an important step towards a resolution of their cases.
Julius Baer has entered into a Deferred Prosecution Agreement pursuant to which it will pay USD 547.25 million. In anticipation of the final resolution, the Group had already taken provisions in June and December 2015, totalling this amount, and booked them to its 2015 results.
In announcing the settlement, Daniel J. Sauter, Chairman of Julius Baer, commented: “Julius Baer’s ability to reach this final settlement with the U.S. Department of Justice is the result of its constructive dialogue and cooperation with U.S. authorities. I would like to thank all our employees, clients and shareholders for their ongoing trust and support.”
Boris F.J. Collardi, CEO of Julius Baer, added: “Being able to close this regrettable legacy issue is an important milestone for Julius Baer. The settlement ends a long period of uncertainty for us and all our stakeholders. This resolution allows us now to again fully focus on the future and our business activities.”
Wikimedia CommonsPhoto: Wes Sparks, Head of Credit Strategies and Fixed Income at Schroders. Wes Sparks, of Schroders, Will Discuss High Yield Bond at the Funds Selector Summit 2016
Continuing volatility and elevated risk premiums mean that high yield bond returns in 2016 could be in the mid single-digit range; however, Wes Sparks, Head of US Credit Strategies and Fixed Income at Schroders, believes that the asset’s expected performance will continue to make it attractive in relation to many other fixed income alternatives.
Wes Sparks will be discussing this market’s expected performance at the second edition of the Fund Selector Summit on the 28th and 29th of April. The meeting, aimed at leading fund selectors and investors within the US-Offshore business, will be held at the Ritz-Carlton Key Biscayne.
The event, a joint venture between Open Door Media, owner of InvestmentEurope, and Funds Society, provides an opportunity to hear several management companies’ view on the industry’s current issues. During his presentation, Sparks will also give his views on global corporate debt market, on which he is an expert following 22 years in the industry.
Wes Sparks is based in New York, leading the US team responsible for all of Schroders’ investment-grade and high yield credit portfolios. He is the lead fund manager for Schroder ISF Global High Yield, a position he has held since the inception of the fund in 2004, and is additionally a co-manager for Schroder ISF Global Corporate Bond and various US Multi-Sector funds.
Sparks joined Schroders in 2000 from Aeltus Investment Management (1999 to 2000) and Trust Company of the West (1996 to 1999), where he worked as Vice President and Portfolio Manager with the corporate sector.
You will find all the information regarding the Fund Selector Summit Miami 2016, which is aimed at leading fund selectors and investors within the US-Offshore business, in this link.
CC-BY-SA-2.0, FlickrPhoto: Helfrain. Japan Lowers Its Rates into Negative Territory: the Currency War Intensifies and Gives Wings to Short-Term Equities
In a surprise move, the Bank of Japan decided on Friday to join the ECB’s strategy and cut interest rates by 20 basis points, taking rates into negative territory at -0.1% (from the previous + 0.1%) for deposits of financial institutions at the central Japanese bank. The experts are divided: the news will help the markets and an economy with great export weight, but accentuates the currency war spiral to capture very modest overall growth and finally, the consequences may not be as promising.
The adoption of a negative rate helps the Bank of Japan to fight deflation by reducing financial costs, in an attempt to breathe some life into Abenomics, the government’s major plan to revive the economy. The Bank of Japan, which blames oil prices for persistently low inflation in the country, adds this new measure to its program of quantitative easing which involves the annual purchase of 80 trillion yen in assets.
In response, the yen fell sharply against the dollar and other reference currencies like the euro, fueling a currency war which though undeclared, continues to cause panic in the trading rooms of half the financial sector.
In the press conference following the decision, the Bank of Japan’s Governor, Haruhiko Kuroda, stated that he does not rule out expanding the quantitative easing program, which could even include further cuts to increase the dip into negative territory.
“As such this challenges our previous outlook and as a result we are stepping back from some of our long yen currency positions as we reassess the absolute and relative policy stances of developed market central banks,” explained Kevin Adams, Director of Fixed Income atHenderson Global Investors.
Meanwhile, despite the rise in stock markets and debt, Keith Wade, Chief Economist and Strategist at Schroders, believes that the decision is caused by weakness and increases the risk that China may retaliate by further depreciating its currency.“If so, we will have entered a new phase in the currency wars where countries fight over a limited amount of global growth, an outcome which does not bode well for risk assets,” Wade points out.
Equities and fixed income
For Simon Ward, Henderson’s Chief Economist, it is more likely that the move is interpreted by the market as a negative signal for economic prospects, and as evidence of “Bank of Japan’s desperation”. This, claims Ward, will cause the market to be more, rather than less, risk-averse.
In the short term, however, the Bank of Japan has become the investors’ best friend. Japanese stocks rose on Friday and analysts agree that they are likely to continue rising in the short term. Robeco’s portfolio of international equities, Robeco Investment Solutions, is overweight in Japan. “We will obviously continue with this strategy. Our position has been strengthened by the decision of the Bank of Japan,” says Leon Cornelissen, Chief Economist at the firm.
“We believe that the surprise announcement is likely to have an incrementally positive effect on the outlook for Japanese equities, as it tempers the recent concern around the drag of a stronger yen on earnings. We maintain the view that Japanese stocks could withstand a moderate appreciation of the yen,” explains the team at Investec’s multi-asset strategies.
Regarding fixed income, Anjulie Rusius, from the Retail Fixed Interest team at M & G, pointed out that the move by the Japanese central bankhas been supportive of Japanese government bonds, alongside those of other countrieswhich have also adopted negative rate regimes, in a movement which could be repeated in the medium term.
CC-BY-SA-2.0, FlickrPhoto: Rodolfo Araiza. Selectivity Needed in Emerging Markets
At a high level, emerging markets are caught between the twin economic powerhouses of the US and China. While it has been this way for many years, the exact nature of those influences has changed through time. Many emerging markets, particularly commodity exporters, have been hit by the sharp fall in demand for basic materials and commodities from China. As the People’s Republic rebalances its economy to favour services over heavy industry and infrastructure, fixed-asset investment and property have slowed from 25% year-on-year growth to 15% today.
Investec consider that these rates are likely to slow gradually over the medium term, rather than declining precipitously, as China works through capacity overhangs in many industries. Nonetheless, for countries that relied on extracting natural resources and selling them to China for their economic growth, this slowdown has come as a distinct economic shock and continues to hold back growth.
For many emerging markets, the US has shifted from being a strong demand and export driver through its consumption of their products, to a monetary driver as they import its ultra-low, quantitative- easing driven interest-rate policy. In some cases, notably in Asia, this cheap money- fuelled excess credit growth has allowed companies much freer access to global capital markets. “If, as we expect, interest rates begin to rise in the US, those economies with high debt loads will be vulnerable over the coming year. To combat the impact of the US rate rise and maintain competitiveness, these countries are likely to let their currency weaken against the US dollar and cut interest rates”, pointed out Investec.
Different pressures
However, noted the firm, not all countries face the same pressures. Countries that have substantial current account deficits such as, Brazil and Colombia, and which were the primary beneficiaries of quantitative easing between 2009 and 2013 are the most exposed to the impact of rising interest rates. Banking systems with high loan-to- deposit ratios and open capital accounts will also likely come under strain. The key risk for 2016 is, therefore, related to the financial cycle, particularly in Asia, where debt build-up is leading to the instability of the financial system and its attendant risks, even though the risk of global recession remains very low.
“Our favoured markets are those of countries that continue to adopt market- friendly growth strategies, remove obstacles to doing business effectively, tame inflation and gain credibility”, added.
Natural extensions
Investec also favour economies that are natural extensions of developed markets, such as Mexico of the US and Hungary of the EU. Both of these countries benefit from their neighbours’ recovery in growth and activity. The relatively robust US economy, propelled by an increasingly confident consumer, provides a potential broader benefit to Mexico. The previous stage of US growth, powered by manufacturing and the shale oil boom, by its very nature did not pass through demand to emerging markets.
However, a more typical recovery with consumers assisted by easier lending standards and a buoyant housing market could see a stronger source of demand.
Fundamentally, however, those countries that were reliant on natural resource revenues, which couldn’t mine it fast enough, and then couldn’t stop mining it fast enough, are distinctly out of favour with investors. Some of these commodity producers may now be fair to good value. However, even then we have to differentiate between those economies that have exhibited the deep political problems associated with a struggling economy, Brazil for example, and those that are simply adjusting to a slower growth path.
“It is easy to be pessimistic about this challenging macro scenario – indeed our central case remains another year of growth disappointments – but value has come back as relative and absolute valuations now more accurately reflect growth prospects”, said the firm. With 150 countries, US$7 trillion in market capitalisation for the MSCI Emerging Market Index and $3.25 trillion of investible debt, according to JP Morgan in March 2015, the emerging market universe is significant and its divergence, in terms of what is on offer, is huge.
Assets invested in emerging markets have proved sticky as institutional investors continue to make strategic allocations and to rebalance fixed-income mandates.
“The breadth of opportunities offered by the divergent bottom-up trends offers great scope to look for attractive returns and for value among the still fundamental challenges. The investor’s challenge is to discriminate between the value and the value traps”, concluded.
CC-BY-SA-2.0, FlickrPhoto: Jose Antonio Cotallo López
. European Smart Beta ETF Market Flows Were Sustained in 2015
European Smart beta ETF market flows were sustained in 2015 but were still impacted by Q2 trend inflection. Net new assets (NNA) for the full year 2015 amounted to EUR4.1bn, close to the EUR4.4 record level of 2014 NNA. Total Assets under Management are up 49% vs. the end of 2014, reaching EUR 15.1 billion. In 2015, Smart Beta ETF flows were mainly focused around Fundamental, Minimum volatility and Multifactor ETFs, with the latter two respectively benefitting from increasingly volatile markets and investors’ search for return enhancement, according to the last Lyxor European Smart Beta ETF Market Trends.
Smart beta are rules-based investment strategies that do not rely on market capitalization. To classify all the products that are included in this category Lyxor has used 3 sub segments. First, risk based strategies based on volatilities, and other quantitative methods. Secondly, fundamental strategies based on the economic footprint of a firm – through accountant ratios – or of a state – through macro-economic measures. Then factor strategies including homogeneous ranges of single factor products, and multifactor products designed purposely for factor allocation.
Q4 2015 flows were relatively limited for Smart beta ETF sat EUR737M, far from Q1 record of EUR2bn, the report says. Yet December 2015 marked a rebound vs the limited flows of November. This is still in contrast with the overall European ETF market where November flows were limited while December flows were close to January record highs.
Factor allocation ETFs saw the highest growth over the year with NNA of EUR1.5bn more than twice the 2014 NNA as investors sought new ways to enhance return. Increasing volatility expectations due to the Fed interest rate increase following end of QE and uncertainties on China growth have led to sustained flows on minimum volatility ETFs gathering a quarter of European Smart beta ETF inflows over the year. Flows on fundamental ETFs driven by high income, high dividend products continued to be signficant at EUR1.6bn due to global yield scarcity and appetite to capture structural reform in Japan, concludes the report.
