QE in Europe and Japan Set to Benefit Higher Dividend Yielding Stocks

  |   For  |  0 Comentarios

El QE en Europa y Japón favorecerá mayores dividendos en los valores con alta rentabilidad
Photo: Alex Crooke heads Henderson’s Global Equity Income team. QE in Europe and Japan Set to Benefit Higher Dividend Yielding Stocks

Alex Crooke heads Henderson’s Global Equity Income team, which consists of twelve professionals with an average industry experience of 16 years.  In his case, he has been managing income generating strategies since 1997. In an interview with Funds Society, Crooke explains: “high dividend yielding stocks are not a fad, they have played an important role in the market for decades. Dividends are a very powerful strategy when investing in equities.”

In fact, over time, dividends are responsible for a highly significant proportion of the total returns on global stock markets. In 2014, listed companies worldwide paid more than $1 trillion in dividends. They are also a good indicator of corporate health. In recent years,  payouts of listed companies have continued to grow. The Henderson Global Equity Income team believes that this trend will continue as fundamentals in markets lagging the economic cycle, such as  Europe, improve.

“Our strategy is truly global,” says Crooke. The universe includes Asia and emerging markets, and stocks of all market capitalizations. “Right now we find better yield in Europe and Asia than in the United States, as well as better dividends among large-cap companies, compared to small and mid caps. Essentially, we have a yield of 3.4%.”

In a world where interest rates are at historically low levels, a dividend culture is warranted, especially in those areas of the world where  aging populations lead to increased demand for income-generating assets.

High and Rising Dividends

“Ours is a bottom-up investment process. The portfolio is constructed from a global universe of companies, which generate good dividend yields. In addition, we have found that companies that raise their dividend tend to perform better overall.”

Crooke’s team looks closely at  companies that deliver good dividends, with a focus on analyzing whether they are able to increase cash flows over the next two or three years. “At the end of the day, a dividend is cash leaving the company, therefore, in order to have a dividend, there must be good cash generation.”

During the investment process, the Global Equity Income team examines several factors, including balance sheet strength, capex needs, and cash generation, but without losing sight of the macroeconomic framework. An example of this is what’s happened with oil companies over the past year, “the macro environment suggested that the price per barrel could not be maintained above US$100 for a long period of time, but even at that price, we saw that many companies within the industry were financing dividend distributions with debt, instead of cash flow; they were handing out the results of future projects. For us, that was a warning sign indicating that it was best to steer clear of these companies, even though their dividend was high. “

A UCITS Strategy for a Three-Year Old UK Domiciled Fund

Alongside Andrew Jones and Ben Lofthouse, Alex Crooke manages the Luxembourg-domiciled SICAV strategy, which launched a year and a half ago as a mirror version of the existing Global Equity Income Strategy, domiciled in the UK. The launch of the UCITS Luxembourg version was driven by the low interest rate environment, which has seen increasing demand in Europe and Asia, as well as interest for such products in the US Offshore and Latin America market.

Overall, Henderson manages approximately US$15 billion in both regional and global Equity Income Strategies. Henderson began investing in income at the global level in 2006, and manages US$3.5 billion in its global dividend strategy domiciled in the United States, and about US$1 billion in the strategy domiciled in the UK.

QE in Europe and Japan should Act as Catalyst for Higher Dividend Yielding Stocks

This strategy, which has the MSCI World Total Return Index as its benchmark, typically has between 50 and 80 companies in the portfolio. “The United States represent 30% of the portfolio, an underweight position,” explains Crooke. This positioning is more the result of valuation rather than one of dividend growth. “Since the United States launched its QE program, the popularity of stocks offering a good dividend yield increased, raising the price of securities in both equities and fixed income.” Henderson’s Global Equity Income team, however, does see some interesting American companies, such as mature technology names like Microsoft and Cisco, which have “a good payout combined with strong cash flow generation.” Another sector in which they are beginning to focus is that of US banks “which we think will be in a position to start paying better dividends.”

But it is in Japan and Europe where Crooke sees the greatest opportunities. “The QE program is in its infancy, thus, the same rationale which pushed money in the US towards dividend stocks should also operate in Europe and Japan.”

The average forecast yield of the companies which form the strategy is 3.8%, with an estimated dividend growth of 5 to 10%. “In the UK, for example, we see interest rates at levels below the average yield of the equity market; this is the situation throughout most  developed world markets, except the United States. Now is the time to reconcile this difference.”

Ampliar

The team’s outlook for emerging markets is very cautious. The strategy’s allocation is less than 5%, although exposure is also gained through certain developed market companies with emerging market business streams.

Restructuring Companies, a Recurring Theme in the Strategy

Around a third of the stocks included in the portfolio are undergoing some form of  restructuring. “Companies that have gone through a process of change to improve their fundamentals tend to behave well regardless of the economic cycle. Since we are not very positive about the global macroeconomic outlook, we focus on these types of businesses as well as companies in sectors uncorrelated with the economic cycle, such as pharmaceuticals or insurance.”

A recurring concern when investing in dividends is to avoid “value traps”. Some high-yielding equities can be more risky than their lower-yielding counterparts, particularly after a period of strong market performance when equity price rises push yields down. The high-yielding companies that are left can be structurally-challenged businesses or companies with high payout ratios that may not be sustainable. Crooke says that it is essential to analyse the sustainability of a company’s ability to pay income.”We avoid investing in companies whose dividend policy is vulnerable to regulatory changes, the interest rate environment, declines in commodity prices, etc”.

Does High Yield Debt Investment Compete with Dividends?

Crooke points out that investing in high yield bonds is currently not as attractive an option. “If you want high yields from fixed income, you have to look to heavily indebted companies. Those with a good credit rating don’t offer such attractive yields. In Europe, for example, 55% of companies offer better yields through dividends than through debt issues.”
 

Ampliar

Furthermore, if inflation returns, the risk of rising rates is still there, and it may damage the performance of a fixed-income portfolio. “If you’re counting on a gradual reflation of the economy, we believe that it’s much better to be in equities than in fixed income,” says Crooke.

Membership of the Reserve Currency Club is But Part of China’s Master Plan

  |   For  |  0 Comentarios

La siguiente fase del renacimiento económico de China ya está en marcha
CC-BY-SA-2.0, FlickrPhoto: Simon Pielow . Membership of the Reserve Currency Club is But Part of China’s Master Plan

Until recently, by maintaining a watertight capital account, China deliberately postponed its membership of the reserve currency club. A few years ago, China had grown to be a giant in the world of trade, yet remained a dwarf in the world of capital. More recently, the People’s Republic reached a point where – given its rapidly increasing economic size and trade footprint – this contradiction was no longer sustainable or sensible.

The next phase in China’s economic renaissance is now well underway. It is actively pursuing its twenty-first century manifest destiny to regain the mantle it lost in the 1830s: being the world’s largest economy. This means it must expand its role in global capital markets to match those it has already achieved in global trade. This will balance the two windows through which China looks at the world – and just as importantly through which the world looks at China. Being a member of the reserve currency club is but a stepping stone on the renminbi’s path to achieving that worldwide acceptance, and especially in China’s efforts to master the world of capital. Expect a new Shanghai-Hong Kong-Shenzhen triptych to become one of the world’s three main fountainheads of capital and the next pit-stop on China’s road to global economic pre-eminence.

For this to happen sustainably however, China will need to move from being an exporter of capital – born of running a current account surplus – to being an importer of capital – which follows on from running a current account deficit. This answers the Triffin Dilemma which says that to have a truly acceptable reserve currency, one needs to produce a surplus of that currency so that third parties can hold it. Only when the appetite of China’s consumers for foreign goods exceeds that of foreigners for China’s goods – when China runs a current account deficit – can this be truly achieved.

In the interim, China has to find a way of recycling its trade surpluses so that foreigners get easy access to its currency. Here Xi Jinping’s signature foreign policy doctrine – the One Belt One Road programme – achieves this aim. By forcing Chinese surplus capital abroad to revive the terrestrial Silk Road of Central Asia and its maritime equivalent through the Indian Ocean, China is repeating what Britain did in the late nineteenth century: establishing its reserve currency status first by investing its trade surplus abroad before, one suspects, the eventual rise of the import-hungry Chinese consumer spreads the renminbi worldwide ‘naturally’, after China’s current account stops being a surplus and instead becomes a deficit.  

Michael Power is Strategist at Investec Asset Management.

Robeco Builds Presence in the UK

  |   For  |  0 Comentarios

Robeco se afianza en Reino Unido con la apertura de una oficina en Londres
CC-BY-SA-2.0, FlickrPhoto: Gabriel Villena. Robeco Builds Presence in the UK

Robeco announces the opening of its new London office in the City of London. The office will focus on serving UK institutional investors, global distribution partners and global consultants.

As previously announced Mark Barry has been appointed Head of UK and Institutional Business for Robeco UK. Robeco’s Global Financial Institutions team, headed by Nick Shaw, and Global Consultant Relations team, headed by Peter Walsh, are also run out of the London office. They are currently supported by a team of 6 FTE and Robeco is planning to expand this to around 20 FTE within the next two years. Robeco has a long track record with the UK institutional market and currently has approximately GPB 5bn in assets under management (as at 30 September 2015) from UK client mandates.

As in many other regions across the globe, Robeco will provide its client base in the UK market with access to high level expertise, amongst others within the field of Sustainability and Quantitative Investing. Robeco has been integrating ESG criteria in its mainstream products for many years, and has been at the forefront of active ownership by engaging with companies in which we invest to improve their sustainability practices since 2005. Robeco is also a pioneer in the field of quantitative stock selection since the early ‘90s. In 1994 the first stock selection models were used in Robeco equity strategies. Following the success of these models in practice, Robeco launched a 100% quantitative equity product line in 2002. This expanded over the years, currently spanning a wide range of investment strategies, with different regional exposures and risk-return characteristic and has over the last years developed a number of innovative factor investing strategies.

Mark Barry said: “Robeco coming to the UK is about bringing a suite of capabilities and skill sets to help clients build more sustainable, long-term portfolios to achieve their objectives. There is definitely a space in the UK for Robeco’s ‘cautiously pioneering’ mentality of using long-term, highly innovative sustainable investment strategies. These have been built on the bedrock that founded Robeco in 1929 and still stands today: using research-based, tried and tested strategies to deliver long-term results.”

Hester Borrie, Head of Global Distribution & Marketing and a Member of the Management Board of Robeco Group, said: “Building on our track record with clients in the UK, we are ready to be going to the next stage. We are delighted that our commitment to the UK market is now set in stone, with the opening of our new London office and the appointment of Mark Barry as Head of our UK business.  Mark is supported by a strong team within Robeco that has had a solid focus on London in recent years.  London is a key hub for the institutional and wholesale investment business globally. With the opening of our new London office, Robeco is now well established in all of the world’s major financial centres.”

Dentons Combines With Luxembourg’s OPF Partners

  |   For  |  0 Comentarios

El despacho de abogados Dentons consolida su presencia internacional fusionándose con la firma de Luxemburgo OPF Partners
CC-BY-SA-2.0, FlickrPhoto: Naroh. Dentons Combines With Luxembourg's OPF Partners

Global law firm Dentons today announced that it will further its leading presence in the world’s top financial centers with a combination between Dentons Europe LLP and Luxembourg’s OPF Partners. OPF Partners’ is a  leading Luxembourg firm, rated by Chambers and The Legal 500 for banking and finance, corporate, investment funds, tax, real estate and dispute resolution. The firm’s 34 lawyers, including nine partners, will join Dentons Europe LLP on January 1st, 2016.

In 2015, Dentons has entered or expanded in six of the world’s leading financial centers, and this combination means that the Firm now has a presence in the following cities out of the 25 top financial centers in the world: London, New York, Hong Kong, Singapore, Seoul, Toronto, San Francisco, Washington, DC, Chicago, Boston, Frankfurt, Sydney, Dubai, Montreal, Vancouver, Shanghai, Doha and Shenzhen.

“In our 10th transformative initiative in 2015, Dentons has done more for its clients this year than any global firm,” said Dentons Global Chairman, Joe Andrew. “By listening to our clients and planning our strategy around their business goals, we are creating the law firm of the future—one that anticipates client needs and delivers the specific practice expertise and business experience required, in communities around the world.”

Global Chief Executive Officer Elliott Portnoy added, “OPF Partners is recognized as one of Luxembourg’s leading firms and its lawyers will be able to offer our clients elite counsel in this important European market, consistent with our polycentric approach of offering the best legal talent in communities around the world. We are very pleased to welcome this high quality team to the Firm.”

Evan Lazar, Chairman of the Europe Board said, “Luxembourg plays a key role in the global and European investment fund and private equity sector, which is one of our core areas of focus and strategy. We are delighted to welcome our new colleagues from OPF Partners, with whom we have been working jointly for clients over recent years, and who share our commitment to excellence and building a leading pan-European practice.”

“We have already achieved a lot this year with our Milan launch, the hire of a substantial team in Hungary and the significant growth of our German practice with nine new partner appointments,” said Chief Executive Officer for Europe Tomasz Dąbrowski. “This transaction implements another top priority under our strategic plan for Europe which we will continue to focus on in 2016 and the coming years.”

Frédéric Feyten, Managing Partner of OPF Partners, commented, “We have always been committed to innovatively supporting local and international clients on the full spectrum of their Luxembourg projects. This combination will strengthen our capabilities in delivering pinpointed legal advice on a global scale. Luxembourg has achieved its status as a leading financial center, the largest European investment fund center, and a major private equity hub through its excellent services, international open-mindedness and stability. In this context, our teams are well positioned to solve the most challenging global client demands.”

The news builds on Dentons’ recent growth in Europe with the launch of a Milan office last month; the hire of 50 lawyers in Budapest earlier this year; and significant lateral partner hires in Germany, Russia and France. It also follows transformative combinations in China and the United States; the recent announcement of combinations with Australia’s Gadens and Singapore’s Rodyk; the Firm’s February establishment of its Johannesburg office in Africa, where it is the first global law firm to achieve Level 1 Broad-Based Black Economic Empowerment status; and the creation of its innovation platform, NextLaw Labs, which is focused on developing, deploying, and investing in new technologies and processes to transform the practice of law around the world.

Equity and High Yield: the Assets in Which to Find Absolute Returns in 2016

  |   For  |  0 Comentarios

Renta variable y high yield: los activos en los que encontrar retornos absolutos en 2016
Photo: Cheezepie. Equity and High Yield: the Assets in Which to Find Absolute Returns in 2016

In an environment which is more uncertain than in the past, investors are wondering where to find absolute returns in 2016. Schroders experts are clear: in assets such as high yield bonds, or equities. “Given the adjustments that occurred in the credit market, the yields are attractive and we can now get real positive returns, even in an environment of rising interest rates by the Fed,” explains Karl Dasher, Head of Schroders in the US, and Co-Head of the management company’s Fixed Income.

As part of the Annual International Media Conference held recently in London, he said he sees opportunities in the high yield segment, “a very interesting asset in which to be now.” Despite the caution by the energy component in asset, he deems that opportunities may be found in different industries, such as consumer or industrial sectors, and also in the financial sector, with differentials of 6% -7% – avoiding the energy risk, and predicts total returns of between 5% and 10% next year. “The important thing is the selection of securities and investing in a widely diversified manner; we have about 150 names in the portfolio, “he adds.

For Alex Tedder, CIO and Head for and global and US equities, there are always opportunities in equities, despite the uncertain environment in which the market moves. “This year’s returns have been almost flat, disappointing, but in geographical and sectoral terms, there is much divergence”, demonstrating that there are always opportunities. The manager sees a situation with several equilibrating factors: on the positive side, profits, liquidity and its condition as preferred asset and flow capturer; and in the negative side, profit revisions, except in Japan, valuations (most markets, with the exception of Japan are relatively expensive), and geopolitical risk.

But “there are reasons to remain positive: the yields on equities are attractive versus bonds and, if we go back to previous crises, we see that valuations are not so bad,” he adds. In addition, there are always opportunities in those areas where the market is often wrong: the manager mentioned securities which benefit from disruptive technologies, secular growth, innovation, niche players, or those who have purchasing power. For example, those industries which benefit from the growth in online transactions and commerce, such as Tencent, Alibaba, Uber, LinkedIn, Netflix, Google, Trip Advisor, Expedia or Airbnb. “We have no sectoral or country bias: We have no sectoral or country bias: we seek global growth and opportunities and with this viewpoint, the set of opportunities is substantial.

 Opportunities in Debt

The bond market has experienced 30 years of gains in fixed income, in a scenario of slowing economic growth, higher saving rate (partly due to demographic reasons) and a lower level of investment than expected, excess savings also in emerging markets, and a fall in public investments. The Bank of England estimates that the overall impact of these factors, among others, explains a fall of 4.5% in real yields.

For Dasher, markets are not looking to the forward looking indicators but at the rearview mirror, and are behaving as if the Fed had already raised rates. “In fixed income markets, many of the fears of a rate hike have already been priced in.” he explains. The proof: Also speaking of credit, the spreads on debt assets are lower than at other times in history. He rules out that the Fed will make a move any time soon: the market has priced it in that it will do so in December, but progress will be very slow, reaching 1.5% -2% within the next 18 months. For its part, the ECB will continue with its QE but will disappoint, while UK rates will rise sometime next year.

In the case of US credit, the expert talks about its dynamics: supply and corporate issues increased, but foreign demand has not been sufficient. However, he sees a trend on the horizon: the appetite of Japanese investors for the asset. “Japanese investors are changing their habits and shifting from investing in domestic assets to international assets, for example, in US debt”; therefore, he explains that issues in corporate debt and the increased supply in this area, can be offset by demand for the asset.

He explained that in emerging debt, adjustments in China will be gradual, and that if the renminbi is not undervalued further, and continues at levels of three years ago, it is because the rest of the world has depreciated more. But he is not worried about the country’s debt levels: “If there is a debt crisis, comparisons with other historical moments would put China in the less severe end of the spectrum,” he adds. In general, he believes that in emerging debt there are interesting opportunities from a viewpoint of selection, of both companies and public debt, building portfolios which are very different from the benchmarks.

 

Groundhog Day for Financial Markets

  |   For  |  0 Comentarios

Mes de la marmota para los mercados financieros
Photo: Fut Und Beidl. Groundhog Day for Financial Markets

Financial markets have endured their own version of Groundhog Day in recent months: the three issues that troubled investors earlier in the year – namely the precise timing of the Fed’s first rate rise, the subdued pace of global growth and the ongoing macroeconomic uncertainties in China – are not that much closer to being resolved now than they were back in the summer. So perhaps it is worth considering what has changed in markets, and what hasn’t.

The Fed, for its part, has worked very hard to try and keep the December policy meeting alive (current market pricing suggests that a December hike is now likely, having been less than a 30% probability prior to the October meeting). Nonetheless, it is still impossible to predict with complete certainty whether or not the Fed will move before the year is out, particularly given the seasonal decline in market liquidity that is seen in December. Critics of the Fed would argue that the Federal Open Market Committee (FOMC) has simply been too transparent, and that policymakers have painted themselves into a corner. If the FOMC itself is not sure about what it should do, it is impossible for anyone else to predict what the Fed will do with any accuracy.

While the Fed’s moves (or ‘none moves’) have occupied the lion’s share of the column inches in recent weeks, it is the muted tone of global economic data that is perhaps most vexing. The Lehman crisis took place well over seven years ago, and yet signs of a traditional cyclical recovery remain very hard to find. If anything, the current concern in markets is overcapacity in China and what that will mean not only for commodities and energy producers but also industrial profitability in general. Whilst we do not expect an economic recession, it is clear that life for a number of global industries is very difficult and likely to get worse. Talk of a recession in industrial profits may sound alarmist, but is probably not too wide of the mark if you happen to be a maker of mining equipment or agricultural equipment, areas where there is significant global oversupply. If you produce a commoditised, undifferentiated product – such as steel plate, for example – life is incredibly tough and companies are failing.

Why has global growth been so subdued? One explanation is that while QE has created the conditions (i.e. near-zero interest rates) for companies to invest, it only makes sense for companies to invest if they think that there is demand for what they will then produce. Post crisis, that demand has been notable by its absence, outside of emerging markets. Of course, as has been discussed ad infinitum, emerging markets are now under significant pressure (particularly the ones that have built their economies to feed Chinese demand for commodities) meaning that the global consumption outlook is muted at best. In that context, it is perhaps not surprising that companies have chosen to cut costs and use spare cash to pay dividends (or special dividends) and latterly they have used financial engineering (such as share buybacks) to support their share prices. In a world where organic growth is hard to find, it makes much more sense to buy back shares than committing to expensive, long-term projects involving huge amounts of capital expenditure and uncertain pay-offs – as many mining companies have found to their cost.

A lack of corporate confidence to invest is only part of the story. When oil prices slumped, we expected the consumer to benefit from a ‘cheap energy’ dividend, but this simply has not emerged in the way that we expected. Why is this? Rather like corporations, which are reluctant to spend on large-scale investment projects, we believe that many consumers are simply thankful to have a job in the post-crisis world and are therefore banking the gains they have made from low energy prices. Perhaps more significantly, and despite tightening labour markets in countries such as the US and UK, wage gains have been very modest. We should also not forget that a generation of people who left school or college in the late ‘noughties’ will have grown up without ever knowing the cheap and abundant finance that was available pre-Lehman. Leveraged consumption is not returning in the US or elsewhere and this will have a material impact on the level of GDP growth we will see next year and in the coming years. To put this another way, the unholy trinity of tighter regulation, higher legal costs and tougher capital requirements will mean that retail banks will increasingly look like utilities in the future.

What does this mean for investors? In our estimation, organic growth will be hard to find and that perhaps explains the recent pick-up in M&A. Companies that have already shrunk their cost bases and used financial engineering to lift their share price have few other options left in the locker. Indeed, increased M&A and the fact that companies have become more creative with their balance sheets has driven the recent deterioration in credit fundamentals in the US.

The fact that growth is likely to be subdued means that interest rates will be lower for longer. Indeed, the terminal fed funds rate for this cycle could be as low as 2%. On paper, this is positive for bonds but it is hard to get excited about government bonds given where yields are and the fact that the Fed will be raising rates. European high yield does however look interesting, given a meaningful yield spread over government bonds and the fact that the asset class is usually a beneficiary of M&A, unlike investment grade.

A low discount rate is in theory a major positive for equities but all the issues discussed above suggest that economic growth – and therefore earnings – are likely to be weaker than they would have been if some of the excess global productive capacity had been burnt off. We think that a selective approach in equities will pay off, particularly as Chinese growth concerns are unlikely to abate any time soon. We also think that investors will focus more on valuations and fundamentals as global liquidity continues to ebb, and in that world investors should be ready for more stock-specific disappointments. In future, the Fed will not be underwriting equity markets and despite the likelihood of further action by the ECB, there will no longer be a rising tide of global QE that lifts all boats.

Mark Burgess is CIO EMEA and Global Head of Equities at Columbia Threadneedle Investments.

 

The Key to Pioneer Investments’ Income Strategies: Diversify Different

  |   For  |  0 Comentarios

La clave de Pioneer Investments para las estrategias income: diversificar diferente
. The Key to Pioneer Investments’ Income Strategies: Diversify Different

Demographic challenges, increased regulation, and the Public Debt Mountain, are fueling investor demand for assets that provide income; thus converting income strategies into the most affordable way to cope with mortgage payments or health insurance, and supplement public pensions.

This market trend is increasingly clear to the team at Pioneer Investments, which presented the panel, ‘A Need for Income in Today’s Economic Environment’ at the investment seminar “Embrace New Sources of Return”, which was held in Miami. Both Adam MacNulty, CFA, Senior Client Portfolio Manager of Pioneer Funds – Global Multi-Asset Target Income, and Piergaetano Iaccarino, Head of Thematic Equity and Portfolio Manager of Pioneer Funds – Global Equity Target Income shared their expert views in the series of panelist questions.

Despite the increased demand for income, Pioneer Investments believes that many investors’ conservative portfolio exposures may not be positioned to cope with the income need.

“We believe that investors face multiple concerns over time, but on top of the list is the need to generate income on a sustainable basis. In our opinion secular trends, such as an ageing demographic, public debt and increased regulation, which by definition are beyond the realm of the economic cycle, will shape the outlook and behavior of investors, by continuing to drive the demand for income,” company experts point out.

In the current environment of low interest rates and low returns of sovereign debt making it more difficult to draw income from traditional assets, Adam Mac Nulty, recommended looking beyond traditional sources, such as the U.S. stock market, the European stock market or U.S. Treasuries. In their search for sustainable income, the company intends to explore the U.S. high yield market, European high dividend equities, or REITs.

The key is to maintain a low volatility target, between 5 and 10%, and at the same time diversify among poorly correlated assets to keep the risk toward the downside. The Global Multi-Asset Income Target strategy seeks to deliver these goals.

Meanwhile, Piergaetano Iaccarino, also pointed out that one of the keys to attracting income to the portfolio is to be flexible in asset allocation. Thus, the Pioneer Investments team effectively attenuates falls in volatile markets.

In Global Equity Target Income fund’s case, Iaccarino explained that its portfolio has 80% of core positions and 20% of tactical positions which vary according to the strategy’s requirements and market conditions. Thus, the expert from Pioneer achieves flexibility and dynamism, which are crucial in finding assets that provide income. This portfolio construction enables potential for high income in a stable portfolio.

Safra Sarasin Acquires Leumi Luxembourg Unit

  |   For  |  0 Comentarios

Safra Sarasin adquiere el negocio de banca privada de Leumi Luxemburgo
Photo: 55Laney69. Safra Sarasin Acquires Leumi Luxembourg Unit

Banque J. Safra Sarasin has announced the acquisition of Bank Leumi Luxembourg’s private banking business, in a bid to expand its private banking presence in the region.

As a result of the transaction, Safra Sarasin will take over responsibility for Bank Leumi Luxembourg’s clients and relationship managers. Services of Bank Leumi had been tailored to Ultra High Net Worth and High Net Worth clients.

The agreement comes as a number of Israeli banks have announced their withdrawal from European private bank operations, due to, among others, profitability and fiscal compliance concerns. This includes Israel Discount Bank, which sold its Swiss unit to Hyposwiss private bank Genvève earlier this week.

Just as their international counterparts, the move to sell Israeli private banking units was also reinforced by the global crackdown on tax evasion. Last year, Bank Leumi had already settled with US authorities to pay a $400m fine for helping US account holders to evade taxes.

Jacob J. Safra, Vice Chairman of J. Safra Sarasin Group, commented: “This acquisition underlines our position as a consolidator in the European private banking market. Our capital strength and family ownership provides great flexibility to do such transactions. Bank Leumi’s Luxembourg business sits ideally within our strategic focus, providing tailor made solutions to clients.”

The acquisition is expected to be completed during the course of the first quarter of 2016, subject to regulatory clearance. The financial terms of the agreement were not disclosed.

“Time Is One of The Few Remaining Market Inefficiencies”

  |   For  |  0 Comentarios

“El tiempo es una de las pocas ineficiencias que quedan en el mercado”
Foto: Historias Visuales, Flickr, Creative Commons. El crecimiento mundial será anémico en 2016 y 2017 pese al petróleo barato, los tipos bajos y el menor lastre emergente

Mark E. DeVaul, portfolio manager of North America Value Fund and a member of the Nordea’s investment team (through the firm The London Company), explains in this interview with Funds Society how to be a good value investor in these high volatile markets. Recent additions to the portfolio have come from multiple sectors including Consumer Discretionary, Industrials, and Consumer Staples.

US equities have experienced a strong rally in recent years. Investing with a value perspective requires discounts to be found. Is this possible in a more expensive stock market scenario? 

US stocks have been strong since the bottom of the market back in March of 2009. Valuations have improved and the US economy is in much better condition compared to the depths of the great recession. It is more difficult to find great investing ideas today vs. 5-6 years ago, but we are still finding them. We attempt to purchase strong companies when they are trading at a roughly 30-40% discount to our estimate of intrinsic value. We calculate intrinsic value using a process we call Balance Sheet Optimization. Our goal is to build the investment thesis for each holding around the strength of the company’s balance sheet and not rely on future growth.

What return potential are you currently detecting for your portfolios, taking into account market prices? Has the safety margin tightened compared with before? 

We don’t have a specific return goal each year.  Our goal is to outperform the broader market over full market cycles (5-6 years) while maintaining more attractive risk characteristics (better downside capture, lower beta, lower standard deviation). Yes, the discount to intrinsic value is lower today vs. a few years ago. 

Value management is characterised by patience and long-term convictions… Do you believe it is possible to maintain a buy&hold management approach in view of the current high volatility? 

We believe it is an advantage to follow a buy and hold approach. Many investors have a very short time horizon. We think time is one of the few remaining market inefficiencies. We look at each company as if we were going to buy the whole firm. Our average holding period is five years. We build diversified portfolios of 30-35 holdings. Each holding is meaningful and can drive value to shareholders over a multi-year holding period.

In this regard, have you made any changes to your management approach as a consequence of the market volatility in recent years? 

No, we have not made any changes to our investment approach because of recent volatility. 

As regards sectors or companies in which you are currently detecting value, which sectors are you concentrating on?

We build our portfolios following a bottom up approach and pay little attention to sector weights. Our goal is to have a strong margin of safety in each holding. Recent additions to the portfolio have come from multiple sectors including Consumer Discretionary, Industrials, and Consumer Staples.

What impact could the Fed’s decision to raise interest rates have on your portfolios? Could the volatility that has been created be useful in any way?

The Fed’s timing of interest rate increases will not have much of an impact on our portfolio. We are aware of the risk and on the margin have stayed away from some of the sectors that investors may view more like bonds because of the high dividend yields (REITs, Telecom, Utilities). If rates begin to move higher, we take that into consideration as part of our balance sheet optimization approach in determining intrinsic value. 

To what extent do you take into account macro considerations when it comes to making your investment decisions? 

Our process is 100% bottom up so there is limited impact from macro considerations. That said, we are aware of what is going on at the macro level and try to avoid major headwinds when possible. 

I imagine that you invest bearing in mind the fundamentals of the company. Do you think the exposure of US companies to China and other EMs will impact their fundamentals?

Exposure to China and other EMs may have some impact. In our large cap portfolio, roughly 30% of sales from the companies in the portfolio are generated outside the US. So we recognize there is some impact.  However, the impact is fairly limited as we attempt to buy companies with very little growth expectations priced into the shares.

Who are the 15 most Relevant Latin American and US Offshore Private Banking Industry Professionals?

  |   For  |  0 Comentarios

¿Quiénes son los 15 profesionales más relevantes de la industria de banca privada en América Latina y US Offshore?
Photo: Google . Who are the 15 most Relevant Latin American and US Offshore Private Banking Industry Professionals?

Terrapinn, in collaboration with Wealth Management Americas, has published a list of the 15 most influential industry professionals from private banking and wealth management in Latin America and US Offshore. Voters have valued excellence in customer service, in addition to wealth planning and preservation, and portfolio management. The ranking this year includes professionals from 14 private banks and four different countries; eight are located in Brazil; five based in the United States, with one professional in Mexico and another one in Switzerland.

Beatriz Sanchez, of Goldman Sachs, United States, was the highest ranked with 252 votes, closely followed by Emerson Pieri, of Barings Investments, Brazil, with 247, and Diego Pivoz, of HSBC USA, with 235. The Spaniard, Conchita Calderon of JP Morgan, Mexico, and Ernesto de La Fe, of Jeffries, United States, rounded out the top 5 with 211 and 198 votes respectively.

Between the fifth and tenth positions, are two industry professionals based in the United States, and three in Brazil: Gabriel Porzecanski, of HSBC, USA; Adriana Pineiro, of Morgan Stanley, USA; Renato Cohn, of BTG Pactual Brazil; Joao Albino Winkelmann, of Bradesco, Brazil; and Francisco J. Levy of UBS, Wealth Management Brazil.

Four other professionals based in Brazil, and the only one located in Switzerland to obtain a position in the ranking of the 15 most influential professionals, appear between the tenth and fifteenth positions: Charles Ferraz, of Itau Unibanco, Brazil; Guilhermo Morales, of Audi Bank, Switzerland; Raphael Guinle, of BTG Pactual, Brazil; Felipe Godard, of Deutsche Bank, Brazil; and Renato Roizenblit, of SLW Brazil.

The Wealth Management Americas 2015 forum, organized by Terrapinn, took place this week, with the participation of two of the professionals ranked in the top 5: Diego Pivoz, of HSBC, who shared his view on deregulation and transparency, and Ernesto de la Fe, of Jeffries, who talked about client relationship management, and how the private banking industry needs to adapt to the increasingly global presence of its clients.