Blackrock’s CEO Larry Fink Sees “Stakeholder Capitalism” and Sustainability as Key to Delivering Value to Clients

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CEO BlackRock
Foto cedidaLarry Fink, CEO de BlackRock.. Larry Fink ve clave el “capitalismo de stakeholders” y la sostenibilidad para navegar en el nuevo entorno que deja la pandemia

Larry Fink, CEO of BlackRock, has published his annual letter to the CEOs of the companies around the world in which the firm invests on behalf of its clients. As every year, this missive seeks to encourage business leaders to manage companies with a long-term mindset that offers shareholders consistent returns over time.

Fink points out the importance of “stakeholder capitalism”, which, for him, is not about politics: “It is not a social or ideological agenda. It is not “woke.” It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism”.

He believes in its ability to help individuals achieve better futures, to drive innovation, to build resilient economies, and to solve some of our most intractable challenges: “In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders. It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long term. Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success”.

The CEO also highlights that the pandemic is “dramatically accelerating” how technology is reshaping life and business, has deepened the erosion of trust in traditional institutions and has exacerbated polarization in many Western societies. “This polarization presents a host of new challenges for CEOs. Political activists, or the media, may politicize things your company does. They may hijack your brand to advance their own agendas. In this environment, facts themselves are frequently in dispute, but businesses have an opportunity to lead. Employees are increasingly looking to their employer as the most trusted, competent, and ethical source of information – more so than government, the media, and NGOs”, he adds.

In this context, Fink arguments that “it’s never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy, and a long-term view”. That is why he encourages them to put their company’s purpose at the foundation of their relationships with stakeholders in order to achieve long-term success.

“Employees need to understand and connect with your purpose; when they do, they can be your staunchest advocates. Customers want to see and hear what you stand for as they increasingly look to do business with companies that share their values. And shareholders need to understand the guiding principle driving your vision and mission. They will be more likely to support you in difficult moments if they have a clear understanding of your strategy and what is behind it”, he says.

A new world of work

In the CEO’s view, no relationship has been changed more by the pandemic than the one between employers and employees: “As companies rebuild themselves coming out of the pandemic, CEOs face a profoundly different paradigm than we are used to. Companies expected workers to come to the office five days a week. Mental health was rarely discussed in the workplace. And wages for those on low and middle incomes barely grew”.

That’s why companies not adjusting to this new reality and responding to their workers do so at their own peril. “In addition to upending our relationship with where we physically work, the pandemic also shone a light on issues like racial equity, childcare, and mental health – and revealed the gap between generational expectations at work. These themes are now center stage for CEOs, who must be thoughtful about how they use their voice and connect on social issues important to their employees. Those who show humility and stay grounded in their purpose are more likely to build the kind of bond that endures the span of someone’s career”, Fink adds.

Besides, his letter shows that new sources of capital are fueling market disruption as over the past four decades, there has been an explosion in the availability of capital. “Young, innovative companies have never had easier access to capital. Never has there been more money available for new ideas to become reality. This is fueling a dynamic landscape of innovation. It means that virtually every sector has an abundance of disruptive startups trying to topple market leaders”, he says.

In his view, CEOs of established companies need to understand this changing landscape and the diversity of available capital if they want to stay competitive in the face of smaller, more nimble businesses. That’s why BlackRock wants to see the companies they invest in for their clients evolve and grow so that they generate attractive returns for decades to come. “We too must be nimble and ensure our clients’ assets are invested, consistent with their goals, in the most dynamic companies – whether startups or established players – with the best chances at succeeding over time”, he insists.

Sustainability and ESG

Regarding sustainability, Fink highlights that they focus on it not because they’re environmentalists, but because they are “capitalists and fiduciaries” to their clients. “That requires understanding how companies are adjusting their businesses for the massive changes the economy is undergoing. As part of that focus, we are asking companies to set short-, medium-, and long-term targets for greenhouse gas reductions. These targets, and the quality of plans to meet them, are critical to the longterm economic interests of your shareholders. It’s also why we ask you to issue reports consistent with the Task Force on Climate-related Financial Disclosures (TCFD): because we believe these are essential tools for understanding a company’s ability to adapt for the future”, he reveals.

In his opinion, divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero. “Foresighted companies across a wide range of carbon-intensive sectors are transforming their businesses, and their actions are a critical part of decarbonization. We believe the companies leading the transition present a vital investment opportunity for our clients and driving capital towards these phoenixes will be essential to achieving a net zero world”, he says.

In this sense, he thinks that governments need to provide clear pathways and a consistent taxonomy for sustainability policy, regulation, and disclosure across markets. They must also support communities affected by the transition, help catalyze capital for the emerging markets, and invest in the innovation and technology that will be essential to decarbonizing the global economy. “When we harness the power of both the public and private sectors, we can achieve truly incredible things. This is what we must do to get to net zero”, the letter says.

Lastly, Fink points out that just as other stakeholders are adjusting their relationships with companies, many people are rethinking their relationships with companies as shareholders. “We see a growing interest among shareholders – including among our own clients – in the corporate governance of public companies”, he concludes.

BNP Paribas AM Integrates its Private Assets Platform in BNP Paribas Capital Partners

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Pixabay CC0 Public Domain. BNP Paribas AM refuerza su plataforma de activos privados con la integración de BNP Paribas Capital Partners

BNP Paribas Asset Management has finalized the integration of BNP Paribas Capital Partners, its specialized alternative multi-management platform including private asset fund solutions, as well as funds of hedge funds and UCITS-compliant hedge funds. The firm thus strengthens its private asset strategy by combining the resources of BNP Paribas Capital Partners, FundQuest Advisor and the multi-asset teams into a single division.

In a press release, the asset manager explains that this decision is in line with its strategy of accelerating the development of its private asset investment strategies. Following the signing of the acquisition of Dynamic Credit Group in September 2020, the integration of BNP CP further strengthens its Private Debt & Real Assets investment division, bringing its assets under management to more than 20 billion euros (22.77 billion dollars).

The closing of this transaction will also allow BNP AM to expand its scope to new market segments within private debt, benefiting from BNP CP’s successful development in recent years in specialized debt and impact private equity fund solutions. The fund of hedge funds business will join the already well established Multi Asset, Quantitative & Solutions business led by Denis Panel. This will extend the coverage of its multi asset and FundQuest Advisor teams to liquid alternative funds.

“BNP Paribas Capital Partners’ private asset fund investment activities, focused on impact private equity and specialized debt, are very complementary to the direct investment strategies developed within PDRA since 2017.  With the addition of this multi-management expertise, and the recent acquisition of Dutch mortgage specialist Dynamic Credit Group, our private investment platform offers investors an unrivaled breadth and significant scale of private investment solutions with assets under management totaling more than EUR 20 billion”, commented David Bouchoucha, Head of PDRA.

Meanwhile, Denis Panel, Head of MAQS, highlighted that the combination of resources coming from BNP Paribas Capital Partners, together with FundQuest Advisor and their multi asset teams “shows BNP Paribas Asset Management’s strong commitment to supporting and developing its absolute return fund of funds business.“

Unearthing Asia’s Next Winners

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Pixabay CC0 Public DomainLíderes del futuro en Asia. Asia

Backing a sector winner is a logical strategy but identifying its heirs is a more challenging alpha generator. Detailed analysis of stock return profiles shows that companies improving their return on equity (RoE) to amongst the top quartile tend to outperform in the long term.

Selecting these businesses involves identifying certain characteristics, but even if they are found, the maturity of the sector in which the company operates is an important factor.

In more maturing ‘new economy’ areas, such as e-commerce in China, it may make more sense to identify the players that are taking market share from the incumbent.

But in more emerging industries, such as electric vehicle components, often it proves more fruitful to back the industry leader because of the inherent uncertainty during the early stages of fast-moving, burgeoning sectors.

Incumbent errors

Leaders in more established sectors can be hampered by several pitfalls, such as losing their focus, and engaging in so-called ‘di-worse-ification’ – whereby they try, often unsuccessfully, to enter adjacent or new sectors.

Even though dominant players often benefit from a first-mover advantage in their infancy, as their sector ages, it becomes more segregated, with new niches emerging, providing opportunities for new rivals to pick off these areas as their own. An example of this is the current China ecommerce incumbent whose dominant market share has been significantly eroded in the past few years due to emerging competitors.

This is why we focus especially hard on particular attributes to help us identify the next upcoming winners within our concentrated 40-50 stock Asia Future Leaders fund, which over three years has delivered nearly three times its benchmark, the MSCI AC Asia ex-Japan index. The fund has been awarded with a 5 star rating by Morningstar.

 

Innovation focus

The core of our strategy relies on three pillars: quality management, scalability and innovation, with the latter a clear differentiator to traditional investment frameworks.

We harness the deep experience of our Future Leaders panel, which benefits from the experience of a range of prominent professors, including French business school INSEAD’s Nathan Furr, a pre-eminent voice on innovation, to help us identify tangible traits that are often indicators of inventive companies.

Combining the panel’s insight with our proprietary research allows us to pinpoint innovative companies at an earlier stage in their life.

As these companies grow older, we continually assess their competitive edge, which is re-evaluated frequently to see if aspects such as its forward-looking corporate culture and ability to enter new markets remains.

Analyzing the extent to which companies prioritize R&D, and incentivize innovation, are two key metrics we study.

Key characteristics

A common denominator of an innovative company is a decentralized organization that gives middle management meaningful responsibility and rewards them for their success.

One such Chinese materials company compensates its R&D team with 15% of the profits of successful new products and 30% of increased revenue from process improvements.

Another important element is how the R&D side of a business is driven. Firms that rely solely on senior management for their inspiration can often begin to struggle, whereas ones that actively engage with their customers for feedback to influence their R&D are much more likely to prosper.

And beyond this, the ability to gather, process and react to data will drive the winning firms of the future.

 

Accelerating away

It’s this skill in harnessing data, through the likes of machine learning and artificial intelligence, that has influenced some of our holdings. One such stock is a Chinese electric battery (EV) maker, which harnesses AI and machine learning to apply the latest technology to its production process. The company is a leader in an emerging industry, and its focus and success in R&D is a key attraction for us.

Similarly, another stock we own is a leading China EV manufacturer that has managed the recent supply chain shocks better than peers, in large part due to their superior vertical integration, producing their own batteries and power transistors – two key components of an electric vehicle.

These two companies play into a broader theme of China winning the EV race, especially given its market is already four times larger than the US, there are eight times as many charging points in China than America, and much of the world’s lithium is in China.

This makes us optimistic for these companies as we enter 2022; however, there are other sectors and other countries that we’re bullish on.

 

Emerging opportunities

The prospects for real GDP growth in the likes of India, Indonesia and Vietnam appear stronger for 2022. In India, we see the potential for huge opportunities, with the pipeline of IPOs doubling in the past year. The pace of innovation in India is remarkable, and it now has the third most unicorns – a private company valued over $1billion USD – in the world.

The pandemic has forced many people in southeast Asia towards e-commerce and other digital services, most first-time users, which means that the opportunity for companies to access a new, larger audience is potentially huge.

 

 

EFG Asset Management (EFGAM) is an international provider of actively managed investment products and services to financial intermediaries and institutional investors around the world.

EFGAM’s New Capital funds and strategies offer a focused range of actively managed, specialist strategies across equity, fixed income, alternative and multi-asset within both developed and emerging markets. The strategies are available in a variety of structures including AIFs, CITs, SMAs and UCITS, and are available through vehicles domiciled in Ireland, Luxembourg, Switzerland, Hong Kong and the United States.

Overall Morningstar rating as of 12/31/2021 rated against 730 (O Inc) Asia ex Japan funds on a risk-adjusted basis’.

EFGAM manages approximately USD 32.9 billion (as of December 2021) on behalf of clients.

For professional investors / trade press only.  Not to be used with or distributed to retail clients.

Past performance is not indicative of future results. The opinions herein are those EFGAM as of the date of this article and are subject to change at any time due to market or economic conditions.

 

 

 

Boom in Global Private Equity Investments by AFOREs

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Foto: PXhere CC0. Photo:

In 2021, there were 37 issuances of private equity funds or feeder funds on the stock market (BMV and BIVA), of which 30 were for global private equity investments (CERPIs) and 7 for local investments (CKDs). Of the 30 new CERPIs, more than half are subseries that allow the manager to have a series per SIEFORE and thus satisfy the investment objective at the term of each of the generational SIEFOREs.

The issuance of CKDs and CERPIs observed in 2021 were almost double those that arose the previous year in both cases, however, the number of new CKDs issuances fell compared to what was observed between 2015 and 2018 (14-20 vs. 7 in 2021).

1

Two years ago (in December 2019), the number of SIEFOREs increased from 5 to 10 SIEFOREs, which allowed for the migration to Generational Funds or Target Date Funds (SIEFOREs based on retirement age).

2

Over time, some CERPI issuers have chosen to offer exclusive CERPIs for AFORE and/or SIEFORE, which allows their strategy to be differentiated. The size of assets under management and costs have also been differentiators, amongst others.

In the case of the CERPIs that were placed in 2021, the dominant sector was that of fund of funds, while in the case of the CKDs, it was the real estate sector, as can be seen in the following table.

3

The amounts committed might seem high in several cases since they are part of the strategy of having vehicles for the current and future resources that the AFOREs will allocate. Here one must consider that the AFOREs double their assets practically every five years.

Throughout 2021, 10 CKDs and CERPIs began their initial process of listing on the stock exchange. Their main takeaways are:

  • They want to issue 5 CKDs and 5 CERPIs.
  • 7 started the procedure in BIVA and 3 in BMV
  • Among the 5 CERPIs, 3 are funds of funds; one in the energy sector and the other one in real estate. There is only one new manager.
  • Among the 5 CKDs are 3 real estate and 2 in private debt. There are 3 potential new issuers.

In the issuance of new private equity vehicles and feeders, from 2019 there are 8 issuers that started their placement process and from 2020 there are 5 that are pending. Historical experience tells us that of these 13 laggards, only some could be issued, being more difficult for those from 2019 (three years ago) than for those of 2020 and 2021 (one or two years ago).

4

At the beginning of the year Lock Capital Solutions (feeder) issued LOCKXPI (#21) with a first capital call of US $2.7 million and commitments up to US $840 million.

Although the trend in recent years favors the issuance of CERPIs, the issuance of CKDs continues to be selective, although not quite what was seen with the 2015-2018 boom.

Column by Arturo Hanono

Deutsche Bank Appoints Muriel Danis as Global Head of Product Platforms & Sustainable Solutions

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Deutsche Bank nombramiento
Pixabay CC0 Public DomainMuriel Danis, directora global de Plataformas de Producto y Soluciones Sostenibles de la división de Banca Privada Internacional (IPB) de Deutsche Bank .. Deutsche Bank ficha a Muriel Danis como directora global de Plataformas de Producto y Soluciones Sostenibles

Deutsche Bank’s International Private Bank (IPB) announced this week the appointment of Muriel Danis as Global Head of Product Platforms & Sustainable Solutions, effective March 14, 2022.

In this newly created role, Danis will be responsible for the continuous development of Deutsche Bank’s product and services platforms across the IPB’s client segments and will “ensure robust governance across regions”. The firm clarified in a press release that this will include responsibility for trading and capital markets governance, funds, alternatives and accounts, cards and payments products as well as supporting the development of the IPB’s sustainable solutions in line with the commitments laid out at the Sustainability Deep Dive in May 2021.

“Muriel Danis’ appointment is testament to our business’ ability to attract leading industry talent to our fast-growing product platform and reflects our ambition to become the house of choice for clients who wish to make positive social change. Her role will be a significant driver as we pursue delivery of the IPB’s ESG targets”, said Claudio de Sanctis, Global Head of the IPB and CEO EMEA.

Danis has over 22 years of experience across Global Markets and Private Banking, most recently at HSBC in London as Global Chief Operating Officer in the Wealth Management division’s Products and Investment Groups. Prior to that, she held an array of roles, including Global Head of Advisory, as well as Global Head of Product Management and Business Development. She was also a Director in the Family Office Partnership, Middle East and Africa in Dubai. Before joining HSBC, she had a number of positions within Credit Suisse’s Private Bank and Global Markets divisions.

Mario Aguilar Joins Janus Henderson as Senior Portfolio Strategist

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Mario Aguilar de Irmay
Foto cedidaMario Aguilar, estratega de carteras senior en Janus Henderson Investors. . Mario Aguilar se incorpora a Janus Henderson como nuevo estratega de carteras senior

Janus Henderson Investors is bolstering its Portfolio Construction and Strategy team with the hiring of Mario Aguilar as Senior Portfolio Strategist. In this newly-created role, he will support clients in the Latin American, US Offshore and Iberian markets.

Aguilar, who assumed the role on 1 December 2021, will be based in London and report to Adam Hetts, Global Head of Portfolio Construction and Strategy Group. The asset manager has revealed in a press release that in his new position he will serve as “a crucial partner” to clients by delivering actionable investment strategy insights through customized portfolio analytics and proprietary thought leadership, across all asset classes. 

Janus Henderson has highlighted that Aguilar brings “a wealth of industry experience” having joined from Allspring Global Investments (formerly Wells Fargo Asset Management), where he was an EMEA Client Relations Director since 2013. In that role he had multi-asset product coverage responsibilities for EMEA and Latin American clients, engaging with those clients in a variety of formats including individual client portfolio consultations, group presentations, and providing investment and market commentaries. Prior to that, he worked as a Client Services Director at Markov Processes International where he was an expert on their flagship portfolio analysis software.

The Janus Henderson Portfolio Construction and Strategy (PCS) team performs customized analyses on advisor portfolios, providing differentiated, data-driven diagnostics, and publishes proprietary asset allocation and macro insights. The firms points out that through guidance from the PCS team, “advisors can build more resilient client portfolios through deep performance/risk model analysis and unique investment perspectives”.

Aguilar’s appointment brings the headcount of the PCS team to a total of 12 people covering Janus Henderson clients across US, US Offshore, LatAm, and EMEA.

“I am delighted to have Mario onboard to offer clients in Latin America, US Offshore and Iberia the specialist knowledge of our PCS team. We are dedicated to growing our private bank network in these regions and the value propositions that the PCS team will be able to offer advisors will be invaluable in helping them to deliver results in line with their investors’ long-term objectives. We are confident that the combined technical expertise of Mario, PCS technology and the local expertise of our sales colleagues on the ground will result in a superior client experience”, said Ignacio de la Maza, Head of EMEA Intermediary & LatAm said.

Meanwhile, Adam Hetts, Global Head of Portfolio Construction Strategy, commented that Aguilar is “a critical addition” to their growing global team: “He brings a tremendous mix of local expertise and global investment acumen that is ideally suited to our clients’ needs in the Latin America, US Offshore, and Iberia markets”.

In his view, thanks to this addition, Janus Henderson and their sales colleagues are deepening their client relationships in these “key strategic markets” by delivering an even wider array of customized portfolio construction insights and market perspectives. “Mario brings unique perspective to how we can best apply our global team’s resources to his local markets, and we are all very excited for what he will accomplish on behalf of our clients”, he concluded.

iM Global Partner Rebrands its UCITS Fund Range from Oyster to iMGP Funds

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Foto cedidaPhilippe Couvrecelle, consejero delegado y fundador de iM Global Partner.. Philippe Couvrecelle, consejero delegado y fundador de iM Global Partner

iM Global Partner announced in a press release that its Luxembourg-based Oyster fund range has changed its name to iMGP Funds. The decision is part of “an extensive rebranding effort” in response to its accelerated company growth and a renewal of its corporate vision.

“At the heart of the rebranding initiative, is a change of the company’s Oyster fund range to iMGP Funds”, the firm added. Specifically, the US funds changed their name on 16th December 2021 and the Luxembourg-based SICAV on January 10th. 

The worldwide investment manager highlighted that 2021 was “a milestone year” for its business, as it broadened its asset management network with two new partners: Richard Bernstein Advisors who joined in July 2021 and Asset Preservation Advisors in September 2021. In its view, both have provided clients with access to “an even wider selection of distinctive high-quality funds”.

The firm also acquired 100% of the Litman Gregory wealth management and funds businesses, strengthening its US distribution footprint and capabilities. Consequently, iM Global Partner’s assets under management almost doubled in 2021 from US$19.6 billion in December 2020 to US$38 billion in December 2021 and staff numbers grew from 50 to 115.

“In the last few years, iM Global Partner has cemented its status as a market leader in distinctive fund products. We experienced over 90% growth in assets under management last year. This growth reflects the increased recognition that asset managers must provide transparent funds that perform competitively on a risk adjusted basis”, commented Philippe Couvrecelle, CEO and Founder of the company.

In this sense, he believes that this announcement provides them with “the unique opportunity” to ensure their brand becomes synonymous with quality: “Our brand reflects the strength, sustainability and flexibility of our investments solutions”.

Couvrecelle explained the announcement demonstrates the confidence his team has in the company’s future and lays the groundwork for further expansion which will be demonstrated in 2022. He added that the firm plans to reach $60-65 billion in 3 to 4 years and $150 billion in 2030, with 4-6 new partners by 2023/2024.

“The iMGP Funds range illustrates the diversity of our high-performing team of top-notch asset managers spread throughout the world. At iM Global Partner, our clients know that our brand stands for quality – we search the world to find the most capable fund managers with the tenacity and innovation to achieve investment returns in any market environment. Therefore, we are confident that 2022 will be another good year for iM Global Partner and particularly iMGP Funds,” he concluded.

Leadership in European ETFs and a Business of Liquid Alternatives: Amundi’s Bets After the Acquisition of Lyxor

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Foto cedidaValérie Baudson, consejera delegada de Amundi.. Ser líderes europeos en ETFs y una línea de negocio de soluciones alternativas líquidas: así es la apuesta de Amundi tras la compra de Lyxor

After six months of preparatory work and the completion of the acquisition of Lyxor, Amundi explained this week the strategic benefits for its business and growth plans. Three key ideas were the focus of the press conference: to be the leader in the European ETF market, to have a platform of liquid alternative investment solutions and to add new skills and talent to its team.

“The acquisition of Lyxor is another important step in the deployment of Amundi’s strategy. It elevates Amundi to the top position among European ETF providers and enriches our active management offering with a leading position in liquid alternative assets. Amundi is fully prepared to be the partner of choice in these areas of expertise for both retail and institutional clients in Europe and Asia, and to continue its growth in two promising markets,” said Valérie Baudson, CEO of Amundi, during her presentation. 

The head of the asset manager explained that the integration of both companies will generate synergies in terms of annual costs of 60 million euros before tax (68 million dollars), the full impact of which is expected to be visible in 2024. By the same date, Amundi’s CEO estimates synergies in terms of annual current income to be €30 million (34 million dollars). “The integration process will be carried out progressively over the next two years with several stages: IT migration, legal mergers, creation of a new organization,” she clarified.  

Founded in 1998, Lyxor has more than €140 billion in assets under management and advice. In addition, the asset manager is a major player in the ETF market with €95 billion under management, making it the third largest player in Europe with a market share of 7.7%.

Regarding the active management business, “Lxyor has developed a recognized expertise in active management, with €45 billion under management, in particular through its leading alternative platform. Thanks to this acquisition, Amundi benefits from strong levers to accelerate its development in the ETF segment, which is currently experiencing rapid growth, as well as complementing its active management offering, particularly in liquid alternative assets, as well as advisory and OCIO capabilities, and fiduciary management,” Baudson emphasized.

Commenting on the roadmap, Lionel Paquin, CEO of Lyxor, added: “Lyxor joins Amundi with remarkable business momentum across all franchises and fully committed to ambitious new development goals. Driven by a pioneering spirit they have always shared, the Amundi and Lyxor teams will now work as one to build for their clients an even stronger and more innovative leader.”

ETFs, smart beta and indexed solutions

As highlighted by Fannie Wurtz, global head of ETFs, Indexing and Smart Beta business, “the acquisition of Lyxor will propel Amundi’s passive platform to the position of Europe’s leading ETF provider.” Overall, the combined ETF business represents more than €170 billion in assets under management, representing a 14% share of the UCITS ETF market for Amundi. 

She also argues that the new expanded ETF range will provide investors with “efficient access to one of the largest and most comprehensive ranges of UCITS ETFs available on the market”. This range of more than 300 products includes some of the most attractive strategies, especially in ESG, weather, thematic investing, emerging markets and fixed income.

“In a market where size and scale are key, Amundi’s passive platform, bolstered by more than €282 billion, is an important step in cementing Amundi’s unique positioning as the European partner of choice in passive management for retail and institutional clients around the world. The Amundi Passive platform has set itself the target of increasing its assets under management by 50% by 2025,” she added.

Wurtz explained that their new position will allow them to continue to grow in an industry segment that has been driven in recent years by clearer, more concise and transparent regulation, as well as the transformation towards ESG and the digitization of distribution channels. Supported by this growth experienced by the ETF universe, Amundi expects strong growth in adoption by retail investors, both through ETF portfolio models and the acceleration of the European self-directed ETF segment, especially through online platforms. “In this broad retail segment, Amundi will leverage its global firepower and deep understanding of local market specificities to partner with distributors to co-design comprehensive and fully tailored solutions, including services such as digital and training support,” the asset manager says.

In this regard, Amundi anticipates growing interest from European institutional investors who are keen to increase their use of ETFs, especially for fixed income and ESG allocation. As Wurtz clarified, the fund manager has identified a strong appetite from non-European institutions, as the UCITS ETF franchise has proven attractive. “Thanks to the group’s long footprint in Asia and its presence in Latin America, and the breadth and depth of its offering, Amundi is well positioned to establish itself as the preferred European passive provider in these regions,” she commented on what its main regions of interest will be.

Finally, the firm wants to take advantage of the high demand for ESG solutions to grow the ETF business. Its conviction is that ESG ETFs will contribute to democratizing access to meaningful investment in a cost-effective way. In this regard, Wurtz announced that Amundi’s existing product range is being strengthened with the addition of innovative products from Lyxor ETFs. “In particular, with the Green Bond and Net Zero Climate ETFs, the newly expanded range of Amundi ESG & Climate UCITS ETFs, with a market share of around 20%. Going forward, responsible investing will be the primary focus of any product launches within the platform,” she said.

In addition, in line with Amundi’s 2025 ESG Ambition plan and Net Zero commitment, Amundi ETF will aim to double the proportion of responsible ETFs – i.e. classified as SFDR 8 or SFDR 9 – available to investors, reaching 40% of the total ETF range by 2025. As announced by the fund manager, all these growth targets and projects will be led by Arnaud Llinas, who will head the Amundi ETFs business division.

New business line: liquid alternative solutions

The second key to the deal, Baudson and Wutz insisted, is to enable Amundi to create a new business area focused on liquid alternative solutions, where Lyxor has extensive expertise and a strong business. “The integration of Lyxor allows Amundi to enrich its active management capabilities with the addition of alternative investment expertise, giving investors access to innovative sources of diversification and performance for their portfolios,” the asset manager noted.  

Amundi has therefore made the strategic decision to create a dedicated Liquid Alternatives business line called Amundi Alternatives, thus complementing its range of investment solutions to better serve the needs of all its clients worldwide, including institutions, private and wealth investors and asset managers. 

The Liquid Alternatives business is currently valued at more than €23 billion, including the Liquid Alternatives UCITS Platform and the Dedicated Managed Account Platform (DMAP) business, which represents €16.7 billion of assets. As announced, this division will be headed by Nathanaël Benzaken.

With this decision, the asset manager reaffirms its position as a leader in alternative investment, aiming to increase assets under management on the UCITS Alternative platform by 50% by 2025 and accelerate the development of DMAP towards institutional clients internationally. “This new platform is well placed to generate resilient, long-term growth thanks to Lyxor’s historical position as a trusted partner to the best names in the global alternative investment industry, as well as to the world’s largest and most sophisticated investors,” the fund manager concludes.

Internal organization

During the presentation of this ambitious plan, Amundi’s CEO emphasized that the Lyxor team will be integrated with the current Amundi team. Thus, as of January 1, 2022, Lyxor is a subsidiary of Amundi and will be integrated into the group’s operations with significant changes to its structure. 

In particular, Lionel Paquin, CEO of Lyxor, joins Amundi’s Executive Committee; and Arnaud Llinas, head of ETF and index solutions at Lyxor, assumes responsibility for the ETFs, indexing and Smart Beta business line for the consolidated perimeter within Amundi. In addition, Nathanaël Benzaken, Chief Client Officer at Lyxor, also assumes responsibility for the new Alternatives business line at Amundi. According to the fund manager, in their new roles, Arnaud Llinas and Nathanaël Benzaken will report to Fannie Wurtz, a member of Amundi’s General Management Committee.

In addition, Florence Barjou, currently Chief Investment Officer of Lyxor, will become Chief Investment Officer of Crédit Agricole Insurance, effective March 1, 2022. And Edouard Auché, Lyxor’s Secretary-General, will be in charge of the migration of Lyxor’s IT and operations to Amundi’s platform, in addition to his current duties. Finally, Coralie Poncet, Head of Human Resources at Lyxor, is in charge of leading the integration of Lyxor employees into Amundi, in addition to her current duties.

The fund manager notes that all other Lyxor businesses and country managers report to the corresponding business and country managers within Amundi. In a second phase following the legal transactions, scheduled for mid-2022, Lyxor will merge with Amundi.

The Alternatives Market Takes the Path of Resilience and Sustainability

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Pixabay CC0 Public Domain. Los activos privados y alternativos toman el camino de la resiliencia y la sostenibilidad

As the new year begins, asset managers take stock of what has happened in their main business units. In this context, M&G has highlighted that its £65 billion (87.7 billion dollars) Private & Alternative Assets division deployed more than £11.5 billion (15.5 billion dollars) in the 12 months to 30 November 2021.

The firm has revealed that this division, with a history of investing in private markets in excess of two decades and over 150 years investing in bricks and mortar real estate, deployed the capital across a plethora of markets, including leveraged finance, unlisted real estate equity, unlisted infrastructure equity, real estate finance, private asset-backed securities and books of consumer loans and mortgages.

Their high level of activity over the past year demonstrates the importance that investors are giving to alternative investments. “The pandemic has clearly done little to deter the prevailing trend of increasingly diversified lending markets post the Great Financial Crisis. In Europe, the banking system continues to hold around 75% of lending assets as a share of GDP – still significantly above the level in the US – and we would expect this to decrease against a backdrop of tightening bank regulations”, said William Nicoll, Chief Investment Officer of Private & Alternative Assets at M&G.

In his opinion, this situation is creating “significant opportunities” for pension funds and insurance companies looking for diversification and potentially high risk-adjusted returns in areas such as residential mortgages and consumer loan pools, while the banks retain the relationships and service the end-consumers. 

At the same time, he believes sustainability is becoming a key driver in markets: “Some investors are allocating capital to address the biggest challenges facing our society, particularly in relation to the health of the planet and climate change, as well as social issues such as financial inclusion. This is particularly prevalent in our real assets investments such as real estate and infrastructure, where we can support the changing needs of society whilst delivering sustainable returns for investors”.

Nicoll pointed out that despite the Covid-19 pandemic prompting the most extraordinary consumer bailout ever seen, no business was left untouched by the impact that various lockdowns had on operations. “Last year, we dedicated our resources to understanding how companies were impacted and to ensure they were capitalized appropriately to navigate operational turbulence that continues to persist”, he added.

Looking ahead, he is convinced that for patient, long-term investors with the ability to embrace technology and complexity, innovate in evolving markets and be nimble when opportunities arise, “the private markets are an exciting place to be”.

M&G’s accomplishments

In response to these market trends, M&G has achieved important milestones this year. For example, the launch of Catalyst, which is investing up to £5 billion into privately-owned businesses where capital is required to drive innovation and impact to create a more sustainable world. “The 25-strong investment team based in the UK, USA, India and Singapore, is deploying the mandate on behalf of millions of customers invested through the £143 billion Prudential With Profits Fund”, the firm says.

Besides, almost £3 billion was deployed by the direct real estate investment team, with over £1 billion of this in the Asia-Pacific region where the business has been actively investing since 2002. This includes establishing a new partnership to develop an Australian real estate portfolio investing in the logistics sector, on behalf of a third-party client; and launching into the UK’s Shared Ownership sector to initially create more than 2,000 new, sustainably designed and affordable homes, through establishing a strategic partnership with Hyde Housing.

Meanwhile, Infracapital, the unlisted infrastructure equity division, raised €1.5 billion (1.7 billion dollars) from investors for its latest greenfield investment strategy. M&G has revealed that “over 50% of the capital is already allocated to companies at the forefront of delivering energy transition or digital connectivity”. This includes EnergyNest, a Norwegian thermal battery company deploying innovative technology to decarbonise energy intensive industries and improve their sustainability.

All in all, its commitment to the private and alternative assets business is clear. In fact, last year the Specialty Finance team partnered with Finance Ireland to bring long dated fixed rate mortgages to the Irish market for the first time. The asset manager has also worked on the internationalization of origination capabilities through the first direct private investments in India, Chile and the Czechia Republic.

Matt Christensen: “We Try To Show the Client That the Return Risk Profile Is Better with ESG”

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Matt Christensen, director global de Inversión Sostenible y de Impacto de Allianz Global Investors
Foto cedidaMatt Christensen, director global de Inversión Sostenible y de Impacto de Allianz Global Investors. Matt Christensen, director global de Inversión Sostenible y de Impacto de Allianz Global Investors

We spoke to Matt Christensen, Global Head of Sustainable and Impact Investing at Allianz Global Investors, about the development of ESG investment policies across continents and countries, as well as the fund manager’s approach to sustainability, which has recently launched a range of equity funds aligned with the SDGs. The manager also tells us about his experience as a guest at COP26 and gives his views on the commitments made there.

In the drive towards the green transition, we find different speeds in different regions. Why is it taking so long for the US and Latin America to jump on the sustainability bandwagon?

I believe that what I see in Europe will start to happen here, and it’s just a question of speed. Why hasn’t it happened faster here? I think from an American perspective, there has always been a lot of confusion about whether this is a ‘lose money to feel good’ thing. There were even sectors that thought: Is it something to solve the problems on the coast? In fact, ESG is about a focus on material risk factors that can help provide better insights for asset management. In the USA context, ESG has sometimes been used as a political debate and even at this moment, is caught up in discussions around Biden’s climate bill; however, longer term, ESG will move out of this current debate and become part of the toolkit for fund managers. Now, if you look at Lipper’s revenue inflow data, it is striking that the main inflows over the last year and a half have been sustainable investment funds, so that is scientific evidence around the longer term trend.

In Latin America, similar to the US, there might still be this preconceived and established mentality, as in this region many companies are from more traditional sectors. Requiring mining and oil companies to rethink their business models is not always easy in any country, but that is precisely what they are now doing in Latin America. Moreover, I think this is a trend that, regardless of who is the next president of the US or any Latin American country, is already difficult to turn back.

I am particularly interested in what the asset management industry is doing from an innovation point of view. Every five years we have new trends, we could almost talk about fads, like thematic funds, green bonds… What are you doing from a product innovation point of view for the industry?

First of all we are pushing everything related to showing the client that the return risk profile is better with ESG assets, which is what much of the academic evidence now shows. We have done a lot of work to bring the reports to life, both in terms of the ESG score and in terms of the scores and narrative reports per company. In terms of product innovation, probably where it has taken off the most is in the themes that connect best with the Sustainable Development Goals.

We are also developing a range of blended finance and blended finance vehicles. What we do is we can take some of the risk out of going into emerging markets by having loss protection programmes with groups like the International Finance Corporation or the Inter-American Development Bank, which take a loss, if there ever is one, and then create a return profile, subject, of course, to any credit risk we are exposed to with those entities. Think of this more as a fixed income approach to start generating a four to five per cent fixed income rate of return, which tends to be better than most types of sovereign debt yield products in Europe. That’s really interesting.

So it’s a fixed income fund that you are developing?

We have it available, but it is not in an open-ended fund structure. That’s why I say it’s a blended finance vehicle. You would think of it as a fixed income approach focused within the private debt asset class. But to your question on product innovation, actually, with both listed and unlisted, we are developing more and more products in this sense. We are very keen to link listed and unlisted products over time for our clients around impact investing.

Are most thematic funds focused on sustainability primarily equity or fixed income? What proportions for each type do you manage at Allianz?

First would be equities, then fixed income green bonds and then private equities. Roughly we have maybe 5% in impact investing, 10% in public funds and 5% in green bonds. But 100% of our assets have an ESG risk profile. That’s about $700 billion. As far as ESG integration is concerned, it will affect publicly traded assets which will represent $150 billion of the $700 billion. By the end of the year the whole of our private market, which is 110 billion, will have fully integrated ESG criteria.

The issue of embedding ESG for risk mitigation is what I think should be the first piece of the pedagogy we have to do in the market. It is no longer about sustainable and responsible investing where you exclude things or make them adherent to your specific values. 100% of our assets must incorporate at least an ESG risk assessment.

Looking at emerging markets, when you do this ESG assessment, sometimes there is a love-hate relationship, like with Chinese products (goods). We all hate them, but we all buy them. These are products that are probably not ESG-compliant in many respects. How do you treat the emerging part of your portfolios?

We are seeing a big push for ESG in small-cap emerging markets because there is such an interest in ESG that it is quickly getting coverage. Now in the emerging market we have probably around 70-80% of that ESG coverage. So that’s already very good. We have to be honest, the ESG level in emerging economies is not the same. And that’s why we are rating the ESG practices of emerging economies at a level that is commensurate with their own context. Our role is to say that we can look at the ESG risks of any company in the world and have a point of view because we are not saying they are perfect. They are not. We look at what are the social and environmental governance risks of companies in the countries themselves.

And for emerging companies is it the same, does investing in companies with a high ESG rating really reduce risk, is it more important or less important than in developed countries?

It certainly is important for us in the sense of getting good information to make a decision, because there is typically less ESG information available. I just hired two people in Hong Kong in order to help bring a bottom-up ESG view to our investments in the Asia Pacific region. They are based locally in order to help us gain access to ESG information that we cannot easily get from traditional data providers at this time.

Were you at COP26, what was it like, what were your impressions?

I made the closing speech on the first day of a dedicated investment event and the room was packed. At the same time, outside of the event were protesters, Greta Thunberg and all the others, saying that actions to reduce global warming were not going fast enough. They are right. But I live in France and in France, a few years ago, the government tried to go faster by adding a fuel tax, and that led to this famous yellow vest movement, which created social unrest for a number of months.

So, on a personal level, I can agree that society is not going fast enough. But on a political level, if we go too fast, we risk populations becoming angry and creating social unrest. The tension is a delicate balance for countries to manage.

Related to the COP26 topic, we at AllianzGI have three sustainable investment themes of our enterprise: climate change, planetary boundaries, (which is the connectivity between climate, ocean water, blue finance, biodiversity of the earth, etc.), and inclusive capitalism related to a post-COVID world. These are the three themes that we, as a company, are looking at in our product design, our innovation, our research data and how we start to think about it. In our view, these are the big drivers for the next decade.

What do you exactly mean by ‘inclusive capitalism’?

Inclusive health, education, gender gaps, digitalisation gaps, access to those who can work in offices, those who can’t work from home, those who don’t have any digitalisation. So they are stuck doing menial jobs while the rest of the world has digital access. So you also have to look not only within the country, but also between the developed world and the western world. And I think that’s going to be a big trend after COVID.

At COP26 there was a lot of signing of documents, we were constantly publishing, is this really important, do you think the industry has really united and committed to sustainability after COP26, what do you think?

The Glasgow initiative was a good initiative. Although, it is not a new initiative in the sense that it is something we have just invented, it serves to bring together financial services players to share their sustainability policies. For example, Net-Zero Asset Owner is an asset management initiative chaired by Allianz. There are others and they are all brought together in this group called the Glasgow ‘The Guns’ Initiative. There was also a lot of discussion around climate and all the areas we need to address to be successful.

Overall, I think it’s a positive outcome for the asset management industry as it creates more awareness and measurability and speaks to fixing. What we need from these policies is a top-down target-setting exercise. In the end it comes down to how much we, as an industry, keep pushing the government, the public sector, to deliver on those promises that are made.