Foto cedida Fernando Quiroz, courtesy photo. Aegon Launches an Asset Management Company in Mexico
Aegon NV and its subsidiary Transamerica have joined forces with Administradora Akaan to create an asset management company named Akaan Transamerica. Akaan Transamerica has recently received formal approval from the Mexican Banking and Securities Commission (CNBV) to initiate operations and go to market.
Akaan Transamerica will offer a wide variety of Mexican and International mutual funds as well as diversified global investment solutions. Akaan Transamerica has implemented Aladdin, BlackRock‘s trading and risk management system which combines leading-edge risk analytics with comprehensive portfolio management, trading and operations on a single platform.
Akaan Transamerica will leverage the extensive investment knowledge and experience from a highly skilled team of investment management professionals. Its product offering includes alternative investments, actively- and passively-managed funds, and bespoke investment strategies. In addition to the wide variety of investment products, Akaan Transamerica will offer integrated investment solutions for individuals and companies based on their financial needs. Akaan’s Chairman and Founder, Fernando Quiroz, was formerly CEO and Vice Chairman of Citigroup’s ICG Mexico and Latin America as well as Vice Chairman of the Board of Directors for Banco De Chile. Mr. Quiroz was also a Board member of Banamex, Grupo Financiero Banamex, Aeromexico and the Mexican Stock Exchange (BMV).
Mark Mullin, President and CEO of Transamerica, commented, “We are thrilled to form this partnership with the highly respected firm of Akaan and to benefit from the tremendous expertise of Fernando Quiroz. We are determined to help individuals and corporations in Mexico pursue wealth accumulation and growth as they work toward securing a sound financial future.”
Fernando Quiroz, commented, “We are delighted to have formed a JV and a strategic alliance with Aegon and Transamerica. Our teams worked extremely hard to set up a new asset management company, with a state-of-the-art technological platform and the most innovative financial solutions for our clients.”
Kent Callahan, President and CEO of Transamerica Latin America, added, “This unique combination of experienced professionals and cutting edge technology sets a new bar for customer service excellence in the asset management business in Mexico.”
Pixabay CC0 Public DomainPhoto: freephotos. Loomis Sayles & Company, JP Morgan Asset Management, and Alliance Bernstein Get 700 Million Dollars From Afore XXI Banorte's Mandate
Afore XXI Banorte, the largest pension fund in Mexico, successfully completed the funding of its third investment mandate. On this occasion it granted $700 million to three managers to actively invest in US equities. Alliance Bernstein received $250 million, JP Morgan Asset Management $150 million and Loomis Sayles & Company (owned by Natixis Global Asset Management) received $300 million.
To date, the pension fund administrator of Grupo Financiero Banorte and the Mexican Social Security Institute (IMSS), has funded three investment mandates; the first in European stock markets for approximately $1.1 billion, the second in the Asian market for approximately $1 billion and the latter with exposure to the United States for $700 million.
Mauricio Giordano, CEO of Natixis Global Asset Management Mexico, told Funds Society that “US equities are not normally considered to be alpha-generating, since the average manager does not beat the market, and what I tell the players is why to see the average if there are managers like Loomis who consistently present an overperformance.” The director added that the funding of this mandate came in only two months which is proof that “when you have well-structured teams with a very clear plan things can be done very fast.” Loomis will actively manage 3 segregated US Equity portfolios for Afore XXI Banorte. The Large Cap Growth accounts will be managed by seasoned US growth manager Aziz Hamzaogullari and his dedicated research team, using their proprietary bottom up research structured around quality, growth and valuation.
Aziz Hamzaogullari, VP and Portfolio Manager Loomis Sayles Growth Equity Strategies team, commented: “We are delighted that Afore XXI Banorte has chosen Loomis Sayles as a strategic partner. We believe in taking a long-term, private equity like approach to investing. Through fundamental research, we look to invest in those few high-quality businesses that we believe have sustainable competitive advantages and secular growth when they trade at a significant discount to intrinsic value”.
This transaction gives Afore XXI Banorte the opportunity to take advantage of the conditions of the United States stock markets and actively manage the portfolio for the benefit of its clients. “With the funding of this mandate, Afore XXI Banorte confirms its commitment to affiliates, offering the best investment product for their retirement in Mexico under the management of specialized firms with extensive international experience. In addition to this, we used the services of a temporary administrator known as “transition manager” and a proven international custody model, all in order to enhance the performance of our portfolio for the benefit of our affiliates in the long term”, said Juan Manuel Valle, Chief Executive Officer at Afore XXI Banorte.
Sergio Méndez, Chief Investment Officer at the pension fund, commented: “With the funding of this mandate with exposure to the North American region we finalized the first phase of our plan on the outsourcing of investment services, maximizing the use of our investment regime, which places Afore XXI Banorte at the forefront in the local market.”
C4_0010_shutterstock_540575218. How Could Individual Investors Outperform Institutional Investors?
Portfolio management is the art and science of making decisions about mixing investment with policy, matching investments to objectives. Within Crèdit Andorrà, the Advisory team is dedicated to portfolio construction and to guiding clients on capital markets.
There are two categories of investors in the financial markets: individual investors and institutional investors. The term institutional investors refers to just what the name implies: large institutions, such as banks, insurance companies, pension funds, and mutual funds.
Institutional clients usually use a benchmark to manage their portfolios, meaning that they have to follow defined rules of asset allocation that they cannot derive too much from. Those rules are hard constraints, with a defined level of active exposure (also called tracking error) that they can implement. Those hard constraints oblige them to own assets on which they have negative views, which is highly inefficient. More constraints are usually bad for portfolio management if you are talented, as you cannot completely implement your views on capital markets. As most of the portfolios from individual investors are not benchmarked, their portfolios’ returns should on average outperform the ones from institutional clients. However, we are seeing the opposite as institutional clients outperform individual clients by 1% per year on average. We explore the reasons behind this phenomena and what could be done to reduce this performance gap.
Outperformance is less due to skills differential
One could think that this outperformance mostly comes from skills. Institutional money, which is also called “smart money”, is managed by professionals that not only have a lot of experience in managing money but also dedicate 100% of their time to this activity. On the other hand, individuals usually manage their portfolio when they have the time, mostly during weekends or at night, and they do not always have the technical background to do so.
However, most of the outperformance is not due to the difference in skills, but to basic mistakes coming from individual investors that could be easily corrected. Thanks to investment behavioural mistakes
For instance, we see patterns of investor behaviour biases that have a negative impact on portfolio returns. Most clients have a home bias, which is the natural tendency for investors to invest in large amounts in domestic markets because they are familiar with them. This results in an unnecessary concentration in assets and less portfolio diversification. In addition, many Latin clients look for assets that provide yields, as they perceive them as being less risky. This is not true, as the demand for this type of assets is high and, therefore, they end up being expensive from a valuation point of view. Finally, individuals have a bias towards loss aversion. Loss aversion refers to people’s tendency to strongly prefer avoiding losses rather than acquiring gains. As a result, investors keep assets in their portfolio with large losses for years even though those assets have very little probability of recovery.
We believe that individual investors could reduce the performance gap with institutional investors by simply focusing on three aspects of portfolio management:
#1 Focus on diversification by holding alternative assets
Everybody knows that diversification is key in portfolio management. But the reality is that few portfolios are well diversified within private banks. Many Latin American clients’ portfolios are only invested in US stocks and emerging market bonds, which is a strategy that has worked very well over the last 3 years. There are benefits to being exposed to direct names to reduce the cost of management fees; however, it is also primordial to use funds to benefit from diversification. Indeed, it is wiser to use funds in the following asset classes: high yield bonds, preferred shares, catastrophic bonds, small caps Equity, and emerging markets equities.
We believe that most portfolios should have an exposure to the alternative assets class. We define alternative assets as those assets that have a low correlation with equity and fixed income.
Those are strategies such as long/short equity, CTAs, Global Macro, Merger Arbitrage, Real Estate and Private Equity, for instance. Adding alternative assets allows portfolios to be more robust during phases of market correction; in other terms, they reduce downside risks.
#2 Focus on the right asset allocation instead of on picking securities
The second advice is to stop spending too much time on picking the right securities. What is important is asset allocation, where most of the portfolio performance will come from. A top down approach should be implemented to determine the right exposure to equity vs. fixed income, at the region level and sector level.
Indeed, what is important is not if you own Facebook instead of Google, but your exposure to technology vs. energy, as technology has been the best performing sector in the US this year and energy the worse one. Stocks within the same sector tend to be highly correlated in average.
A common mistake for individual investors is to do the opposite. They focus on trade ideas applying a bottom-up approach without taking the interconnection amongst all those ideas.
Worse, they usually cumulate all the trading ideas without having specific target returns and stop losses. If the ideas do well, they will sell it -most of the time too early. And if the ideas do not work, they will keep it until they recover their losses. This is a bad idea, as returns are auto correlated (following a negative return, an asset has a higher probability to go down than to go up).
#3 – Do not overreact by taking more risks than you can afford
Following a market correction, some individual investors start to feel nervous and prefer to sell their positions, basically selling at the worse time. This happens because they took more risks than they could afford.
The most important question investors should be able to answer is how much they can lose before they start selling their positions, basically knowing their capacity to lose investments. Once you know that the most you can lose is a 20% for instance, you can manage your risk exposure accordingly.
To manage your risk, you need to rebalance you portfolio on a regular basis. As equity usually tends to outperform fixed income, its weight in the portfolio increases over time. Rebalancing allows a reset of the portfolio to the initial portfolio weight.
Conclusion:
We saw that institutional money tends to be benchmarked, which adds constraints for portfolio management. Individuals, on the other hand, do not have all those constraints. By focusing on diversification, asset allocation, and risk tolerance, they can generate alpha and manage risks efficiently in the long term.
Pixabay CC0 Public DomainMexico City's financial district. Old Mutual Latam Launches Their Wealth Management Segment in Mexico
Old Mutual has decided to enter into the Wealth Management segment in Mexico. This new division is being led by Rodrigo Iñiguez, a professional with over 11 years in the group.
Mexico is the second largest market in the Latin American region, after Brazil, so Old Mutual expects that in the next 5 years this line of business will generate a high percentage of its sales for Mexico and complement that of Latin America. According to McKinsey Global Wealth Management, Mexicans have over 800 billion dollars in different financial institutions.
Agustín Queirolo, who is in charge of the Wealth Management segment for Latin America, said: “We will face this new challenge by leveraging our experience and the great acceptance we already have in countries such as Chile, Peru, Switzerland and the United States…We are sure that this new and innovative Mexican solution will help us in advising our clients in an integral way with a local and international vision. Our solution allows Mexican clients and residents in Mexico the possibility of guarding their investments both locally and abroad.”
Julio Méndez, Group CEO in Mexico, said: “The company has achieved significant growth in its different segments in recent years. We maintain a leading position in the Institutional business through the administration of Private Pension Plans and have managed to expand our distribution through more than 3,000 investment advisors across the country. The DNA of our Group is constantly pushing the creation of new investment solutions with a constant innovation in the creation of products and today we visualize great opportunities to enter the Wealth segment.”
Thinking of complementing Private Banks, Family Offices and Wealth Managers that advise affluent and high net worth Mexican families, they will be using a life insurance solution, with an investment component, as an asset planning tool, as well as other innovative instruments that fit the segment and its clients.
Pixabay CC0 Public DomainMatteo Dante Perruccio, courtesy photo. Jupiter Asset Management Teams up with Unicorn to Target Latin America
Jupiter Asset Management (Jupiter AM) reached an agreement with global distribution platform Unicorn Strategic Partners, a global third-party distribution platform which services clients through offices in Santiago de Chile, Montevideo, Buenos Aires, Miami and New York, to service key Latin American markets as well as US offshore hubs of New York and Miami.
The agreement will allow Jupiter AM to continue its international growth strategy based on a selective business expansion in the regions where the Company has identified potential client demand and provides Jupiter AM with access to potential clients in the region. According to Matteo Dante Perruccio, Head of Global Key Clients: “Our alliance with Unicorn offers us the opportunity to enter the region partnering with an exceptionally talented and experienced team of distribution professionals with an in-depth knowledge of the unique characteristics and requirements of the Latin American market.”
According to the latest figures, private wealth in Latin America will reach an estimated $7.5.9 trillion by the end of 2021, making it a significant and rapidly growing market. Chile, Uruguay and Argentina are strategic markets in the region.
With this alliance, Jupiter AM consolidates its global presence, with representation in UK, Spain, Germany, Switzerland, Austria, France, Hong Kong, Italy, Luxembourg, Portugal, Sweden and Singapore.
Active management and high conviction investment:
Jupiter AM is a UK asset manager founded in 1985 that believes in high quality, high conviction active management and in the independence of its managers as a key requirement to be able to add value. As such, there is no in-house macro-economic view or investment committee that produces lists of recommended stocks. Managers instead have the freedom to make investment decisions, albeit always working within strict risk parameters.
Jupiter AM is an established UK-listed asset management business. In recent years the company has expanded its footprint across Europe and Asia. It currently has more than $ 61.1 billion under management globally (as at June 30, 2017).
Joel Peña, Photo Linkedin. Joel Peña Joins DoubleLine to Lead Expansion in Latin America, Caribbean
Joel Peña has joined DoubleLine Capital LP as head of the firm’s institutional and intermediary investor relations in Latin America and the Caribbean. Peña comes to DoubleLine from international asset manager Robeco where he served as managing director for Latin America and U.S. Offshore.
In addition to heading DoubleLine’s institutional and private client relations in Latin America and the Caribbean, Peña will manage relations with overseas clients, advisors and distributors engaging the firm via its U.S. offshore platforms.
“Thanks to economic growth, a broadening middle class and rising standards of living, countries in Central and South America have seen growth in assets entrusted to pension funds, insurers and other fiduciaries. These institutional investors are looking beyond their local markets for investment opportunities and expertise,” said Ron Redell, executive vice president of DoubleLine. “My colleagues and I are delighted to welcome Joel into the DoubleLine team to sharpen our focus on the needs and objectives of institutional and private investors in Latin American and the Caribbean.”
“Navigating markets in today’s complex environment is far from easy. Very few firms have been as successful at it as DoubleLine,” Peña said. “I look forward to leading the expansion in Latin America within this organization, a company which is fully committed to always putting its clients’ needs first.”
Peña has 16 years of experience in asset management. Prior to Robeco, he served nearly six years as head of institutional clients in Latin America for fixed income manager PIMCO. He began his career in asset management at BBVA Bancomer in Houston and Miami before joining Bank Hapoalim as senior private banker. He holds an undergraduate degree in economics from Instituto Tecnológico y de Estudios Superiores de Monterrey , Tecnológico de Monterrey, Mexico, and an MBA from the Stern School of Business, New York University. He is a CFA and CAIA charter-holder.
CC-BY-SA-2.0, FlickrPhoto: Marco Klapper. Surviving the Income Drought
Whether you are a private investor, a pension fund, an endowment or an insurer, you can be forgiven for sometimes feeling that the search for income is a lot like looking for a needle in a haystack. It doesn’t have to be that way, but it’s hard to deny the scale of the challenge or the impact of the drought.
As we entered 2017, more than $10 trillion of bonds offered only negative yields, according to the financial services company Tradeweb. The hangover from the financial crisis, approaching a full decade ago now, is clearly still lingering. Global growth remains sluggish, and central banks across the world have stepped in to help prop up economic activity, but the resulting financial repression has made income yield a scarce commodity.
A glance at developed market government finances makes for pretty ugly reading as well. Mounting pension and healthcare liabilities mean that the situation will only get worst. Aging Western populations will conspire to make the asset/liability equation much more challenging to solve. Consequently, governments will continue to need regular sources of funding or “income” to help meet their growing liabilities. At the other end of the spectrum, individuals’ thirst for yield will increase as they are forced to take ever increasing responsibility for securing and managing their own retirement incomes. Companies and institutions don’t escape either – none more so than an insurer who is faced with heightened regulatory capital requirements, at precisely the point where low yields would suggest they should be looking to alternative sources of income.
All this is intended to offer a frank assessment of where we are today and why income, such a key part of investor’s needs, is so elusive. But not all is doom and gloom. Indeed, today there are more sources of income than ever before. For example, the emerging markets bond universe has doubled since 2007, now standing at US$10.3 trillion. Until recently, other asset classes, such as litigation finance and catastrophe bonds, hardly existed at all, and were accessible to only the most sophisticated investors.
Diversify to survive1
By allocating across a broader mix of asset classes (alternatives), beyond traditional equities, fixed income and property, and combining them together in an intelligent way, investors can reduce risk and increase expected returns because the correlations between them and more traditional sources of yield are often low. Catastrophe bonds and other insurance-linked securities2 are good examples of these types of investments. The market for catastrophe bonds has grown from under $1 billion in value outstanding in 1997 to more than $25 billion today according to data provider Artemis. Typically for these instruments, the risk of non-payment is based on issues occurring in the natural world rather than in financial markets. They are certainly not “risk free” but clearly are exposed to a very different set of risks. Using some of these alternative asset classes should reduce the volatility of the overall portfolio. In fact, if the asset classes are fundamentally sound, the more types one uses, the lower the volatility – all other things being equal. Aircraft leasing, peer-to-peer lending and global loans are other compelling opportunities. Of course, as ever, due diligence in these areas is key.
To varying degrees, more traditional asset classes such as equities, fixed income and property still have an important role to play. A healthy and balanced portfolio can include steady and meaningful dividend payouts from equities, as well as the asset-backed, but more illiquid, returns from property and areas of the bond market that offer relatively attractive yields.
Liquidity is great, but you do pay for it
Outside of diversifying, which is a fairly well understood notion these days (although the strategies and approach can be nuanced), there is another important factor to consider as part of how to solve the income challenge, and one that many overlook far too quickly: liquidity.
In a technology-led age of instant access it is easy to see why we obsess over the importance of liquidity. Having ready access to funds is a genuine priority, and one that many investors are hesitant to give up. However, there is a cost associated with it. Sources of return, whether income or growth, require investors to take on a degree of risk, traditionally measured by volatility. Rarely is liquidity risk given the same prominence or depth of thought.
Liquidity risk, tailored effectively, is something to be explored and will suit different investors at different times. Ultimately, though, by taking a long-term view as defined benefit pension funds do, your portfolio has more chance to meet your overall objectives. On a deeper level than that, it makes sense to better coordinate short-, medium- and long-term cash flows, identifying when it is possible to accept some illiquidity within the overall portfolio, and thus harness the benefits associated with locking your money away for longer periods of time. It is worth taking the time to do so, as interesting asset classes such as private loans to infrastructure projects and to corporates can suddenly become available.
The message is not just an institutional one; even retail investors should take heed and consider whether they are prizing liquidity above everything else, including the likelihood of a decent return once markets recover. The exodus from UK property funds after Brexit is a good example. Investors who were quick to rush out of the door after the UK referendum vote on June 23 missed the bounce in returns that occurred almost immediately after. The Towers Watson Illiquidity Risk Premium Index, which covers all asset classes, estimates that investors who are prepared to accept some liquidity are typically rewarded with between about 75 and 175 basis points.
We cannot pretend that the market environment is easy, and that yield assets are easy to come by. What we can do, however, is readjust our expectations and mind-sets around some long-held misconceptions. Liquidity can be our friend, and unfamiliar does not necessarily equal risky.
For more on how Aberdeen can help meet the income needs of investors, visit this link.
Column by Aberdeen AM written by Gregg McClymont
1Diversification does not ensure a profit or protect against a loss in a declining market. 2Insurance-linked securities (ILS) are financial assets, the values for which are driven by insurance loss events. Ref: 24533-010217-1
Pixabay CC0 Public DomainPhoto: StockSnap. A New Order in the Oil Industry?
At the end of July, the UK government announced plans to ban the sale of new gasoline and diesel vehicles from 2040, being the fifth country, with Holland, Norway, India and France, to end the sale of cars with traditional internal combustion engines. Noting the rapid changes taking place in the industry, many of the major car manufacturers have in turn announced their plans to focus on electric powertrain technologies in developing their product plans and launches. What’s more, in Volvo’s case, it has been announced that from 2019 the vehicles released into the market will be either electric or hybrid.
However, while much of the market narrative focuses on electric vehicles, the destruction of demand and the end of the oil era, the energy team at Investec Asset Management believes that global demand for crude oil continues to grow at a decent rate.
The International Energy Agency continues to alter historical data, distorting the picture, but the projected growth rate of demand is at 1% to 1.5% per year and shows no signs of slowing down. With this in mind, we expect the price of oil to remain at between 10% and 15% of current prices in the short and medium term. Even more important, for the energy companies that we have in our portfolios, we have behind us four consecutive quarters (from June 30th, 2016 to June 30th, 2017) in which the price of a barrel of Brent has averaged $50. This gives us a good understanding of the company’s profitability in the new oil order. In fact, we can find companies that are in the process of becoming more profitable at this price level than they were at the highest peak of the last cycle: given cost cuts, in asset classes, debt reduction and strategic focus on ‘value over volume’, which is perhaps not surprising. The main gas and oil companies have historically had no difficulties in generating liquidity; their errors have been committed from a poor allocation of capital and a search for growth.”
Fred Fromm, an analyst and Portfolio Manager at Franklin Natural Resources, a Franklin Equity Group fund, argues that while a small number of countries have announced plans to eliminate sales of internal combustion vehicles, given a time frame, which is often measured in decades, they do not see an impact in the oil markets. “These goals are long term and aspirational, with little foresight given the physical limits and practical implications of that shift. In the medium and short term, there simply is not enough infrastructure to facilitate a complete shift towards electric vehicles, while gasoline-powered vehicles have decades of infrastructure to withstand them, even with increased electric vehicle penetration, it will take years, if not decades, before the global base of vehicles, and therefore the demand for oil, is significantly affected,” says Fromm.
“The move to electric vehicles will require an upgrade of the existing electricity grid, the creation of new public recharging stations, the refurbishment of homes to equip them with charging capacity, and an increase in the production of batteries and associated minerals. While we see the increase in electric vehicle usage as a long-term trend, we do not think it is so short-term as to threaten global demand for crude oil. In any case, the Franklin Natural Resources fund is a diversified portfolio, with significant exposure to the energy sector, but which also invests in diversified metals and mining companies, so that it can invest in companies positioned to benefit from growth in demand for electric vehicles. In addition, the fund’s energy investment is spread among several sub-sectors and among oil and natural gas producers, the latter is likely to benefit, as it is a cleaner fuel in generating the electricity needed to recharge electric vehicles. While part of this potential increase in demand for electricity can be met from renewable sources of energy, such as wind and solar energy, these alone will not be sufficient and will depend on battery technology and large capacity storage solutions,” he adds.
Likewise, Pieter Schop, Lead Manager of the NN (L) Energy fund, agrees that the impact of the electric vehicle on the demand for oil is exaggerated. “Demand for crude oil is expected to continue to grow at around 1.5 million barrels per day for the next few years, reaching peak demand within a decade or two. Demand for gas-powered passenger vehicles in the developed world will be affected, but growth in demand will come from China and other emerging countries. There are still 3 billion people without access to a car, and the first vehicle they are going to buy is probably not a Tesla. Secondly, the other half of the demand for transport comes from demand for aircraft, trucks and buses, where it is much more difficult to switch to electric motors. Industrial and residential demand is also expected to be more resilient.”
According to Eric McLaughling, senior investment specialist at BNP Paribas Asset Management Boston, while he is aware of the forecasts for the long-term demand for fossil fuels, short-term prospects for oil prices are positive. Lower investment by oil producers will weaken supply growth throughout the latter part of this decade. “Through the lens of our investment horizon, the gradual introduction of the electric vehicle does not alter our valuation thesis.”
When it rains, it pours
In an industry that has been affected by the volatility and uncertainty surrounding oil and energy prices, a negative sentiment persists despite the fact that Brent’s average price so far this year is US$ 52 per barrel, surpassing the US$ 45 per barrel average of 2016; the devastation caused by Hurricane Harvey in Texas and adjacent states is now the immediate focus of investors. “There are numerous repercussions in refineries, as well as in the upstream and midstream sectors, however, we believe that the impact will be transitory, given past experiences, and the operational strength and resilience of these sectors and businesses,” the team at Investec Asset Management comments.
In that regard, Schop, Manager at NN IP claims that the direct effects of the storm are limited. “The affected refineries will suffer cuts for a limited period of time and afterwards will continue production. We have seen some weakening in the price of WTI, but the Brent has not been impacted. This has resulted in an expansion of the spread between the WTI and Brent barrel. For most European oil companies, Brent is more important. The indirect effect of the storm is that it can result in lower GDP growth in the United States as damage costs are expected to exceed $ 10 billion. In turn, lower GDP results in lower demand for oil.”
Finally, from Franklin, they point out that in terms of impact on global markets, changes in production on the Texas and Louisiana Gulf Coast have resulted in a shift in trade flows, where Latin American markets have sought to import products from Europe and Asia to replace those typically received from the United States, and recent exports have also suggested that refineries in Asia are looking to secure US crude because of the discount at which it trades against Brent. “Although changes in production are the primary impetus that has led to the expansion of the differential, this was expected to occur at some point given the growth in US production, the limited ability of US refineries to expand their processing capacity in the short and medium term, and the need to encourage a decrease in net imports (through lower imports and higher exports).”
CC-BY-SA-2.0, FlickrIgnacio Fuenzalida, courtesy photo. Chile’s Pension Reform and Savings in Peru and Colombia: An Interview with AllianceBerstein's Ignacio Fuenzalida
Ignacio Fuenzalida has just been appointed as AllianceBerstein’s Regional Director for Chile, Peru, and Colombia. His incorporation coincides with the opening of an office in Chile, which reinforces the firm’s presence in Latin America. Fuenzalida spoke with Funds Society about the region’s situation and AB’s projects.
What challenge does heading the Andean zone (Chile, Peru and Colombia) for AllianceBerstein pose for you? “I’ve been entrusted with the task of making AB grow in this region. I believe we have a range of products which is capable of satisfying different types of clients in this region. And I think I have the tools to overcome that challenge. We have both institutional and retail clients and I believe that the diversification of the market is quite relevant. The number of players is very relevant. “
Chile is in the process of reforming its pension system, with some changes already known and others that are underway. What impact will these innovations have and how are they appraised? The reform bill is still being discussed, but I think the reform takes care of emerging needs. We believe it’s important to increase future pensioners’ contributions and savings. And we hope that in the future we can satisfy those savings with adequate investments that allow pensioners’ returns to grow.”
Do you see it as a restriction or as an opportunity? “We see that we are in line with other developed countries, which seek an increase in savings, and we believe that this increase will always mean a greater opportunity for us, as we have good products and focus on satisfying the client”.
The reform proposed by the Chilean government includes the creation of a state entity to manage part of the contributions: Will there be room in this sector for players like you? “That remains to be seen, but at AllianceBerstein we are investment tool suppliers, and I am sure that, with our returns and variety, some of them will adjust to the needs of how these pensions are managed in future “.
The operations of two countries that are doing well economically, Peru and Colombia, are centralized in Chile: What are AB’s perspectives for these countries? “We think they are countries that have good economic data, which have a fairly stable and sustained growth over time. We believe that this will continue and that the economies of Colombia and Peru (and also of Chile), will increase their rates of savings over time. And as these savings rates increase, the amount available for investing will grow. That is why we believe that we are going to be a very relevant player in the region, both for pensions and for the voluntary savings of non-pensioners. All the countries of the Andean region share similarities, the pension systems are quite uniform and their somewhat conservative investment practices are similar. That’s what poses a significant challenge.”
It is often pointed out that there is little tendency to save in Latin America, but you describe a future with an increase in savings in homes and institutions. “This has to do with what we have seen that has happened in other countries. At present, the savings to income ratio is quite low, and is almost nil in some segments of the population. Fortunately, in these countries we have pensions as mandatory savings, and we believe we are heading towards an increase in the mandatory rate. But also, as countries grow and per capita incomes increase, we believe that the most basic needs are being met, and then we can move on to savings. Savings will be one of the things that are going to happen, because in these countries there are also idiosyncrasies of a certain order and both mandatory and voluntary savings will increase gradually.
Could you tell us about AB’s funds’ range? “Perhaps AllianceBerstein was initially known for fixed income products, and there were quite traditional products such as High Yield and American Income (with a more conservative and a more aggressive part), which together have worked very well during the fund’s 22 year history. But its share of equity is presently very strong; we currently have about 30 funds which are ranked very well, with the highest rating and also four stars. Presently, I feel that I have several funds, more than ten, that I can offer clients because they adjust to their needs. “
AllianceBerstein, based in New York, is currently present in 21 countries, including Brazil, Argentina and Mexico. Globally, the firm has about $ 517 billion in assets under management.
Photo: Bolton. Ruben Lerner and Manuel Uranga Join Bolton's New York Team
Independent broker-dealer Bolton Global Capital has ramped up its expansion in New York City with the addition of Morgan Stanley international advisors Ruben Lerner and Manuel Uranga.
After nine years as managing directors at Morgan Stanley, where they advised on an international client book of $550 million, Lerner and Uranga have launched A Plus Capital, which will be headquartered in Manhattan at 515 Madison Avenue, Bolton has announced.
Junior partner Ariel Materin, client associate Jennifer Ramos and office manager Olga Lopez also join from Morgan Stanley. Materin will manage client acquisition and investment strategy for the team while Ramos will be based in A Plus Capital’s Miami location and Lopez will manage the New York office.
Lerner, originally from Venezuela, and Uranga, from Spain, service clients across Europe, Latin America and the US.
The duo joined Morgan Stanley from Smith Barney, which was then still part of Citi, in 2008 with sales assistants Dolores Alcaide-Mendez and Jennifer Ramos. Alcaide-Mendez remains with Morgan Stanley.
Custody of client assets will be held through BNY Mellon Pershing. Bolton will be providing compliance, back office, and marketing support as well as the wealth management and trading technologies for the A Plus Capital team.
Morgan Stanley confirmed the team’s exit, but declined to comment further.
Bolton’s big plans
The Bolton, Massachusetts-based business is looking to continue to acquire more than $850 million in client assets in New York City market before the end of 2017. It entered the region in May when former HSBC private banker Ethan Assouline joined the broker-dealer.
Over the last two years Bolton had been targeting advisors in Miami, adding international teams that had left wirehouses and private banks due to internal policy changes during that period. It now has over $4 billion in assets under management from non-US resident clients.
