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A Spring in the Step for European Equities

"Es importante utilizar la gestión activa para obtener exposición a renta variable europea" — . A Spring in the Step for European Equities

Optimism on European equities is growing. A recent Merrill Lynch fund manager survey showed that 63% of respondents expect to be overweight Europe this year, up from only 18% a month ago, and a record in the history of the survey.

Several factors have helped to propel European equities this year. Economic data has improved, the ECB has launched sovereign QE, helping to weaken the euro, and flows into European equities have been very strong; one estimate suggests that as much as $40bn flowed into European equities in Q1 2015.

“Our belief is that much of this flow has been fairly indiscriminate, typically using passive instruments. This presents a danger for markets if, as seen in 2014, expectations for better growth and earnings are not ultimately met. We therefore believe that it is extremely important to utilise active management to gain exposure to European equities”, point out Dan Ison, Senior Portfolio Manager at Columbia Threadneedle Investments.

Moreover, an active approach allows  investors to be selective and focus on the beneficiaries of QE and a weaker  currency, such as dollar earners. “In  our portfolios we have been emphasising areas such as aerospace, auto original equipment manufacturers and auto supply stocks, and pharmaceuticals, all of which have benefited from FX tailwinds”, said.

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Healthy economic indicators

Looking forward, Columbia Threadneedle Investments expect to see earnings and economic growth expectations firming during the year. Many economic indicators are showing healthy signs, such as purchasing managers’ indices, retail sales and car sales. Meanwhile unemployment is falling and real wages are starting to rise.

On the corporate front, European earnings revisions have just turned positive. This is first time this has happened since January 2011.

The consensus GDP forecast for the eurozone has been upgraded from 1.0% to 1.3%. While there is little room for disappointment, this could be the first year of upgrades since 2010.

Encouragingly deflation fears appear to have peaked and we are starting to see signs of structural reforms in two of the laggard countries in the eurozone, Italy and France.

Current credit growth, if annualised (€120bn) would produce a 1.2% boost to the eurozone economy. Such is the level of operational gearing in European corporates that this could quite easily take our earnings growth numbers up to 15-20%.

Attractive equity valuations

While the strong move in markets so far this year suggests a lot has already been discounted, said Ison, European equity valuations are not unattractive, particularly when they are com- pared to fixed income and cash.

The European market is still yielding more than 3%, compared with zero or negative rates for some investments, such as short-dated government bonds. Additionally,  should we start to see nominal growth rates improve in the domestic economies of Europe, there will be further operating leverage which should drive European profits much higher in the next few years, against a backdrop of static or falling earnings in many other regions of the world”, believes the Threadneedle´s expert.

“The main risk to our positive outlook (apart from the possibility of higher interest rates in the US and UK) is if energy prices recover and put upward pressure  on European inflation. This would begin to remove the justification for QE in Europe and so raise the spectre of policy tightening by the ECB. That would cause a rise in European bond yields and a fall in equity prices but such an outcome does not look likely any time soon”, concluded.

An Investment Trip Around the World with Templeton’s Global Equity Group

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La vuelta al mundo de la mano del Grupo de Renta Variable Global de Templeton — Heather Arnold, Templeton’s Global Equity Group Director of Research - Courtesy photo. An Investment Trip Around the World with Templeton’s Global Equity Group

Heather Arnold, Director of Research of Templeton’s Global Equity Group guides us on a journey through the world’s major equity markets. Her vision is value-oriented, in order to obtain the best ideas for a complete business cycle, which has an average life of five years. Templeton is part of the Franklin Templeton Group.

Beware. All that Glitters is not Gold

According to Heather Arnold, there is a valuation problem in the price of money. Currently, banks and governments of many countries have negative yields. She argues that we are paying for lending money to governments, which in no way reflects the risk assumed by investors, as the rates are artificially low due to QE programs. “In fact, interest rates should be much higher because the global debt has grown. What has changed is the geographical location of debt. Investors need to realize that there is something odd about fixed income markets. They are pursuing the safest option, which in reality is the most dangerous and risky, “Arnold says.

Europe: So Bad, that it’s Actually Good

This also applies to equity markets overall. The US has been regarded as the safest option, because of its better corporate earnings, and that is why it has risen so much, but for a value investor, Europe offers better opportunities. “It is true that corporate profits in Europe have not yet regained their 2007 levels, but there is enough gap for margins and valuations to recover,” said Arnold. She also raises concerns on the valuation of the US stocks. In a historical Shiller P/E ratio analysis of the US market, there are only two occasions when it has been more expensive than now, in 1929 and 2000. Additionally, since 1940, US stocks accumulate the longest relative rally to the rest of the world.According to Arnold, this data is far more disturbing than a strong dollar, which is already a problem for US companies.

In Europe, however, there is a quantitative easing program (QE) in place which will gradually help banks to wake up and give credit. Although timidly, governments may also spend a little more; but above all, the greatest tailwind pushing European stocks is a weaker euro, which is also a consequence of QE. Arnold notes that we must also add the positive effect on consumption that will result from weaker oil prices. Therefore, the foundations are laid for the expected recovery in European business profits. Since market valuation is reasonable, everything which is bad in Europe is actually “good”.

Russia and Greece: The Potential Risks in Europe

There are two breeding grounds for instability in Europe, or at least in their region, which can be the source of many problems. On one side there is Russia, which may not remain impassive in the face of deployment of NATO troops in Ukraine, and this may be a “serious problem” for Europe, especially for Germany. The other difficult country is Greece. Its situation is not good, whether it stays in the euro zone or leaves it. In the second case, its exit will be accompanied by a default on its debt, which “once again complicates European credibility.”

The Japanese Experiment is no Guarantee for Success

When speaking of the increase in global debt since 2008, Arnold refers mainly to Japan. The government is trying to get out of debt by creating inflation. “This did not work in Germany during the first half of the twentieth century, we will see if it works for Japan,” says the Templeton expert. For now, what can be seen in Japan is an asset loop, “the Bank of Japan (BoJ) is buying all the new debt issued by the government and also the debt which is held by pension funds, which, in turn, are buying equities. However, despite the depreciation of the yen, neither consumption nor exports have improved substantially”. Corporate profits have improved somewhat but in order to continue doing so, “great reforms in the corporate world are needed.”

Arnold explains that exports have not improved as much as expected after the decline of the yen, because it was so grossly overvalued that most exporters had already left to produce abroad, mainly to China, but also to the US.

Furthermore, the country’s demographic problem cannot be ignored, a problem which will be further aggravated if Japan really becomes an inflationary country, because the savings of a very aged population will tend to wane. “Another problem which inflation could bring is a decrease in productivity due to increased wages,” Arnold says. To address this issue, the country would have to open to immigration, something which is extremely unpopular in the country even though companies are now silently hiring more foreigners.

Arnold concludes that even though valuations are reasonable in relation to the ROE of Japanese companies, this profitability cannot improve much without further corporate reforms.

There Are Select Bargains in Emerging Markets

The Templeton Global Equity Group is beginning to see some value returning to emerging markets, which they have underweighted for quite some time. “A more attractive valuation is awakening some interest within the region, but as yet there are no great bargains because the money has continued to flow into these markets, mainly as foreign direct investment.”

Now that China’s economic growth has begun to slow down, the Templeton Global Equity Group notes that companies with more reasonable capital allocation and greater profitability are starting to emerge. This is positive.

As regards to companies linked to commodities, Arnold recommends waiting. “We should not get excited yet. At a P/BV of 1.5, the sector is still expensive in relation to the current point of the cycle, with the exception of companies in the energy sector”.

Energy: The Great Opportunity

The fall in oil prices has wiped out the valuations for the energy sector. Templeton’s Global Equity Group sees this as a great opportunity, both in Europe and in the US.

“The excess global oil supply can be adjusted very quickly,” says Arnold. In 1986, the excess of supply over demand for oil reached 15%, because the OPEC countries had increased their oil production to take advantage of the upturn in prices that occurred in the early eighties. “Now, this excess capacity is barely 4% and could be reduced to 2% with the current increase in demand. This oversupply could be absorbed very quickly because there are many exploration projects which have stopped and much Capex has been removed from the sector. On the demand side, more barrels are being consumed due to falling oil prices. “Arnold explains that the P/BV ratio of the sector has not been this cheap since 1986. “We’ve never seen so many bargains in this sector,” she concludes.

Chinese Tech Entrepreneurs Take a New Path

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Los nuevos emprendedores chinos transforman antiguos problemas en oportunidades — Photo: Gabriel Jorby. Chinese Tech Entrepreneurs Take a New Path

Since the first Internet companies from China began going public on the NASDAQ exchange about 15 years ago, investment bankers have typically been able to find comparable U.S. companies during IPO road shows in order to help investors better understand the business nature. However, these days when I visit companies in Asia or attend investor conferences, it takes a bit more time and effort to understand the basic business models for some new market entrants. These new start-ups are no longer just copycats of any U.S. counterparts, but are now more deeply rooted in unique economic fundamentals, and more evolved in their own ways. So what makes today’s technology entrepreneurs in China different from earlier pioneers?

First, new ventures need to be better aligned between technology and current lifestyles. China’s earlier Internet start-ups were mostly website portals, search engines or developers of instant messenger applications. One wired desktop was all people needed, whether they were in New York or the other side of the Pacific Ocean. Nowadays, however, things are different. Take ride-sharing companies, for example, which need to work with local taxi unions, city by city. As the Internet and technology have become well integrated into modern lives, a higher level of engagement is often needed in order for new ideas to succeed.

It took 30 years for the U.S. to grow its GDP from US$1 trillion to US$10 trillion (from 1970 to 2000). Meanwhile, China replicated this success in only 16 years, from 1998 to 2014. There, people live different lifestyles. While many don’t have landlines at home, cellphones are a “must have” to navigate the modern world, having leapfrogged the full household penetration of landlines. In addition, a much bigger proportion of Chinese household income is spent online as department stores never developed an efficient supply chain to lower costs. In terms of real estate, when Chinese buyers purchase condominiums, they tend to require additional work from construction companies to build them out as they are more like shells that need much outfitting. And, as an example, of an auto-related new business model, new firms are springing up to help China’s car shoppers verify mileage on pre-owned cars as odometers can often be tampered with in the country’s aftermarket sales.

Secondly, entrepreneurs are now more creative, and capital markets are more sophisticated these days. Earlier entrepreneurs are mostly “returnees”—people who grew up in a much less commercialized society, often obtained their bachelor degrees in China, went to the U.S. for graduate school, and secured jobs in places like Silicon Valley before returning back home to copy and implement U.S. business models. Over a decade ago in China, venture capital was still a foreign concept. When people with ideas in China wanted to start their own businesses, family and friends were often the first and only ones they could turn to for loans. Not surprisingly, many start-ups struggled with financial obligations from day one and struggled to get off the ground. Now, all one needs is simply an idea, a business proposal and a capable team. There are hundreds of experienced venture capitalists who have the money, market knowledge and most importantly, the ability to differentiate between the quality of various entrepreneurial teams.

Although China’s economy has been slowing, I am excited by the new generation of entrepreneurs that is viewing some of the country’s earlier challenges as opportunities.

Raymond Z. Deng is Research Analyst at Matthews Asia.

The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.

Old Mutual Global Investors Introduces Team Based Approach to Fixed Income Range

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Old Mutual Global Investors reorganiza su equipo de renta fija tras la entrada de Oxley y la salida de Stewart Cowley — Photo: Esparta Palma. Old Mutual Global Investors Introduces Team Based Approach to Fixed Income Range

Old Mutual Global Investors announces the introduction of a team based approach to managing its fixed income range of funds. This change mirrors the approach utilised by Russ Oxley and his team, who joined the company earlier this year. This development has also resulted in promotion for some members of the team, which aligns to Old Mutual Global Investors’ desire to offer career growth opportunities.

With the arrival of Russ Oxley and the Rates and LDI Team (initially titled Fixed Income Absolute Return Team) Old Mutual Global Investors now has a powerful 20-strong fixed income capability in two distinct teams. The two teams (Absolute Return/Rates and LDI – headed by Russ Oxley and Total/Relative Return – headed by Christine Johnson) will harness the skill set of each other’s experience continually, there will be synergies but the end result will be independent. These two teams will work collaboratively, sharing tools and discussing views. However, as there is no fixed income house view, each team will manage funds in line with their own investment process.

Stewart Cowley will leave Old Mutual Global Investors at the end of June 2015. Until that time, Stewart will support the business in the transitioning of the funds he has actively managed to the newly named teams stated above.

Julian Ide, CEO at Old Mutual Global Investors comments: “I am grateful to Stewart for the guidance and stewardship he has given to Old Mutual over the last six years and for the commitment he invested in building our powerful fixed income capability. He has made a vital contribution to our management teams over many years, and particularly since I joined the company. Stewart leaves with our gratitude and best wishes.

“I believe that we now have one of the industry’s most powerful fixed income capabilities led by two highly experienced fixed income leaders, Christine and Russ. The changes we have made to our funds will benefit our clients in the future. I am also pleased that we have been able to offer further career growth opportunities to Bastian, Hinesh and Lloyd,” point out.

Stewart Cowley adds: “I am immensely proud of what we have achieved at OMAM and Old Mutual Global Investors over the past six years. Bringing this group of people together has been one of the most important things I have done in my career. Achieving this whilst guiding clients through some of the most difficult market conditions I have seen in my time as a fund manager gives me a real sense of achievement. I wish Julian Ide and all the Old MutuaI Global Investors’ family well in the future.”

Matthews Asia’s Sunil Asnani to participate in Miami Fund Selector Summit

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Sunil Asnani, de Matthews Asia, hablará sobre renta variable india en el Fund Selector Summit Miami 2015 — . Matthews Asia’s Sunil Asnani to participate in Miami Fund Selector Summit

Sunil Asnani, portfolio manager at Matthews Asia, is set to present views on the future of India when he presents at the Fund Selector Summit Miami 2015, at the Ritz-Carlton Key Biscayne on 7-8 May.

Continued reforms in the country, as well as monetary policy, will play their part in determining developments in the country’s equity markets through 2015. Asnani is set to focus on small and mid cap companies, and explain how he builds a portfolio for investors seeking exposure to the country.

Asnani joined Matthews Asia in 2008 as a research analyst. Previously, he was senior associate in the Corporate Finance and Strategy practice for McKinsey & Company in New York. In 2006, he obtained an MBA from The Wharton School of the University of Pennsylvania.

From 1999 to 2004, he served in various capacities, including as Superintendent of Police, for the Indian Police Service in Trivandrum, India.

The Funds Society Fund Selector Summit Miami 2015 will bring key fund selectors, primarily from the Miami area but also from other locations where decisions are made regarding the US Offshore market, together with top-performing Asset Managers to explore the latest portfolio management strategies and investment ideas. The Summit is designed specifically for key fund selectors who want to benefit from the knowledge of leading fund managers.

You may access further information through this link.

Natixis Global AM: Emerging Markets are No Longer a Homogenized Asset Class

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Natixis Global AM: Los emergentes han dejado de ser una clase de activos homogénea — CC-BY-SA-2.0, FlickrPhoto: Kevin. Natixis Global AM: Emerging Markets are No Longer a Homogenized Asset Class

Commodity and currency pressures, economic slowdowns and structural reforms have been creating a divergence in emerging markets in recent months. All of this punctuates the fact that not all emerging market investments are created equal.

The nature of investing in emerging markets has changed significantly since the Great Financial Crisis, explains David Lafferty, Chief Market Strategist Natixis Global Asset Management. Through much of the 2000s, EM performance across countries was driven by several common factors including double-digit or near- double-digit growth rates, strengthening local currencies and growing exports – often coinciding with commodity demand.

No longer “one-size-fits-all”

Today however, these factors no longer dominate the EM landscape, points out Lafferty. Forecast gross domestic product (GDP) growth for EMs in aggregate is now closer to 4%–5%. The strong demand for commodities has collapsed and most EM currencies are under pressure due to the expectation of tighter U.S. monetary policy. In the absence of these macro themes, each country now trades based on its own fundamentals, not as part of a homogenized asset class. So we can expect the fortunes of each country to diverge due to differences in interest and inflation rates, domestic savings rates, current account position, and commodity dependency. As performance diverges, security, country and currency selection will all take on greater importance.

Because each country is now following its own path, the broad outlook for “emerging markets” is cloudy at best. U.S. dollar strength has brought back echoes of the currency crises of the 1980s–90s as dollar-denominated debt is harder to pay back. Local currency weakness creates inflation (i.e., imports become more expensive), and curbing that with higher rates hampers growth. Finally, falling commodity prices, particularly for oil, may severely weaken growth due to lower exports in major emerging markets like Russia, Brazil, Venezuela, the Middle East, and parts of Africa.

Long-term growth, short-term pain

Even so, on both the equity and debt sides, Natixis Global AM continues to view EM as an essential asset class for the long run. Cyclical growth rates have come down somewhat, but due to demographics and younger populations, most of the secular growth in the world today still resides in EM countries, explained the firm. Across equities, valuations may be deceiving. EM stocks have a lower relative Price-to-Earnings than other markets, but this is skewed by unique risk factors and state-owned enterprises. EM bonds still offer attractive yields, and credit quality has been steadily improving. While sovereign debt levels have grown, so has GDP, so debt remains manageable. Moreover, U.S. dollar strength isn’t the bogeyman many folks think, for several reasons:

Many EM countries now have local currency debt, not just U.S. dollar debt.
Weaker local currency boosts export growth.
As the EM consumer base grows, they contribute to their own economies and are less dependent on trade and external funding.

Mexico and India among favorites

In terms of specific markets, Natixis Global AM likes Mexico and India. Mexico is becoming more competitive thanks to structural reforms in energy and education, and its cost of production is becoming more favorable when compared with rising labor costs in Asia. Mexico also benefits from its proximity to the gradually improving U.S. economy. India has been slow to reform, but new government under Prime Minister Modi is rooting out corruption, reducing agricultural subsidies, and opening up industries to competition.

In contrast, Russia looks far more dicey as its economy collapses under the weight of global sanctions and falling oil prices. In this environment of currency and commodity volatility, the insights by experienced portfolio managers may be particularly valuable to investors.

Allfunds Becomes Europe’s Largest Mutual Fund Platform

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Allfunds se convierte en la plataforma de fondos de inversión más grande de Europa — Photo: Deurimpoyu. Allfunds Becomes Europe’s Largest Mutual Fund Platform

Allfunds has become Europe’s largest mutual fund platform, overtaking UBS, according to the latest annual edition of The Platforum “European Platforms and Open Architecture 2015 Guide”.

Platforum also revealed today that Allfunds has been recognised by asset managers for having the best potential for supporting their distribution strategies.

Platforum also suggested that the winners from upcoming MiFID II European fund regulations will be those platforms who not only provide excellent technical services for fund administration but also help asset managers with fund selection; a wide range of supportive management information and offer support in commercial negotiations – three elements in which Allfunds has strength in depth.

As the largest provider of mutual funds Allfunds believes it has become the irrefutable leader in ‘open architecture’ – the industry model which offers asset managers the opportunity distribute their funds more widely while offering financial advisers and their end clients a far greater level of choice than from proprietary platforms.

Allfunds focus on open architecture is complemented by the provision of independent research of the mutual funds it has on its platform – an area Platforum suggests will become ever more important with MiFID II. Unlike some research providers, Allfunds does not operate the ‘pay to play’ research model – which allows the largest and most financially strong fund groups to dominate its research agenda. Rather Allfunds seeks to fund its research activities from its adviser clients who aim to provide the widest range of fund choices for their clients.

Commenting on the Platforum’s findings, Allfunds Bank CEO Juan Alcaraz said, “It has taken 15 years from the foundation of Allfunds to get to the leading position in Europe. That has only been achieved because we have relentlessly pursued our belief in consumer choice through our open architecture model and by focusing solely on providing a robust business to business service to institutional clients in the financial advisory sector. Our approach to open architecture is complemented by our desire to offer information and independent research to our clients with a view of offering as wide a range of choice as possible.”

U.S. Investors Fear Market Correction But Expect Double Digit Gains in 2015

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CC-BY-SA-2.0, FlickrFoto: José María Silveira Neto. Los fondos long/short de renta variable se perfilan como una alternativa para gestionar la volatilidad

Americans believe their investments will perform well this year, but are wary that a market correction could derail their financial security, according to survey findings released today by Natixis Global Asset Management.

“Most investors in our survey participate in retirement plans and say they’re on their way to a secure retirement”, said the survey.

“American investors have gotten used to excellent stock market returns in the last few years, so their view of financial markets is notably positive,” said John Hailer, chief executive officer of Natixis Global Asset Management for the Americas and Asia. “At the same time, many investors remember seeing significant losses in their portfolios after the global financial crisis. The missing piece is that many haven’t really planned, or prepared themselves emotionally, for another market setback.”

Fifty-four percent of 750 investors surveyed say their portfolios will perform better this year than in 2014, when the Standard & Poor’s 500 Index rose by 13 percent. At the same time, 67 percent say they feel powerless to protect their investments in the face of a severe market correction.

Rational exuberance?

Investors are pleased with their past returns and expect more of the same. Eighty-two percent of investors say they were satisfied with their gains last year.

Looking ahead, investors say their portfolios have to earn a return of an average of 10.1 percent a year, above inflation, to meet their financial needs. The S&P 500 gained an average of 9.5 percent annually, including reinvested returns, from 2005 to 2014. This 10-year stretch included deep losses from the global financial crisis.

Eighty-one percent of investors say their double-digit expectations are realistic.

Risk-taking rises, while planning lags

Most respondents (51%) say they’re willing to take more financial risk than they were a year before. Still, there are issues that could keep investors from making financial progress. They include:

Most don’t plan: Forty-nine percent of investors have financial plans. Fifty-five percent of those who work with advisors have plans, in contrast to 38 percent of non-advised investors.
Politics and the Economy: Investors say U.S. politics (50%) and a global economic slowdown (43%) could undermine their finances in the next year. In both cases, members of the baby boom generation (age 50 to 68) are the most skeptical; 64 percent cite politics as a worry and 61 percent say world economics.
Emotional decisions: Sixty-five percent of investors say they struggle to avoid making emotional decisions about their money during market shocks.

“Confidence has its limits,” Hailer said. “Investors are far better off when they have a plan – so they can prepare for the future and get through rough patches in the markets. Working with a professional financial advisor to build a more durable portfolio is the best way to get ready for those unforeseen events. Durable portfolio construction can help manage risk and reduce volatility to help investors stay in the market to meet their long-term goals.”

Most investors understand the value of advice. A majority (87%) of investors, including those who don’t consult with advisors, believe that getting professional financial advice is important in making investment decisions. Natixis encourages investors to work with an advisor to create a durable portfolio that can help manage risk and reduce volatility through a mix of alternative investment strategies working in tandem with long-only, traditional investments.

In fact, 76 percent of investors want strategies to better insulate their portfolio from market swings, and 83 percent desire strategies that offer a better balance between risk and return.

Alternatives to traditional strategies

Investors say they’re interested in strategies that don’t rely strictly on stocks and bonds. Sixty-eight percent say traditional investment approaches aren’t enough.

More than half (55%) say they invest in alternative asset categories, a group that includes hedge funds, private equity, commodities and long-short funds, among other investments. The total includes 76 percent of Generation Y (those age 18 to 33); 62 percent of Generation X (age 34 to 49); and only 32 percent of boomers. Yet most investors (73%) still perceive alternatives as riskier than other assets compared to 65 percent a year ago.

Retirement: Participation and perils

The survey found Americans are optimistic about retirement, their top financial priority, even as they expect to pick up most of the tab themselves, and as they foresee risks after their working careers.

Eighty-eight percent believe they will meet their retirement savings goals. They are being helped by enrolling in retirement savings programs such as 401(k)s; 67 percent participate in those types of plans.

“Most investors in our survey participate in retirement plans and say they’re on their way to a secure retirement,” said Ed Farrington, executive vice president for retirement at Natixis. ”While that’s encouraging, we should remember that about half of Americans still don’t have access to a savings program at work. As a nation, we need to give those workers better ways to invest in their futures.”

Almost two-thirds of Americans (63%) say the costs of retirement are shifting to individuals, away from the government and employers. They say 55 percent of their retirement income will come from their own efforts – saving, investing, selling a home or working after retiring. Of the rest, 36 percent would come from a pension or programs like Social Security and 8 percent from other sources.

Baby boomers are most concerned about financial risks in retirement. Of the perceived threats to retirement security, three stand out:

Long-term care: Fifty-nine percent of investors say the costs of basic needs in old age could endanger their financial wellbeing. Among boomers, that concern rises to 74 percent.
Uninsured healthcare: Fifty-seven percent of investors say medical costs represent a financial risk; the figure includes 71 percent of boomers.
Inflation: Forty-two percent say rising living costs could affect retirement; boomers again lead the pack, at 50 percent.

Market expectations for the next year

Investors say stocks will be the strongest investments in the next year. Forty-five percent of investors name stocks as the best asset class, followed by cash (17%), real estate (12%) and bonds (9%). Another 16 percent predict other categories of investments will do better.

Central Banks Have Distorted Reality in the Volatility Market

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Los bancos centrales provocarán breves repuntes de la volatilidad — Photo: El coleccionista de instantes. Central Banks Have Distorted Reality in the Volatility Market

The major impact of Central Banks actions all over the world has been a massive decrease of interest rates. This rates move has led to very good performances for bond investors, but reduced their potential of future returns. As a consequence, investors started to look for alternative yields, for example by allocating more risk to Equities, but also by selling volatility to extract the volatility risk premium and generate yield.

This is where Central Banks have distorted reality in the volatility market: volatility has become abnormally low and abnormally stable compared to the uncertainty over global recovery.

The consequence for the volatility market is that is at some point there is uncertainty regarding Central Banks (Tapering talks in June 2013 or more recently Fed Rates hike talks, or ECB QE), volatility can spike quite sharply, like we experienced in October 2014.

As Central Banks in general around the world will stay very accommodative in 2015, we at Seeyond expect volatility to stay artificially low in average, ie lower than where it would be otherwise, but with some key periods ahead (Fed rates hike, ECB QE effects, etc) we expect to see volatility short lived spikes few times in the coming year.

Simon Aninat, portfolio manager at Seeyond, subsidiary of Natixis Global AM.

FINRA Board Approves Changes to Communications With the Public Rules, Trading Activity Fee

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FINRA prepara cambios en las normas de comunicación a clientes — Photo: Matthew Keefe. FINRA Board Approves Changes to Communications With the Public Rules, Trading Activity Fee

The Financial Industry Regulatory Authority (FINRA) announced that its Board of Governors has approved proposed changes to FINRA’s Communications With the Public Rules, as well as amendments to the Trading Activity Fee for firms with no customers that are engaged solely in proprietary trading activity for their own accounts.

The changes to the Communications With the Public Rules follow a retrospective rule review that was launched in April 2014, which was designed to assess their effectiveness and efficiency. The proposed rule changes are the first to be made to FINRA rules under the retrospective rule review program. FINRA will issue a Regulatory Notice in the coming months seeking comment on proposed changes to Rules 2210, 2213 and 2214.

“The proposed changes to FINRA’s Communications With the Public Rules will help ensure that these rules are meeting their intended investor-protection objectives by reasonably efficient means. FINRA also announced that it is proposing to tailor its Trading Activity Fee (TAF) to the business activities of proprietary trading firms with no customers,” said FINRA Chairman and CEO Richard Ketchum.

FINRA will issue Regulatory Notices soliciting public comment on a series of proposals, including:

Communications With the Public

The Board authorized FINRA to publish a Regulatory Notice requesting comment on proposed amendments that would eliminate certain filing requirements that present a low level of risk to investors, such as the filing requirements for generic investment company material and investment company shareholder reports, and make other changes to better align the requirements to the relative risks presented by specific types of sales material.

Trading Activity Fee

The Board authorized FINRA to publish a Regulatory Notice requesting comment on proposed amendments to the TAF for firms with no customers and are engaged solely in proprietary trading activity for their own accounts. The proposed amendments would exclude from the TAF those transactions executed on an exchange of which the firm is a member (including non-market-maker trades) provided the firm does not have customers and trades only for its own account. These proposed changes follow the SEC’s recent proposal to eliminate the registration exemption for proprietary trading firms that are members of exchanges but not FINRA.