Internacional archivos - Página 2697 de 3354

SRI Investing Strategies

I am often asked “What is SRI?” or variations such as ESG Investing, Sustainable Investing, Mission-based Investing, Responsible Investing, Ethical Investing, Green Investing, Impact Investing or Socially Responsible Investing. Whatever the name, SRI is an approach to investing that recognizes the generation of long-term sustainable returns is dependent on sustainable companies and capital markets. More importantly, SRI explicitly acknowledges the relevance of environmental, social and governance (ESG) factors to financial returns.

According to US SIF, SRI Investing continues to grow with $8.72 trillion assets under management as of the beginning of 2016. A decade ago there was less than $1 tillion invested in SRI strategies. There are several trends behind this significant growth, certainly in the last few years. Investment Advisors, Multi-Family Offices and Institutional Investors are increasingly incorporating SRI and ESG factors into their investments analysis and portfolio construction. Recently, firms like Goldman Sachs and BlackRock launched major product initiatives in this field which has led to a greater awareness on Wall Street of the importance and client demand for increased SRI engagement. Another reason has been due to the growth of the UN Principles for Responsible Investment (PRI). The PRI initiative is an international network of investors working together to put the six Principles for Responsible Investment into practice. As of today, there are over 1’700 signatories which include asset owners, investment managers and service providers.

There are 6 key SRI strategies which include:

Negative Screening: the exclusion of assets based on ESG criteria
Positive Screening: the inclusion of best-in-class assets based on ESG criteria
ESG Integration: the systematic and explicit inclusion of ESG data into investment decisions
Impact Investing: targeted investments aimed at solving social or environmental problems
Engagement: which is active engagement with company management around ESG issues (selective or overlay)
Thematic Investing: the selection of assets based on their categorization under certain sustainability themes (e.g. renewables).

Negative Screening is the traditional and most common approach which excludes individual companies or entire industries from portfolios if their areas of activity conflict with an investor’s values. This process can be quite flexible as it can rely either on standard sets of exclusion criteria or be tailored to investor preferences. For instance, investors may wish to exclude companies with sales generated from alcohol, weapons, tobacco, adult entertainment or gambling – so-called “sin stocks.” Some faith-based investors also exclude companies involved in contraception and abortion-related activities.

In the case of government bonds, investors may seek to avoid an entire country based on the sovereign’s compliance with select international standards (e.g. human rights or labor standards). In general, one of the major criticisms of this approach is that it reduces the investable universe.

Positive screening seeks to identify companies working towards social or environmental good. This screening uses ESG performance criteria and financial characteristics to select the best companies within an industry or sector, usually relying on a sustainability rating framework. This is usually a more knowledge-intensive process than exclusionary screening because it requires understanding which factors are relevant for each industry and evaluating individual issuers on each of these factors.

ESG integration, unlike positive screening, seeks to incorporate material ESG risks and growth opportunities directly into traditional security valuation (e.g., through inputs such as earnings, growth or discount rates) and portfolio construction. This approach has gained traction in recent years and is based on the premise that additional ESG information not covered by traditional analysis could have an impact on the long-term financial performance of a company. ESG integration involves understanding how companies handle social, environmental and governance risks that could damage their reputations and whether they are positioned to capture ESG opportunities that could give them a competitive edge.

Impact investing explicitly seeks to generate a positive social or environmental impact alongside a financial return, unlike other SRI approaches, where progress on social and environmental issues may be a by-product of financial enterprise. The niche market of impact investing is growing fast. Examples include community investing, variants of microfinance, as well as private equity-like deals investing in such sectors as education, healthcare, basic infrastructure and clean energy.

Shareholder Engagement recognizes that as a shareholder of a company, investors have the ability to take an active part in the governance and activity a company employs. Shareholder influence attempts to shift corporate behavior toward greater compliance with ESG principles. Influence can be exerted by investors through direct communication with corporate management or by filing shareholder proposals and proxy voting. The influence of shareholder engagement on ESG issues has risen in recent years. The majority of the proposals filed have been focused on political activities of corporations, the environment, human rights/diversity, and governance.
Thematic Investing targets specific themes such as climate change, water, human rights or gender lens investing. For instance, using a gender lens to empower women would evaluate companies and investment opportunities based on women’s leadership, women’s access to capital, products and services beneficial to women and girls and workplace equity.

A common concern about SRI investing is that there is a premium to be paid for making responsible investments that would naturally diminish investment returns. For instance, by applying an exclusionary screen the available investable universe is reduced and thus this could have a negative impact on returns. Given that there are many different SRI strategies, making comparisons becomes more challenging. For example, shareholder engagement in single stocks might create long-term value but what benchmark would this be compared to?

Thus, an investor may choose to add value(s) to investing in order to achieve a positive environmental or social impact alongside financial returns; align investments with values and core beliefs; and improve portfolio risk/return characteristics by factoring sustainability into investment decisions. The way an investor can implement this objective would be to:

Develop a beliefs statement regarding ESG integration and sustainability
Update Investment Policy with ESG Policy
Develop asset allocation strategy in line with the ESG Policy
Implement changes in the portfolio
Manage and monitor the portfolio.

SRI investing does raise strong emotions and disputes from both sides of the debate. Opponents to SRI are opposed to anything other than financial factors affecting the value of a security. Likewise, some advocates for SRI have such deep moral convictions that they cannot imagine the possibility that the integration of ESG factors could have anything but a positive effect on investment returns. The challenge therefore is to ignore the emotion based in pre-conceived beliefs coming from these opposing views and rather focus on the facts.

Ultimately, I believe there is an important value added in helping our clients identify the core values that are important to them and creating an investment strategy that empowers those values.

Column by Philip Carey

Terry Simpson: “Economic Expansion is Becoming Sustained and Synchronized Across the Globe”

| Por Fórmate a Fondo | 0 Comentarios

The global economy is moving towards more sustained economic expansion, and is still far from an inflationary environment. Although the Fed has begun its normalization process, there are still many questions surrounding the policies of the European Central Bank, the Bank of Japan, the Bank of England, and even the Bank of Canada, which recently decided to increase its reference rate by 25 basis points, the first-rate increase in seven years. Structurally, the economic environment is one of low growth and low interest rates, but what do these conditions mean for returns? Where can they be found in this environment? Terry Simpson, Multi-Asset Investment Strategist at the Black Rock Investment Institute, answered these, as well as other questions, during his visit to Miami for the presentation of the firm’s strategic vision for the second half of the year to their clients.

Simpson, who joined BlackRock in 2004, explained that they use various tools to be able to identify economic growth that is not captured by traditional economic indicators, such as capex, employment, or industrial production. In addition to estimating the growth of the G-7, the seven major world economies through advanced economic indicators using an econometric technique called Nowcasting, they also use Big Data technology to continue to innovate in their internal forecasting elements. “There are household spending patterns and business developments that you cannot capture with traditional economic variables, and we believe our differentiated approach gives us a competitive advantage over the data analyzed by the market consensus on the street,» he says.

In this way, BlackRock establishes that the G-7 12-month forward growth forecasts are shaping up to be 2% over the next 3 months, between 25 and 30 basis points above the market consensus, a difference that may seem small, but in which a low growth environment can be sufficient to influence asset allocation decisions and investor sentiment. «We are seeing that the improvement in global economic growth is in a synchronized trend. The United States’ economic cycle is ahead, but the rest of the G-7 economies are now catching up.” Last year all the improvement came from the US economy, but now there is significant improvement in Germany, Canada, Japan and France, which is very important to increasing global growth.»
Continuing with the theme of sustained economic expansion in the United States, Terry Simpson addressed a frequent question about the duration of the cycle. “The United States is now eight and a half years into this economic cycle, this is the third longest economic expansion in US history, and many expect it to end soon. This is erroneous. They are just thinking about it from the wrong perspective. By our analysis, we can see that, since the last cycle, we are still far from reaching what we call the potential in the economy, which still argues that this cycle has room to run and this cycle should be measured in years, not quarters.»

Next, Simpson referred to the more aggressive tone from central banks in the early part of the summer, beginning with statements by Mario Draghi at the Sintra symposium in late June during the European Central Bank Forum, where the market interpreted that the European authority on monetary policy is prepared to be more aggressive in withdrawing its economic stimulus measures. The FOMC then continued with its third-rate hike in 6 months. But this should not divert investors’ attention, who should nevertheless bear in mind that most central banks aim to keep inflation close to their target: “Since 2015, core inflation in the US, the Eurozone and Japan has remained very stable and flat, if anything we have recently seen a decline in US inflation, which has raised much concern. The reality is that Central Banks really have not been hitting their inflation targets, so it is very likely that they are not going to be aggressive while removing their expansionary policies and that is one thing that markets misinterpreted, and structurally, we believe that we are going to be in this low-growth, low- interest rate environment for the foreseeable future.” Most central banks are mandated to manage around an inflation target. Some banks have a dual mandate, like the Fed with full employment as their second mandate, but the vast majority of them conduct their monetary policy in relation to an inflation target, projections on GDP and developments on the output gap. In any case, in Europe inflation is around 1%, while the inflation target is 2%. “If Draghi announced the tapering of the QE program this year, we think it would be a very gradual wind down.”

China is another frequent concern for investors. BlackRock uses economic data to evaluate the trend for China’s PMI, a leading indicator for the country’s economic prospects. The current data remains high by recent historical standards, the highest of the last three years, so they do not believe that a hard landing is as automatic as some think. «Policy makers have identified the imbalances in the economy and are starting to address them; and that is a good thing. This doesn’t necessarily mean it’s going to be a smooth ride, but at least they recognized the importance and potential impact on the economy,» adds Simpson.

Rethinking Risk

At a time when volatility levels are at a minimum, it is important to ask about the likelihood of a shift to a high volatility regime. According to BlackRock, if we are currently in a low volatility regime like the present one, there is a 90% probability that we will be in the same regime one year forward and a 70% probability that the same regime will be maintained over a three-year period. This is an important fact, since most clients are de-risking their portfolios because they believe that such low volatility is not normal. «Volatility is at such low levels because of conventional and unconventional monetary policy measures of recent years. However, there are other reasons at the macroeconomic level: GDP, unemployment, and inflation volatilities are at levels below their historical rates. It is consistent that if you have low macroeconomic volatility, you will have low financial volatility, so we do not expect volatility to mean revert.”

It may rise from the current levels, but it would take a geopolitical shock or economic shock to shift us into high volatility regime. In other words, investors should maintain their current exposure to risk, or even increase it. “This is a contrarian call as investors are pairing risk exposure back and taking profit. We still like equities and high quality credit fixed income» he said.

Inversión por factores: ¿una amplia carretera por delante?

| Por Gabriela Huerta | 0 Comentarios

Factor Investing – A Wide Highway Ahead? — Foto: ChristianeFe. photography. Inversión por factores: ¿una amplia carretera por delante?

A medida que los inversores continúan agregando estrategias basadas en factores a sus carteras, los observadores del mercado se preguntan: ¿son las estrategias de factores demasiado populares?

Odio esperar en el tráfico. No me gustan las paradas y los arranques, la sensación de arrastrarse, y todo ese apiñamiento. Como cualquier conductor sabe, no es sólo el número total de coches que importa, sino también el tamaño de la carretera en sí: la misma cantidad de tráfico en una autopista contra un sinuoso camino de un solo carril marca toda la diferencia entre un viaje agradable y un embotellamiento.

En la primera mitad de 2017, más de 18.000 millones de dólares se colocaron en los ETFs de start beta listados en EE.UU., después de los 43.000 millones de dólares invertidos en 2016. Estos números suenan impresionantes, por lo que no es sorprendente que algunos inversores se hayan preguntado si las estrategias factoriales se han aglomerado, pero en el contexto más amplio: ¿Son las estrategias factoriales una carretera o un camino angosto? ¿Las estrategias factoriales han alcanzado su capacidad? Comencemos por citar algunos hechos y cifras importantes.

¿Cuánto se invierte hoy en estrategias factoriales?

En la actualidad, los activos en estrategias de factores son simplemente empequeñecidos por los activos invertidos en vehículos tradicionales, como fondos pasivos y activos. Como ejemplo, considere los fondos smart beta que invierten en los componentes del Índice S&P 500. El índice S&P 500 representaba 19,2 billones de dólares (trillion en inglés) en valor de mercado al 31 de diciembre de 2016. De los 8,7 billones de dólares de activos indexados o comparados con el S&P 500, los fondos de inversión activamente gestionados representaban 5,7 billones. En comparación, los ETFs smart beta con acciones de Estados Unidos representaban aproximadamente 224.000 millones, o menos del 1,2% de la capitalización bursátil del Índice S&P 500. ¡La cantidad actual invertida en fondos smart beta es diminuta!

Ampliar

A diferencia de algunas estrategias propensas a limitaciones de capacidad, como las acciones de microcapitalización o las estrategias activas que operan acciones escasamente negociadas, las estrategias de factores generalmente han tendido a invertir en un mercado de valores más líquido y profundo. Los fondos de factores pueden estar más capacitados para invertir nuevos flujos de fondos sin afectar indebidamente los precios de los valores, dándoles el potencial de acomodar grandes flujos.

Trillones de dólares en fondos activos ya siguen factores

Aunque la cantidad invertida directamente en estrategias smart beta es minúscula, muchas instituciones ya son inversionistas de factores, aunque no asignen explícitamente estrategias o factores smart beta. Nuestra investigación descompuso los rendimientos de los fondos mutuos gestionados activamente en tres componentes: factores, componentes que varían en función del tiempo y selección de valores. De los billones de dólares en fondos mutuos activos estadounidenses, creemos que el primer componente, las exposiciones a factores estáticos, pueden representar más de 2 billones de dólares de activos bajo administración. En otras palabras, el dinero ya está siguiendo estas estrategias de factores; Lo que está cambiando es la manera en que los inversionistas están accediendo a esos factores.

Midiendo la capacidad de las estrategias factoriales

Existen varias formas de estimar la capacidad de las estrategias basadas en factores, incluyendo la propiedad de los activos, los flujos de capital y los costos de transacción. Consideremos las estimaciones de costos de transacción, que pueden no proporcionar medidas definitivas de capacidad, pero son ciertamente medidas informativas del comercio en el mundo real experimentadas por los inversionistas.

Cada inversión incremental en una estrategia basada en factores supone un costo de transacción adicional. Hay un punto de equilibrio donde los nuevos flujos de inversión de los inversionistas se pierden por los costos de transacción, compensando los rendimientos históricos. ¿Qué tan lejos estamos de ese punto de equilibrio de los activos bajo gestión, el cual indica que no hay capacidad adicional?

Para abordar la cuestión de capacidad, utilizamos el modelo de costo de transacción exclusivo de Blackrock, que cubre decenas de miles de valores, incluyendo más de 50.000 acciones. El modelo es utilizado diariamente por los equipos de inversión de BlackRock e incorpora la rotación, el volumen, el riesgo de todo el mercado y el específico a la acción, las comisiones, los impuestos y los diferenciales, entre otros. El modelo se utiliza para todas nuestras carteras – no sólo las de smart beta.

¿Qué nos dicen los costos de transacción sobre la capacidad potencial de las estrategias factoriales?

Con un horizonte de negociación de cinco días, que es apropiado para las grandes operaciones, el valor, el momentum, la calidad, el tamaño y los factores de volatilidad mínima muestran un potencial de capacidad de cientos de miles de millones. Algunos factores, como la volatilidad mínima, pueden tener una capacidad de más de 1 billón de dólares. El factor de impulso o momentum tiene la mayor facturación y volatilidad en relación con los otros factores de estilo, y por lo tanto, debe tener la menor capacidad. Sin embargo, incluso para el momentum, nuestra estimación de capacidad supera los 320.000 millones de dólares. Para la mayoría de los factores, el punto de equilibrio para los costos de transacción indica una capacidad que supera ampliamente los activos actualmente invertidos en esos factores de estilo.

¿Qué hay de apiñamiento y valoración?

El apiñamiento, o embotellamiento en una operación, presenta el riesgo de que los inversores que ocupan posiciones grandes y similares salgan de esas posiciones simultáneamente. El apiñamiento puede manifestarse en las tendencias a corto plazo y en las valoraciones a corto plazo. Estas son preocupaciones importantes, pero son diferentes de las consideraciones de capacidad a largo plazo.

Todos los activos experimentan períodos de tendencia ascendente o descendente y valoraciones altas o bajas. Un inversor experto podría ser capaz de utilizar la fuerza relativa y las métricas de valoración para inclinar las posiciones de los factores gradualmente con el tiempo. Otras señales útiles en un marco de inclinación de factores podrían incluir la dispersión y el régimen económico. Lea mi post reciente sobre la inclinación de factores para más información sobre cómo las inclinaciones pueden ayudar a mejorar los retornos y comprobar las perspectivas de nuestras últimas opiniones sobre el factor de sobre y subponderaciones.

Gran espacio en la carretera

Entonces, ¿qué pasa con los opositores que afirman que las estrategias de factor están a capacidad? Hemos hecho la investigación y sugiere que hay un gran potencial de capacidad en estrategias factoriales y smart beta. Creemos que la capacidad podría ser de por lo menos cientos de miles de millones y, en muchos casos, billones de dólares de activos -más de 100 o 1000 veces más que lo que se invierte en estrategias factoriales-. Las estrategias de factores parecen tener una amplia carretera por delante.

Columna de BlackRock escrita por Andrew Ang

Considere cuidadosamente los objetivos de inversión de los Fondos, los factores de riesgo y los cargos y gastos antes de invertir. Esta y otra información se puede encontrar en los folletos de los Fondos o, si está disponible, los prespectos que se pueden obtener visitando las páginas de ETF iShares y Fondos Mutuos de BlackRock. Lea detenidamente el prospecto antes de invertir.
La inversión implica riesgo, incluyendo una posible pérdida de capital.
En América Latina e Iberia, sólo para inversores institucionales e intermediarios financieros (no para distribución pública). Este material es solamente para fines educativos y no constituye un consejo de inversión o una oferta o solicitud de venta ni una solicitud de una oferta de compra de acciones de cualquier fondo o acción y es su responsabilidad para informarse de, y observar, todas las leyes y reglamentos aplicables de su jurisdicción. Si se mencionan o infieren fondos en este material, dichos fondos no han sido registradas por los reguladores de valores de Brasil, Chile, Colombia, México, Panamá, Perú, Portugal, España, Uruguay o cualquier otro regulador de valores en ningún país de América Latina o Ibérica y por lo tanto, no pueden ser ofrecidos públicamente en ninguno de estos países. Los reguladores de valores de cualquier país dentro de Iberoamérica no han confirmado la exactitud de cualquier información contenida aquí. No se puede proporcionar información al público en general en Latinoamérica o Iberia. El contenido de este material es estrictamente confidencial y no debe ser transmitido a terceros.
No puede garantizarse que el desempeño será mejorado o que el riesgo se reducirá para los fondos que buscan proporcionar exposición a ciertas características de inversión cuantitativa («factores»). La exposición a tales factores de inversión puede disminuir el rendimiento en algunos entornos de mercado, tal vez por períodos prolongados. En tales circunstancias, un fondo puede tratar de mantener la exposición a los factores de inversión objetivo y no ajustarse a objetivos diferentes factores, lo que podría dar lugar a pérdidas.
Las estrategias discutidas son estrictamente para fines ilustrativos y educativos y no debe interpretarse como una recomendación para comprar o vender, ni una oferta de venta ni una solicitud de una oferta de compra de valores. No hay garantía de que las estrategias discutidas sean efectivas.
Los ejemplos presentados no toman en cuenta las comisiones, las implicaciones fiscales u otros costos de transacción, que pueden afectar significativamente las consecuencias económicas de una estrategia o decisión de inversión determinada.
Este material representa una evaluación del entorno de mercado en un momento específico y no pretende ser un pronóstico de eventos futuros o una garantía de resultados futuros. Esta información no debe ser tomada por el lector como análisis o consejo de inversión con respecto a los fondos o cualquier acción en particular.
Este documento contiene información general únicamente y no tiene en cuenta las circunstancias financieras de una persona. Esta información no debe ser considerada como una base primaria para una decisión de inversión. Por el contrario, una evaluación debe ser hecha en cuanto a si la información es apropiada para las circunstancias individuales y debe considerarse la posibilidad de hablar con un asesor financiero antes de tomar una decisión de inversión.
Los Fondos son distribuidos por BlackRock Investments, LLC (junto con sus filiales, «BlackRock»).
Index-providers-all
© 2017 BlackRock, Inc. Todos los derechos reservados. LACKROCK, BLACKROCK SOLUTIONS, BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, iRETIRE, iSHARES CONNECT, FUND FRENZY, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES, the iShares Core Graphic, CoRI y el logotipo de CoRI son marcas comerciales registradas y no registradas de BlackRock, Inc., o de sus subsidiarias en los Estados Unidos y otros lugares. Todas las demás marcas son propiedad de sus respectivos propietarios.
233191

La australiana Antipodes Partners lanza una versión UCITS de su fondo insignia

| Por Gabriela Huerta | 0 Comentarios

Australian Boutique Antipodes Partners Unveils UCITS Version of Flagship Global L/S Strategy — Wikimedia CommonsFoto: Thennicke. La australiana Antipodes Partners lanza una versión UCITS de su fondo insignia

La gestora australiana Antipodes Partners ha lanzado una versión UCITS de su fondo insignia, el Antipodes Global Fund. Además, están estrenando sus oficinas de análisis en Londres, las cuales serán dirigidas por Chris Connolly, quien está buscando crecer el equipo los próximos meses.

El fondo cuenta con entre 30 y 60 posiciones en una estrategia long/short, enfocada al Asia desarrollada y Europa occidental.

De acuerdo con Jacob Mitchell, fundador de la firma, el entorno actual ha creado un sentimiento de seguridad que considera falso, debido a que los inversores están confundiendo un entorno de baja volatilidad con uno de bajo riesgo, por lo que buscan inversiones que sean atractivas en cuanto a precio pero cuenten con la resiliencia necesaria para otorgar retornos atractivos a sus clientes. En su opinión “estrategias flexibles y enfocadas al riesgo que busquen alpha deberán superar a la gestión pasiva en un entorno en el que la volatilidad está regresando”, concluye.

La gestora australiana Antipodes Partners ha lanzado una versión UCITS de su fondo insignia, el Antipodes Global Fund. Además, están estrenando sus oficinas de análisis en Londres, las cuales serán dirigidas por Chris Connolly, quien está buscando crecer el equipo los próximos meses.
E fondo cuenta con entre 30 y 60 posiciones en una estrategia long/short, enfocada al Asia desarrollada y Europa occidental.
De acuerdo con Jacob Mitchell, fundador de la firma, el entorno actual ha creado un sentimiento de seguridad que considera falso, debido a que los inversores están confundiendo un entorno de baja volatilidad con uno de bajo riesgo, por lo que buscan inversiones que sean atractivas en cuanto a precio pero cuenten con la resiliencia necesaria para otorgar retornos atractivos a sus clientes. En su opinión “estrategias flexibles y enfocadas al riesgo que busquen alpha deberán superar a la gestión pasiva en un entorno en el que la volatilidad está regresando”, concluye.

Mirova: The Eight Sustainable Development Themes which They Pursue in their Responsible Investment Strategies

| Por Fórmate a Fondo | 0 Comentarios

At Mirova, the socially responsible investment arm of Natixis Global Asset Management, they firmly believe that the financial industry, and especially the investment industry, plays a significant role in solving the problems arising from the unsustainability of the current economic development model: climate change, the depletion of natural resources, the imbalance between growth and debt, and the decorrelation with the real economy, amongst others.

The philosophy applied by Mirova in its strategies is based on the conviction that the integration of sustainable development themes into investment decisions allows them to offer solutions in responsible investment. In order to identify the companies that manage future challenges effectively, Mirova experts have developed a unique approach to economic analysis based on eight sustainable development themes: energy, mobility, building and cities, resources, consumption, health, information, and communication technology.

The Energy Challenge

The main challenge for achieving a sustainable energy model is reducing dependence on fossil fuels while fostering access to energy for populations still relying on wood and coal combustion.“Coal has been losing ground to natural gas as a source of energy. Coal powered plants can easily be converted from coal to gas which, in addition to reducing carbon dioxide emissions, extends the life of the power plant and lowers the cost of operations,” says Kenneth Amand, Client Portfolio Manager at Mirova. “These are economic forces that will be hard to fight without substantial coal-power subsides for which there will be little public appetite.”

According to Armand, it would only be logical to expect the wealthier and larger nations globally to bear the biggest weight of building a low carbon economy, as besides being the biggest polluters, they already have the infrastructure in place to develop new energy resources and technology.

As regards the recent US withdrawal from the Paris Climate Agreement, at Mirova they believe that businesses looking to lower their carbon footprint will be at a short-term disadvantage competing with less scrupulous businesses willing to pollute despite climate change. “For the world, we believe that there are opportunities lost – discoveries and advances that could have come from the climate change leader it had in the US, one rich with intellectual and financial resources. Forcing an involvement in antiquated technologies such as coal or oil might adversely affect the US’s ability to remain a leader in the future low carbon world. While the US has good green technologies, such as Tesla and First Solar, it has relatively light regulations, especially on social issues. Europe, on the other hand, has strong regulations forcing most corporations to take Environmental, Social, and Governance criteria into account in all industries.

As for advances in renewable energy, Amand points out that, although the cost of windmills and solar panels continue to fall while their reliability continues to rise, the issue of energy storage remains to be solved. “Storage is critical for energy sources that are intermittent, like wind and sunshine. This demand for storage has fostered a frenzied research and development effort; we would be amazed if a solution were not found in the short term. Storage of energy needs to be portable and less than USD 150/kwh, a point at which gasoline will be rendered too expensive.”

Another branch of research focuses on tidal power and seeks mainly to increase its efficiency.In addition, there is another race focused on studying the products and materials used in industrial production as a means to cutting costs. “Tesla’s giga-factory is one effort. Trying to convince Bolivia to mine its lithium reserves is another.”

Solving the Mobility Issue

The increase in the population moving into the cities is making these crowded.There is scarcely enough capacity for this increase on most public transportation systems, let alone enough room for every inhabitant to drive and park their own vehicle. With this backdrop, electric, self-driving cars seem to offer the best solution for non-point pollution and transportation with start and end points as diverse and dynamic as the people they serve. “Every major automotive company and virtually every technology giant is, in one way or another, pursuing self-driving car technology. In fact some of the major automakers are preparing for this eventuality by stepping out of the race to the biggest,” Amand points out.

The Change in Homes

Most households around the world are preparing to improve their energy efficiency. Thermal insulation of a house provides sufficient energy savings to cover the cost of the renovation carried out in the house.Similarly, LED bulbs, lower power appliances, and smarter devices are making homes more energy efficient. As regards the issue of space, building upward is the best way to use limited city real estate and conserve energy.

Water Conservation and Optimization of its Consumption

Although two-thirds of the planet is occupied by water, very little can actually be used for human consumption and agriculture.Arabic nations spend a significant amount of their annual energy consumption desalinating ocean water for drinking and servicing their cities. “The US uses about 10% of its energy production replacing water spilt through leaky and old pipes. Mexico has determined that childhood obesity can be connected to soda consumption in lieu of clean drinking water. Today, a tax against sugary beverages is levied to pay for filtration systems to be put in state schools.” Amand points out.

The Paradox of Consumption

The number of people purchasing in large shopping centers is getting lower each year. However, consumption rates haven’t fallen. “They’ve migrated back to the catalog. However, that catalog is no longer the Sears and Roebucks book of the past, it’s Amazon.com, Etsy, ebay, and the websites of most designer labels. The smart companies have found ways to make their store fronts an extension of their digital catalog. From high-end designer clothes to basic electronics and food products, the world is seeking a balance between eRetail and storefront retail. Where will the balance land and who will be the winners?” wonders the team at Mirova.

Increased Expenditure on Health

Each year, a growing number of people reach retirement age, starting a new chapter in their lives, rich in social and cultural experiences.To maintain their quality of life, sometimes they simply require small adjustments, such as the need to correct eyesight, failing due to the passage of time.Nearly half of all people in retirement use some sort of corrective lens. “As people get older, diseases once rare and oft unheard of are becoming daily facts of life. Medicine has become both better at serving the masses, with quicker more efficient eye care, and better at serving individuals with devices uses to determine specific dosages for individuals are treatments based on a larger set of inputs.”

Information and Communication Technology

At present, the most relevant trend in information management is cloud migration, an environment in which software can be easily upgraded, enabling better control of cybersecurity problems and fraudulent practices such as phishing and spam. Other additional benefits include lowering the cost of energy and the cost of maintaining equipment. «Moore’s Law has come to an end, transistors will get no smaller and likewise computer processors, as we know them, won’t likely get any faster. As such, new ways will be discovered to reduce the time data are processed. Cloud computing helps here as well.»

Investment and Environmental, Social, and Governance Criteria

Finally, Amand reviews the current scenario of sustainable investment: «On the financial side, Europe is leading responsible investment but things are moving in the US as well. China has a strong industrial power and strong investment in green technologies but strong social risks. Implementing ESG factors is not something countries do, but rather something asset managers and corporate boards do. For asset managers, these factors can help the manager unearth advantages and disadvantages a particular business has, given real-world implications on its business. For corporations, ESG can be a guide to testing whether all aspects of their business are properly aligned with sustainable goals. However, some countries and securities administrations have set forth more robust disclosure policies, like the EU which has some of the strongest disclosure policies in the world.” Amand concludes.

Crèdit Andorrà Financial Group

| Por Fórmate a Fondo | 0 Comentarios

Grupo Crèdit Andorrà, fundado en 1949, es un grupo financiero de servicios globales de banca privada y gestión de activos. Líder en el mercado andorrano y con presencia internacional en Europa y América, ofrece servicios boutique en Wealth Management.

Grupo Crèdit Andorrà, con un volumen de negocio de 15.885 millones de euros a cierre de 2016, dispone de una amplia gama de servicios financieros y propone una gestión completa y personalizada del patrimonio. Su operativa se orienta a la especialización y al asesoramiento, con una propuesta de valor centrada en el servicio al cliente, en ofrecer soluciones adaptadas a sus necesidades concretas y su perfil inversor, en la confianza y en la reputación.

El Grupo propone un servicio de banca privada que combina soluciones globales a través de una plataforma internacional que pone a disposición de los clientes las alternativas de inversión más diversas, con el valor añadido que aporta el conocimiento local de cada mercado. Se trabaja desde una perspectiva de arquitectura abierta y la posibilidad de multibooking.

www.creditandorragroup.com/es

Finegan: “We Look for High Quality Companies in Emerging Markets at Reasonable Prices, that Makes Us Very Different from the Index”

| Por Fórmate a Fondo | 0 Comentarios

During the “Janus Henderson Knowledge Exchange”, the first Janus Henderson Investors event after completing its merger process, Glen Finegan, Head of the Emerging Markets Equity team, reminded attendees that a market index is not always the best option for finding investment opportunities and detailed the criteria they take into account when selecting and including a stock in the Henderson Gartmore Emerging Markets fund.

Based on the historical composition of the MSCI Emerging Markets index, he explained that in 1992 the index invested 30% in Mexico, around 20% in Malaysia and about 12% in Brazil. However, China and South Africa, two of the economies with the greatest potential at that time, lacked representation. “In the past, the index was a very poor guide on where to invest during the next 25 years. And, it is very likely, that currently it’s also a poor guide for knowing where to invest, so one wonders whether 25% should be allocated to China, as suggested by the index at present. That’s why we don’t take it into account when building the portfolio and we follow a bottom-up philosophy when selecting stocks,» said Finegan.

He also pointed out that the index also fails to both where people lives today and the expectations of population growth, a determining factor in creating opportunities in emerging markets: “In ten years, the population in Africa is likely to double and this is going to bring a series of very interesting changes, especially for those companies that are dedicated to the sale of detergents, or the ones that run a chain of supermarkets, as they will benefit from a fascinating trend in the long term. While the index focuses on identifying where companies with the largest stock market capitalization are, we are more interested in locating the secular trends that will determine the earnings and profits of companies in emerging markets.”

Finegan explained that an index does not correctly reflect the investment universe because it is only a list of large capitalization companies, something that in emerging markets is frequently linked to companies with state ownership and management, that do not necessarily take into account the interests of minority shareholders. Instead, he said, there are companies domiciled in the United Kingdom and the Netherlands that are not included in the emerging markets index, but which have a strong appeal due to their position in these markets. He cited PZ Cussoms, a company based in Manchester which produces soap and baby products, as an example. “Created in Sierra Leone 135 years ago, they have built an extensive detergent business in Africa, of baby care products in Indonesia, and more than half of their income comes from the emerging markets business.”

He also mentioned Unilever, a firm with a strong brand that currently obtains 60% of its profits from emerging markets, and which has a strong presence in India and Indonesia, Cairn Energy, an Edinburgh-based oil company that recently made an enormous discovery in Senegal and which has an excellent track record in emerging markets, and Heineken, Nigeria’s largest brewery and one of the largest in India and Latin America.

Henderson’s emerging markets’ equity team has spent years looking for investment opportunities among companies with good corporate governance practices, those that respect the interests of minority shareholders. During this time, they have built a list of approximately 350 companies with sufficient quality to invest in them, that any of these companies is finally included in the portfolio depends mainly on a good price, which is not necessarily cheap, but reasonable.

Another concern with emerging markets is that, normally, minority shareholders are not protected by the rule of law.“News headlines in recent years in China, Russia, Indonesia, Turkey and Brazil show that the companies linked to the governments of these emerging countries usually have an agenda which differs greatly from good corporate governance, very often including corruption schemes. That is why we try to find businesses managed by individuals or family groups that seek to manage their business in a sustainable way and are less likely to generate environmental or social problems,» added Finegan, for whom knowing who manages the business, and how their interests are aligned with those of the shareholders, is essential.

“We look for companies that have generated strong returns over the long term, with a strong financial track record, but we’re tremendously concerned about how these financial results have been achieved. Many companies in emerging markets have built their franchises taking excessive risks. However, we like those companies that have built their franchises over time in a slow and secure way, reinvesting their profits. The demographic trend pointing to a new emerging middle class will serve as a tailwind and competitive advantage for many companies, so it will not be necessary to take big risks. An example of this type of company is Shoprite, a leading supermarket chain based in South Africa, which has spent the last 20 years expanding into the rest of the African continent without a significant debt volume on the balance sheet, only reinvesting part of its cash flows in its expansion project. Building a powerful franchise that will continue to grow in the coming years.”

Although the fund is not labeled as the “Sustainability” type fund, it does tend to take environmental, social and governance (ESG) factors into account when determining the integrity of a company’s management team: “If the company’s control group has taken advantage of any of the other parties involved in the company, why would it be expected to treat minority shareholders differently? For example, the fact that, at present, a manufacturing company in China obtains good profit margins by not treating its waste does not mean that in the future it does not have to face the shutdown of its company, investing millions of dollars in remodeling its manufacturing plant, or having to pay a huge fine. All these possibilities result in bad news for the minority shareholder.”

In addition, Finegan stressed the importance of investing in solid franchises, since only these have a strong purchasing power. So, if inflation is high in the country in which they have presence, they are able to push through price increases.

“There is often talk of the large size of the technology sector in emerging markets, but we do not think so, because the vast majority of so-called technology companies in emerging markets are companies with a low technological component. For example, a Taiwanese company that claims to belong to the technology sector, but which actually builds keyboards for Apple. If Apple’s margins fell, they would stop producing their keyboards and would most likely shutdown. That is why we are looking for companies that have demonstrated that they can generate returns above inflation, counteracting the effects of the devaluation.”

To ascertain the quality of the management teams of the companies in which they invest, they study their behavior during past crises, which in emerging markets tend to be more frequent over time, especially in the case of Latin America. “Brazil has experienced several crises in recent years, specifically in 2009 and 2015; in order to know whether the people who run the company are as conservative as they claim to be, you just have to observe how they managed to navigate through these last episodes.”

Finally, on the financial fundamentals side, they look for companies with low debt levels, investing in indebted companies only when they are backed by a strong business group. In addition, they carefully examine the cash flows generated by the company, because in many cases, the company’s income statement is quite fictitious. “We prioritize the preservation of capital when investing in emerging markets. We try to find companies that manage their businesses with a contrary view, allocating capital at the right moments. An example of this would be the Chilean company Antofagasta, dedicated to copper extraction. Antofagasta usually maintains lower debt levels than its competitors, because they know that the only way to acquire good assets at a good price is to be able to buy when the rest of the competitors are forced to sell,” concluded Finegan.

Flexibilidad, la clave para ganar con la renta fija en tiempos difíciles

| Por Beatriz Zúñiga | 0 Comentarios

Estamos ante un momento de mercado especialmente complejo para los ahorradores conservadores. Encontrar rentabilidades superiores a la inflación esperada para no perder poder adquisitivo en los próximos años –el objetivo de todo inversor – es hoy más difícil de lo habitual.

Es necesario buscar estrategias de gestión más flexibles que permitan encontrar ese plus de rentabilidad que los activos de renta fija tradicionales ya no ofrecen debido a una serie de factores coyunturales. Podemos decir que es momento para invertir en activos de renta fija que se puedan ver beneficiados de la retirada de estímulos y de futuras políticas monetarias restrictivas que se implementarán en el Viejo Continente en un futuro cercano.

Además, dado el momento del ciclo económico y monetario en el que nos encontramos, se hace especialmente importante seleccionar los activos de renta fija adecuados y gestionarlos de una manera activa. Dentro del mercado de bonos, se pueden encontrar emisiones con retornos positivos, que aportan valor a las carteras en cualquier situación de mercado. Como ejemplo, en los últimos seis meses, un bono senior de Telefónica ha caído cerca de un 3% (en línea con la deuda pública de España), mientras que la deuda subordinada del mismo emisor se ha revalorizado más de un 5%.

Por otro lado, las expectativas de tipos de interés en la eurozona son superiores a lo que marcan actualmente sus bonos de gobierno. Por tanto, el riesgo de depreciación en estos bonos es elevado. Actualmente, un gran porcentaje de la deuda pública de la eurozona ofrece rentabilidades negativas. Por ejemplo, invertir en este momento a un plazo de ocho años en bonos alemanes ofrece unos retornos cercanos al 0%. Por ello, vivimos una etapa en la que el activo considerado más seguro podría ser el que nos ofrece una menor rentabilidad a vencimiento (TIR) o, incluso, el que más retroceda en precio debido a la sobrevaloración impulsada por el potente programa de compra de activos llevado a cabo por el Banco Central Europeo en los últimos años.

Cartera diversificada

De esta manera, dentro de una cartera diversificada puede ser interesante buscar activos como bonos corporativos y financieros con vencimiento cercano y con cupones flotantes o variables referenciados a los tipos de interés; deuda subordinada y determinadas emisiones high yield que ofrezcan un óptimo binomio rentabilidad-riesgo, eso sí, siempre analizando los fundamentales de los emisores y el riesgo de insolvencia de las emisiones; bonos de entidades financieras con elevados niveles de capital, reducida tasa de fallidos, y con mayor exposición a banca comercial que a banca de inversión y, por último, renta fija denominada en dólares, que ofrece mayor rentabilidad que sus homólogos en euros, ya que el ciclo de retirada de estímulos está mucho más avanzado que en la eurozona.

Además, se debería evitar invertir en activos de renta fija objeto de las compras por parte de la autoridad monetaria –deuda de gobierno, cédulas hipotecarias, ABS, deuda corporativa de mayor calidad crediticia– en especial con vencimientos lejanos, ya que pueden sufrir importantes correcciones a medida que se anuncie la retirada de estímulos monetarios en las próximas reuniones del Banco Central Europeo.

El ciclo de subida de tipos iniciado por la Reserva Federal se trasladará a este lado del Atlántico más pronto que tarde, pero no debería situar los tipos de intervención en niveles especialmente elevados debido a la ausencia de presiones inflacionistas. Factores como los demográficos, digitalización de la economía con cambios en los patrones de consumo o el menor poder de fijación de precios de las empresas, nos indican una ausencia de riesgos al alza en indicadores de precios en un futuro, y por ello de unas políticas monetarias excesivamente restrictivas.

Vienen tiempos difíciles para la renta fija tradicional acostumbrada en los últimos años a importantes retornos, ayudada por las políticas monetarias expansivas llevadas a cabo por los bancos centrales a nivel global. Por tanto, es importante flexibilizar las inversiones en renta fija a través de la ampliación del universo de inversión y la aplicación de políticas de gestión activas. De esta manera será posible ganar la partida a la retirada de estímulos de los bancos centrales y aspirar a retornos superiores a la evolución del gran enemigo del ahorrador, es decir, la inflación.

Tribuna de Germán García Mellado, gestor de Merchbanc SICAV Renta Fija Flexible, en Merchbanc.

Seizing the Infrastructure Opportunity

| Por Gabriela Huerta | 0 Comentarios

Bridges, roads, water systems…these are but a few examples of the infrastructure essential to keep the global economy moving forward. Infrastructure itself demands ongoing investment. In the developed world, the need is for improvement and new capacity; in emerging markets, urbanization and population growth are driving new spending. Indeed, global infrastructure projects are forecast to more than double by 2030.

Such a robust expected growth rate for infrastructure is certainly supported by the current environment. Not only does the need for more spending exist, but, according to Legg Mason, there’s heightened interest for more fiscal stimulus, especially in the developed world, to help boost a lackluster rate of economic growth. Monetary policy initiatives have largely supported the world economy since the financial crisis of 2008, but if fiscal policy begins to play a larger role then infrastructure could be a natural beneficiary.

Infrastructure in the US: The Trump factor

Increased infrastructure spending is certainly a priority for the new Trump Administration in the United States and it’s one of those rare issues that seem to have a lot of bipartisan support, increasing the likelihood that it actually happens. One of the world’s most important proponent of infrastructure investment right now can be seen in President Donald Trump’s well-publicized trillion-dollar spending objective, the details of which however, are not yet known. According to Richard Elmslie, co-CEO and Portfolio Manager at Legg Mason, “In general, what President Trump is really trying to do is, rather than to build a lot of new infrastructures, to rebuild those existing infrastructures that are in poor condition, and this is actually a proposal that carries fewer risks. His vision is exactly how we look at the infrastructure sector.»

Ajay Dayal, Investment Director at Legg Mason added that «when we find opportunities, we apply a highly-disciplined bottom-up process based on risk-adjusted returns; in fact, RARE is the acronym for Risk Adjusted Return on Equity. Opportunities can come from different factors: from profitability factors, political, or changes in the economic outlook,» explains Dayal. As an example, he recalled that just after the US elections, after Trump was elected, bond yields began to rise and many people began to flee from utilities, which the market sees as a proxy asset to public debt. «After a while, these companies became really inexpensive and from our perspective, when there is a generalized exit from this type of stocks, we must study the opportunities that have arisen there in terms of valuations,» he points out. But the question surrounding Trump is whether this is a time to invest in infrastructure because of the plan that could be implemented in the United States, or whether there is something else. Dayal is convinced that this opportunity, in which the private sector will play a very important role in the financing of projects, is going to spread to many more countries. «Trump’s agenda is incredible for attracting infrastructure investments to the United States, and it’s making people realize that the best way to create growth in a country’s economy is through spending in this area. But Trump’s plan is also going to make other developed and emerging countries take a look at it in terms of productivity.

The need for investment capital

While the public sector will remain a major source of financing, greater private sector participation is a must, given fiscal constraints and the sheer magnitude of the need. With greater involvement from the private capital markets the opportunities for investors should naturally increase as well. In fact, the demand for private-sector capital to make ambitious plans a reality creates opportunities for investors looking to participate in this growth, and to participate in the income opportunities which are a unique feature of this type of investment.

Recognizing the income opportunity

For investors, infrastructure offers a potential opportunity to address some of today’s challenges—like the need for competitive income. Indeed, the S&P Global Infrastructure Index, a key benchmark for the sector, sported a dividend yield of 3.75% as of 3/6/17 compared with 2.37% for the MSCI World equity index and just 1.68% for the Bloomberg Barclays Global Aggregate Bond Index.

In some cases infrastructure company revenues are regulated and often linked to inflation. This can provide for stable cash flows and serve as a potential hedge against inflation. Stable cash flows can allow for sustainable dividend payouts and may contribute to lower correlation and less volatility relative other major global asset classes, which can make it a worthy diversifier in a broader portfolio.

Behind the income from infrastructure investments

Infrastructure investments are uniquely appropriate for investors looking for secular growth in the longer term. The listed companies in these sectors can generate stable dividends and have the potential to generate returns at attractive valuation levels. But surprisingly, it’s the regulated nature of the infrastructure companies that accounts for the highly sought-after potential for stable income for those investors. The electricity, gas or transportation companies, and other key services for citizens such as water supply, airports, roads, hospitals or schools, — along with their associated distribution and maintenance operations – are almost all regulated by governments or agencies – and those regulations tend to focus on minimum and maximum profit margins, as well as on distributions from the income they generate. But that regulation doesn’t encompass the share prices for these companies, which can – and does – fluctuate, providing opportunities for value-minded and risk-averse investors such as the ones offered by RARE Infrastructure to generate attractive total return for its investors.

MFS: Why is Reconsidering Active Management Now More Important than Ever?

| Por Fórmate a Fondo | 0 Comentarios

How much does active management contribute as compared to passive management? With this question, Michael Roberge, CEO, President and CIO of MFS Investment Management opened his presentation at the 2017 MFS Annual Global Analyst and Portfolio Manager Forum, which took place in Boston in mid-May.

According to Roberge, some of their larger and more sophisticated clients, including those who manage sovereign wealth funds and pension plans, are increasing their positions in actively managed funds, contrary to what the average retail client is doing. During his talk, he explained the main reasons why clients should, according to MFS, consider active management in this environment, compared to investing passively.

The Short-Term Mentality of the Bulk of the Market

In the period immediately following Donald Trump’s election in November last year, the market rose between 6% and 7%. For Roberge, even more noteworthy than this rally, was the massive turnaround from the more defensive and higher-quality sectors to much more cyclical sectors, with the expectation that the new administration would reduce taxes and that the regulatory burden would be lower. Likewise, any increase in economic growth was traded: the price of deep cyclical stocks soared and consumer staples companies suffered a fall in prices. This was caused in part by investors who pursued these sectors out of fear of falling behind the benchmark in terms of performance. In a clear example of how the short-term mentality dominates the behavior of the markets, more than five months after Trump’s takeover, a new rotation in the opposite direction was happening. Investors have begun to perceive that it will be difficult for Trump to get approval for significant spending on infrastructure, and that he lacks support for much of his election promises.

According to Michael Roberge, this was clearly reflected in the deep cyclical sectors: US Steel’s stock price, which was US$ 21 per share pre-election, doubled to US$ 42 per share, only to returning a few months later to US$ 21. Meanwhile, MFS ‘strategy was to sell cyclical stocks and buy defensive stocks. The asset manager’s teams look for returns with horizons of three-to-five years, identifying long-term opportunities. This is where the firm thinks it has the greatest opportunity to add alpha to a portfolio.

Higher Volatility

Another factor playing in favor of active management is the minimum volatility period experienced in the last decades. This is largely a consequence of the accommodative policies of central banks.

The European Central Bank, as well as the Bank of England and the Bank of Japan continue with quantitative easing programs; and while the Fed appears to be at the beginning of a rate-hiking cycle, Roberge argued that when inflation is considered, the real interest rate of Federal Funds is negative, which is especially stimulating for an economy growing at around 2%, with the potential to grow at 4%. In the CEO’s opinion, it could be said that all central banks globally, continue to inject liquidity into the system, which not only keeps interest rates low, but also suppresses market volatility.

MFS claims that, in the next ten years, a low growth scenario will persist globally. There is a problem of over-indebtedness and an aging global population in the major developed economies which will cause the world economy to remain below its potential.

For Roberge, the only way to achieve greater growth in real terms would be by fostering an increase in the labor force, something which new immigration policy trends are slowing, or increasing productivity. This last variable is the one that can best be implemented by governments worldwide.

“The global economic environment is still more deflationary than inflationary. In Japan, they have been trying to generate inflation for over 30 years, something that is also beginning to happen in the United States. The latest inflation data (with respect to the previous year) have been downward, even only taking into account the underlying inflation. It could be said that there is an inflation problem at the global level,” said Roberge.

Given these factors, MFS believes that investors can expect a world with lower economic growth, in which there will be greater volatility, as economies will face greater challenges. “There will be new episodes of uncertainty in Europe: Greece will reappear in news headlines due to debt renegotiation, and Italy will hold general elections in May 2018. And finally, the moment central banks begin to remove excess liquidity from markets, higher levels of volatility will be created, which, when added all up, represents a huge opportunity for active management as compared to passive,” he added.

For Roberge, this does not mean that a portion of the portfolio shouldn’t be invested in passive management vehicles, but how much is being spent on active management should be reconsidered.

A Disruptive Environment

According to MFS, another one of the fundamental keys that indicate that it will not be enough to buy the index to achieve the investment objectives is disruption. A large number of industries are going through a disruptive period: “The most obvious example is the retail sector where Amazon is crashing its competitors in the traditional retail segment. More and more sectors are undergoing a period of transformation: Airbnb, for example, has led to a similar change in the leisure industry, Uber has broken into the taxi industry, robo-advisors and smart beta ETFs have hit the financial industry. All of these examples, which highlight the complexity of the environment, make passive management less attractive.”

Now More than Ever, Investors need Active Management

Continuing with the discussion, Roberge highlights two reasons why investors should consider positioning themselves in actively managed vehicles: return and risk management. In relation to the return of the markets in the next ten years, the asset management company expects a global equity return of around 4.3%. This figure is considerably lower than historical returns, especially since starting valuations are very high, meaning most of the opportunities are already priced into the current market prices.

Meanwhile, the expected return for the same term in global investment grade fixed income is roughly 3%. Historically, rates are at very low levels, leaving very little room for capital appreciation gains, and leaving only the coupon search and the spreads on corporate debt as the main source of return for this asset class. Therefore, according to MFS, the average investor who invests in a balanced portfolio could achieve an estimated annual return of close to 4% over the next decade.

These returns make it extremely difficult for the bulk of investors to achieve their retirement goals. Therefore, they will need an additional source of return to achieve their goals, something that can only be achieved through active management and alpha generation,” Roberge said.

In this regard, the alpha in portfolios becomes a more important element than ever. According to MFS projections, for US large cap equities, the contribution of active management in terms of excess return on the index will increase from the 17% registered historically (2% over 10.1%), to 42% (2% over 2.8%). While in fixed income, active management’s contribution will increase from 12% (1% over 7.5%) to 24% (1% over 3.1%).

However, investors have recently stopped believing that there is alpha opportunity and lean instead passive management, seeking only lower commissions, regardless of net returns. In ten years, these investors will be very disappointed if indeed the MFS forecasts are met and their index returns are limited to below the 4% offered by the market, regardless of how low the fees charged by passive vehicles may be. For all of the above, Roberge encourages reconsidering active management as the main way to reach long term investment objectives.