In the latest edition of Global Outlook Standard Life Investments look ahead to 2017, and how its ‘House View’ is positioned in the light of a supportive monetary and fiscal landscape.
Neil Matheson, Market Strategist, highlights that 2016 has been typified by uncertainty in areas such as politics, US interest rates, China and European banking which has spurred many investors to build up high levels of cash. However, despite commentary being dominated by these downside risks, risk assets have been quietly moving higher.
Standard Life Investments believes this rally, which has been seen across credit, equities and global real estate, has been driven by an improvement in the global cycle and a move towards ‘pro-growth’ policies across many of the major economies. As we head into 2017 global monetary conditions are supportive of growth, and there is now active discussion about fiscal easing globally.
Neil commented: “Against this more supportive backdrop in 2017, we anticipate only moderate returns from government bonds, and find better value in credit, particularly higher yielding credit. We also see opportunities in hard currency emerging market debt, as long as there is not a significant rise in US-led protectionism. In equities, although valuations appear high if considered in isolation, they still look cheap if viewed on a yield basis relative to government and corporate bonds. Across equity markets, the US looks the most dependable but it also commands the highest valuation. When it comes to emerging markets it will be important for Chinese policy to remain supportive, the Fed to ‘go slow’ and the Trump administration not to deliver any trade shocks. Meanwhile, in Europe and Japan, we are expecting support from stable-to-slightly weaker exchange rates. At long last authorities appear to ‘get it’ that continued, sustained expansion is required to get the world out of the stop-and-go cycle it has been stuck in since the Great Recession. Markets have only begun to anticipate these developments – assuming of course that political tail risks do not cause undue levels of market volatility.»
“As long as the US President-elect avoids a disruptive increase in trade protectionism, this should reinforce the improvement in global growth, inflation and corporate earnings trends that were already underway before the US election, and was supporting the rotation towards a heavier equity and lighter government bond exposure in the House View.” He concluded.
For the full December Global Outlook research follow this link.
BNY Mellon Investment Management has launched the BNY Mellon Global Leaders Fund, investing in global companies with dominant business models, enduring growth potential and strong cash flow generation.
The fund is managed by global equity manager Walter Scott & Partners, fully owned by BNY Mellon, and aims to achieve long term capital growth through a bottom up, fundamental, investment approach.
It will consist of a portfolio of 25 to 30 of the world’s most innovative and market leading global companies. The strategy will be biased towards large cap companies ensuring sufficient liquidity.
The fund is registered in all standard BNY Mellon Global Funds European jurisdictions including Denmark, France, Germany, Italy, Switzerland, the Netherlands and Spain.
Minimum investment is €5000, $5000 or £5,000 depending on the share class.
“Walter Scott has an outstanding long term track record and is renowned for its rigorous and proven approach to global equity investing. In an environment which is likely to become more challenging, Walter Scott believes markets will become more discerning and quality will be rewarded,” said Matt Oomen, head of International Distribution at BNY Mellon Investment Management. “We are delighted to offer investors a concentrated, benchmark agnostic, outcome driven portfolio which aims to harness the power and stability of the biggest and best run global businesses.”
As of 30 September 2016, BNY Mellon IM had $1.7trn (€1.57trn) in AUM.
BlackRock will lead iCapital’s next funding round. Frank Porcelli, Chairman of BlackRock’s US Wealth Advisory business, will join iCapital’s Board of Directors and will work closely with the organization as a strategic advisor.
Individual investors remain significantly under-allocated to alternative investments relative to institutional investors, but are increasingly exploring the critical role alternatives can play in state-of-the-art portfolio construction. iCapital’s online platform facilitates access to private investment opportunities through an independent origination and due diligence process that prioritizes quality offerings from an array of top managers, and provides an end-to-end technology solution automating the unique subscription, administration and reporting processes of alternative investments.
“We are building the largest independent digital alternative investments platform in the industry. In BlackRock, we have an investor who understands the importance of technology’s role in the wealth management ecosystem,” said Lawrence Calcano, Chief Executive Officer of iCapital Network. “BlackRock’s decision to lead our next round of funding validates the steps we’ve taken thus far and gives us a springboard to scale the platform for future growth.”
iCapital recently announced that it has surpassed $2 billion in subscriptions from approximately 3,000 investors across more than 40 private offerings since the public launch of its platform two years ago. Its member network has expanded to include more than 1,300 users from RIA firms, private banks, independent broker-dealers, family offices and other sophisticated advisory organizations that collectively oversee more than $1.7 trillion in investable client assets.
“Based on our experience, as well as dialogue with our distribution partners, iCapital Network’s open-architecture alternatives platform solves a critical problem for high-net-worth investors and their advisors,” said Frank Porcelli, Chairman of BlackRock’s US Wealth Advisory business. “iCapital’s combination of due diligence capabilities, technology and relationships with alternative asset managers seamlessly facilitates investments in hedge funds and private equity funds, including BlackRock Alternative Investors.”
Burkhard Varnholt is to become Chief Investment Officer Switzerland of Credit Suisse with effect from January 1, 2017. He will assume this role in addition to his responsibilities as Deputy Global CIO and Vice-Chairman of the Investment Committee of Credit Suisse.
As announced by the bank today, Burkhard Varnholt is to become the new Chief Investment Officer (CIO) Switzerland of Credit Suisse with effect from January 1, 2017. He will assume this role from Anja Hochberg in addition to his responsibilities as Deputy Global CIO and Vice-Chairman of the Investment Committee. In his new role, Varnholt will report both to Michael Strobaek, Global CIO and Head of Investment Solutions & Products, and Thomas Gottstein, CEO of Credit Suisse (Switzerland) Ltd. Anja Hochberg will continue in her role as Head of Investment Services and will remain a member of the Investment Committee.
The 48-year-old Varnholt rejoined Credit Suisse in November 2016, having worked for the bank from 1996 to 2006 as Global Head of Financial Products & Investment Advisory in Private Banking. From 2006 until 2014, he was Chief Investment Officer at Bank J. Safra Sarasin. Thereafter, he was Chief Investment Officer and Head of Investment Solutions Group at Julius Bär for almost two years. Varnholt holds a Master’s Degree and a Ph.D. in economics from the University of St. Gallen.
The changing demographics and the ageing populations in many regions have led to top heavy societies. In the developed world the issue of changing demographic profile needs no explanation and whilst the changes happen at glacial pace they really matter.
We found some statistics about the changing global demographics eye opening:
Currently there are 20 countries with declining populations; by 2050 this is expected to be 80 countries.
In the not too distant future it is expected that all of the main economic forces in the world will see a decline in their working population apart from the US.
Germany needs 650k net migration every year for the next 20 years just to keep the workforce flat.
The changing demographics and ageing population profile of different regions has originated some new investment ideas. For global equity investing, it is important that we identify companies where there is a positive change in their business or operating environment, but the stock market valuations and forecasts are not fully reflecting the implications of such change.
Some companies are set to benefit from the changing demographics and aging populations, such as those with a core business on accommodation for the older generations and healthcare.
In the UK, it is forecast that the number of over 55’s is growing at twice the rate of the UK population average, implying that in 15 years’ time there will be approximately one third more over 55’s than there is today.
One of the companies looking to benefit from this changing demographic is McCarthy & Stone, a leading UK retirement home builder. According to McCarthy & Stone, it accounted for 70% of this niche privately-owned retirement accommodation in the UK, focusing on selling homes to over 55’s. The McCarthy & Stone products are priced to attract older residents wishing to downsize and release equity. The facilities are custom built for the demographic they serve and include common spaces and house managers although the accommodation still provides separate living.
When looking for opportunities in the global equity universe, it is important that we constantly meet with companies and discuss industry trends with their peers, suppliers, and other companies who serve the same end market so as to build a view on the strength of different companies’ potential customers, test our investment thesis and challenge our non-consensus angle.
From our analysis, McCarthy & Stone’s internal transformation programs are expected to lead to greater margins than the market expects. Their land bank acquisitions have been executed at better gross margins than the market believes, which is driven by higher hurdle rates set by management. It is believed that they are capable of accelerating completions above the targeted 3,000 pa.
Another interesting example is Orpea, a French listed operator of high end nursing homes with majority of the business in France currently. However, due to limited licences being granted in France, this company has focused the growth overseas, primarily in Europe but also with one early stage venture in China.
By understanding the company’s on-the-ground approach to M&A and their international greenfield expansion plans which are already in motion, we believed that sustainability of 5% M&A growth and acceleration of organic growth to above 5% from 2018 is not in consensus numbers.
Regulation around licences and the inability to do a deal to buy scale makes it hard for competition to present a large threat in their markets. There are no new licences being granted in France and besides Orpea and Korian there are no large competitors. In addition, there is a hugely inadequate stock of specialised care beds for the last stages in life. Growth opportunities therefore exist for a top end operation like this where the focus is on providing very high quality care home for the older generation.
The changing demographic profile in different regions bring challenges but also investment opportunities. Market very often is not fully appreciating the positive implications of some of those positive changes companies are undergoing – investors should focus on identifying such opportunities.
Column by SLI written by Mikhail Zverev, Head of Global Equities, Standard Life Investments
Asia ex-Japan retail investors of all wealth tiers and age groups have become more conservative in 2016 compared to 2015, a survey conducted for the upcoming The Cerulli Report – Asian Wealth Management 2016 has shown.
Due to unsettled market conditions, Asia ex-Japan retail investors have become less patient in their investment horizons. The survey reveals the proportion of respondents with an investment horizon of three years or less rose 48.4% in 2016, from the 39.1% seen in the 2015 survey.
Generally, Asia ex-Japan investors have higher cash holdings in 2016 compared to last year. Except for India, investors in other Asian markets pared down their exposure to unit trusts, mutual funds, and exchange-traded funds.
Indian investors appeared to put more money in managed funds at the expense of investment properties. Hong Kong investors also reduced their exposure to investment properties as prices have been falling steeply in recent years, in favor of directly held bond investments.
Meanwhile, the shift from other asset classes to alternatives was muted for the past year. The survey reveals China is the only country that showed a more than one percentage-point uptick in holdings in the asset class between the 2015 and 2016 surveys.
However, Cerulli notes that alternative products in China are unlike those available in Singapore, for example. In China, alternatives tend to be in the form of structured products, whereas in Singapore, they are often more conventional liquid alternative funds. Cerulli notes that allocations to alternatives in Singapore remained steady over the period, helped by their availability to lower-wealth-tier investors.
Third, funds of funds managed by foreign asset managers have become popular in Taiwan, as they oversee seven of the top-10 funds of funds in terms of inflows year-to-date July 2016.
Evidently, Taiwanese investors are very keen for international exposure. Cerulli believes this provides foreign asset managers with the opportunity to leverage their reputation and expertise to make greater inroads onshore.
Meanwhile, as the FSC continues to tighten regulations on the offshore fund space, it will be harder for smaller, boutique foreign asset managers with niche investment products to enter the Taiwanese market.
This might have an impact on the diversity of products available to Taiwanese investors, and Cerulli notes that it will be ideal for offshore and onshore fund management to co-exist so as not to potentially stifle further product innovation.
Foto: legabbiedelcuore. Los prejubilados priman la construcción de su legado sobre la acumulación de patrimonio
Los estadounidense de entre 51 y 69 años tienen una visión única de la vida, sobre todo cuando se trata de la gestión financiera y los seguros, según el libro blanco recientemente publicado por Chubb. Si bien comparten alguno de los intereses y pasiones con las siguientes generaciones, los prejubilados se preocupan más por construir su legado que por acumular riqueza.
Según el trabajo “The Pre-Retirees: Changing Minds, Changing Needs«(Prejubilados: cambiando su mente, cambiando sus necesidades”), este grupo de población posee cerca de 8 billones de dólares en activos, pero, a diferencia de las generaciones más jóvenes, la mayoría no se preocupa en acumular más riqueza o propiedades, sino más bien en lo que ha logrado y el legado que quiere dejar«, explica Alanna Johnson , SVP, responsable de los Servicios de Riesgo Personal de Chubb. «Esto tiene implicaciones sobre cómo los pre-jubilados y sus asesores abordan la gestión de riesgos. Los asesores patrimoniales y agentes de seguros pueden dar mejor servicio a esta generación si comprenden los cambios en el perfil de riesgo del cliente y diseñan un programa holístico de gestión de riesgos que se adapte a su estilo de vida”.
Algunos de los asuntos relacionados con los prejubilados que sus asesores deben ser conscientes de incluir son: las implicaciones de labores de voluntariado en juntas de entidades caritativas; los riesgos surgidos de nuevas propiedades, pues cada vez son más los mayores que se mudan o compran propiedades para estar más cerca de sus hijos y nietos adultos; los imprevistos en la protección derivados de estrategias sofisticadas de transferencia de riqueza, como el establecimiento de un fideicomiso o LLC; la cobertura de repatriación médica y seguro de viaje en caso de accidente o lesión en el extranjero.
Photo: Pok_Rie. Por qué no es buena idea seguir ignorando a los mercados emergentes
Según Derek Silva, portfolio manager de la gestora finlandesa Evli, nada asusta más estos días que las palabras deuda corporativa de los mercados emergentes. La lista de aspectos espantosos es abundante:
Los asuntos geopolíticos de Rusia.
El intento de golpe de estado en Turquía y la rebaja de su calificación a bono basura.
Escándalos empresariales y políticos en Brasil.
La obsesión del presidente electo de Estados Unidos con México.
Entonces, ¿deuda corporativa emergente? ¿Quién compra eso? “Bueno, si ignoramos esos activos estaremos perdiendo una excelente diversificación y el mejor ratio riesgo-rentabilidad de los últimos 17 años. De hecho, desde 1999, la deuda investment grade de los mercados emergentes tiene el mejor ratio riesgo-rentabilidad (en términos de ratio Sharpe) entre todas las principales clases de activos de renta fija. Y de hecho, la deuda high yield de los emergentes supera a su homóloga estadounidense y a la de la Unión Europea en la misma medida”, explica (ver imagen abajo).
Silva afirma que es interesante que, pese a que la diversificación es uno de los principios básicos de la inversión, muchos inversores sólo realizan pequeñas asignaciones a renta variable o renta fija de los mercados emergentes, a pesar de que las tasas de crecimiento de estos últimos son el doble que en las economías desarrolladas. Solamente en el escenario extremo de este año, los inversores han acumulado posiciones en las acciones y deuda de los emergentes.
Pero aunque las entradas de capital minorista en la deuda corporativa de los emergentes alcanzaran niveles récord este verano, una encuesta reciente de JP Morgan reveló que la mayoría todavía está infraponderado en los mercados emergentes. Como ejemplo de los beneficios de añadir deuda emergente a la cartera de un inversor, desde 1999, la inclusión de deuda emergente investment grade y high yield (a las tenencias de crédito de EE.UU.) ha proporcionado un 0,5% extra de retorno para el mismo nivel de riesgo (ver imagen abajo).
«Creo que el mercado de los mercados emergentes es más resistente a las crisis que los mercados estadounidenses y europeos. ¿Por qué? Porque los mercados desarrollados descuentan a la perfección cualquier evento y un escándalo o crisis puede tener efectos negativos de forma generalizada. Basta con mirar el ejemplo más reciente: los problemas en un banco (Deutsche Bank) sacudiendo los mercados europeos e incluso los de EE.UU.», añade.
Por el contrario, dice el gestor de Evli, los emergentes se distribuyen en cinco regiones muy diferentes (Asia, América Latina, Oriente Medio, Europa del Este, África) y más de 40 países dentro del amplio índice de bonos corporativos (ningún país tiene más del 10% de ponderación). Estas incluyen incluso economías avanzadas (como Singapur, Taiwán, Hong Kong y Corea), junto con países de mayor riesgo como Rusia, Turquía y Sudáfrica. Pero es raro que una crisis individual afecte el mercado de crédito de los emergentes en su conjunto.
En 2016, los mercados de crédito de los emergentes han registrado la mejor evolución en renta fija global, con retornos de dos dígitos, a pesar de una cascada de factores negativos:
Persisten los bajos precios en las materias primas
Lenta recuperación de Brasil y Rusia
Problemas políticos en Turquía y rebaja de su calificación crediticia a ‘bonos basura’
Inminente rebaja de la calificación crediticia de Sudáfrica a ‘bonos basura’
Persistentes preocupaciones en China
El efecto Trump en México
La inminente amenaza de una subida de tipos de la Fed.
“Creo que esto es un testimonio de la diversificación, crecimiento y capacidad superior de los emergentes para obtener un atractivo ratio de riesgo/rentabilidad a largo plazo. Y esto no puede ser ignorado por mucho tiempo”, concluye Silva.
A political agreement reached on the Money Market Fund Regulation was signed-off by the Council of Ministers on December 7th in a meeting of EU Ambassadors (COREPER) and on December 8th by the European Parliament’s ECON Committee. These votes followed an original proposal by the European Commission in September 2013.
According to a press release, «EFAMA is appreciative of the work done and time spent by EU policymakers, which has resulted in a more workable outcome than the initial proposal, for European investors, MMF managers and the Capital Markets Union more generally.»
Peter De Proft, Director General of EFAMA commented: “EFAMA members manage both VNAV and CNAV Money Market Funds. From the outset, we have indicated that a proportionate and balanced Regulation which ensures the viability of both CNAV and VNAV MMFs can support alternative sources of financing to the real economy, a key focus of the European Commission’s flagship initiative on a Capital Markets Union.”
He continued: “In terms of CNAV MMFs, we welcome the creation of the LVNAV product which has the possibility of offering investors a real alternative to European CNAV Prime MMFs. Equally important is the retention of a workable government CNAV regime in different currencies. For the VNAV industry, a number of serious operational challenges have been minimised. However, the MMFR is by no means a panacea for either the industry or investors in MMFs”.
One noteworthy concern for both sides of the industry are the liquidity calculations of MMFs. EFAMA believes that the lack of a principles-based approach on liquidity will make it difficult to determine whether the arbitrary thresholds set in the final political agreement will be workable in different market scenarios.
EFAMA also regrets the agreement’s rejection of MMFs being able to operate as funds of funds, an important mechanism used by many VNAV managers for diversification purposes, and points out to some outstanding concerns on how the exemption from the 10% diversification limit of assets in deposits would work.
Finally, there are some practical difficulties with the ‘Know Your Customer’ requirements and the periodic reviews of the internal credit quality assessments will, in EFAMA’s view, not be workable for smaller players on the market.
Peter De Proft concluded: “There is no doubt that today’s MMFR result is a better outcome than the initial European Commission proposal. However, one cannot ignore the number of question marks on the potential consequences of different parts of the agreement. It remains to be seen whether smaller players will be able to continue operating, given the more elaborate compliance and disclosure requirements, combined with low business margins”.
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council decided to continue its purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017. From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If, in the meantime, the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP.
To ensure the continued smooth implementation of the Eurosystem’s asset purchases, the Governing Council decided to change some of the parameters of the APP. In addition to the extension of the programme, the following parameters will be adjusted on 2 January 2017:
The maturity range of the public sector purchase programme (PSPP) will be broadened by decreasing the minimum remaining maturity for eligible securities from two years to one year.
Purchases of securities under the APP with a yield to maturity below the interest rate on the ECB’s deposit facility will be permitted to the extent necessary. The implementation details will be worked out by the relevant committees.
