Erste AM Appoints Winfried Buchbauer as New Board Member

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Erste AM has announced the appointment of Winfried Buchbauer as new Board Member. The management board of EAM will now consist of Heinz Bednar, CEO, Christian Schön and Winfried Buchbauer.

Buchbauer, who is 51, will be in charge of the areas of Risk Management and Back Office. As an executive director he will cover the market support functions of the company. Hehas a proven track record as a legal counselor in the financial service industry. In his last position as division head with EAM, he was in charge of the Legal department, Human Resources, Network & Project Management, and the Communications department. Furthermore, since January 2016 Winfried Buchbauer is a member of the management board of RINGTURM KAG, a subsidiary of EAM.

EAM coordinates and is responsible for the asset management activities within Erste Group. In Austria, Croatia, Czech Republic, Germany, Hungary, Romania, and Slovakia EAM manages assets of 55.8 billion Euros (as of Dec 2015).

Nanette Aguirre se une al consejo de Florida Alternative Investment Association

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Nanette Aguirre Joins Board Of Florida Alternative Investment Association
Foto: Phillip Pessar . Nanette Aguirre se une al consejo de Florida Alternative Investment Association

Nanette Aguirre, una veterana abogada de Greenberg Traurig, se ha unido al consejo de la Asociación de Inversión Alternativa de Florida (FAIA). Aguirre está especializada en derivados y productos financieros estructurados y aporta años de experiencia en la negociación de todo tipo de derivados internacionales, corretaje y acuerdos de brokerage con instituciones globales, según explicó Michael Corcelli, presidente y fundador de la asociación basada en Miamiy CIO de Alexander Alternative Capital, al anunciar su incorporación.

Antes de unirse a la oficina de Greenberg Traurig’s en Nueva York como accionista, Aguirre tuvo oportunidad de trabajar con algunos de los mayores hedge funds, fondos y planes de pensiones del mercado, desde su puesto en una gran firma de asesoramiento legal. En la actualidad desarrolla su labor profesional en América Latina, incluidos México y Colombia. Con anterioridad había trabajado en Deutsche Bank, Merrill Lynch y Lehman Brothers, donde adquirió su experiencia en derivados.

Debitos Launches a New Online Trading Segment for Distressed Assets

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The German receivables exchange Debitos is now offering a new trading segment on its online auction portal: From now on it’s even easier to sell claims against insolvent companies to the highest bidder. On the site creditors and investors have a direct overview of current company insolvencies whose receivables are being searched or traded on the Debitos online exchange. At Debitos alone some €1.3 billion of private capital from German and international investors is waiting for offers from sellers.

In most insolvencies the creditors have to wait for several years before finding out how much their claims are still really worth. So it often makes sense to sell claims to the highest bidder as quickly as possible, rather than leaving non-performing capital on the books. But how to find the best price and a solvent buyer? At the receivables exchange claims against insolvent companies can be auctioned off to the highest bidder. Since the online exchange started up in late 2012 more than 1,000 creditors, including several Landesbanks, have sold non-performing loans (NPL) valued at more than one billion euros via Debitos.

Claims against insolvent companies are one type of what are known as «distressed assets». There is a large international market for this kind of investment – a market with risks, but interesting prospects too.

Last year already saw the first auctions on the site involving significant volumes of claims against companies like Prokon and KirchMedia. «We are seeing great interest in this segment», says Timur Peters, managing director of Debitos, explaining why it is being expanded. «In Germany it takes an average of four years to wind up an insolvent company. The outcome is often uncertain and capital is tied up all the time», says Peters. «So it is logical that we are paying more attention to this segment, because it provides much-needed liquidity directly.»

Sellers at Debitos can set a minimum price and then watch how investors place bids for the receivables in the online marketplace – the highest bid wins. All that is required to register a seller are the contact details of an authorised representative, a valid company address, VAT ID and a valid email address. Then the company details are verified to ensure that the information provided is correct. The competent Debitos team takes care of preparing the documentation for the auction. For banks and other companies the presence of currently some 350 specialised investors from all over Europe represents a real incentive to offer their outstanding receivables from a range of insolvencies for sale. Investors registered on the exchange consist mainly of banks, funds, debt collection agencies and lawyers.

Los gestores activos están más amenazados por el potencial de crecimiento de las estrategias de beta estratégica que los pasivos

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Active Managers Are More Threatened by the Potential Growth of Strategic Beta Compared to Most Passive Managers
Foto: m.shattock . Los gestores activos están más amenazados por el potencial de crecimiento de las estrategias de beta estratégica que los pasivos

El crecimiento de los activos asignados a estrategias de beta estratégica seguirá mermando la capacidad de los gestores de estrategias activas para retener inversión, según el nuevo informe de Cerulli Associates “Evolución de la inversión pasiva y de beta estratégica en 2016: oportunidades para gestores activos e indexados”.

«La gestión de beta estratégica se encuentra en un punto medio entre la gestión activa y la pasiva y puede ser vista como un enfoque híbrido», afirma Jennifer Muzerall, directora asociada de la firma. «Las suposiciones subjetivas sobre su estrategia de inversión la hacen parecer una estrategia activa, pero su implementación basada en reglas y su transparencia presentan características similares a las de gestión pasiva».

El crecimiento de los activos asignados a estrategias de beta estratégica aumentará a medida que más inversores entiendan los beneficios de incluir productos de beta estratégica en sus carteras, como su potencial de reducir el nivel de riesgo de la cartera y de mejorar rendimientos mientras reduce costes, en comparación con la gestión activa.

«Durante la próxima década, la beta estratégica puede influir en el nacimiento de una nueva forma de contemplar la base de la inversión pasiva», explica Muzerall. “El desarrollo de la beta estratégica eleva el listón a la capacidad de los gestores de activos de generar alfa. Los gestores de estrategias activas se están moviendo a regañadientes hacia la beta estratégica, porque siguen viendo salidas de los productos activos. Aunque nuevas inversiones puedan alimentar los productos de beta estratégica, los gestores se muestran preocupados porque la oferta de beta estratégica pueda canibalizar las de los productos activos existentes«.

«Por otro lado, los gestores pasivos ven la beta estratégica como una oportunidad para ofrecer productos diferenciados, con mayores fees y una salida del altamente competitivo y estandarizado mundo del pasivo”, continúa Muzerall. Esto nos hace preguntarnos quién debería estar más preocupado, ¿los gestores activos o pasivos? «Cerulli cree que los gestores activos están más amenazados por el potencial de crecimiento de las estrategias de beta estratégica que los pasivos«.

Increasing Signs of Economic Slowdown throughout the World

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Signs of economic slowdown are increasing worldwide. This is the view of Guy Wagner, Chief Investment Officer at Banque de Luxembourg, and his team, published in their monthly analysis, ‘Highlights’.

Apart from weakness in the manufacturing sector, services activities are also starting to be affected, despite the favorable effects of falling oil prices on consumer purchasing power. «According to official advance estimates, US GDP slowed to 0.7% in the fourth quarter of 2015, due to a dearth of corporate investments and a slowdown in consumer spending. Most economic indicators also tended to deteriorate in other regions,» Guy Wagner adds.

January was a particularly difficult month for equity markets

January was a particularly difficult month for equity markets. The ongoing weakness of oil prices and increasing signs of economic slowdown heightened investors’ aversion to risk. The S&P 500 in the United States, the Stoxx 600 in Europe, the Topix in Japan and the MSCI Emerging Markets (in USD) all lost ground. «The financial sector was particularly shaky due to prospects of deterioration in companies’ capacities to service their debt following the slump in commodity prices and the economic slowdown,» says Guy Wagner. «Given current zero interest rates, the difficulty the central banks would have in responding to a major economic downturn makes equity markets vulnerable.»

Key interest rates unchanged in the United States and Europe

Having raised the fed funds interest rate by 25 basis points in December, the US Federal Reserve left interest rates unchanged at its January meeting. According to Guy Wagner, «Higher volatility on the financial markets and increasing signs of economic slowdown worldwide have reduced the probability of further monetary tightening in the coming months.» In Europe, ECB president Mario Draghi hinted at the introduction of further monetary stimulus at the Bank’s next meeting in March to combat low inflation.

No concessions on company quality

«In Europe, economic statistics continue to surpass low expectations, but in absolute terms the pace of growth is flagging.” Active management within asset classes, especially equities, is therefore all the more vital. «While the economic and financial environment remains weak, it is particularly important not to make concessions in terms of the quality of the companies in which you invest,» concludes Guy Wagner.

Gold Now?

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Gold never changes; it’s the world around it that does. Why is it that we see a renewed interest in gold now? And more importantly, should investors buy this precious metal?

Key attributes in a ‘changing world’ that may be relevant to the price of gold are fear and interest rates. Let’s examine these:

Gold & Fear
When referencing ‘fear’ driving the markets, most think of a terrorist attack, political uncertainty or some other crisis that impacts investor sentiment, and sure enough, at times, the price of gold moves higher when this type of fear is observed. While that may be correct, I don’t like an investment case based on such flare-ups of fear, as I see such events as intrinsically temporary in nature. We tend to get used to crises, even a prolonged terror campaign or the Eurozone debt crisis; whateveras the ‘novelty’ of any shock recedes, markets tend to move on.

Having said that, I believe fear is under-appreciated – quite literally, although in a different sense. Fear is the plain English word for risk aversion. When fear is low, investors may embrace «risk assets,» including stocks and junk bonds. A lack of fear suggests volatility is low; as such, investors with a given level of risk tolerance may understandably re-allocate their portfolios so that the overall perceived riskiness of their portfolio stays the same. While retail investors might do this intuitively, professional investors may also do the same, but use fancy terminology, notably that they may target a specific «value at risk,» abbreviated as VaR. Conversely, our analysis shows that when fear comes back to the market – for whatever reason – ‘risk assets’ tend to under-perform as investors reduce their exposure.

Assuming you agree, this doesn’t explain yet why gold is often considered a ‘safe haven’ asset when the price of gold is clearly volatile. To understand how the price of gold is affected relative to risk assets, we foremost need to understand how risk assets move; after all, remember our premise that gold doesn’t change, the world around it does.

A traditional way to value a risky asset is with a discounted cash flow analysis. With equities, for example, one adds up expected future earnings, but discounting the future earnings stream.  When future cash flows are uncertain, analysts apply a higher discount factor to future earnings, thereby deriving a lower value. When investors apply a high discount factor – be that because they are uncertain about the business (think of unproven biotech or young tech firms) or about the market as a whole (a broader sense of fear), we believe this theory dictates a greater focus on short-term cash flows (as future cash flows are more heavily ‘discounted’). As a result, we believe it’s reasonable for share prices to be lower and more volatile when fear is higher.

If you have followed me so far, you may be thinking: but gold doesn’t pay any dividends! Correct, and that’s why we reason that the price of gold is not as affected by changes in the ‘fear factor’ because, again, gold doesn’t change.

Note that it is not correct that gold always does well when ‘risk is off’ in the markets. There are periods when the price of gold moves in the same direction as equity indices; and there are times when it moves in the opposite direction. In fact, since former President Nixon severed the tie between the U.S. dollar and the price of gold in 1971, we have observed a zero correlation to equities. And that is how it should be given that the cash flows of gold (of which there aren’t any) are not correlated to the cash flows of corporations.

Ultimately, of course, prices are dictated by supply and demand. And even as gold may not have cash flows associated with it, the supply and demand of gold may be related to the health (expected cash flows) of users and producers. It’s in this context that I often mention that we believe gold is less volatile than other commodities because it has less industrial use. Taking copper, for example, it doesn’t change either (well, it oxidizes), but supply and demand dynamics are far more elastic (volatile).

And of course, just like any asset, prices can be distorted, even for a considerable period. For example, I allege that the price of gold moves more like a ‘risk asset’ when gold has been hijacked by momentum investors, thereby potentially turning it into a proverbial hot potato.

With this framework provided, let me get to a point I have been making about the markets for some time: in our analysis, the Federal Reserve, in conjunction with other central banks, worked hard to take fear out of the markets. That is, central banks «compressed risk premia,» i.e. making risk assets appear less risky. As a result, risk assets from stocks to junk bonds rose on the backdrop of low volatility (when junk bond prices rise, their yields fall). Conversely, as the Fed is trying to engineer an exit, we believe risk premia will rise again. All else equal, we believe this suggests more volatility (more fear) and lower equity prices.

If you agree with the logic outlined here, an environment in which the Fed is pursuing an exit may be favorable to the price of gold. And it’s not because investors are fearful of another terrorist attack, it’s because fear has been suppressed, yet the world is a risky place; and if market forces have it their way, fear as a healthy part of the markets will return. It also means that, all else equal, we believe the price of gold should be higher relative to equities.

Gold & Interest Rates
But all else isn’t equal, as interest rates might be moving higher. At least that was the story we were told for years as the Fed was preparing the markets for an ‘exit’. Given that markets tend to be forward looking, investors seemed to be fleeing the precious metal. After all, the real competition to a shiny brick that doesn’t pay any interest may be cash that does pay interest. Cash, though, is an artificial construct, and investors have every right to be skeptical. Notably, investors may care more about the real interest they receive on cash, i.e. the interest after inflation is taken into account. While we are told what inflation rates are through official statistics, investors may choose their own perception of inflation in making investment decisions.

Instead of high rates, the world appears to be in a rush to go negative. Bloomberg in its Feb 22, 2016, Economics Brief wrote that one third of 47 countries in their global survey have negative 2-year government bond yields. Sure, in the U.S. rates are positive, but will the Fed be able to pursue its exit? Can we get real interest rates that are significantly positive? Or are we heading the other direction, i.e. is an economic slowdown coming that might take rates down further? In a recent editorial in the Washington Post, former U.S. Treasury Secretary Larry Summers «puts the odds of a recession at about 1/3 over the next year and at over 1/2 over the next 2 years.» He then suggests that a «400 basis point cut in Fed funds … is normally necessary to respond to an incipient recession.»

While I don’t encourage anyone to base their investment decisions on Larry Summers’ musings (at least not unless he takes Fed Chair Yellen’s job), I don’t see real interest rates moving higher anytime soon. Larry Summers’ scenario may be positive for gold, although – if we had rate cuts, it might, of course, compress risk premia once again, taking fear out of the markets…

The way we assess the Yellen Fed is a bit like an ocean tanker, i.e. it moves very slowly. The reasons for that we discussed in a recent Merk Insight, but have mainly to do with the fact that Yellen is a labor economist and, as such, typically looks at data that will lag developments in the real economy. To us, this suggests risk premia may continue to widen (causing risk assets to remain under pressure), and that any rally in the markets may be a bull trap, i.e. deceptive. In our assessment, investors are likely to use rallies to diversify their portfolios as they continue to be over-exposed to equities and other risk assets. The question is whether gold will be part of their diversification efforts. We think investors may want to consider adding a gold component to their portfolio.

For more information you can join Axel Merk’s ‘Gold to Beat Stocks?’ on Thursday, February 25.

Where are we in the Credit Cycle?

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Standard Life Investments warns investors should expect another year of volatile outcomes in global credit markets, with further dispersion in regional performance.

In February’s Global Outlook, Craig MacDonald, Head of Credit for Standard Life Investments, has used a number of indicators to assess where investors are in the credit cycle, including trends in bank lending standards, corporate leverage levels, and the flatness of government yield curves.

MacDonald said:  «Although credit markets came under general pressure last year, there was still considerable dispersion in regional performance and investment grade debt which provided selective opportunities for savvy investors. European high yield outperformed US high yield; Sterling investment grade outperformed Euro investment grade, and Asian emerging market credit was actually a strong performer despite global concerns over China.»

«However, there has been a weak and much more correlated start to 2016. Bank lending standards have tightened in emerging markets, and there are nascent signs of tightening in the US, although European lending is still loosening. Corporate leverage is relatively high in the investment grade sector, but remains lower than during the 1990s once the energy and commodity sectors are stripped out. Finally, although yield curves have flattened, they are still steeper than has been associated with previous recessions. While defaults have risen, this is only from historically low levels and they are generally a lagging, not leading, indicator.»

US high yield was one of the worst performing credit markets in 2015 with a -5% return. Almost 50% of bonds produced negative returns and a number entered distressed levels. Just over 20% of US high yield names are in energy and commodities and therefore vulnerable to the fall in commodity prices. Distress has also been seen in retail and telecommunications, however, yields have widened out to 9%, leading to selective opportunities.

“In US investment grade, good-quality issuers now look cheap and while we are avoiding some of the smaller regional US banks with over-exposure to commodities, it is a different story for the large banks such as JP Morgan, which have strong balance sheets with low book exposure to commodities. Another source of market worry has been emerging markets (EM). However, Russian corporate credit had a very strong performance in 2015 despite Russia’s myriad of problems. And Chinese credit outperformed, particularly property bonds. The lesson is that there are opportunities as well as risks in EM credit. The upshot is that we expect another year of volatility in credit markets, and believe the risk of recession is lower than the market is pricing in. This is an environment of selective opportunities. In high yield during 2015, our funds benefited from a reduced exposure to the most risky CCC rated debt, but it is still too early to reverse this positon despite the wider yields on offer, says MacDonald.”
 

Candriam realiza tres fichajes para dirigir la distribución y el canal profesional en Reino Unido y para comunicación global

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Candriam Adds New Head of UK Distribution, of UK Wholesale, and Global Head of Corporate Communications
Foto: Never House. Candriam realiza tres fichajes para dirigir la distribución y el canal profesional en Reino Unido y para comunicación global

Candriam Investors Group ha anunciado recientemente la incorporación de Chris Davies como director de distribución y de Derek Brander como director del canal wholesale o profesional, ambos con responsabilidad en el mercado del Reino Unido, en un esfuerzo por reforzar su presencia en ese país. La firma también ha hecho pública la incorporación de Marion Leblanc-Wohrer como directora global de comunicación corporativa, reportando a  la CEO de la compañía, Naïm Abou-Jaoudé.

Con más de 30 años de experiencia en la industria, Chris Davies se une al equipo después de 11 años en Fidelity y será responsable de liderar la distribución a través de los canales institucional, wholesale o de inversores profesionales y también retail. Davies inició su carrera en Lloyds Banking Group, entidad en la que trabajó siete años antes de pasar a trabajar para Prudential y luego para Fidelity.

Derek Brander, por su parte, aporta una experiencia de 25 años en la industria de la gestión de activos y viene de Natixis Asset Management, donde ha trabajado los últimos cinco. Con anterioridad, Brander trabajó en Societe Generale Asset Management, GLG Partners y AEGON.

Por último, la nueva directora global de comunicación corporativa, Marion Leblanc-Wohrer, dio sus primeros pasos profesionales en 1993, año en que se unió a KPMG en Washington DC, poco antes de trabajar para el Banco Mundial. Posteriormente se trasladó a Londres, donde trabajó como periodista en Thomson Reuters, y más tarde a París, donde fue editora jefe de varias revistas.

 

Cash and Europe, Investor’s Picks

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According to the latest BofA Merrill Lynch Fund Manager Survey, 42% of global investors are overweight on cash, taking their balances to 5.6%, their highest levels since 2001. The FMS also shows that investors have «reset» expectations for macro & markets lower and see default/recession as risk rather than reality. Actually, for the first time since July 2012, both growth and profit expectations are negative.

More than a slowdown in China, the biggest tail risk for global investors surveyed is a recession in the US, where ninety percent of fund managers expect no more than two Fed hikes in the next 12 months, up from 40 percent in December 2015.

Other key takeaways include the fact that positions in equities have fallen sharply to a net 5% from January’s 21%, while bullishness is growing on bonds. In regards to trades, the most crowded continues to be long US dollar, followed by shorting oil and shorting Emerging Markets. The most preferred region globally is Europe with 36% of managers overweight in it.

“Investors have ‘reset’ expectations for macro and markets lower and see default/recession as a risk rather than a reality,” said Michael Hartnett, chief investment strategist.

You can download the full research report in the following link.

The EU Needs Regulatory Stability for the Period to Come

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The European Fund and Asset Management Association (EFAMA) has responded to the European Commission’s Call for Evidence on the EU regulatory framework for financial services. EFAMA welcomes the far-reaching debate launched by the European Commission with its Call For Evidence and wholly acknowledges its challenging nature. They believe “it will provide an excellent opportunity to address and resolve remaining regulatory inconsistencies and unintended consequences.”

With over 40 examples, the European asset management industry argues why existing barriers, inconsistencies and duplications that still exist in the current EU regulatory and policy framework need to be addressed. The examples are wide-ranging and include the regulatory framework built by the European institutions (European Commission, European Parliament and Council), but also regulatory and policy trends stemming from the European Supervisory Authorities.

In its response, EFAMA expresses a desire to ensure a certain degree of regulatory stability for the period to come. Much has been done in recent years in the regulatory field, setting a state-of-the art benchmark for global regulators, many of whom look at EU legislation for inspiration. However, some work remains to be done in terms of implementing and applying these new regulations.

In this regard, EFAMA calls for a realistic implementation timeframe. Too short or unrealistic implementation deadlines lead to legal uncertainty and cause serious challenges for European asset managers in the implementing phase of EU financial legislation.

Alexander Schindler, President of EFAMA, commented: “There are currently many examples of fundamental directives affecting our industry (MiFID II, UCITS V, PRIIPs) where it is extremely difficult to be prepared within the prescribed timetables”.

EFAMA equally supports the so-called “ better regulation” approach to European legislation.

Peter de Proft, Director General of EFAMA, commented: “Better regulation relies on constructive and efficient dialogue with all stakeholders, to obtain the necessary industry and technical expertise of those impacted by regulation. It also relieson the European co-legislators and the Commission to properly assess the potential consequences of a given piece of legislation”.

EFAMA also encourages further consistency and coordination within the European Commission services, between the European Commission and the European Supervisory Authorities  (ESAs), but also among the latter (ESMA, EBA and EIOPA) as well as the European Systemic Risk Board  (ESRB).