The global, sustainable corporate bond fund ERSTE RESPONSIBLE BOND EMERGING CORPORATE has clearly passed the threshold of EUR 100mn of assets under management. A perfect occasion to take stock. Christian Schön, member of the board of directors of Erste Asset Management, explains what role sustainable investments play in emerging markets, especially in the corporate bond segment.
Question: How do sustainability and emerging markets go together? Schön: Very well, actually. Responsibility and growth are not mutually exclusive. Let me take China as example: between 2006 and 2012 energy consumption per unit of GDP was reduced by almost a quarter. By 2020, CO2 emissions are to be cut by 40 to 45% per GDP unit. On top of that, the government plans to increase the share of non-fossil fuels in energy consumption to 15%. The entire industry benefits from this green policy. In China alone, more than EUR 500bn have been invested in renewable energy and measures to cut greenhouse gas emissions over the past five years. In South America, too, we can see enormous progress as far as sustainable business practices are concerned. At the same time corporate bonds from emerging economies continue to pay significantly higher yields than their peers from developed countries. This scenario holds opportunities for sustainable investors, especially in the emerging markets corporate bonds segment.
Q: From your point of view, what is the added value of an emerging markets bond fund that is managed on the basis of sustainable criteria? S: The application of sustainable criteria in company research facilitates an improved risk assessment, particularly for emerging economies. Imagine that in addition to traditional company valuation, you are using another magnifying glass that provides you with new insights into the respective company and its governance. This is particularly essential for the assessment of corporate governance criteria including the risk of corruption. This expanded analysis is done against the backdrop of the stringent ethical criteria, which we as sustainable investors apply with regard to the upholding of human rights or in connection with the problem of child labour.
Q:What criteria play a role in the investment process for emerging markets bonds? S: Especially in a dynamic environment such as emerging markets, an ongoing research process is a crucial element of success. We have been developing our approach for 15 years. It combines all methods of analysis and selection that are available to sustainable investors into one integrated management approach. In addition, we complement our in-house expertise with the know-how of renowned research partners. On the basis of this method, we develop an initial ESG investment universe, which is then used for the individual investment process of the individual funds. The ERSTE RESPONSIBLE BOND EMERGING CORPORATE fund for example invests in the bonds of emerging markets companies that have successfully gone through our ESG screening. It also taps the high-yield segment while requiring a rating of at least B-. However, BBB bonds account for the biggest share of the portfolio. Foreign exchange risks are largely hedged against the euro. This multi-step process ensures the compliance with criteria of sustainability and the opportunity of surplus return.
Q: How has ERSTE RESPONSIBLE BOND EMERGING CORPORATE fared since its launch, and what is its outlook? S: Since the launch of the fund in December 2013 we have recorded a compound annual growth rate of 4.25% in spite of a relatively difficult market environment. We have seen investors return to the emerging markets segment especially as a result of the current low interest rates. The capital inflow into our funds testifies to the fact that sus-tainable criteria play an ever-greater role in this area as well.
Earnings disappoint again, but markets stay resilient. With the U.S. party conventions out of the way and Hillary Clinton polling more strongly, investors may divert their attention, at least for a while, away from politics to focus on economic and company fundamentals.
If they do, will they subscribe to Republican presidential candidate Donald Trump’s view that they should follow him and sell out of equities?
Markets Have Been Remarkably Resilient They’d have to reckon with just how resilient markets have been lately. Equities bounced back from Brexit at the end of June. They even sailed through July’s bear market in oil, which briefly slipped under $40 per barrel last week.
At the beginning of the year, the oil price was one of the major factors driving extreme risk aversion. This time, the impact has been muted. Even energy sector high-yield spreads are pretty much where they were when oil hit its recent high at the beginning of June.
Still, underneath these low yield-supported valuations the economy remains sluggish. As last Friday showed, the U.S. continues to post healthy jobs data. And yet the second quarter U.S. GDP print seriously undershot expectations at 1.2% real and 2.4% nominal growth. You have to go back to the first quarter of 2010 to find a report that weak. Household spending was strong and a lot of the weakness came from inventories being run down, but it wasn’t so long ago that economists were forecasting 3% real GDP growth for the second half of this year.
Three-quarters of the way through the second quarter reporting season, we can see that this is a tough environment in which to eke out earnings growth.
Another Weak Earnings Season Year-over-year, we are on course for a 2% drop in earnings. Take out the energy sector and earnings are up around 2%-3%. That would be false comfort, however. A year ago, the consensus estimate for 2016 S&P 500 earnings per share was $130. Three months ago it was around $123. Now, we’ll be lucky to make $118. That was what U.S. equity investors got in 2014 and 2015, too; three years of flat earnings suggests this isn’t just about oil, but low investment across industry in general.
It’s a similar story in Europe. We’ve pointed to the quiet outperformance of European macro data over recent months, and both second quarter GDP growth and July inflation data came in ahead of expectations. Corporate earnings have been even weaker than in the U.S., however. We are looking at double-digit year-over-year declines for the second quarter.
It’s true that, if we strip out Europe’s banks, we might expect earnings growth of 3%-4% overall. However, stripping out banks in Europe is even more questionable than stripping out energy companies in the U.S. These banks lost a third of their value between the two stress tests of 2014 and 2016 and remain poorly capitalized, weighed down by nonperforming loans and overexposed to sovereign credit issues, which, in an economy as dependent on bank credit as Europe’s, is a serious impediment to growth.
Mixed Signals Create ‘Confused Apathy’ To sum up, the slight improvement in corporate earnings over the last couple of quarters cannot disguise how disappointing the figures are, given the easing off of the China, oil and, for U.S. companies, strong-dollar headwinds that we have been describing since the spring.
A phrase I have heard to describe investment psychology at the moment is “confused apathy.” Active managers struggle to generate alpha; beta looks tired, stretched and expensive; bond yields are incredibly low; the political environment is unpredictable. But wasn’t that what we were saying two years ago when the S&P 500 was 15% cheaper and earnings were exactly the same?
In other words, this is not an ideal way to invest, given the long-term, common sense correlation between earnings and market valuations, but ordinary investors that are patiently trying to grow their wealth arguably can ill afford to ditch equities, especially with bond yields so low. Monitoring risk is sensible, but trying to time this market makes about as much sense as, let’s say, building a wall around Mexico.
Institutional investors across Europe are steadily increasing proportional investment exposure via mutual funds, even where mandates could be demanded, according to the latest issue of The Cerulli Edge – Global Edition.
Cerulli Associates, a global analytics firm, says statistics suggest that, while insurers are leading the way, the trend in Europe is pan-institutional. For example, German pensions’ proportional exposure via funds rose from 41.3% in 2011 to 50.1% in 2015.
«In the search for better investments, insurers are turning to less familiar asset classes–prompting the use of funds rather than segregated accounts to make their investments. There is clearly a greater willingness to have commingled investments,» says David Walker, director European institutional research at Cerulli.
He notes that early allocations to less well-trodden asset classes will be smaller, and therefore the volumes involved may not justify, in either the insurer’s or asset manager’s eyes, a separate account. That said, even in some of the more familiar yield classes–for instance high yield and emerging market debt–certain insurers prefer funds as these are easier to enter and exit compared with being in a segregated account.
«One manager Cerulli interviewed uses geography to split his insurer clientele’s preference for commingled/pooled structures, or investing via mandates. He has mutual funds more generally in France, Germany, Italy, and Spain, but mandates typically in the UK and Europe’s north,» says Walker.
He notes that some institutions are not willing to forfeit the influence over the strategy/risk exposures and the briefings that are part and parcel of a mandate-based relationship. For some institutions, not knowing the identity of the other coinvestors in a broader pooling vehicle is a step too far.
«Some insurers seeking prize investment assets such as buildings or infrastructure projects in this yield-starved environment argue that they lose competitive edge by ‘sharing’ them with rivals in a pooled structure,» says Walker.
BNY Mellon said its U.S. Investor Solutions Group has launched a real-time service to deliver net asset values (NAV) and daily dividend accrual rates for mutual funds.
The firm provides the data on behalf of its asset manager clients to intermediaries such as broker-dealers via The Depository Trust & Clearing Corporation’s (DTCC)Mutual Fund Profile Services (MFPS)by utilizing IBM MQ real time transmission methodology. The technology conveys information more quickly than the batch transmission technology it replaced. BNY Mellon is the first transfer agent to leverage the technology utilized by DTCC to deliver NAV data.
«Our first-to-market MQ technology delivery service enables asset managers to accelerate the delivery of key data—such as NAVs and daily dividend accrual rates—to intermediaries, thereby increasing their ability to meet critical nightly processing windows,» said Christine Gill, head of Investor Solutions Group. «The value of this improved turnaround time flows end-to-end to all stakeholders, not only to intermediaries, but in turn to the clients they serve, and ultimately to shareholders.»
The importance of providing timely data to broker-dealers has been increasing as these intermediaries have gathered a growing percentage of mutual fund assets on their platforms, according to the company. BNY Mellon’s U.S. Investor Solutions Group comprises its transfer agency and subaccounting businesses. As of March 31, 2016, BNY Mellon supported over $2.6 trillion in assets globally on its transfer agency platform and over 165 million accounts with assets of more than $2.6 trillion on its subaccounting platform and is ranked as the largest third party provider of subaccounting services and the second largest provider of transfer agency services (based on accounts) in the U.S., per the 2016 Mutual Fund Service Guide.
Concluded Gill, «We remain committed to investing in technological innovations that improve our clients’ experience and underscore our leadership position as the investments company for the world.»
The European Fund and Asset Management Association (EFAMA) in its latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS from 28 associations representing more than 99% of total UCITS and AIF assets, highlights that for May 2016, net inflows into UCITS and AIF totaled EUR 52 billion, compared to EUR 65 billion in April.
According to EFAMA, the decrease in UCITS net sales was caused by lower net sales of bond funds. Long-term UCITS (UCITS excluding money market funds) recorded net inflows of EUR 24 billion, compared to EUR 33 billion in April.
Equity funds experienced a turnaround in flows, increasing from net outflows of EUR 1 billion in April to net inflows of EUR 3 billion in May.
Net inflows into bond funds decreased to EUR 14 billion from EUR 23 billion in April.
Multi-asset funds recorded net sales of EUR 5 billion, compared to EUR 6 billion in April.
Meanwhile, net sales of UCITS money market funds increased to EUR 17 billion, from EUR 11 billion in April and AIF recorded net inflows of EUR 11 billion, compared to EUR 21 billion in April.
Overall, total net assets of European investment funds increased by 1.8% in May to stand at EUR 13,519 billion at the end of the month. Net assets of UCITS increased by 1.9% in May to EUR 8,290 billion, and AIF net assets increased by 1.6% to EUR 5,229 billion.
Bernard Delbecque, Senior director for Economics and Research at EFAMA commented: “After three months of negative outflows, equity funds achieved again positive net sales in May”.
According to Mike Amey, Head of Sterling Portfolios at PIMCO, with its first policy move in four years and first interest rate move in seven years, the Bank of England’s Monetary Policy Committee has very much embraced the view that if you decide to ease, then be aggressive. «When your economy is approaching the zero lower bound on interest rates and intermediate gilt yields are already well below 1%, it makes sense to use what modest monetary scope you have as decisively as you can. Thursday’s four policy moves – to cut interest rates to 0.25%, restart quantitative easing, initiate a corporate bond buying programme and provide financing support to the banking system – certainly constitute a decisive and comprehensive package. Now the two critical questions are will it work, and what are the investment implications?» He writes.
Amey believes that whether it is likely to work is best explained by looking at the BOE’s growth and inflation forecasts, which are very similar to PIMCO’s. UK growth is expected to fall to just above zero for the next twelve months, and then rise back up to 2% by 2018–2019. Headline inflation is expected to rise to 2.5% and fall back slowly to the 2% target thereafter. «This represents a relatively benign outlook, and assuming the new Chancellor announces some reversal of the previous plan to further tighten fiscal policy, there looks to be a good chance that these forecasts will be realised. Given the speed of deterioration in the Purchasing Managers’ Index and other surveys released post the Brexit vote, there are clearly risks to the outlook, but the new policy measures should go some way to negating those risks.» He adds.
The BOE’s asset purchase programme will take six months to complete and the corporate bond purchase programme is intended to be completed over an 18-month period. In amey’s words, this suggests monetary policy will remain highly accommodative for much of the cyclical horizon, keeping the damper on shorter- to medium-term UK sovereign yields despite the fact that many are already hitting new lows. In relative terms, longer-dated (30-year) gilts yielding around 1.5% are becoming more attractive versus shorter maturities, where yields are around 0.1% on the two-year and 0.7% on the 10-year. Meanwhile the British pound has been weak, but is still at levels above those seen in the last month.
«In summary, we expect longer-term gilt yields should be supported by the BOE policy moves and the broader economic environment, whilst the British pound looks to have scope to go lower.» He concludes.
Foto: LinksmanJD . Panamá recibirá el Latin Private Wealth Management Summit en septiembre
Después del éxito vivido en mayo, Marcus Evans se prepara para realizar el próximo Latin Private Wealth Management Summit, en el Trump Ocean Club de la ciudad de Panamá en Panamá.
En dos días de evento, este foro reúne a compradores y vendedores de élite y ofrece a las single y multi family offices de LATAM un ambiente íntimo para debatir temas actuales en la industria de la riqueza privada y obtener soluciones a las problemáticas. Esto además acompañado de sesiones de networking formal e informal en un resort 5 estrellas.
Algunos de los asistentes confirmados inlcuyen a: • Guillermo de Leon, Blue Line Investments • Elaine King, Family and Money Matters Institute • Nelson Cury Filho, Cedar Tree Family Business Advisors • Martin Zavalia, Guggenheim Partners Latin America • Jesus Gustavo Garza, ITAU BBA
Los participantes explorarán los principales temas y problematicas dentro de la industria de la riqueza privada en la región de América Latina como son el capital privado, las inversiones extranjeras directas, conflictos familiares, inversión, etc.
El evento esta dirigido a: directores de inversión / CIOs, VP’s, directores, fundadores, y jefes de inversión de multi family offices, single family offices, o investment advisors.
Foto: Instituto Siglo XXI
. Estados Unidos ocupa la decimocuarta posición en seguridad para la jubilación
Estados Unidos ocupa el puesto número 14 en seguridad para la jubilación, según 2016 Global Retirement Index, publicado por Natixis Global Asset Management. El índice examina los factores clave que proporcionan seguridad en la jubilación, y supone una herramienta de comparación de las diferentes prácticas en las políticas de retiro de 43 países.
El norte de Europa domina el top 10, con Noruega en primera posición, acompañada de Suiza, Islandia, Suecia, Alemania, Países Bajos y Austria. A ellos se suman Nueva Zelanda (4º), Australia (6º) y Canadá (10º).
«El retiro solía ser simple: las personas trabajan y ahorran, los empleadores proporcionan una pensión, y los impuestos sobre la nómina financian los beneficios gubernamentales, lo que resulta en un flujo de ingresos predecible para una jubilación financieramente segura», dice John Hailer, CEO de Natixis Global Asset Management en las Américas y Asia. «La demografía y la economía han vuelto insostenible el viejo modelo, pero los países que lideran nuestro índice están encontrando formas innovadoras para adaptarse a la nueva realidad y proporcionar un modelo al resto del mundo».
El índice crea una puntuación total en base a cuatro factores que afectan la vida de los jubilados. Las finanzas son un componente importante, pero se incluyen otros que influyen en el bienestar, la salud y la calidad de vida para proporcionar una visión más holística.
A pesar de sus muchas virtudes, hay que dar la alarma en Estados Unidos Estados Unidos se beneficia de elevado ingreso per cápita, la estabilidad de sus instituciones financieras y su baja tasa de inflación, de acuerdo con los datos del índice. Además, la tasa de desempleo del país ha bajado, continuando una tendencia a largo plazo.
En contraste con estos factores positivos, EE.UU. también tiene uno de los niveles más altos de desigualdad de ingresos de las naciones desarrolladas, poniendo el objetivo ahorrar para el retiro fuera del alcance de millones de personas. Estados Unidos también tiene una cada vez mayor proporción de jubilados entre los adultos en edad de trabajar, lo que significa que hay menos trabajadores para apoyar programas como Social Secutiry o Medicare, ejerciendo una presión creciente sobre los recursos del gobierno. Esta tendencia, combinada con el cambio de prestaciones definidas en los planes de jubilación de aportación definida que realiza el empleador, supone la transferencia de la carga financiera de la jubilación a los individuos.
Los estadounidenses son conscientes del cambio en la responsabilidad financiera
Los inversores estadounidenses son muy conscientes de la cada vez mayor necesidad por parte de los individuos de financiar una mayor parte de su jubilación. En una encuesta realizada por la firma a principios de este año, el 75% dijo que esta responsabilidad recae cada vez más sobre ellos mismos.
Sin embargo, muchos estadounidenses pueden estar subestimando la cantidad de dinero que necesitan ahorrar para jubilarse cómodamente. Los inversores estiman que necesitarán para reemplazar sólo el 63% de su ingreso corriente cuando se retiren, muy por debajo del 75% a 80% en general, que asume los profesionales en su planificación.
Además, una gran parte de los estadounidenses no tiene acceso a los programas de ahorro patrocinados por el empleador, como los 401 (k). El Departamento de Trabajo (D.O.L.) de EE.UU. estima que un tercio de la fuerza laboral del país no tiene acceso a un plan de retiro. Otra encuesta separada realizada a los participantes en planes de aportación definida revela que, incluso cuando no tengan acceso a un plan, cuatro de cada 10 participantes contribuye menos del 5% de su salario anual.
Los inversores estadounidenses ven claros obstáculos para la seguridad financiera durante la jubilación e identifican como sus tres mayores retos: los costes de la atención a largo plazo y de la salud, el no ahorrar lo suficiente, y el hecho de sobrevivir a sus activos. Cuando se les preguntó cómo iban a compensar un déficit de ingresos, dos tercios de los inversores de Estados Unidos dicen que van a seguir trabajando en el retiro.
In a market update webcast, Western Asset Management Chief Investment Officer Ken Leech described a global economy rife with problems – yet one that continues to grow, especially in the United States, even if slowly and with evident risks.
“We expect steady, unspectacular U.S. and global growth,” Leech said adding: “That’s been our basic message: slow but sustainable growth globally. The fear the market had in the first quarter, that the slow growth rate might actually fall, is what got the markets in pretty dire straits.”
During that first quarter, Western Asset did not believe the global growth situation was going to develop into a global recession, (a prediction that has so far proven correct), but it has warranted exceptional monetary accommodation.
“Policymakers have to be attentive to downside risks, especially in an environment where U.S. and global inflation remain exceptionally subdued,” Leech said. “Fortunately, central bank accommodation is aggressive, and increasing. That means U.S. Treasury bonds and sovereign bonds will be underpinned by these low policy rates, which will continue around the world.”
As for the U.S. Federal Reserve, which Leech said has made “a dovish pivot,” he concluded, “The Fed is going to be very cautious, and is unlikely to be moving rates up any time soon.”
Leech continues to see strong opportunity ahead in investment grade (IG) corporate bonds. Regarding Europe, the recent Brexit vote injected a high level of uncertainty into the outlook. He expects that the European Central Bank (ECB) will expand its QE program, both in length of the program and the size. Addressing emerging markets, Leech reported a generally positive outlook. “There’s a real case to be made for emerging markets, both in local currency and dollar-denominated bonds,” he said. “That’s an area we are focusing on even more meaningfully than coming into the year. The yield spread between EMs and developed has reached crisis wide. When you think about valuations and people needing yield, this is where yield is abundant… The two positions we’ve liked structurally have been Mexico and India. Over the course of the year we have been opportunistically investing in a number of others. One I’d highlight is Brazil.”
“Another point highlighted by the World Bank is the bumpy adjustment in China,” he added. “China’s growth is going to be slow. We need to be very thoughtful about it, but the policy adjustment in China was so aggressive that they could avoid a hard landing.”
“Global headwinds are straightforward. When you look at world GDP, we have been in the camp that a 3 percent growth rate, very slow by historical standards, can be maintained. A low bar, and it’s going to take a lot of policy help. Fortunately, we’ve had that, which truncated some of the downside risk. But the major headwind of growth over time is the enormity of the debt burden around the world. It’s going to take time, low interest rates and a continuation of policy support.” He concluded.
You can watch the replay of the webcast in the following link.
Fidelity Investments ha anunciado el lanzamiento de Fidelity Go, una solución de asesoramiento que la firma ha diseñado pensando en aquellos inversores que busquen un equipo que gestione sus activos a través de una sencilla experiencia digital.
La plataforma –para cuyo desarrollo se ha colaborado con inversores jóvenes expertos en herramientas digitales- es una combinación entre la gestión profesional de una cartera, un teclado digital de fácil uso, la integración de las herramientas y servicios de inversión de Fidelity, y un coste que se encuentra entre los menores de la industria.
«Fidelity Go hace la gestión profesional de las carteras ampliamente accesible al ayudar a la gente a pasar de ahorrar a invertir de forma rápida y eficiente, con costes que empiezan en 20 dólares anuales”, dice Rich Compson, director de cuentas gestionadas de Fidelity. “Nuestro objetivo es ayudar a la gente a alcanzar sus objetivos financieros, y Fidelity Go es una nueva manera de ayudar a los `digital-first´ y a aquellos que están empezando”.
Los inversores también se beneficiará del resto de capacidades de Fidelity, incluyendo la integración con sus herramientas de planificación financiera o el control continuado a través de las diferentes aplicaciones. “La integración con la más amplia experiencia de Fidelity puede ayudar a los clientes a reforzar y simplificar al mismo tiempo su vida financiera”, concluye Compson.
