The Fed’s dovish turn coming out of its March 15-16 meeting took many market participants by surprise. The Federal Reserve’s median projection for Fed Funds rate increases in 2016 fell from four in December to two, reflecting concerns about the impact of lower global growth and tighter financial market conditions on US GDP and inflation.
The median forecast for core PCE inflation at the end of 2016 remained unchanged at 1.6%, while the forecast for headline PCE fell from 1.6% to 1.2%. Finally, perhaps in recognition of relatively moderate wage inflation, the estimate for longer run median NAIRU (non-accelerating inflation rate of unemployment) was reduced to 4.8% from 4.9%.
The Fed took these decisions despite having up to the minute economic and market data that should have, in our view, allayed their concerns about the impact of both global growth and tighter conditions on US GDP and inflation. Recent US GDP, employment and inflation data have remained stable or are somewhat better than December levels, despite lower global growth. Having recovered from the early year sell-off, financial conditions on March 15, the day prior to the release of their statement, remained similar to those observed in December, when the Fed decided to raise rates. After reviewing the available data, one may conclude that either the Federal Reserve has erred in its current decision, and has given up some of its flexibility to raise rates, or that the Fed decided that their December hike was a mistake.
Below, we have highlighted a number of relevant economic and market levels at December 16, following the release of the Fed’s December statement and projections, and on March 15, prior to their release of their March 16 statement and projections.
Foto: Terry Johnston
. Neuberger Berman Trust Company nombra CIO a Richard Gardiner
Neuberger Berman ha incorporado a Richard Gardiner a su filial Neuberger Berman Trust Company en calidad de CIO, puesto desde el que dirigirá la estrategia de inversión del grupo, y al comité de asignación de activos de la firma.
Como parte de su nuevo rol, Gardiner trabajará con los weath advisors y trust officers en los clientes NHW, fundaciones y legados. Supervisando la asignación de activos, la selección de managers y la construcción de carteras, Gardiner y el equipo de estrategas de inversión del grupo identificarán el gestor y las estrategias más apropiadas de entre varias regiones para presentar los mejores resultados a los clientes de Neuberger Berman.
Antes de unirse a la firma, Gardiner era consultor en Reservoir Capital Group y CIO y cofundador de una firma independiente de wealth management. Con anterioridad fue el director de Arbitrage & Credit y miembro del comité de inversiones de Man Investments y responsable de ventas y trading de convertibles en JP Morgan y Goldman Sachs.
Se graduó cum laude en Yale University y obtuvo un MBA en Harvard Business School.
CC-BY-SA-2.0, FlickrFoto: Bastiaan, Flickr, Creative Commons. Capital Group abre oficina en Ámsterdam y ficha a Martin Hofman como Country Marketing Manager para Benelux y regiones nórdicas
Capital Group, una de las mayores firmas de gestión de activos del mundo, ha anunciado el lanzamiento de su oficina en Ámsterdam, así como el nombramiento de Martin Hofman como Country Marketing Manager para el Benelux y las regiones nórdicas.
Capital Group continúa centrado en desarrollar servicios de inversión de elevada calidad a largo plazo para los inversores e instituciones de toda Europa. El lanzamiento de la oficina de Ámsterdam y el nombramiento del señor Hofman, junto con otras contra contrataciones y desarrollos de negocio recientes, reafirman su compromiso, según indican en un comunicado.
En relación a la apertura la semana pasada en Ámsterdam, Rob Lovelace, miembro senior del Comité de Gestión de Capital Group y gestor, comentó: “Capital Group reconoce la importancia de impulsar las relaciones sobre una base global, regional y local, con el fin de aprovechar su larga trayectoria. Nuestra oficina holandesa es la última de una serie de nuevas oficinas en Europa que hemos abierto durante los últimos dos años y es una parte esencial de nuestro propósito de desarrollar servicios de gestión fiables a largo plazo para los inversores holandeses y europeos, así como expandir nuestra presencia global».
Hofman tendrá la sede de la oficina en Ámsterdam y se unirá a Feike Goudsmit y Marnix van den Berge, que desarrollarán las actividades de negocio entre los inversores institucionales de Benelux y los intermediarios financieros de los mercados, respectivamente. Hofman desempeñará un papel clave en la expansión de los servicios de Capital Group en Benelux y las regiones nórdicas.
Hofman se incorpora Capital Group procedente de Threadneedle Investments, donde comenzó como gestor de marketing regional para Benelux y las regiones nórdicas en 2008. Desde 2014, era el responsable de liderar las actividades de marketing institucional en la región EMEA, incluyendo la planificación y estrategia, y el desarrollo y ejecución de las campañas regionales y locales.
Capital Group también ha continuado expandiendo sus operaciones en Europa mediante distintos nombramientos el año pasado, entre los que se incluye el nombramiento de Christophe Braun en enero de 2016 y Julie Dickson en diciembre de 2015 como especialistas en inversiones en la oficina de Londres.
Capital Group tiene actualmente sucursales de ventas en ocho lugares de Europa: Ámsterdam, Fránckfort, Ginebra, Londres, Luxemburgo, Madrid, Milán y Zúrich.
The bond market’s response to the European Central Bank’s (ECB) latest easing measures was immediate and broadly positive, but the implications for the real economy are harder to gauge.
The market’s immediate reaction to the latest easing measures announced by the ECB on 10 March was, in some respects, counter-intuitive. Most investors will be used to seeing government bond yields fall in the wake of greater-than-expected policy easing, but in this instance, 5-year and 10-year Bund yields rose steeply.
This is because Bund yields had already been driven to extremely low levels during January and February’s firmly ‘risk-off’ market tone. The ECB’s latest support measures cheered markets, and resulted in some of the ‘safety premium’ embedded in Bund valuations being reduced.
A boost for bond bulls
Indeed, there is little doubt that the latest steps from ECB President Mario Draghi are positive for financial markets. The first phase of ECB asset purchases, in early 2015, focused on buying government debt. This pushed government bond prices up and nudged investors into riskier assets to replace the lost yield.
The fact that risk assets – currently non-banking investment grade corporate bonds – are now included in the expanded €80 billion-a-month asset purchase scheme, means that the ECB is driving down the cost of risk more directly. We expect investment grade corporate bonds will continue to perform strongly from here. Credit spreads should narrow, and investors will reach for higher-yielding corporate assets. This impact has also been positive for equity markets, because the cost of capital has improved.
Will the changes make a «real» difference?
The implications for the real economy are less clear-cut. A high proportion of the liquidity which should have entered the US economy through its own QE schemes became ensnared in the banking system, and the velocity of money didn’t appreciably pick up. There was no real spike in lending, and regulatory changes meant that the mortgage market remained somewhat impaired. Of course, if QE had never been implemented, then the condition of the US economy could have been far worse.
In our view, the likelihood of the ECB achieving its vaunted 2% inflation target, even within five years, is low. The output gap, which bears down on both worker and company pricing power, is too significant for prices to improve to the 2% target growth rate. Economic growth – currently forecast to be around 1.4% in 2016 – is insufficient to close this output gap quickly. The ECB, in our view, will need to do more.
The waiting game
This, then, begs the question of why Mario Draghi followed up the latest policy announcements with the suggestion that further rate cuts are “unlikely”. The euro, having fallen after the deposit rate was reduced, rose as soon as Mr Draghi made the comment. However, we see his observation as largely practical. Running a negative interest rate policy is unlikely to work in the long term, as it would encourage investors to hoard cash. Excessively negative rates mean that even the cost of insuring cash deposits ‘in-house’ could be less significant than the cost of depositing funds with the ECB.
However the ECB proceeds from here, it seems unlikely that the deposit rate will be the tool that they reach for. For now, we believe that the amended policy environment has bolstered existing support for risk-asset markets and settled simmering nerves. Patience will be required to see quite how effective the measures will be for stimulating more economic growth.
The policy statement released on Wednesday by the Federal Reserve’s Federal Open Market Committee (FOMC) represents a continuation of the “wait-and-see” trend anticipated by the market. The Fed continues to keep the door open to interest rate policy normalization, which it began in December, with the pace of change dictated by economic data and financial conditions. Overall, economic data in the U.S. have marginally deteriorated since the central bank embarked on rate normalization away from emergency conditions, but the Fed’s mandated objectives of full employment and price stability are still largely on track for continued tightening this year, even if at a slower pace than anticipated. Indeed, the language of today’s statement highlighted some of those concerns, for example mentioning that “business fixed investment and net exports have been soft.” Also, vitally, the FOMC stated that “…global economic and financial developments continued to pose risks,” underscoring the extent to which external economic and financial market stresses can influence Fed policy today.
Further, the FOMC’s changes to its Statement of Economic Projections (SEP) also highlight the likely slower path of interest rate change this year, and some continued uncertainty over U.S. growth prospects in a world of slowing economic growth overall. For example, the Fed downgraded real GDP growth projections in 2016, from the 2.4% it had assumed in December to 2.2% today, with 2017 growth also witnessing a modest reduction. We agree that the data will continue to marginally deteriorate from here, which justifies the Fed’s lowered anticipated “dot-plot” path of one or two more hikes by year-end, versus the four implied by the December SEP. We believe the door was open to beginning this normalization process a couple years ago, and to some extent the Fed missed its optimal window of opportunity to normalize rates in an easier manner. Today, the central bank must contend with payrolls growth that is likely peaking, challenging financial market conditions from abroad, and an inflation rate that appears to be firming.
Unlike some others, we don’t believe the U.S. economy will enter a recession anytime soon, but labor market growth will slow in the quarters ahead, as companies are scaling back expenditures of all kinds (capital expenditures, hiring, and inventory-builds, for example), as their top-line revenues and earnings decelerate. Moreover, changes to headline payrolls tend to lag corporate earnings/profits changes by a six-month time frame, so the rolling over of the growth rate of corporate profits in recent quarters should feed through to a worsening jobs picture by the back half of 2016. Further, temporary hiring has started to slow, which historically has been a signal of future weakness in payrolls growth, as it hints at changes in the supply/demand of labor. All these dynamics put the Fed in a difficult position regarding normalizing rates, since the economic cycle may be moderating as the central bank seeks to raise rates.
We are not arguing that these dynamics represent a tangible economic weakness that threatens the recovery, but rather that slowing payrolls growth is likely to keep the Fed’s rate normalization path more contained than outlined at the December meeting, and perhaps even than the path implied by today’s SEP. We also think there is a tangible wage and inflation lag, and believe that this will also play out going forward, as we have recently witnessed with current inflation data, such as Average Hourly Earnings, the CPI and Core PCE readings.
Generally speaking, it is not the U.S. consumer that concerns us, as consumer spending is likely to support the economy on the back of very strong employment growth over the past few years and potentially improved wage growth in the year ahead. What does concern us, though, is another potential economic fault line, the fact that a variety of corporate sector metrics have been disappointing of late. Years of extraordinarily easy monetary policy stoked corporate borrowing and financial engineering, and some companies are now struggling with the increased debt load as revenues and profits begin to roll over (see graph).
Additionally, what is ironic is that while everyone (understandably) focuses on the domestic economic situation, the factor that has opened the door again for the Fed to keep moving rates this year, which seemed impossible only a few weeks ago, is the improvement in financial conditions. That has largely come on the heels of China policy makers making a decision to not aggressively devalue their currency to protect against capital flight, an aggressive ECB, and a stabilization in oil’s persistent price descent. Thus, while we think that the U.S. data is marginally deteriorating, and may continue to do so, we think that financial conditions, including the potential strength of the USD (and its related influence on global growth and corporate earnings), will be one of the primary determinants of whether that door for further Fed moves stays open or gets slammed shut due to global economic/market duress.
Hence, keeping an eye on the Fed for market price-action going forward may also mean keeping the other eye focused outside the U.S., and somewhat outside the Fed’s core dual mandates of employment and price stability. Indeed, the path of monetary policy change in the year ahead may be determined as much by what occurs outside the country’s borders than within them; more so than any time in recent history.
For many years, a constant within the capital markets was that emerging markets equalled growth. This also served as the universal argument for investing in emerging markets. For Marc Erpelding, fund manager of the BL-Emerging Markets fund, emerging markets will experience a slower rate of growth in the future.
«The days of “simple” growth, backed by state investment programmes and exports based on low wage levels are pretty much gone. Going forward, the service sector and the domestic consumption will play an ever greater role. However, studies have shown that there is no link between economic growth and stock market performance. So “growth” is not a valid reason for investment, not even for emerging markets.» Therefore, according to Erpelding, the slowdown in growth should not necessarily be considered a negative development.
His investment process includes focusing on firms «which are in a position to create added value in the long term for their customers and shareholders; ideally, they can do this independently of macroeconomic trends. Firms that have high barriers to entry, present robust balance sheets and generate strong positive cash flows generally have the advantage of seeing less correction in bear markets and often emerge on top after crises. In addition, we only invest in easy-to- understand business models. It does not matter to us whether or not these companies are included in the index or what their weighting is.» This consistent investment approach can result in them being very underweight in financials or commodities. «We often find that banks lack transparency and, in the case of commodities firms, the investment decision tends to depend more on the commodity cycle than on the company itself.»
In the years 2010 to 2014, the MSCI Emerging Markets index mainly moved sideways. «However, we are less interested in the direction of the index than in the price performance of the high-quality companies we are tracking. Since May 2015, we have seen sharp corrections in this segment too, which we have used to raise the equity ratio from around 68% to approximately 84% at present. This is the highest equity ratio in the fund since the financial crisis. The corrections have led to more attractive valuations for many high-quality firms and allowed us to add to existing positions or initiate on new companies. These are purely bottom-up decisions. We will increase the equity ratio further, should high- quality companies increasingly undergo correction.. In an asset class that is (unfortunately) still regarded as satellite and therefore heavily depends on investors’ appetite for risk, we think this countercyclical approach makes great sense» he concludes.
The Association for Financial Markets in Europe (AFME), the European Fund and Asset Management Association (EFAMA), the International Capital Market Association (ICMA) and Insurance Europe have issued a joint paper backing efforts by EU policymakers to develop a robust and successful framework for simple, transparent and standardised (STS) securitisation.
In line with the Commission’s flagship Capital Markets Union initiative, the associations believe that a new framework for securitisation could play a pivotal role between banks’ financing and capital markets, enabling much-needed non-bank funding alternatives and providing investors with high-quality fixed income securities and attractive yields.
In the joint paper, the organisations affirm that securitisation is an important element of well-functioning financial markets and call for securitisation to be treated on a level playing field with other forms of investment. They highlight their shared views on the key points for EU policymakers to consider in their development of the new framework.
Simon Lewis, Chief Executive of AFME, said: “The development of a high-quality securitisation market in Europe is an integral part of the Capital Markets Union and contributes to the Commission’s objectives to revive the real economy through increased financing and prudent risk transfer. For the European securitisation market to be safely and successfully rebuilt, the new framework must be attractive for both issuers and investors whilst operating under a strong but fair and rational regulatory regime. We are delighted to unite with investors and other market participants on this important policy initiative.”
Peter De Proft, Director General of EFAMA, commented: “EFAMA is acutely aware of the generational opportunity offered by the Capital Markets Union in restoring economic growth in Europe. The Commission’s securitisation package, as an essential component of a successful CMU, could potentially generate billions in additional funding for the economy and could act as a key driver in encouraging investor participation in European capital markets. This joint initiative of the buy-side and sell-side is testament to the sheer emphasis we believe should be placed on achieving a balanced securitisation framework which will work for our markets, our investors and Europe as a whole.”
Martin Scheck, Chief Executive of ICMA, said: “Securitisation represents a crucial asset class for investors and borrowers in Europe. As an association with both buy- and sell-side members we have strongly welcomed efforts to revive securitisation as a key element in financing the drive to restore jobs and growth in Europe. This joint paper underlines our commitment to supporting an appropriately designed framework to achieve this.”
Michaela Koller, Director General of Insurance Europe, said: “Insurers must have access to a wide range of assets in order to diversify their portfolios, and this includes a need for high quality securitisations. Steps to identify good securitisations have already been made under Solvency II and the Commission’s proposal is a continuation of this, with some important improvements. However, further improvements are needed, some of which this paper outlines. From an insurer’s perspective, we are calling for a much needed revision of the capital treatment of securitisations under Solvency II.”
“Compliance rules have dramatically changed in the last few years, and the next two ones will be even more complicated or challenging for most wealthy families,” says Martin Litwak, from law firm Litwak & Partners who discusses how the new compliance rules are impacting private wealth management in Latin America.
According to the Lawyer, «there is a lot of information online about FATCA and CRS coming from banks and financial providers, but some families are not getting the best advice, from independent lawyers, on what to do or not do, how to manage the risks and the practical impact of these changes. It is not about filling out a new questionnaire. Families must make sure that the set of structures in place are in compliant with the new scenario. It is not just one piece of law that has changed; the whole system is now different.»
Nowadays countries are cooperating for tax purposes, and the information on a family’s assets is available to authorities as well as to third parties. «Which is a bigger issue in a region like Latin America, where kidnappings take place and many governments are corrupt. The fact that information could exchange hands for very little money is very dangerous» he says.
In his opinion, families must have the right structures in place before all these new rules take effect. They also should report whatever they have or own. «If they do not like the consequences this reporting may have, they can move to a different country with a better tax system. If they are not prepared to do this, they may be able to save or differ some taxes and/or to reach some level of confidentiality at least vis a vis third parties other than governments by setting up trusts and/or private family funds.»
Jurisdictions traditionally considered as offshore international financial centers have stronger protections of secrecy and privacy. «With offshore assets, it is better to structure them offshore too. Our clients usually pursue three objectives: privacy, tax optimization and succession planning. If they value secrecy the most, regulated investment funds (perhaps with their shares being publicly traded) are better than trusts. If succession planning is more important, a trust structure might be the best solution. We try to identify what matters to them the most, but they must also understand what can and cannot be achieved in this new transparent world.»
CC-BY-SA-2.0, FlickrFoto: AedoPulltrone, Flickr, Creative Commons. MiFID II y lecciones de Reino Unido para Europa
Europa se ha dado un respiro con el retraso de un año en la aplicación de MiFID II, pero esto no es una excusa para quedarse quieto y no hacer nada. Como RDR fue el precursor de MiFID II, los distribuidores en la Europa continental vuelven la mirada a Reino Unido para entender cómo podría afectar la normativa al panorama de la distribución y qué lecciones se pueden obtener de su experiencia.
En primer lugar, es importante entender una de las diferencias fundamentales entre la RDR y MiFID. En el Reino Unido, hay que pagar por el asesoramiento tanto si es proporcionado por un asesor financiero independiente, como por un asesor vinculado o un asesor del banco. Todo el servicio de asesoramiento debe ser pagado. Este hecho tuvo el efecto no deseado de crear un gap de asesoramiento porque los inversores modestos ya no eran capaces de pagar. Además, los bancos se retiraron de la prestación del asesoramiento porque no podían ofrecer un servicio rentable y para evitar futuros escándalos.
En Europa, la situación es diferente. En virtud de MiFID II, sólo se ha de pagar por el asesoramiento independiente, lo que significa que los asesores vinculados a entidades pueden seguir beneficiándose de retrocesiones, siempre y cuando se le declaren y sean transparentes para el inversor. Esto no va a crear un ‘advice gap’ como ha hecho en el Reino Unido, pero es probable que lleve a los inversores hacia soluciones en las que no tengan que pagar por el asesoramiento (aunque en realidad van a pagar mucho más a lo largo de los años en retrocesiones). Para los países con industrias nacientes de asesoramiento, tal medida podría significar un problema, pero hay un montón de maneras de que los asesores independientes y gestores de patrimonios puedan luchar y garantizar que tengan un futuro a largo plazo en la industria de servicios financieros.
Primera lección: es importante recordar que se trata de una reforma de la oferta. Los inversores siempre necesitarán asesoramiento, pero la forma en que accedan a él va a cambiar. Las personas aún necesitarán asesoramiento sobre sus ahorros e inversiones y planes a largo plazo. La industria no se va a acabar sólo por la llegada de esta nueva legislación.
Lección dos: trabaje en estrecha colaboración con el regulador para asegurar que obtiene el máximo rendimiento de esta legislación en España. No proteste ni sea difícil, asegúrese de que su voz y sus opiniones sean escuchadas y tomadas en cuenta.
Lección tres: no espere hasta que sea demasiado tarde. Las empresas más exitosas de asesoramiento en el Reino Unido comenzaron a trabajar inmediatamente en su modelo post RDR. Se puede obtener una ventaja competitiva mediante la elaboración de su propuesta ahora. Revise sus costos, su base de clientes y entienda cómo se agrega valor. Hay que promover ese mensaje coherente.
Cuarta lección: no trate de hacer las cosas de la manera antigua. Es necesario adaptarse al nuevo entorno. Y utilizar la tecnología e Internet para ofrecer un servicio ágil y rentable. Haga su propuesta lo más atractiva posible a sus clientes.
Lección cinco: No espere al regulador o a la prensa para promover su negocio. Hágalo usted mismo y ahora. Empuje sus asociaciones comerciales para promover el valor de asesoramiento independiente y habilidades de inversión superiores. Sea proactivo. Anuncie. Coloque artículos en la prensa. Haga todo lo posible para convencer a los consumidores de que «atar» el asesoramiento no es la mejor opción.
Y si todo lo demás falla, hay una última cosa que puede hacer … defínase como no independiente!
Columna de opinión de Bella Caridade-Ferreira, CEO de Fundscape
Puede encontrar la presentación de Bella Caridade-Ferreira, realizada en el marco del último evento de banca privada de iIR, en este link.
Jérémie Fastnacht has joined BLI – Banque de Luxembourg Investments as a portfolio manager. His main responsibility in this role will be to support Guy Wagner in managing the BL-Equities Dividend fund.
The 30-year-old Frenchman comes from Banque de Luxembourg, where he served for one and a half years as an analyst and equity portfolio manager in the Private Banking Investments department.
“Quality research is even more important in today’s market environment. We are therefore staying on our chosen path and – as we have done successfully with our BL-Equities Europe and BL-Equities America funds – have provided our fund manager with a co-manager,” said Guy Wagner. “With Jérémie we have selected an in-house candidate, especially as he knows the Bank, our investment philosophy, and shares our values.”
Jérémie Fastnacht added: “I am pleased to take on this new role on the equity fund team of BLI – Banque de Luxembourg Investments. Alongside Guy I will share responsibility for the Bank’s flagship funds, which is highly motivating.” Jérémie holds a master’s degree in Finance from Université Paris-Dauphine and completed a post-graduate program in Financial markets from SKEMA Business School / North Carolina State University. Jérémie began his career as an equity fund manager at BCEE Asset Management in Luxembourg in August 2012.
