Looking to service wealthy Thais, Credit Suisse has expanded its Thailand operations.
The bank that has had a full-service securities house in Thailand for 16 years, has hired a team of 6 – looking to grow into 12, to target two key client segments – HNW individuals with assets of more than US$2 million (Bt71 million), and UHNW individuals with assets of $50 million, or $250 million in net wealth, of which the Credit Suisse Global Wealth Report 2015, estimates are close to 340 in Thailand.
According to International Investment, Christian Senn, Credit Suisse’s private banking market group head for Thailand, noted that Thai clients are increasingly looking to diversify their domestic wealth through global investments, as the the regulatory policy towards overseas capital flows in the country “continues to evolve”. They also note that in 2014 there were 91,000 Thais with more than US$1m in investable assets.
The new team will be supported by the firm’s regional private banking hub in Singapore, which houses more than 200 investment specialists, and which was in charge of the Thai Wealth Clients until now. With Thailand, Credit Suisse now has an onshore wealth presence in six Asia-Pacific markets.
For years, practitioners have been signaling the apocalypse for the offshore private wealth business due to strangling regulation. Yet, year after year, clients are well served, products are well developed and doomsday never quite arrives. Former Secretary of the Treasury Nicholas Brady is said to have once remarked: «Never bet on the end of the world; for one thing, even if you win there’d be no one around to collect from.»
And so it is with regulation. No doubt that technology and the otherwise shrinking and connected world have greatly accelerated the pace of global initiatives like tax transparency. Similarly, the pace of change in many countries has lagged and the ability to gather and share personal data globally has not moved consistently with governmental stability and the ability to keep private data private. Nonetheless, the global initiatives and their reduction to local law and regulation are a current reality.
No practitioner in the private wealth world should be without at least a conversational familiarity with those pieces of regulation shaping our world. While the regulations themselves vary from aspirational multinational initiatives by non-governmental bodies to specific national legislation or treaties, together they form a mosaic that is, in fact, beginning to resemble something recognizable.
I. United States Anti-Money Laundering Act
From 1970 the United States has had at least some measure of comprehensive anti-money laundering legislation. While the intricacies of the AML framework are vast and broad, certain areas directly impact the offshore private wealth world.
Broadly, money-laundering is the process of making illegally gained proceeds appear legal. It was officially established as a federal crime in 1986. Importantly, the ultimate offense of laundering criminal proceeds applies with specificity only to those Specified Unlawful Activities (SUA) enumerated in the legislation. Not all crimes are listed, and many are noticeably omitted, including tax non-compliance in foreign countries.
In the aftermath of the September 11, 2001 terrorist attacks, the US Congress passed the PATRIOT ACT. Title III of the Act is its primary AML component and greatly changed the landscape for brokerage and other non-banks. The Act greatly increased the diligence provisions of AML KYC (Know Your Customer) and crafted those as part of broader Customer Identification Programs (CIP) to which nearly all financial institutions must adhere. These CIP requirements, including its Customer Due Diligence and Enhanced Due Diligence prongs are most familiar to private wealth practitioners as they today form an essential piece of client onboarding and account opening. Foreign customers are treated differently than the domestic US national customers and require additional data gathering including identification documents which may range from passports to country verification cards.
The Customer Due Diligence Program (CDD) is designed to demand more from those clients and institutions that may present higher risks for money-laundering and terror financing. Customers that pose higher risks including certain foreign accounts such as correspondent accounts, senior foreign political figures and personal corporate vehicles, require even greater diligence. This “enhanced” due diligence (EDD) is the normal course for the offshore private wealth client.
Part and parcel of enhanced diligence is the concept of “looking through” corporate investment vehicles, whether simple entities or trusts, to determine and verify true ownership. The use of these vehicles is regularly regarded as an additional risk factor which requires “high-risk” documentary procedures in account opening and subsequent monitoring. Of particular interest are potential underlying crimes of political corruption. Enhanced scrutiny of accounts involving senior foreign political figures and their families and associates is required to guard against laundering the proceeds of foreign corruption.
II. FATCA
In what is the most significant legislation impacting financial transparency, the Foreign Account Tax Compliance Act (FATCA) has reshaped the world of international tax reporting and cooperation. FATCA’s original intent was to enforce the requirements for US persons to file yearly reports on their non-US financial accounts by requiring foreign financial institutions to search the records for indicia of US person accounts and to report these to the Department of the Treasury. For those who fail to adequately search and report US persons within those foreign institutions, a 30% penalty would be assessed to qualifying payments. Because the US capital markets remain the world’s foremost, access by foreign institutions to those markets quickly became FATCA dependent.
For foreign institutions, FATCA commands they search their customer base for FATCA indicia of US person status, including place of birth, US mailing address, a current US power of attorney, and other indicators. Additionally foreign institutions are to annually certify compliance and implement monitoring systems to assure the accuracy of the certification.
An important FATCA feature is its complex definitional scheme. Many of FATCA’s definitional criteria impose bank-like requirements on commonplace personal investment entities designed to suit the needs of only one individual or family. Practitioners need to be aware that under FATCA simple PIC’s may well qualify to be FATCA foreign financial institutions.
In its most familiar implementation, FATCA devises a model of international financial data exchange through bilateral Intergovernmental Agreements (IGA’s). Today, there are over 100 IGA’s calling for exchange of information between governments. Beginning with France, Germany, Italy, Spain and the UK in 2012, other countries have joined the data sharing protocols which provide for either the foreign institution to directly provide the US person account data to the IRS (Model 2) or the institution reports to its home authority, which in turn reports the data to the US IRS (Model 1).
It is important to note that while mutual, not all IGA’s are reciprocal and that the reporting obligations may vary among the signatories. By example, under Model 1A, the US shares information about the country’s taxpayer, while under Model 1B there is only exchange to the US, but not from the US. The quality of the data may also vary greatly. As an example; Mexican financial institutions must identify the ultimate owners of corporate entities with US persons. Non-reciprocally, US financial institutions need not report those corporate entities beneficially owned by Mexican residents.
III. Automatic Exchange of Information
Taking its cue from the developing US FATCA framework, the OECD and the G20 crafted its own version of a global transparency framework beginning in 2014. The Automatic Exchange of Information Act (AEI) framework imposes an automatic standard requiring financial institutions in participating jurisdictions to report individual account holders to their respective home countries, including “looking through” legal entities and trusts.
The actual data exchange implementation requires bilateral agreement between the countries. Countries are free to deny exchange with other signatories if confidentiality standards are not satisfactory, among other factors. Importantly, the US is not committed to the AEI or it’s Common Reporting Standard (CRS) which dictates what the signatories are to report and contains many of the “look through” features which reveal the identities and home countries of the ultimate beneficial owners of corporate entities and trusts. While to date the US remains committed to its FATCA/IGA framework as its mode of implementing global tax transparency , IRS Commissioner John Koskinen recently has called for the adoption of the AEI/CRS standard.
Common Reporting Standard
In order to affect meaningful data exchange, there must be a uniform standard for the quality of data to be exchanged. Those provisions exist under Common Reporting Standard. Unveiled in February 2014, over 50 countries have expressed their willingness to join the multilateral framework. The US is not yet an adopter, and the OECD has noted that the “intergovernmental approach to FATCA is a pre-existing system with close similarities to the CRS.” In deference, the OECD views FATCA as a “compatible and consistent” system with the CRS. Under the CRS, institutions must report passive investment entities and look through the entity structure to report its “Controlling Persons”. Also included in the reporting scheme are trusts both revocable and irrevocable.
IV. Conclusion
The recent wave of regulation is fast and fervent. While it builds on an existing foundation in many instances, nothing will quite ever be the same again. Transparency and data sharing are inevitable. For the offshore private wealth practitioner, the only answer is transparent and locally tax efficient and compliant solutions. Consulting a learned wealth planner is no longer a luxury; it has become a necessity.
Since the beginning of the year, the greenback has shown it’s not almighty after all; and gold – the barbarous relic as some have called it – may be en vogue again? Where are we going from here and what are the implications for investors?
Like everything else, the value of currencies and gold is generally driven by supply and demand. A key driver (but not the only driver!) is the expectation of differences in real interest rates. Note the words ‘perception’ and ‘real.’ Just like when valuing stocks, expectations of future earnings may be more important than actual earnings; and to draw a parallel to real interest rates, i.e. interest rates net of inflation, one might be able to think of them as GAAP earnings rather than non-GAAP earnings. GAAP refers to ‘Generally Accepted Accounting Principles’, i.e. those are real-deal; whereas non-GAAP earnings are those management would like you to focus on. Similarly, when it comes to currencies, you might be blind-sided by high nominal interest rates, but when you strip out inflation, the real rate might be far less appealing.
It’s often said that gold doesn’t pay any interest. That’s true, of course, but neither does cash. Cash only pays interest if you loan it to someone, even if it’s only a loan to your bank through a deposit. Similarly, an investor can earn interest on gold if they lease the gold out to someone. Many investors don’t want to lease out their gold because they don’t like to accept the counterparty risk. With cash, the government steps in to provide FDIC insurance on small deposits to mitigate such risk.
While gold doesn’t pay any interest, it’s also very difficult to inflate gold away: ramping up production in gold is difficult. Our analysis shows, the current environment has miners consolidating, as incentives to invest in increasing production have been vastly reduced. We draw these parallels to show that the competitor to gold is a real rate of return investors can earn on their cash. For U.S. dollar based investors, the real rate of return versus what is available in the U.S. may be most relevant. When it comes to valuations across currencies, relative real rates play a major role.
So let’s commit the first sin in valuation: we talk about expectations, but then look at current rates, since those are more readily available. When it comes to real interest rates, such a fool’s game is exacerbated by the fact that many question the inflation metrics used. We show those metrics anyway, because not only do we need some sort of starting point for an analysis, but there’s one good thing about these inflation metrics, even if one doesn’t agree with them: they are well defined. Indeed, I have talked to some of the economists that create these numbers; they take great pride in them and try to be meticulous in creating them. To the cynic, this makes such metrics precisely wrong. To derive the real interest rate, one can use a short-term measure of nominal rates (e.g. the 3 month T-Bill, yielding 0.26% as of this writing), then deducting the rate of inflation below:
The short of it is that, based on the measures above, real interest rates are negative. If you then believe inflation might be understated, well, real interest rates may be even more negative. When real interest rates are negative, investing cash in Treasury Bills is an assured way of losing purchasing power; it’s also referred to as financial repression.
Let’s shift gears towards the less precise, but much more important world of expectations. We all know startups that love to issue a press release for every click they receive on their website. Security analysts ought to cut through the noise and focus on what’s important. You would think that more mature firms don’t need to do this, but the CEOs of even large companies at times seem to feel the urge to run to CNBC’s Jim Cramer to put a positive spin on the news affecting their company.
When it comes to currencies, central bankers are key to shaping expectations, hence the focus on the «Fed speak» or the latest utterings coming from European Central Bank (ECB) President Draghi or Bank of Japan’s (BoJ) Kuroda. One would think that such established institutions don’t need to do the equivalent of running to CNBC’s Mad Money, but – in our view – recent years have shown quite the opposite. On the one hand, there’s the obvious noise: the chatter, say, by a non-voting Federal Open Market Committee (FOMC) member. On the other hand, there are two other important dimensions: one is that such noise is a gauge of internal dissent; the other is that such noise may be used as a guidance tool. In fact, the lack of noise may also be a sign of dissent: we read Fed Vice Chair Fischer’s absence from the speaking circuit as serious disagreement with the direction Fed Chair Yellen is taking the Fed in; indeed, we are wondering aloud when Mr. Fischer will announce his early retirement.
This begs the question who to listen to, to cut through the noise. The general view of Fed insiders is that the Fed Governors dictate the tone, supported by their staff economists. These are not to be mistaken with the regional Federal Reserve Presidents that may add a lot to the discussion, but are less influential in the actual setting of policy. Zooming in on the Fed Governors, Janet Yellen as Chair is clearly important. If one takes Vice Chair Fischer out of the picture, though, there is currently only one other Ph.D. economist, namely Lael Brainard; the other Governors are lawyers. Lawyers, in our humble opinion, may have strong views on financial regulation, but when it comes to setting interest rates, will likely be charmed by the Chair and fancy presentations of her staff. I single out Lael Brainard, who hasn’t received all that much public attention, but has in recent months been an advocate of the Fed’s far more cautious (read: dovish) stance. Differently said, we believe that after telling markets last fall how the Fed has to be early in raising rates, Janet Yellen has made a U-turn, a policy shift supported by a close confidant, Brainard, but opposed by Fischer, who is too much of a gentleman to dissent in public.
It seems the reason anyone speaks on monetary policy is to shape expectations. Following our logic, those that influence expectations on interest rates, influence the value of the dollar, amongst others. Former Fed Chair Ben Bernanke decided to take this concept to a new level by introducing so-called «forward guidance» in the name of «transparency.» I put these terms in quotation marks because, in my humble opinion, great skepticism is warranted. It surely would be nice to get appropriate forward guidance and transparency, but I allege that’s not what we have received. Instead, our analysis shows that Bernanke, Yellen, Draghi and others use communication to coerce market expectations. If the person with the bazooka tells you he (or she) is willing to use it, you pay attention. And until not long ago, we have been told that the U.S. will pursue an «exit» while rates elsewhere continue lower. Below you see the result of this: the trade weighted dollar index about two standard deviation above its moving average, only recently coming back from what we believe were extremes:
f reality doesn’t catch up with the storyline, i.e. if U.S. rates don’t «normalize,» or if the rest of the world doesn’t lower rates much further, we believe odds are high that the U.S. dollar may well have seen its peak. Incidentally, Sweden recently announced it will be reducing its monthly bond purchases (QE); and Draghi indicated rates may not go any lower. While Draghi, like most central bankers, hedges his bets and has since indicated that rates might go lower under certain conditions after all, we believe he has clearly shifted from trying to debase the euro to bolstering the banking system (in our analysis, the latest round of measures in the Eurozone cut the funding cost of banks approximately in half).
On a somewhat related note, it was most curious to us how the Fed and ECB looked at what in some ways were similar data, but came to opposite conclusions as it relates to energy prices. The Fed, like most central banks, like to exclude energy prices from their decision process because any changes tend to be ‘transitory.’ With that they don’t mean that they will revert, but that any impact they have on inflation will be a one off event. Say the price of oil drops from $100 to $40 a barrel in a year, but then stays at $40 a barrel. While there’s a disinflationary impact the first year, that effect is transitory, as in the second year, inflation indices are no longer influenced by the previous drop.
The ECB, in contrast, raised alarm bells, warning about «second round effects.» They expressed concern that lower energy prices are a symptom of broader disinflationary pressures that may well lead to deflation. We are often told deflation is bad, but rarely told why. Let’s just say that to a government in debt, deflation is bad, as the real value of the debt increases and gets more difficult to manage. If, in contrast, you are a saver, your purchasing power increases with deflation. My take: the interests of a government in debt are not aligned with those of its people.
Incidentally, we believe the Fed’s and ECB’s views on the impact of energy prices is converging: we believe the Fed is more concerned, whereas the ECB less concerned about lower energy prices. This again may reduce the expectations on divergent policies.
None of this has stopped Mr. Draghi telling us that US and Eurozone policies are diverging. After all, playing the expectations game comes at little immediate cost, but some potential benefit. The long-term cost, of course, is credibility. That would take us to the Bank of Japan, but that goes beyond the scope of today’s analysis.
To expand on the discussion, you can register for Axel Merk’s upcoming Webinar entitled ‘What’s next for the dollar, currencies & gold’ on Tuesday, May 24.
A few months ago, when the already so distant summer of 2015 was coming to a close, we had the opportunity to talk to Art Hogan, MD, Director of Research and Chief Market Strategist at Wunderlich, at an event organized by Dominick & Dominick, a division of Wunderlich Wealth Management, for its Miami clients, regarding investors’ major concerns. We have now resumed that conversation to find out whether those concerns have changed and, if so, how.
On September 9th, 2015, at an event held for Dominic & Dominic clients in Miami, Art Hogan listed investors’ major concerns at that particular time in the following order: What will the Chinese government do to stimulate the economy? (Which had climbed from fourth place to the top of the list); Will there be continuity to the Fed’s policy or not? (An issue which was previously in sixth position); thirdly, an issue concerning valuations, are stocks expensive? The fourth concern was, what effect will geopolitical risks have? And as the last of the concerns in the top five, how will corporate earnings evolve?
Leaving concerns behind, Hogan III shared the good news: GDP growth, corporate earnings for the second quarter and estimates for the third, volume of mergers and acquisitions in the first half of 2015, employment growth; the strong recovery in housing sales; the low price of gasoline and electricity, the fact that banks were extending loans, and developments in Europe, which had improved greatly over the previous year.
And how do we stand now? Are the reasons that keep investors up at night still the same, and in the same order? Hogan responds by analyzing each of those topics.
Monetary Policy Monetary policy is investors’ major concern, given the huge impact which the decisions of some countries have on the economy of others, both overall and on the financial sector, which is crucial for the functioning of the economy. «We must be aware of monetary decisions» as some potential errors could be disruptive, like China «irresponsibly » devaluing its currency very quickly; another error would be for central banks to consider that negative interest rates help their economies become more competitive, when it has been shown that, at present, they cause the opposite effect; a third would be if the United States acted with undue haste in rising rates in an unstable economy. “It hasn’t done so yet, and I’m less concerned about us being too restrictive than about others being too lenient”. Monetary policy is definitely one of the issues that Hogan recommends we should follow closely.
Commodity Prices in General, and Energy in Particular. The second major issue is the price of commodities and energy. Emerging economies are dependent on commodity sales to developed economies and, in general, the latter are favored by low prices. But make no mistake, the benefits obtained by developed markets is not as great as the damage suffered by emerging markets, because they need stable prices to grow. Furthermore, Hogan points out that «looking at the prices of commodities and the economy, can lead to the erroneous interpretation that the former are premonitory of the evolution of the latter. It’s an error to believe that if the price per barrel was US$100 18 months ago and $ 36 a month ago, the global economy must be in tatters. It is not always the case.» In fact, the real problem is the imbalance between the excess supply and the demand.
The first steps in the right direction are being taken to reach some agreement, says Hogan, his reasoning being that high prices are in everyone’s interest and there is movement within the sector (Saudi Arabia and Russia have made a first and difficult attempt at communicating, America is slightly reducing its production, Iran- starting to export after years of sanctions- is asked not to increase its production). By pointing out that intentions are not about freezing production altogether, but rather about halting its increase, and carrying out rational negotiations, Hogan makes it clear he does not expect the outlook to change from one day to the next, but he believes we are at the beginning of the path to recovery and invites us to see what happens at the OPEC meeting in June, although he believes there will be preliminary discussions.
China China may not be investors’ major concern at this time, but it’s still in the Top 3 and, according to Hogan, will remain in the list of concerns for a long time, as it is after all the second largest economy in the world and still undergoing a process of major change. The country is in the throes of a difficult process, from being purely an exporter of inexpensive products produced by cheap labor, to becoming a net consumer at the hands of its emerging middle class. What we do not know is how effective they will be at orchestrating a soft landing -as they are new in what they do and, inevitably and as part of the process, they will make mistakes -or how disruptive this will be if they don’t succeed. They will improve in the process, however, as well as improving their communication.
US Politics US politics, which although is not usually on his «list» does appear now because it’s in the midst of the electoral process. It is another issue that Art Hogan follows closely. At the start of the primaries, when Trump and Sanders both looked promising, Hogan commented that it was easier to be well positioned for the less moderate candidates, although it is more likely that the more moderate ones finally win the elections. Neither option -Trump, with his protectionist proposal, calling for import taxes on products imported by China, Mexico and Japan, among many other measures, nor Sanders, leaning towards socialism, with anticipation of higher taxes, unfriendly to Wall Street, and planning to spend a lot of money- seems the most «market friendly». For now, markets are allowing the process to continue and will react when the candidate for each party is known. So, can’t we predict the market reaction to a possible Democrat or Republican victory? “Exactly”, says Hogan, “that will depend on who the candidate is for each of the options. The best performing markets over the past 15 years, regardless of whether the President is either Democrat or Republican, have had either a mixed senate or one with a majority from the president’s opposing party, which balances decisions”.
Geopolitical Risks Abroad When asked for his opinion on the political situation in other countries, Hogan points out that India is moving in the right direction according to the markets, while Brazil does so in the opposite direction, although because of cycles, «we must monitor the movements well». His biggest concern in the geopolitical sphere is the low price of commodities and reminds us that the situation in Nigeria, Venezuela, Iran and Iraq. Also, Russia and Saudi Arabia are stable when prices are high, but not so much when the lack of revenue caused by the fall of those commodities begins to cause economic problems within the country.
Europe is another region facing its own challenges, with somewhat distant positions between the EU and the UK. «If the European Union wants to keep the UK among its members, it will have to make some reforms. Its departure could encourage other countries to follow suit and produce great instability in the region. In the short term, the UK must be kept within the European Union,» said Wunderlich’s Research Analyst and Strategist, pointing out that just a few months ago it seemed that Greece could be the first one to exit the EU, and advising not to forget that country. Europe also faces another major challenge which will leave a mark on its future, which is the operational, financial, and economic management of immigration, the resolution of which will not be as fast as decision making in the UK. But there are still other issues outstanding: the establishment of a single monetary policy and stimulating the economy, something to which the strong dollar has contributed towards in recent months, improving competitiveness.
Will There be Contagion? Another issue that seems to worry the markets, «although I do not share it» is that the slowdown in global economic growth could end up leading developed economies into recession. One of the most frequent conversations these days is whether the slowdown in emerging countries, will end in recession and then cross the border to spread to the United States; the Chief Market Strategist says he still believes that there will be no recession in the United States. «Although it is now more likely than before, the possibility remains at around 20%.» According to Hogan, the US economy is moving in the right direction: the GDP is growing between 2 and 2.5%, and the rate of employment, consumer confidence, car sales, etc. are all increasing. In short, if it does happen, it would be more the result of contagion than of country fundamentals.
Foto: Flazingo. GAM, propietaria de Julius Baer Funds, compra Taube Hodson Stonex
GAM, la gestora dueña de Julius Baer Funds, ha anunciado la compra de THS, una firma de inversión especializada en renta variable europea con sede en el Reino Unido.
Se espera que la adquisición, sujeta aprobación regulatoria, se cierre en el tercer trimestre de 2016. El equipo de inversión, dirigido por Cato Stonex, Mark Evans, Robert Smithson y Ali Miremadi, se trasladará a las oficinas de GAM en Londres y sus estrategias serán comercializadas bajo la marca GAM. A cierre de marzo, THS gestionaba activos equivalentes a aproximadamente 1.780 millones de libras (2.600 millones de dólares).
THS cuenta con una larga trayectoria en la gestión de inversiones por medio de mandatos institucionales en renta variable global y europea. THS también ha sido el sub-asesor de una de las estrategias globales más antiguas de GAM, la cual fue lanzada en 1983.
«Con su trayectoria probada y amplia experiencia, el equipo de THS encaja estratégica y culturalmente con GAM y estamos encantados de que hayan elegido unirse con nosotros. Tenemos una relación de varias décadas con los fundadores y esta adquisición es consistente con el programa de crecimiento que se propuso en el año 2015, que incluye buscar oportunidades de que profundicen sustancialmente nuestras capacidades globales de renta variable», explicó Alexander Friedman, director general de GAM.
Cato Stonex, socio fundador de THS dijo: «Estamos muy contentos de unirnos a GAM – uno de nuestros clientes más antiguos y una firma con un impresionante historial en inversiones activas. Creemos que esto es un excelente negocio para nuestros clientes. La red global de clientes de GAM y su infraestructura operativa nos permitirán mantenemos enfocados en nuestras prioridades de inversión y construir sobre nuestras fortalezas».
According to Chi Lo, Senior Economist, Greater China, Hong Kong at BNP Paribas Investment Partners, concerns that an economic hard landing in China could force Beijing to massively devalue the renminbi have receded since the start of the year but remain in the background. «Such a development would send shockwaves through global financial markets. Some investors continue to wonder whether Beijing is losing control of its economy and currency.» He writes on his blog.
Lo mentions that traditional macroeconomic indicators, such as growth in industrial output, electricity consumption, freight volume and steel and cement output, do paint a hard-landing scenario for China by showing either anaemic growth rates or outright contraction. However, the new economy, represented by the service-based tertiary sector became the largest category of GDP in 2013. «This development suggests to me that creative destruction is underway. The traditional macroeconomic indicators have failed to capture the structural changes. The fact that China is going through a difficult transition from the old to the new economy with some setbacks in financial reforms does not necessarily spell an economic crisis.»
While the new economy is neither large enough nor strong enough to offset the contraction of the old economy, electricity consumption and railway transport have been growing in the new economy. Lo argues that there should be a policy-easing bias until economic momentum stabilises. He also mentions the setbacks in China’s financial reform, «notably the bursting of asset bubbles and a clumsy renminbi policy shift. All this has led to an exodus of capital recently. However, setbacks do not mean crises. Beijing is walking a fine balance between sustaining GDP growth and implementing structural reforms. The resultant creative destruction is dragging on growth and creating volatility. This situation should not be seen as a sign of Beijing losing control of the economy.»
What about the currency? Some market players have used the Impossible Trinity theorem to argue that with capital fleeing China, it is not going to be possible to maintain a stable renminbi and ease monetary policy at the same time. If Beijing wants to cut interest rates to stabilise domestic GDP growth, it would have to allow a sharp devaluation in the currency, the pessimists argue.
«However, the application of the Impossible Trinity analysis to China is flawed. I do not see signs of capital flight. Otherwise, one should have seen a significant depletion in domestic deposits, which has not been the case. More crucially, the Impossible Trinity is not as pressing a constraint on China as many have claimed. Despite the seemingly big strides that China has taken in recent years, its capital account is still relatively closed. Most of the liberalisation measures have been aimed at institutional and official institutions’ investments. Beijing has only been opening up the capital account in an asymmetric fashion by allowing capital inflows but still restricting capital outflows.»
Sure, China lost about USD 700 billion in currency reserves last year, despite a surplus in its basic surplus (current account balance + net foreign direct investment inflows). But a big chunk of the decline came from the valuation effect, Chinese companies repaying their foreign debt and a one-time transfer to recapitalise the policy banks (three new “policy” banks, the Agricultural Development Bank of China (ADBC), China Development Bank (CDB), and the Export-Import Bank of China (Chexim), were established in 1994 to take over the government-directed spending functions of the four state-owned commercial banks). «There is no denial that there are capital outflows from China, but they do not signify Beijng losing control of the renminbi. Since there is still no full capital account convertibility, China’s monetary policy will only be partly compromised if the People’s Bank of China wants to keep the control of the renminbi in the medium-term.» Lo concludes.
Advent International, one of the largest and most experienced global private equity investors, announced that Enrique Pani has joined the firm as a Managing Director in its Mexico City office. Enrique Pani will work alongside Luis Solórzano, head of Mexico for Advent, and 12 other investment professionals in the office. Advent has the largest dedicated private equity team in Latin America, with 41 investment professionals working from offices in Mexico City, Bogotá and São Paulo.
Prior to joining Advent, Enrique Pani was a Managing Director and Head of Investment Banking for Mexico at Bank of America Merrill Lynch (BAML). There he was responsible for managing the investment banking coverage and execution team based in Mexico City and was also a member of the BAML Management Committee.
Enrique Pani started his career as an equity research analyst and has over 20 years of investment banking experience in Mexico and New York. He established and was responsible for investment banking operations in Mexico at Deutsche Bank, BTG Pactual and, most recently, BAML. He has advised clients in the financial services, healthcare, retail and infrastructure sectors across Latin America and has raised more than USD 20 billion in capital for his clients.
“Enrique is a great addition to our firm as his broad experience and deep relationships in a number of our target sectors will benefit Advent as we continue to build on the local team’s achievements”, said Luis Solórzano, a Managing Director and Head of Mexico for Advent. “We have a 20-year presence in Mexico and continue to believe it is an attractive market for private equity. We look forward to welcoming Enrique to the team.”
Since opening its Mexico City office in 1996, Advent’s local team has invested in 25 companies in Mexico, the Caribbean and other Latin American and global markets. The team focuses on buyouts and growth equity investments in the firm’s five core sectors: business and financial services; healthcare; industrial, including infrastructure; retail, consumer and leisure, including education; and technology, media and telecom. Recent Mexican investments include; Viakem, a Mexico-based manufacturer of fine chemicals for the global agrochemical industry; Grupo Financiero Mifel, a Mexican mid-sized bank serving the mass-affluent retail segment and small and medium-sized companies; and InverCap Holdings, a Mexican mandatory pension fund manager.
“Advent is one of the leading private equity firms in Latin America, and I am excited to begin working with Luis and the team in Mexico as well as with Advent professionals throughout the region and worldwide,” said Enrique Pani. “Advent has a differentiated approach to investing and building value in Latin American companies, and I believe my prior experience and existing relationships will be quite complementary to this large and talented group.”
In the 20 years it has been operating in Latin America, Advent has raised more than USD 6 billion for investment in the region from institutional investors globally, including USD 2.1 billion raised in 2014 forLAPEF VI. LAPEF VI is the largest private equity fund ever raised for the region. Since 1996, the firm has invested in over 50 Latin American companies and fully realized its positions in 35 of those businesses.
Foto: Biblioteca nacional de España, Flickr, Creative Commons. Capital Group lanza su estrategia de renta variable estadounidense, Investment Company of America, en Europa
Capital Group, gestora internacional con 1,4 billones de dólares en volumen gestionado, ha anunciado el lanzamiento en Europa de su estrategia más longeva, Investment Company of America (ICA). En consonancia con el plan anunciado en el año 2015, destinado a ofrecer a los inversores europeos el acceso a algunas de sus estrategias de inversión de mayor éxito, y tras el lanzamiento del Capital Group New Perspective Fund (LUX) el año pasado, Capital Group pondrá a disposición de los inversores europeos su emblemática estrategia estadounidense a partir de junio de 2016.
La entidad lanzará la estrategia ICA en Europa a través de un fondo domiciliado en Luxemburgo (UCITS), que seguirá el mismo enfoque activo y avalado por la experiencia que lleva más de 80 años generando resultados. El nuevo fondo estará gestionado por el mismo equipo que gestiona la estrategia estadounidense. Desde su lanzamiento en 1934, la estrategia ICA de Capital Group ha obtenido una rentabilidad anual del 12,9% frente a la rentabilidad del 10,7% anual registrada por el índice S&P 500.
Tal y como afirma Richard Carlyle, Investment Director, “la filosofía de inversión de la estrategia, basada en el análisis fundamental, lleva ocho décadas generando una rentabilidad constante con horizontes de inversión a largo plazo, disciplina de valoración y una especial predilección por empresas consolidadas con perspectivas de dividendos futuros. Dicha filosofía ha ofrecido crecimiento durante diferentes ciclos de mercado, así como protección frente a las caídas en momentos de incertidumbre o volatilidad. Por todo ello, la estrategia ICA constituye una opción atractiva para aquellos inversores que buscan incorporar a su cartera de renta variable una exposición activa a largo plazo a la renta variable estadounidense, o para aquellos que desean gestionar el riesgo de caídas frente a un enfoque pasivo”.
En palabras de Hamish Forsyth, presidente europeo de Capital Group Companies Global, “este nuevo lanzamiento constituye una nueva etapa de nuestro plan estratégico, que tiene como objetivo poner a disposición de los inversores europeos lo mejor de Capital Group, así como contribuir al crecimiento de nuestras actividades en la región. Tanto las instituciones como los intermediarios financieros han reaccionado de forma muy positiva al lanzamiento del Capital Group New Perspective Fund (LUX). Pensamos que el hecho de ofrecer a los inversores europeos acceso a una de nuestras estrategias de mayor importancia y tradición supone un paso importante en este proceso”.
Capital Group lleva trabajando para los inversores europeos desde 1962, cuando la entidad abrió en Ginebra su primera oficina fuera de Estados Unidos. Capital Group cuenta con más de 500 empleados en Europa, y con oficinas y sucursales de ventas en Ámsterdam, Fráncfort, Ginebra, Londres, Luxemburgo, Madrid, Milán y Zúrich.
La gestora seguirá teniendo su sede en Róterdam.. Robeco da autonomía a su gestora separando sus actividades de las del holding financiero y con cambios en su cúpula
Robeco Groep N.V. ha anunciado en un comunicado que se dispone a separar sus actividades en dos compañías totalmente diferenciadas: por un lado estará la gestora de activos, Robeco Institutional Asset Management B.V., que tendrá su propio Consejo de Supervisión y gestión ejecutiva para enfatizar su posición como una gestora global autónoma, bajo el nombre de Robeco y con sede en Róterdam, preservando su nombre y su historia; y por otro lado, Robeco Group (RG), que será transformado desde una compañía operativa en un holding financiero.
Así, la nueva estructura corporativa separará y desmarcará las actividades de Robeco Group de las de los negocios de gestión de activos de sus subsidiarias (Boston Partners, Harbor Capital Advisors, Transtrend, RobecoSAM y Robeco). La nueva estructura refleja, según dice la firma en un comunicado, las actuales tendencias de mercado y de la industria global, y garantiza un expertise continuado en inversiones, distribución y servicio a los clientes.
En línea con ese carácter autónomo, la gestora tendrá su propio Consejo de Supervisión, que estará formado por los siguientes miembros: Jeroen Kremers (presidente), Jan Nooitgedagt y Gihan Ismail. Próximamente la firma anunciará el resto de integrantes. Tanto Jan Nooitgedagt como Jeroen Kremers han sido miembros del Consejo de Supervisión de Robeco Groep, mientras Gihan Ismail -que cuenta con 20 años de experiencia en el sector de servicios financieros- es actualmente director ejecutivo de la firma Marine Capital Limited. El resto de miembros del Consejo de Supervisión de Robeco Groep saldrán de la firma cuando se complete la transición.
Según el comunicado, el día a día de la gestión sigue a manos de Leni Boeren, Roland Toppen, Peter Ferket, Ingo Ahrens y Karin van Baardwijk, que forman el Comité Ejecutivo de Robeco. Boeren saldrá del grupo pero el resto, «ejecutivos con fuertes raíces y experiencia en el sector de la gestión de activos y que han servido en Robeco durante muchos años», parece que continuará, «lo que asegura estabilidad y continuidad para la nueva Robeco», según dice la firma.
Boeren liderará la transición hacia la nueva estructura de gobernanza y seguirá siendo miembro del equipo hasta que se complete el cambio. Cuando acabe, abandonará la firma -actualmente es vicepresidente del Consejo de Gestión del grupo y tiene varias posiciones en los consejos de las subsidiarias Boston Partners, Harbor Capital Advisors, Transtrend, Robeco Institutional Asset Management y RobecoSAM y es vicepresidente del consejo del Fondo de Pensiones Holandés y la asociación de gestión de activos-.
También saldrán otros profesionales puesto que, como holding financiero, RG no realizará ninguna actividad de gestión de activos y el Consejo de Supervisión y el Consejo de Gestión serán reemplazados por un consejo financiero simplificado liderado por Makoto Inoue, presidente y CEO de ORIX Corporation –firma nipona que compró cerca de un 90% de Robeco en 2013-, algo sujeto a la aprobación regulatoria final. Los presidentes salientes de ambos consejos (el Consejo de Supervisión y el Consejo de Gestión), Bert Bruggink y David Steyn, respectivamente, han dejado Robeco y se unirán a ORIX Group. Los otros miembros del Consejo de Supervisión de Robeco Groep abandonarán la entidad una vez se haya completado la transición hacia la nueva estructura corporativa.
Makoto Inoue, presidente y CEO de ORIX Corporation comentó: “Robeco emplea un gran talento. Esta nueva estructura permitirá que este talento florezca y ayudará a la firma a expandirse”.
Ken Hsia, Investec - Foto cedida. Investec: “En Europa el viento de frente ha virado hasta convertirse en viento de cola”
El equipo de renta variable europea de Investec es parte del equipo “4Factor Investment Team”, más amplio y que supone una de las 7 capacidades inversoras de la gestora. El 4Factor team es responsable de un total de entre 30 y 35.000 millones de dólares en activos de clientes. Ken Hsia, Lead portfolio manager del European Equity Fund, resume para nosotros en su última y muy reciente visita a Miami este proceso de inversión.
“Creemos que los mercados de renta variable son ineficientes por definición, pero el nivel de eficiencia varía en función de los titulares”,explica . En estos momentos los inversores están recibiendo noticias sobre ralentización, elecciones presidenciales en Estados Unidos o el referéndum en Reino Unido, un tipo de noticias que llama su atención y ha creado volatilidad en los últimos tiempos, provocando mayores ineficiencias en los mercados. “Como selectores de valores nuestro trabajo es ser capaces de aprovechar estas ineficiencias”.
¿Por qué existen esas ineficiencias? “Por errores de comportamiento de los participantes en el mercado. Existen determinados patrones que, cuando se trata de invertir, hacen que se compre caro y se venda barato”, responde Hsia, añadiendo: “Creemos que si se hacen las cosas bien se pueden obtener mejores resultados consistentemente en el tiempo”.
Para lograr ese objetivo, aplican -desde una base agnóstica con respecto a benchmark, estilo y capitalización- su “4Factor”, un proceso que les lleva a analizar cuatro diferentes aspectos: elevada calidad -que las compañías hayan creado valor para sus accionistas en el pasado-; valoración atractiva –que estén más baratas que la media en función de cash flow return on investment and asset based valuations-; mejora de resultados operativos –que están viendo revisadas sus previsiones de beneficios por parte de analistas-, y creciente atención por parte de inversores –iniciando tendencia alcista-.
Los dos primeros, los dos tradicionales, son lo que ayudan a encontrar corporaciones de alta calidad a valoraciones atractivas y los dos últimos, relacionados con los comportamientos, los que ayudan a marcar el momento preciso de tomar posiciones o dejarlas y a evitar errores de comportamiento.
¿Por qué Europa, ahora?
Los ingresos y beneficios empresariales crecerán, gracias a las commodities. Los mercados europeos, que Hsia considera en una etapa temprana del ciclo de beneficios, no han tenido unos retornos en los últimos meses que, de primeras, hagan obvio el inicio de la recuperación que el gestor señala, pero él explica que la caída de precio de las commodities en los últimos 12-18 meses (el petróleo ha pasado de superar los 100 dólares el barril a oscilar entre 35 y 45, y el hierro de más de 100 por tonelada a pagarse a entre 40 y 50, por ejemplo) está pesando sobre los ROEs. Y estén o no es su propia cartera, Royal Dutch, Total, BHP Billiton, u otros valores con exposición a materias primas, pesan en el benchmark del fondo, el MSCI Europe.
“Los dos datos más interesantes son que para 2017 los analistas esperan un incremento de beneficios en las corporaciones europeas de un holgado doble dígitoy que las commodities pasarán de frenar sus crecimientos, a empujarlos”, cuando en 2014 y 2015 la evolución subyacente de los beneficios por acción (EPS) –excluyendo commodities- se aproximó al 5%, y para 2016 el consenso habla de entre el 4 y el 6%.
Hay señales de recuperación
“Hemos identificado dos sectores cíclicos que dan algunas muestras”: por un lado, las ventas de automóviles -que son un claro indicador de la confianza de los inversores- se están recuperando desde 2013, y en el primer trimestre de este año crecieron en Europa un 8% -aunque con diferencias entre unos países y otros-. Todavía a un nivel un 15% por debajo de sus máximos anteriores, el gestor confía en que vuelva a alcanzar los picos previos, como ha visto que ya han hecho las ventas de coches en EE.UU. en esta recuperación; el otro sector revelador es el del cemento. La diferencia entre el consumo de este producto en su momento álgido y el más bajo fue del 80% en España y del 50% en Italia -por poner algunos ejemplos-, que ahora son dos mercados en recuperación.
Dada la lentitud del proceso de recuperación -que frustra a algunos inversores- y para dotar de profundidad al estudio, el equipo mira en detalle cada sector y, así, Hsia habla, por ejemplo, de commercial real estate, que especialmente en los países del sur de Europa está en manos de familias privadas, o compañías de seguros, que no han recibido ningún incentivo para volver a invertir. “La eficiencia energética en Italia o España no es la óptima, pues sólo el 15% de los complejos de oficinas obtiene la más elevada calificación (“A”), mientras que en Francia y Alemania la merecen más del 30%, y en Reino Unido hasta el 40%, por lo que es necesario mejorar las instalaciones”. Pero también vemos acciones que cambiarán el sector, como que en Italia la regulación esté pasando de favorecer al propietario a favorecer al inquilino y la aparición de REITS en Europa, que están facilitando la entrada de capital para la realización de esas mejoras en el sector.
Son algunos ejemplos que muestran la recuperación, dice el gestor que explica tener sentimientos encontrados, pues mientras desea la mejora del entorno –que favorece a todo el mundo- opina que para los inversores es mejor que la recuperación no sea muy rápida, pues “cuando el crecimiento económico es muy fuerte hay más competencia”.
Los balances están creciendo
Los balances corporativos están en recuperación y mucho más sanos que en 2008-2009, gracias a la mejora del cash flow operativo que el gradual crecimiento de la economía y el fortalecimiento de la demanda han traído consigo, como también el hecho de que algunas compañías ya no basen sus planes en grandes crecimientos económicos futuros y estén racionalizando sus costes y saneando sus balances, lo que, además, permitirá crear más valor. ¿Deberíamos esperar más despidos masivos? No necesariamente, dice el estratega, la racionalización de costes puede venir también por una mejora en el proceso productivo, de compras, etc. Deberíamos pensar que el desempleo bajará.
Las valoraciones mantienen su atractivo
Con un PER ajustado al ciclo de 15 veces beneficios y una media histórica de entre 20 y 21, la oportunidad parece clara, y el estratega apuesta por que volverá a los niveles máximos. Otro elemento favorable es la falta de emisión de bonos soberanos por parte del BCE, que provocará el flujo de inversiones hacia otro tipos de activos, como pudiera ser la renta variable.
“En resumen, hay signos de crecimiento, a veces frustrantemente lenta pero eso hace que la diferencia entre ganadores y perdedores se incremente”.
“En un entorno como éste, vemos que hay sectores cuyos indicadores mejoran, como el industrial, aunque en nuestra cartera sigue infraponderado con respecto al benchmark –en éste, hemos incluido Siemens, que está pasando de negocios obsoletos a crear una nueva oferta más adaptada a las necesidades de los consumidores actuales-. Otros sectores que nos gustan son las tecnologías de la información, el más sobreponderado de nuestra cartera, y las consumer discretionary. No así los consumer staples, donde no vemos valor, ni health care”.
Por lo que respecta al sector financiero– añade Hsia- en el que estamos sobreponderados un 2% con respecto al benchmark, somos pragmáticos con respecto a la enorme volatilidad, pero nos gustan los FinTech, los bancos enfocados al negocio de particulares de los países en los que ya se ha producido la consolidación, como Francia, Benelux y Reino Unidoyno tanto los de aquellos en que todavía hay mucha fragmentación –Alemania, Italia y España-, pues aunque vemos cierta consolidación no observamos creación de valor para el accionista. Tampoco nos gustan los bancos de inversión en Europa e infraponderamos seguros y real estate.
Por países, Reino Unido, que aunque supone el 24,7% de sus activos –con mucha diversificación- está un 5% infraponderado; Francia está sobreponderado en un 6% y Alemania, en algo más, es el que más le gusta. “Cuando vimos la primera bajada de tipos del BCE, creímos que habría oportunidad en Alemania, pero entonces Japón –su mayor competidor- bajó los tipos y ésta se obvió. Sin embargo, ahora sí encontramos buenas ideas.
Aprovechamos que Hsia vive en Londres para preguntarle por los sectores que podrían verse más afectados si el resultado del referéndum que se celebrará en junio en Reino Unido impulsasen su “desenganche” de la UE. Se muestra tranquilo y señala que las grandes corporaciones tienen un plan “B” y quizá uno de los sectores más afectado sería el de la agricultura, pero ni bancos ni otras grandes empresas le preocupan porque “idealmente tendrán el tiempo suficiente y cuentan con recursos de preparar su estructura a un entorno que podría cambiar. En cualquier caso, de haberla, la transición sería suave”.
Una vez más, resume: “El mayor impulsor de la renta variable europea serán los beneficios corporativos, ya que el viento de frente ha virado hasta convertirse en viento de cola”.
The short of it is that, based on the measures above, real interest rates are negative. If you then believe inflation might be understated, well, real interest rates may be even more negative. When real interest rates are negative, investing cash in Treasury Bills is an assured way of losing purchasing power; it’s also referred to as financial repression.
