Industry Veterans Launch FDS, Specializing in US Offshore and Latin America

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Industry veterans Lars Jensen, Jorge Letelier, Roberto Teperman, and Christian Blomstrom have launched FDS, Fund Distribution Services, specializing in both  institutional and retail channels in US Offshore and Latin America. This is a lift out of the senior Legg Mason team that has worked within the region for the last two decades. 

FDS has reached an agreement with Arcano Partners focused on maximizing value creation for their clients while seeking to increase the positive impact on society and the development of a more  sustainable world. 

“We are thrilled to partner with Arcano, who have extensive experience providing  relevant, innovative, and timely investment solutions to their clients. We think that our  mutually client centric strategies and values are an exciting fit and opportunity for our  clients in the region”, saids Lars Jensen, Managing Partner FDS.

Pedro Hamparzoumian, Managing Partner- Investor Relations stated that “Arcano has always been committed to innovation, but now we are taking another step forward in our growth strategy in this market with the agreement reached with FDS, with  whom we share objectives and values. We are sure that this alliance represents a great opportunity and that it will add great value to our clients”. 

FDS offers a holistic approach to the business with local presence in the United  States, Chile, and Brazil. The goal is to partner with managers whose strategies are innovative  and strategic to Latin American investors, according the Press Release. 

Arcano Partners, is focused on maximizing value creation for its clients while seeking to increase the positive impact on society and the development of a more sustainable world. The company has two business areas: Alternative Asset Management: with more than €7.5 billion managed and advised since our inception in 2006, Private Equity, Credit Strategies, Real Estate, Sustainable Infrastructure, Venture Capital, and Asset & Capital Finance, with a strong focus on sustainability and responsible investment and Investment Banking for companies in a variety of sectors.  

Arcano has a staff of more than 200 professionals with offices in Madrid, Barcelona, Bilbao, Seville, Milan, New York and Los Angeles. It has become one of the leading independent firms in the European alternative finance market.

 

 

 

Why Investors Need to Watch the Rising Dollar

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The volatility in U.S. stock and bond markets stemming from the Federal Reserve’s move toward tighter monetary policy has made its way to global currency markets, with the U.S. dollar soaring compared with global rivals. So far this year, the dollar is up about 8% against a basket of other major currencies. It has risen a staggering 13.6% over the past 12 months and recently hit a 20-year high. 

Though some observers believe the hawkish Fed and investors’ flight to the relative safety of the dollar amid geopolitical strife is driving the rise,  Morgan Stanley’s Global Investment Committee thinks today’s currency dynamics may be more complicated, with divergent central-bank actions also driving relative weakness in other currencies. To understand this dynamic, consider: 

  • Japan, where the central bank is implementing “yield-curve control”—an effort to actively manage borrowing costs across different maturities—alongside money-printing to engineer higher structural inflation and a path away from nearly 40 years of deflation. Accordingly, the yen recently tumbled to a 20-year low against the dollar. 
  • Europe, where weakness has emerged in the euro, as the risk of recession grows around the Russia-Ukraine war and as the European Central Bank tries to delay inevitable monetary tightening.
  • China, where implementation of zero-COVID policies has weakened the outlook for an economic recovery and pushed its central bank toward easing policy, causing the yuan to depreciate.

The implications of a stronger dollar for financial markets and the economy are also more complex than many realize, making the path ahead riskier for investors and policymakers alike: 

  • The typical investing playbook for a strong U.S. dollar may not work well in today’s market. For instance, commodities usually move inversely to the dollar, so theoretically we should see prices fall. But we haven’t. Instead, commodities-based inflation remains significant, due to the dual supply shocks caused by COVID-19 and Russia’s invasion of Ukraine. A strong dollar also tends to bode ill for emerging markets that are dependent on dollar-denominated debt by making it harder for these regions to service this debt. Today, however, many emerging-market regions are in excellent fiscal shape, with plenty of foreign-exchange reserves. In fact, those that supply fuel, fertilizer, food and metals, as is the case for much of Latin America, actually stand to benefit from the global supply squeeze. And in equities, many investors today are favoring defensive stocks and not names that would typically benefit from a strong dollar, such as retailers and homebuilders.
  • The soaring dollar adds risks for the Fed as it seeks to tame inflation without slowing the economy into a recession. In the near term, the stronger dollar may bolster the purchasing power of companies and consumers when it comes to imports, thus helping ease inflationary pressures. But the dollar’s strength can also hurt U.S. exports and the translation of overseas profits by U.S companies, posing headwinds to growth. Longer term, the currency’s strength may help further tighten financial conditions, just as the Fed is shrinking its balance sheet and international flows into the U.S. market could be slowing in line with recoveries elsewhere.

In short, continued U.S. dollar strength could complicate the outlook for the economy and markets, implications that may be underappreciated by investors at the moment. We think investors should watch real yield differentials for signs that the U.S. dollar is peaking and consider rebalancing international exposure, especially in equities. The U.S. dollar may peak in the next three to six months, and a tailwind may develop, enhancing regional market recoveries.

This article is based on Lisa Shalett’s Global Investment Committee Weekly report from May 2, 2022, “Watch the Greenback.”  If you want to read the full text, please click on the following link.

Colleen Denzler Joins Loomis Sayles as New Head of ESG

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Loomis, Sayles & Company announced that Colleen Denzler, CFA, has been named the firm’s head of ESG. Colleen, who is based in Boston, will report to David Waldman, chief investment officer. 

As head of ESG, Colleen will advance the firm’s ESG initiatives, support sustainability efforts.

She will work across the entire firm to refine ESG priorities, goals, metrics and criteria, as well as maintaining alignment with the ever-evolving regulatory requirements for ESG.

In addition, she will partner with investment teams to identify how ESG considerations may be further incorporated into their investment processes and to determine areas of engagement with companies in which they invest and collaborate with various industry groups to foster best investment management practices; and

She will communicate Loomis Sayles’ approach to sustainability and ESG to clients and stakeholders.

In addition, Colleen will oversee the existing firm-wide ESG committee structure to provide strategic support to Loomis Sayles’ investment teams, conduct internal education and serve as a thought leader on material sustainability issues. 

“Prioritizing ESG and sustainability – which meaningfully impact the global economy, the financial markets and society at large – is a matter of fiduciary responsibility and good stewardship of clients’ capital,” said Kevin Charleston, chief executive officer. 

“Good governance and sustainable business practices are inherent factors in our decision-making as long-term investors who seek to deliver superior long-term, risk-adjusted returns to our clients,” said David Waldman, chief investment officer.

 “Colleen’s extensive background will be an asset as we strive to leverage ESG insights and data in our investment processes and to design products consistent with clients’ ESG objectives,” Waldman adds.

Over her more than 35 years in the asset management industry, Colleen has held a number of investment and ESG leadership roles. She began her career at Calvert Asset Management, an early leader in responsible investing, where she was an ESG portfolio manager and analyst. Colleen went on to leadership roles at Janus Henderson, where she was Global Head of Fixed Income Strategy, and American Century Investments, where she was a senior Portfolio Manager and Head of Money Markets. 

She then served as Chief Investment Officer of First Affirmative Financial Network, a sustainable investment focused RIA, and president of its industry-leading SRI Conference. Colleen later leveraged her expertise as a strategic advisor to asset managers on ESG and sustainable investing. Most recently, Colleen led ESG integration efforts at Smith Capital Investors.

US Healthcare’s Cyber Risk Vulnerability Is Rising

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Cyberattacks on US healthcare companies is a growing risk that could have negative implications for issuer credit profiles due to increasing financial and reputational costs, says Fitch Ratings.

Both quantitative and qualitative factors, including the persistence of effects on operations and cash flow, management’s response and leverage headroom relative to sensitivities, will influence future rating actions. Cybersecurity is already a factor in Fitch’s ESG Relevance Scores for healthcare issuers, due to the social and governance aspects of attacks.

The frequency and severity of attacks with respect to the number of individuals affected and costs to healthcare companies has increased over the past five years. There were 713 known breaches affecting approximately 45.7 million individuals in 2021, up from 329 breaches affecting 16.7 million individuals in 2016, according to data from the US Department of Health and Human Services.

We believe greater use of medical devices, remote patient monitoring, slow upgrades to technology, the use of post-merger legacy systems and increased use of third parties due to the digital transition have raised the sector’s vulnerability to cyberattacks.

Cyberattack costs can include expenses for notifying patients, lost business and ransom payments, with insight on the cost of a ransomware attack to a hospital’s bottom line beginning to surface.

Cybercrime in healthcare has increased during the pandemic, as the sector experienced periods of elevated patient demand and staff shortages. These things spurred new legislative proposals to strengthen US businesses’ defense mechanisms against cyber threats.

The SEC voted to propose rules for incident reporting and disclosures, providing shareholders enhanced and standardized information regarding cybersecurity risk, along with management’s strategy to prevent attacks.

Transparency about the nature of cyberattacks, damages suffered and remediation actions is viewed favorably. Fitch’s ESG Relevance Scores, which include considerations for cyber incidents, reflect the relevance and materiality of ESG issues and explain their impact on our credit rating decisions

Luisa Montoya Appointed Head of Diversity, Equity and Inclusion at Santander US

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Santander US has hired Luisa Montoya to lead its commitment to diversity, equity and inclusion.

“I’ll be joining Santander US as its Head of Diversity, Equity and Inclusion Engagement for the US,” Montoya posted on her LinkedIn account.

Montoya comes from J.P. Morgan’s Houston office where he also worked in the same area.

In addition, she worked at KeyBank for one year between 2016 and 2017. She then served at BBVA between 2017 and 2021 in charge of retail banking and business banking and global wealth.

“This is a significant milestone in my career as my passion for supporting the employees and our communities have finally found a home. It is great to join a company in which 58% of its employees are women, and 70% are people of color,” adds Montoya.

 

J.P. Morgan Private Bank hires Carolina Yepes in Miami

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Carolna Yepes joined J.P. Morgan in Miami from Credicorp Capital.

“I am pleased to share my new position as Vice President SC at J.P. Morgan Private Bank,” the advisor posted on her LinkedIn account.

The Colombian financial advisor has 15 years of experience in Latin American markets.

Her CV includes 10 years at Credicorp Capital, where she served in different roles as Senior Private Banker in Medellin and then Financial Advisor in Miami.

According to industry sources, Yepes controls $120 million of AUMs.

The advisor has a master’s degree in finance from Universidad EAFIT. In addition, although her new Brokercheck registration does not yet appear, he has FINRA Series 7, 65 and 63.

 

The Purchase of a Stake in Xp Is Part of Itau’s Expansion Strategy

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Itau Unibanco bought a stake in Brazil’s XP in line with its strategy, sources at the Brazilian bank told Funds Society on Monday.

Itau bought an 11.36% stake in brokerage XP for about 8 billion reais (equivalent to about $1.6 billion approximately).

Sources at the Brazilian bank told Funds Society that the XP purchase is in line with Itau’s strategy.

“It is part of Itau’s strategy to buy entities that have attractive profitability,” the sources said.

Itau clarified in an internal memo that the deal does not change XP’s governance and this purchase is not expected to have a relevant effect on 2022 results.

In November, Itau received approval from Brazil’s central bank to buy the stake, Reuters reported.

The bank sources added that Itau is expected to buy companies “in the Fintech field.”

Investing in the Earth: How to Manage Water Risks in Sustainable Investment Portfolios

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Water is the ultimate renewable resource – yet it is scarce, and has been burdened with our overconsumption, pollution, and the effects of climate change. Global water use has more than doubled in the last 40 years. It is estimated that we will need 50% more food and 40% more freshwater by 2030, said an article by La Francaise.

According to the UN, 45% of the global gross domestic product (GDP), 52% of the world’s population and 40% of global grain production is expected to be at risk due to water stress by 2050 if business-as-usual persists. Companies are already experiencing financially-material stresses related to water scarcity and the associated degradation of ecosystems.

Groundwater – our main freshwater resource is scarce and fast depleting

22nd March was celebrated as the World Water Day and the theme of this year was ‘Groundwater – making the invisible visible’. Our Blue Planet is named for the abundance of the blue liquid on its surface, yet less than 1% of it is usable is its natural form. For most of our uses – domestic and industrial – we pump water from under the ground. Groundwater is the most abundant form in which freshwater can be used, but it is fast disappearing. We are pumping non-renewable groundwater reserves at unsustainable rates to counter droughts across the world without even knowing how much we have left. 

As data from NASA suggests, globally, one-third of our largest groundwater basins are under distress – being rapidly depleted by human consumption. In US alone, almost half of the water supply needs are met by pumping from underground aquifers. Add to these, the enormous amounts of pumping that is done by bottling companies, other industries and the groundwater reserves have been depleted beyond repair. NASA estimates that the likelihood of mega droughts (lasting more than 30 years) in US Southwest and Central plains is going to increase to 60%, even if we achieve net zero by 2050 (which the IPCC’s latest reports claim we will not). 

Industries face multiple forms of risk from the growing water scarcity

Industries and agriculture use 90% of global freshwater resources – with agriculture accounting for the lion’s share. Global water demand (in terms of water withdrawals) is projected to increase by 30% by 2050 (despite the increasing scarcity), mainly due to increasing demand from manufacturing and electricity sectors (OECD). A growing and increasingly wealthy global population needs more food, materials and energy – placing intense pressure on water resources. Water-related risks, from physical to reputational, can potentially damage companies’ financial performance. 

Source: Barclays Research, PRI

Industries such as the food and beverage sector are riddled with water-related risks. Agriculture, for example, uses a major share (70%) of global freshwater resources and its survival is questioned by climate change. Water is vital to industry even when it is used for cleaning, cooling, or heating and the rising scarcity is increasing costs for companies. According to Global Water Intelligence (GWI), average global municipal water tariffs have roughly doubled over the last decade.

Many more industries are exposed to water-related risks such as water scarcity through their supply chains. The current global semiconductor chip shortage, exacerbated by water issues, is roiling automotive and technology industries. Companies like Sony, Samsung and GMC are already struggling to meet production targets because of no chips. The shortage is expected to last well into 2022.

If water becomes scarce, companies can lose their license to operate. Adani, a coal mining company in Queensland, failed in a Federal Court to get access to billions of litres of water for its venture. Construction of the mine and rail project is still underway, but resolution over the impact on water and biodiversity must be found. In northern India, a Coca-Cola plant was ordered to close after farmers blamed it for using too much water. This came 10 years after another Coca-Cola plant was closed for the same reasons in the southern state of Kerala. Nestlé exited its US Waters business last year – at least partly due to numerous protests, lawsuits and fines over the draining of local watersheds for its bottling operations.

Water Risk Management – a new frontier for investors in sustainability

Key is disclosures. At present there is an information deficit for investors and other stakeholders on the reporting of material water-related financial risks and opportunities in mainstream corporate reporting. A shortfall means investors are unable to allocate capital that can effectively instigate change. CDP Water disclosure campaign provides a good starting point for data gathering. In 2021, 

90% of all companies targeted by CDP Non-Disclosure campaign participants responded to the Water security questionnaire – that is an impressive response rate, and led to a 20% increase in corporate disclosure. According to the CDP Water Report 2020, the cost of inaction on water security is over five times the cost of action.

The next step will be target setting. Science Based Targets Network (SBTN) is working on setting guidelines to have water-based targets for companies in subsequent years. As investors, another important factor towards tackling the water risks in our portfolios is also dependent on market-wide guidelines on best practices. The Climate Disclosure Standards Board’s (CDSB) Water Guidance offers companies a means of developing their reporting practices and ensures investors are receiving the material water-related information needed for effective investment decision making. 

Above all, what is most valuable in the case of water risk at present is active ownership on these issues. A water-secure world requires companies to rethink their strategies and transform their business models. Companies need to take into the account the risks and opportunities in their supply chains related to water scarcity. There are plenty of opportunities to engage collectively on these topics through PRI, CDP and SBTN. As responsible investors, we need to go beyond numbers and make sure companies are involved in managing water availability in their operations, supply chain as well as communities in which they operate in. Water, unlike carbon, is a local resource – its sustainability depends a lot on the sustainability of the entire watershed. 

 

 

U.S. Energy Sector Poised to Regain Dominance

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Captura de Pantalla 2022-04-26 a la(s) 10
Pixabay CC0 Public Domain. ..

Russia’s invasion of Ukraine has triggered plans by many oil and natural gas importing countries to curtail Russian imports and transition to what may be perceived as more reliable, less unsavory sources of supply, while accelerating their transitions to green energy – opening the door for the U.S. to re-emerge as the world’s dominant oil and gas provider, according to Preqin.

Reducing dependency on Russian energy will be onerous, particularly for Europe, which imports about 30% of its natural gas and 25% of its oil from Russia. So far, the U.S. and some EU countries have curtailed imports of Russian crude oil and if more countries follow suit, there will be strains in the global markets to adjust to accommodate a reconfiguration of the 5 million Bbl/d (barrels per day) of waterborne exports from Russia. Indeed, Russia’s oil tanker exports are being offered at a significant discount of roughly $30/Bbl to Brent, indicating that new buyers aren’t fully absorbing demand lost in the boycott.

Recent releases from the U.S. Strategic Petroleum Reserve (SPR) (30 million Bbl) and from international partners (30 million Bbl) provide minimal relief. Potential deals – if they could even be reached – with Iran (1 million to 1.5 million Bbl/d) and Venezuela (less than 1 million Bbl/d) would still not be enough to fill the void. If anything, the recently announced historic SPR release (1 million Bbl/d for six months) suggests that these deals are unlikely to be completed soon and emergency responses are needed to meet demand.

The war in Ukraine comes at a particularly vulnerable time of tight inventory and a low backlog of oil wells, with little room for disruption. According to the U.S. Energy Information Agency, prior to Russian sanctions, OPEC+ excess capacity stood at only 3%-3.5%, or roughly 3-3.5 Bbl/d, down from about 8% to 9% in 2002. However, from recent discussions with energy officials in the Middle East, true spare capacity could be even lower at just 2.5%.

We believe OPEC+ will likely stick to its current plan and not increase output further, despite higher oil prices. This is because if the cartel decided to bring more volumes online, the investment community might react to the prospect of little-to-no spare capacity by sending oil prices even higher. Moreover, Russia is joint chair of OPEC+, leaving it unclear whether it will be able to fulfill its share of the cartel’s production.

The U.S shale industry – which produces both crude oil and natural gas – is well-positioned to increase production in the lower 48 states, but it will take time. During the last few years, energy producers curbed spending on new wells, following two mini U.S. shale boom and bust cycles, the latest causing roughly $55 billion of defaults. Responding to shareholder demands for strong investment returns, producers pivoted from a focus on production growth (“drill baby drill”) to one of capital discipline – maintaining modest leverage metrics and consistent cash returns on volume growth of just 0% to 5%.

As a result, exploration and production (E&P) operators face shortages in oil rigs (utilization is approaching 90%), frac fleets (which are completely sold out), and labor. E&P executives have indicated they could deploy more capital and maintain high profitability levels – thanks to improvements in drilling and completion technology – but estimate it will take them up to 12 months to increase current production volumes. In our view, the U.S. Shale “3.0 model” (e.g., spending within cash flow) of reliable production volumes and consistent cash returns could make U.S. energy attractive to countries overseas over the medium- to long-term.

Along with growth in U.S. shale production, Preqin expect recent geopolitical events and consequent rise in oil and gas prices to accelerate investments in green energy. As green energy becomes a larger component of the overall global supply, traditional U.S. oil and gas will likely remain a dependable baseload power source in the overall market.

Snowden Lane Partners Adds $350 Million Advisor Team

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Snowden Lane Partners announced that Andrew Randak has joined the firm as Senior Partner and Managing Director, alongside his colleagues, Nicole Boutmy de Katzmann and Kristian Sedeño, both of whom joined as Managing Director and Partner.

Together, they form The Mile Creek Global Group, based in Snowden Lane’s New York, Coral Gables and New Haven offices and overseeing $350 million in client assets.

Randak is a CFA and boasts nearly 30 years of industry experience. He provides sophisticated and unbiased advice to successful businesspeople, their families and their companies. Like Boutmy de Katzmann and Sedeño, he specializes in helping clients throughout Europe, North and South America manage wealth and tackle complex, cross-border issues.

Similarly, Boutmy de Katzmann advises families in Europe, Latin America and the United States, with expertise in multigenerational wealth planning, investments, philanthropy and gifting. Sedeño is a CPA and has also provided wealth management and private banking services to domestic and international families for over a decade.

“We were excited when Andrew, Nicole and Kristian expressed interest in joining the firm and are pleased to officially welcome them to the team,” said Greg Franks, Snowden Lane’s Managing Partner, President & COO.

“We have the utmost respect for Fieldpoint Private, as they have done outstanding work in our industry. We are fortunate to have The Mile Creek Global Group come on board and I’m looking forward to witnessing the big impact they will undoubtedly have at Snowden Lane,” he adds.

Prior to Snowden Lane, Randak and Boutmy de Katzmann each served as Managing Directors and Senior Advisors at Fieldpoint Private, while Sedeño worked as Vice President and Associate Advisor.

Randak began his career in private banking at The Chase Manhattan Bank. He spent two of his six years in Chase’s Santiago, Chile offices, where he managed the firm’s private client lending platform. In 2000, he joined Brown Brothers Harriman & Co. where he was responsible for wealth management and trust clients in South America. He moved to Fieldpoint Private in 2015 with a mandate to grow the firm’s wealth advisory and private banking business outside the United States.

Sedeño is a Certified Public Accountant and worked at PricewaterhouseCoopers (PwC) from 2009 to 2011. Following that, he joined Brown Brothers Harriman as an Associate, working with ultra-high net worth families in South America. Together with Randak, he joined Fieldpoint Private in 2015 to help build the firm’s global presence.

Boutmy de Katzmann’s career in global banking started at Republic National Bank of New York. With Republic, she served as an international private banker in Montevideo, Milan, London and New York. A few years after HSBC acquired Republic in 2000, Republic’s former senior executive team invited her to join them in forming a new firm, NuVerse Advisors, where she remained for over a decade. After NuVerse, she was a Senior Director in Oppenheimer & Company’s Private Client division for over three years.

Snowden Lane has 122 total employees, 69 of whom are financial advisors, across 12 offices around the country: Pasadena and San Diego, CA; New Haven, CT; Coral Gables, FL; Chicago, IL; Pittsburgh, PA; Baltimore, Salisbury and Bethesda, MD; San Antonio, TX; Buffalo, NY, as well as its New York City headquarters.