Foto cedidaÁlvaro Palenga. El Grupo AMCS amplía su equipo con una nueva incorporación en Uruguay y pone foco en su expansión
AMCS Group, a Miami and Montevideo-based third-party distribution firm, has appointed Alvaro Palenga as Sales Associate.
Palenga joins the firm at an exciting time, as the business is seeking to significantly grow the market presence of its two asset management partners, AXA Investment Managers and Merian Global Investors, while aiming to complete a deal with a third asset manager to further expand and diversify its UCITS offering to its distribution network.
Palenga will report to Santiago Sacias, Managing Partner and Head of Southern Cone Sales, who is also based in Montevideo. He will initially be tasked with supporting Sacias and the wider team in continuing to strengthen Merian and AXA IM’s position in the region.
Palenga previously worked for Sura in Montevideo as a financial advisor. Prior to Sura he worked at Trafigura as Oil Risk and Market Analyst. He also completed an internship at Citi International Financial Services (CIFS) as an Investment Analyst. Alvaro is a CFA level 3 candidate
Santiago Sacias, managing partner, the AMCS Group, comments:
“We are delighted to have Alvaro join the AMCS Group. His experience in the wealth management, alongside his academic achievements will fit perfectly with our investment-centric approach to client development and servicing. We all look forward to his contributions to our ambitious growth plans.”
The AMCS Group team details:
Currently the AMCS team is formed by the following member with the resposabilities described below:
Chris Stapleton, co-founder and Managing Partner, oversees global key account relationships across the region, as well as advisor relationships in the Northeast and West Coast.
Andres Munho, co-founder and Managing Partner, oversees all advisory and private banking relationships in Miami, as well as firms located in the Northern Cone of LatAm, including Mexico.
Santiago Sacias, Managing Partner, based in Montevideo, leads sales efforts in the Southern Cone region, which includes Argentina, Uruguay, Chile, Brazil and Peru.
Fabiola Peñaloza, Regional Vice President, is responsible for select advisory and private banking relationships in Miami, as well as firms located in Colombia.
Francisco Rubio, Regional Vice President, is responsible for the Southwest region of the US, as well as independent advisory firms in South Florida and Panama.
The team is supported by Virginia Gabilondo, Client Services Manager.
Foto: Matthews Asia. Japan According to Matthews Asia
Many investors already have exposure to the Japanese economy’s new era, ushered in by corporate reforms and increasing integration with broader Asia. While these growth drivers apply across the market capitalization spectrum, Matthews Asia believes a compelling alpha opportunity may exist in Japan’s small-cap market.
In a company publication, they say that the potential to generate alpha by investing in Japan’s small companies is driven by multiple factors: thin sell-side research coverage, an undersize venture-capital funding environment and low correlations to other asset classes.
Thin Research Coverage
After years of lackluster equity performance and declining commission rates in Japan, many sell-side firms focused resources on a limited number of large caps in Japan, primarily those with trading volumes that justify the costs.
Geography also plays a role according to the asset manager. Most Japan-focused sell-side firms are based in Tokyo. Companies elsewhere tend to be overlooked until they reach a certain size. As a result, the universe of small-cap Japanese equities is largely uncovered by sell-side analysts, leaving the field open for active managers to find undiscovered companies with growth potential.
Of the more than 1,900 Japanese small-cap equities for which FactSet Research Systems tracks analyst coverage, 75% are not covered by any third-party sell-side research providers or have just single-analyst coverage. Compare that with the small-cap market in the U.S., where 70% of companies are covered by three or more analysts, leaving only 22% with one or zero analyst coverage. In fact, among small caps, Japan has less analyst coverage than the U.S., Western Europe or even Asia ex Japan.
“This information asymmetry creates a potential advantage for fundamental active managers, as exciting companies with underlying characteristics that can fuel long-term, sustainable growth often are overlooked by investors.” They mention.
Limited Startup Funding
Although sell-side analyst coverage of small-cap companies in Japan is thin, there is no lack of companies to cover. In fact, Japan features a steady flow of small-company listings on public exchanges. Early- and middle-stage companies—and even companies with decades of history that want to launch a new phase of rapid growth—frequently turn to public listings to raise capital, given the country’s limited scope of venture capital and startup funding.
The gap in startup funding is significant. The market capitalization of listed U.S. companies is approximately six times larger than the market capitalization of listed Japanese companies—but the disparity in venture capital is meaningfully more pronounced: Venture capital investment in the U.S. is more than 40 times greater than in Japan, as of the end of 2017. Historically, the venture-capital landscape in Japan has been constrained by several factors, including cultural and language barriers, unfavorable tax and corporate laws and a bank-centric financial system that favors conservative investment strategies.
As a meaningful number of small Japanese companies turn to public markets for funding, according to Matthews Asia, alpha-seeking investors can benefit from a wider opportunity set—and many of these small, innovative companies start small and grow bigger, rewarding investors along the way.
Low Correlations Provide Diversification Potential
Japan small-cap stocks historically have enjoyed low correlations with other major markets, creating an environment with potential for diversification and alpha generation. In terms of correlation to the S&P 500 Index, Japan small-cap stocks posted similar marks over a 10-year period as frontier markets (such as Bangladesh and Pakistan). At the same time, Japan small caps are more liquid than frontier markets—a discernible advantage for most investors. The average daily trading volume of the Tokyo Stock Exchange Mothers Index, for example, typically is $1 billion to $3 billion, eclipsing the trading volume of the frontier markets in aggregate and even surpassing markets in South Korea and India.
The Alpha Environment in Small-Cap Japan
The characteristics described above lay the groundwork for alpha generation in Japan—but have portfolio managers historically been able to capture the resulting opportunities? In any given market, one or two managers will be able to identify alpha, even in efficient markets such as the U.S.; at Matthews Asia, they hypothesize, however, that the small-cap market in Japan has a robust alpha profile for long-term investors—one in which more than a select few can potentially identify alpha.
To validate this premise, they first gathered data on average investment-manager alpha generation in Japan relative to one of the most efficient environments: U.S. Large Blend (Core). According to Morningstar investment-manager category averages, the average Japan equity manager achieved alpha far in excess of that realized in the U.S Large Blend (Core) category over the three- and five-year periods ending March 31, 2019. In fact, alpha generation was negative for the average U.S. Large Blend (Core) manager during these periods.
Next, they broadened the universe to compare alpha generation of the average Japan manager against Europe, Asia ex Japan, U.S. Large Growth and China. As illustrated below, Japan led the pack in terms of alpha generation over the five-year period and ranked third over the three-year period.
Matthews Asia believes the Japan small-cap market is a unique environment where multiple factors combine to create a fertile hunting ground for alpha. As investors ask how best to harness Japan’s growth potential during its newest economic era, they believe the country’s small companies are a key component of the answer, providing investors with a powerful opportunity to help meet long-term goals for growth.
A New Era in Japan’s Economy
Corporate reforms are resulting in improvements in governance, capital allocation and shareholder-return policies — In part, the long malaise in the Japanese market was brought about by antiquated business practices and conceptions. For decades, Japan’s corporations and their boards primarily focused on safeguarding market share, head count and influence—all while hoarding cash, at the expense of profits and shareholder returns.
Today, the landscape is markedly different. With the advent of Prime Minister Shinzo Abe’s economic restructuring, sweeping corporate reforms and new Corporate Governance Code, Matthews Asia sees increasing pressure from the government, investors and peers on many of Japan’s longtime laggards to abandon weak businesses, diversify their boards and put cash to work, especially through dividends and buybacks.
From a bottom-up, fundamental perspective, they are seeing important signs of change in management behavior, including more-thoughtful and productive capital allocation decisions, a long-absent focus on ROE, more engagement with investors and better shareholder-return policies. All of these should benefit investors over the long term.
Japan is increasingly integrating with broader Asia — Over the past 15 years, Japan has become more integrated with the emerging economies of Asia than ever before. This deepening integration is propelled by multiple factors, including continued economic liberalization, tech-driven productivity gains and new entrepreneurship. As a result, they see incomes continuing to rise across emerging Asia. They expect this to continue to expand the already vast middle class, which now enjoys more leisure time, more disposable income and a taste for more sophisticated products and services.
“A growing segment of Japanese companies are well-positioned to access this growth in incomes and rising productivity. Many Japanese corporations have meaningful operations in broader Asia—especially in consumer products, household products and high-quality branded consumer products—which meet the evolving demand and growing sophistication of the rising middle class in Asia. Consequently, we see a growing set of opportunities among Japanese companies that benefit from the country’s increasing integration with the rest of Asia.” Matthews Asia concludes.
Aberdeen Standard Investments will talk about multi-asset funds during the first edition of Funds Society’s Investments & Rodeo Summit, which will take place on March 5, 2020 at the Intercontinental Houston Medical Center.
During the presentation, Tam McVie, ASI’s investment director, will talk about the use of none-traditional asset classes to create genuine diversification, taking as an example the Aberdeen Standard SICAV I Diversified Income fund, a fund that “relies on a rich opportunity set that can reduce reliance on equities and bonds; Capturing the breadth of opportunities.”
As Investment Director for Aberdeen Standard Investments, McVie is responsible for providing investment and product support for ASI’s multi-asset solutions, including the firm’s flagship Global Absolute Return Strategies (GARS) portfolio. Working with the Multi-Asset Investing Team since 2007, he uses in-depth knowledge and technical expertise to support the on-going needs of the firm’s institutional clients. Previously based in the UK, Tam joined Standard Life Investments’ Boston office in January 2012 and was instrumental in SLI’s expansion to the US. He is a frequent speaker at key industry conferences, including FundForum, Citywire and Asset International’s CIO summit. Tam joined SLI in 2004 and previously worked at UK pension manager, Friends Ivory & Sime (now part of Aberdeen Standard Investments). He began his career with Standard Life Assurance Company in 1998.
The event will also be attended by Menno de Vreeze, who leads the firm’s international business development practice in the Americas, as well as Damian Zamudio.
Menno de Vreeze is Head of Business Development – International Wealth Management at Aberdeen Standard Investments. Menno is responsible for the US Offshore market and Latin American Wealth Management channel. Menno joined Aberdeen Asset Management in 2010. Previously, Menno was Head Financial Institutions Benelux where he was responsible for business development towards financial institutions as private banks, retail banks, insurance companies, and wealth managers within the Benelux. Other previous work experiences include: Carmignac Gestion as Head of the Netherlands, ABN AMRO Luxembourg within the Private Banking department, and Accenture as a Business Consultant specialized in the Private Banking/Asset Management industry. Menno holds an MS in International Business with a specialization in Finance from Rotterdam Business School. He has also studied at Ecole Supérieure de Commerce de Bordeaux and the Skema Business School in Sophia Antipolis. Menno holds FINRA 7 and 63 licenses.
Zamudio is a Sr. Business Development Manager at Aberdeen Standard Investments. Damian is responsible for building and maintaining relationships with investment advisors in wirehouses, RIAs, broker- dealers and family offices across the Americas international markets. Damian joined Aberdeen Asset Management in November of 2012 and brings over a decade of experience in wealth and asset management businesses. Previously, he worked at Merrill Lynch Wealth Management as a consultant for domestic and international financial advisors to facilitate guidance in asset allocation, investment trading and due diligence. Prior to that, Damian was Vice President at BlackRock responsible for sales of mutual funds, SMAs and alternative investment products across US private banking and international markets.
If you are involved in the management of fund portfolios, or the selection and analysis of funds, and want to participate in this event, reserve your place as soon as possible by writing to info@fundssociety.com.
Jose C. González and Emilio Veiga Gil, courtesy photos. FlexFunds nombra CEO a Jose C. González y vicepresidente Ejecutivo a Emilio Veiga Gil
Given the growing demand for asset securitization services that FlexFunds provides and the strong growth experienced in recent years, which have made it an international reference in structuring investment vehicles, FlexFunds has announced the reinforcement of its management team.
Jose C. González has been appointed Chief Executive Officer. Jose, founder of the company and majority shareholder, is also the founder of Leverage Shares, FlexInvest, co-founder and former director of Global X, a provider of exchange traded funds based in New York. Jose was instrumental in the success of Global X, making the company a reference as a supplier of ETFs that today has exceeded $10 billion in assets managed in more than 60 different products. Throughout his career, Jose has acquired extensive experience in the asset management and brokerage businesses, having served in Prudential Securities, MAPFRE Inversión and Banco Santander. Jose obtained his degree at Universidad Autónoma de Madrid.
Emilio Veiga Gil, the company’s current Chief Marketing Officer, has been promoted to Executive Vice President. Emilio brings 20 years of experience in marketing and business development in financial services, banking, and consumer goods. Following his beginnings at PricewaterhouseCoopers, Emilio held senior positions in marketing and business development in leaders of multinational industries such as MoneyGram International and Dean Foods Corporation. He has led multicultural teams in four continents and has implemented international initiatives in more than 50 countries around the world. Emilio has a degree in Economics and Finance from St. Louis University, an MBA and a postgraduate in Marketing from ESADE Business & Law School and Duke University, and an Executive MBA, with High Honors, from The University of Chicago, Booth School of Business.
With these appointments, FlexFunds reinforces its management team to accelerate the growth experienced to date, which has led the company to exceed $4 billion in securitized assets in more than 200 issues and in 15 jurisdictions around the world.
For more information about FlexFunds, visit them at their site or write to info@flexfunds.com.
Bernardo González Rosas, courtesy photo. Amafore" Esperamos que la primera inversión en fondos mutuos internacionales ocurra en las siguientes semanas"
2019 represented a year of challenges and achievements for the Mexican Retirement Savings System (SAR). According to the Mexican Association of Administrators of Retirement Funds (Amafore), “after the turbulence of the financial markets during the last months of 2018, the capital gains accumulated during 2019 were the highest in the history of SAR, as they rose to 486.4 billion pesos. Today, of each peso managed by the system, 41 cents come from the returns generated.” Additionally, Mexico became the first Latin American country to adopt Target Date Funds for the administration of retirement funds.
“The migration of resources to these new funds was carried out successfully in mid-December, facilitating greater capitalization of workers’ returns and, something that surely, will contribute to improving the pensions of Mexicans,” added Amafore.
However, the association notes that there are still pending issues.
For Bernardo González Rosas, president of the institution, “time is up” to approve a pension reform. Although González would like to see a complete reform to improve the pensions of workers in Mexico, he is aware that this is difficult to achieve, so “we believe that we should start with an indispensable minimum reform: that the mandatory contribution be increased from 6.5% to 15%, which is the indispensable minimum,” he says.
He also considers that “it is very important that the investment reform, which is pending in the Chamber of Deputies, be approved as soon as possible so that we can better invest and diversify the resources of the workers. If we invest part of resources in other countries when Mexico is not doing as well as we would like or does not grow at the rates we would like, we can invest in other countries where such growth is taking place… What is important is to generate the greatest return to the workers.” He emphasized.
Regarding the use of international mutual funds in Afores’ portfolios, González Rosas told Funds Society that although “we still don’t have investments in these funds, we expect it to happen in the following weeks.”
Last September, Amafore highlighted 42 international mutual funds from 11 fund managers so that Afores can consider for their investments. As confirmed by Álvaro Meléndez Martínez, technical vice president of Amafore, the list, which is updated every month, already includes 70 funds from 14 administrators, ten funds and one more manager (JPMorgan) since the last update.
Pixabay CC0 Public Domain. UBS ha sido la gestora extranjera con mayor flujo de entrada por parte de las AFPs chilenas durante 2019
Investments in foreign funds by the Chilean AFPs registered net outflows of 1.8 billion dollars during 2019, according to the monthly report issued by HMC Capital. At the end of December, total AUM of foreign funds were of 84.3 billion dollars, which represent 29% of the pension fund portfolios.
Outflows were registered mostly during the second half of the year. While the first 2 quarters of the year registered positive inflows for an amount of 2.5 billion, and 411.7 million dollars respectively, these were offset by net outflows of 3.6 and 1.1 billion dollars during the third and fourth quarter of 2019.
It is important to highlight than since the social protests started in Chile on October it is not possible to distinguish a clear trend in the direction of flows as the last three months of the year have shown different behaviour. During the month of October 760.8 million dollars net inflows were recorded, 1.6 billion in November while outflows of 3.4 billion dollars were registered in December.
Significant outflows in equity funds
In terms of management style, active funds have registered outflows of 2.1 billion dollars versus net inflows in passively managed funds and 73.7 million dollars in money market.
By asset class, the AFPs have shown preference for fixed income funds during 2019 with a net inflow of 424.7 million dollars during the year, versus equity funds that have registered outflows of 2.3 billion dollars during the same period of time. In accumulated terms, equity funds represent 72% of foreign funds invested in Chilean pension funds portfolios, versus 27% in fixed income and 1% in money market.
Specifically, in fixed income, net inflows during the year have been invested in financial bonds funds (+595.2 million dollars), emerging market debt in hard currency ( +427.5 million dollars), US High Yield ( +399.5 million dollars) and convertible bonds in euro (+245.1 million dollars).
On the other side, the Chilean pension funds have reduced their exposure to, among others, emerging market debt in local currency (-409.3 million dollars), flexible bonds ( -243.1 million dollars) and Latinoamerican emerging market debt (-206.1 million dollars).
In equity markets, there has been significant flow of funds directed towards strategies that invest in China ( +1.77 billion dollars) and to a leaser extend to Korean and Asian equity markets with net inflows of 305.5 and 230.4 million dollars respectively. In contrast, there has been signifcant outflows in Japan large Cap asset class of 1.116 billion dollars, German equity (-962.4 million dollars), Asia ex Japan (-788.0 million dollars), Hong Kong ( -764.1 million dollars) and India ( -664.9 million dollars).
Asset manager ranking
Five have been the foreign asset managers that have succeeded in registering inflows over 500 million dollars. UBS leads the annual ranking with net inflows of 1.281 billion dollars, followed by Aberdeen (900.1 million dollars) and JP Morgan ( 737.5 million dollars). Lord Abbet and Pimco occupy the fourth and fifth position with net inflows of 663.5 million dollars and 541.7 million dollars respectively.
On the opposite side, seven asset managers have register net outflows over 500 million dollars during the year. GAM and Matthews overpass the 1 billion mark with net outflows of 2.070 and 1.016 billion dollars respectively. These two are followed by: Invesco ( -937 million dollars), Schroders (-826.9 million dollars), Fidelity ( -788.8 million dollars), NN Investments ( -752.4 million dollars), DWS ( -702.9 million dollars) and BlackRock ( -522.2 million dollars).
In terms of total AUM as of end 2019, in both active and passive funds, BlackRock iShares leads the raking with an amount of 8.19 billion dollars as of end December 2019, followed by Investec and Schroders with a total aum of 7.5 and 6.99 billion dollars respectively.
The chart bellows shows the ranking of asset manager with a total AUM over 1.000 million dollars as of the end of 2019.
Funds with largest inflows and outflows during the year
Regarding the funds that have recorded the largest inflows, the funds AMUNDI FUNDS EMERGING MARKETS BONDS, ABERDEEN GLOBAL CHINA A SHARE EQUITY FUND and UBS CHINA OPPORTUNITY (USD) stand out with inflows of 1.5 billion dollars, 1.3 billion dollars and 887.2 million dollars respectively.
On the contrary, between the 10 funds that have registered the largest outflows during the year, JULIUS BAER -LOCAL EMERGING BOND FUND: AMUNDI FUNDS EMERGING MARKETS BONDS and DWS DEUTSCHLAND IC stand out with outflows of 1.4 billion dollars,1.4 billion dollars and 958.8 million dollars respectively.
Lastly, as a side note, we must point out that the fund AMUNDI Emerging debt and HSBC Global Liquidity in dollars with inflows and outflows are funds with different ISIN code but that seem to follow similar investment strategies.
Ignacio Rodriguez Añino has been appointed Head of Distribution for the Americas at M&G Investments. He will bebased in Miami.
According to a press release, Rodriguez will be tasked with the responsibility to deepen and grow M&G’s wholesale and institutional client base in the region, helping customers access investment solutions which draw on M&G’s strong capabilities across fixed income, equities, private debt and real estate asset classes.
Ignacio joined M&G in 2005 as Country Head for Iberia, adding Latin America to his remit in 2012. He will continue to report to Jonathan Willcocks, Global Head of Distribution at M&G.
Of the appointment, Willcocks comments: “I am delighted to announce that Ignacio Rodriguez will lead our American business. With over 30 years’ experience in the industry and 15 years working at M&G, Ignacio has extensive expertise across different areas of asset management and great knowledge of our business. This appointment is the latest step in M&G’s strategy to invest in global locations and markets offering client development opportunities and scope for future growth.”
Ignacio’s appointment follows the opening of two M&G offices in New York and Miami in 2018, covering the US institutional and offshore Latin American markets respectively. M&G has over $352 billion in assets under management.
Jack Bogle, Vanguard. One Year After His Passing, Jack Bogle’s Legacy is Still Strong
A first-of-its-kind opinion survey released by the Institute for the Fiduciary Standard reveals how much the trailblazing index fund entrepreneur and Vanguard founder, Jack Bogle, influenced investors.
Bogle’s investing principles and index funds are fixed in the American mind; his reputation stands alongside giants in American business.
The survey, designed to commemorate his passing on January 16, 2019, notes that:
Among business and finance leaders Warren Buffett, Bill Gates, Steve Jobs, Chuck Schwab, Michael Bloomberg and Mark Zuckerberg — and former Senator John McCain, the reputations of Bogle, Buffett and Gates are far on top with ratings of 51.7%, 51.3% and 51.0%. Bloomberg and Zuckerberg bring up the rear with ratings of 26% and 19%.
How is Jack Bogle remembered? “Investing in the entire market with low cost index funds is better than stock picking” and “Made investing understandable” are two top phrases that investors choose to describe him.
Investing for the long term and diversifying are two principles Bogle championed that are important to investors (57, 53%). Vanguard investors agree, more so (70, 64%).
A majority of the investing public reports being knowledgeable (somewhat, very, extremely) with index funds (59%); Vanguard investors are more familiar (75%).
The investing public rates Vanguard highly (41%) compared to Charles Schwab (32%) and Merrill Lynch (25%). Berkshire Hathaway rates at 47%. Vanguard investors rate Vanguard (73%) far above Berkshire Hathaway (43%), Charles Schwab (22%) and Merrill Lynch (16%).
Knut A. Rostad, president of the Institute for the Fiduciary Standard, said: “After exiting Vanguard, Jack Bogle spoke and wrote volumes on investing and serving investors first for 19 years. His voice resonated with many, including former President Bill Clinton, former Federal Reserve Board Chairman, Paul Volcker, and Warren Buffett. Scholars and regulators embrace his principles and applaud his investor advocacy. This survey shows that many ordinary investors do too.”
The survey was conducted by Rockland Dutton Research for the ‘Friends of Jack Bogle’, and polled 500 Vanguard investors and 500 non-Vanguard investors with $100,000 or more in investable assets.
Chip Roame, Tiburon Strategic Advisors chief and consultant to financial services executives notes, “I was particularly struck by the increased focus of 40% of general investors who recognize the value of minimizing costs as the number one driver of long-term performance. Among investors who knew Jack, it’s 67%. This is legacy impact.”
Jeff Rosen, President & CEO of the National Constitution Center says, “Jack Bogle was revered by so many who followed or worked with him. It’s wonderful to see how brightly his legacy shines among the millions of investors who also knew him. “Made investing understandable” is just one phrase that Americans associate with Jack. His calm and steady wisdom will continue to guide investors for generations to come.”
Neil Dwane, Global Strategist at Allianz Global Investors, courtesy photo. Neil Dwane (Allianz GI): “Los tipos bajos han provocado que la gente ahorre más e invierta menos”
The global economy will continue to slow in 2020, but the risk of a recession remains higher than priced into markets. This view is according to Neil Dwane, Global Strategist at Allianz Global Investors. Dwane sees several key factors shaping the market narrative in the year ahead, including the US-China trade war, the evolution of the economic cycle in the US and the positioning of central banks.
“Wehope China will continue the process of transforming its economy and that its contribution at the global level will continue to be supportive. There will also be good forces driving the global economy from Indonesia and India, which are going through a different phase of their economic cycles and are engaged in major structural reforms. Europe can also surprise positively if policymakers manage to move the European Union (EU) in the right direction,” he explains.
In the UK, Dwane sees Brexit as one of the more important issues facing the greater EU in the coming year. “In most scenarios, we expect the UK to leave the EU at the end of January. We will see some fiscal stimulus from the UK, which may reduce the chances of a recession. This may allow the UK to contribute to global growth, which did not happen in 2019.”
Keys to 2020
Dwane sees central banks remaining relevant next year, maintaining their accommodative stance. “We may see interest rate cuts at central banks around the world,” he says. They will continue to support the global economy, but he warns that the real debate will be “to what extent monetary policy will continue to be useful.”
That is why he considers the return of fiscal spending to be one of the key economic drivers in 2020. “Investors should decide whether or not fiscal spending made by governments will be supportive of economic growth. Fiscal stimulus can lengthen the cycle, but what will be relevant is the breadth and scope of the stimulus. One of the conclusions I draw for 2020 is that both the UK and the US would likely not cut their interest rates to negative levels if they were forced to fight an economic recession.”
In the US, Dwane points out that a key factor will be the next presidential election at the beginning of November, but caveats that we are at a somewhat uncertain starting point. “We won’t know what will happen between Democrats and Republicans until June 2020. We have several open fronts, the first of which is what happens with President Trump’s impeachment. Secondly, there is the ongoing trade war with China, which has become something of a geopolitical tool for both sides.”
Investment opportunities
Dwane believes that the way to navigate this market, marked by a long period of low rates, is for investors to accept that “if they don’t take risks, they won’t get satisfactory returns.” In his view, fixed income investors have to think a lot about how to position their portfolios because the underlying assets often offer very little return or have a lot of risk. “Fortunately, investors have become much more realistic with their expectations of return and risk,” he says.
Dwane sees select opportunities in the high-yield market but reminds investors that they have to be aware of the risk they face. Leaving aside the opportunities offered by US Treasuries, which are often used to hedge other risk exposures, he prefers US and Asian high yield. “In the case of Asian assets, it should be remembered that they are more sensitive to economic cyclicality, and for emerging markets, it is better to focus on countries that are carrying out structural reforms such as India or Indonesia. On the other hand, we are more cautious toward Brazil, Mexico and Chile.”
Looking ahead, Dwane believes that if investors want attractive returns, they will have to allocate some of their portfolios to equities. That’s why he says it’s time to consider thematic investments that capitalize on “any trend that will work globally in the future.” Mr. Dwane highlights investments linked to sustainability, climate change, infrastructure, renewable energy, technology, artificial intelligence (AI) and robotics, as well as specific trends related to consumption and the tastes of younger generations, particularly millennials.
Pixabay CC0 Public Domain. Amizut termina el año con el mejor resultado de su historia y eleva su objetivo para 2020
Based on the first preliminary results on the Group’s activities and the first forecasts on 2019, Azimut expects to close 2019 with the best consolidated net profit in the history of the Group, ranging between 360 and 370 million euros.
The cumulative dividends distributed to shareholders over the 5 years of the plan, including what will be proposed to the BoD convened for March 5, 2020, will be at least 7,8 euros per share. As a consequence, the average payout throughout the plan will be greater than 90%, well above the envisaged target, resulting in a cumulative average yield of 44%. With this latest result, all targets indicated in the 5 year business plan have been achieved for the third consecutive time since 2004.
In 2019 the Group recorded 4.600 million euros of Net Inflows, bringing total assets to exceed 59.000 million euros (vs. the 50.000 million euros plan and + 16% compared to the end of 2018). Furthermore, the target set for International AuM at the end of the plan has also been fully achieved and exceeded.
In fact, at the end of 2019, the AuM from non-domestic businesses reached 29% of Total, against the 15% budgeted in the plan. EBITDA from the international operations in 2019 is estimated to be between 50 and 55 million euros (ca. + 53% compared to 2018).
Thanks also to the above results, the Group estimates under normal market conditions, to achieve a net profit of at least 300 million euros in 2020, raising its initial range of 250-300 million euros indicated during the Investor Day of June 4, 2019. This positive delta is expected to be reached thanks to growth across all business lines: distribution in Italy, alternatives and International activities.
The alternatives project continues to progress well. After the success of the largest Italian event dedicated to private markets (Azimut Libera Impresa EXPO), net inflows on products launched in the last quarter of 2019 stands at c. 450 million euros, bringing the total AuM in the private markets space to exceed 1.000 million euros.
Pietro Giuliani, Chairman of the Group, comments: “In 2019 we generated a net weighted average performance to clients of c.+ 8.5%, above the Italian industry. There is no better way to celebrate Azimut’s 30 year anniversary: all targets of our latest five-year business plan have been successfully completed for the third consecutive time.
We expect 2019 to close with a net profit between 360 and 370 million euros, marking a new historical record for the Group. Also our share price closed 2019 with a record: + 128% performance during the year, making Azimut the best performing stock amongst FTSE MIB members. The trust we receive every day from customers and shareholders makes us confident to continue with the same pace also in 2020, and achieve a net profit of at least 300 million euros.
Our international business has seen another sharp increase in 2019, with AuM accounting for almost 30% of total assets and an expected EBITDA of 50 to 55 million euros. Lastly, we are satisfied with the launch of the first products in the private markets area, democratizing this asset class and allowing us in just a few months to exceed € 1 billion of AUM in this segment.”
