Wikimedia CommonsNéstor Fernández, Photo linkedin. Afore Metlife's Former CIO Takes Over as CIO of Merged Afore Principal
“Néstor Fernández currently holds the position of Head of Investments of Afore Principal Mexico. In this position, Nestor is in charge of the investments for Principal Afore and reports directly to Juan Manuel Verón, who serves as CIO of Principal Mexico.” Said Principal to Funds Society, just after the Pension System’s regulator (CONSAR) informed that the merger of Afore Principal and MetLife has been completed.
With the conclusion of the merger, announced on October 26, 2017, Afore Principal becomes the fifth afore of the Mexican system, with assets under management which amount to almost 227 billion pesos or approximately 11.6 billion dollars.
Until now, the portfolio managed by Fernandéz was almost 70 billion pesos, which means that after the merger, his managed assets almost tripled. With more than 20 years of experience in the financial sector, Fernandez joined Metlife Argentina in 2005, transferring to Mexico in 2009, until separating from the firm for the period between 2011 and 2014. Among other companies, he worked at Citi, Grupo Generali and Megainver. He studied at the National University of La Plata, and has a specialization from the University of Buenos Aires and an MBA from the University of the Americas.
Wikimedia CommonsSpanish team, courtesy photo. Muzinich & Co Reaches Third Close on Pan-European Private Debt Fund
Muzinich & Co has made its third close of the Muzinich Pan-European Private Debt Fund at 460 million euros.
Focused on lending to the lower mid-market, or companies with EBITDA of between 5 and 25 million euros, the Fund is one of a suite of 6 private debt vehicles managed by the firm, which has been providing flexible financing solutions to small and medium-sized companies since 2014. Locally-based teams across Europe deliver on-the- ground deal sourcing and origination.
“We are one of very few private lenders in the lower middle market with a Pan-European offering,” said Kirsten Bode, Co-Head of Private Debt, Pan-Europe. “We have a large team of investment professionals and a local presence across Europe with offices in seven key markets. We believe this gives us a significant advantage in accessing a broad and diverse market in order to generate attractive IRRs for our investors.”
The Fund focuses on bespoke financing for growth capital opportunities for lower mid-market companies to fund acquisitions, expansions and transitions.
The final close of the Fund is expected later in 2018.
More than 90 investment advisory professionals from Argentina, Brazil, Panama, Switzerland, Uruguay and the US attended the Bolton Advisor Conference held by Bolton Global Capital at the Four Seasons Hotel in Miami, on the 3rd and 4th of May.
The first day began with a welcome speech by Ray Grenier, CEO of Bolton Global Capital; to be followed by Oscar Isoba, Managing Director and Region Head of US Offshore and LatAm at Nuveen Investments, who moderated the debate between guest investment strategists: Ashwin Alankar, Head of Global Asset Allocation and Risk Management, and Portfolio Manager at Janus Henderson Investors, Matthew Claenson, Portfolio Manager of the Investec Latin American Corporate Debt Fund strategy, managed by Compass Group for Investec Asset Management. Paresh Upadhyaya, Director of Currency Strategy at Amundi Pioneer Asset Management, and Justin Wells, Global Equity Strategist at Old Mutual Global Investors.
Afterwards, it was the turn to discuss regulatory issues, taxation, and compliance issues, Sergio Álvarez-Mena, Partner of Jones Day, Brian Curtis, Global Head of Anti-Money Laundering for Pershing LLC and Kathy Keneally, also Partner for the firm Jones Day.
Matt Beals, Chief Operating Officer at Bolton Global Capital, and Sean Power, Customer Success Manager at Agreement Express, talked about developments in new products and technology during the afternoon’s last conference. The events of the first day came to a close with a cocktail and a subsequent dinner.
The second day was dedicated to technical sessions with representatives from Bolton’s local offices, lecturers and conference sponsors (Investec Asset Management, Janus Henderson Investors, Old Mutual Global Investors, Amundi Pioneer Asset Management, Franklin Templeton Investments, AB, Carmignac Risk Managers, MFS, Aberdeen Asset Management, Capital Group, Fidelity Institutional Asset Management, Stone Castle, Nuveen Investments, BlackRock, Morningstar, American Express, Agreement Express and BNY Mellon Pershing).
The debate between investment strategists
The discussion began with a review of the economic outlook and the movements of the markets so far this year. As pointed out by Justin Wells, the global equity team at Old Mutual Global Investors spends a lot of time understanding key dependencies that influence and actually drive market conditions. “We are seeing higher volatility in the US and Canada. Probably the biggest movement we have seen since Christmas has been the rapid deterioration in terms of market sentiment towards Europe. In Japan, we see a market that is very much driven by current policy, with somewhat less cross-sectional volatility, but we still see a higher degree of positive sentiment. We believe that what we are seeing in Asia Ex-Japan is probably a backdrop and maybe one of the drivers, of synchronized global economic growth, in which a weaker dollar has helped, but with a very different structure in our investment universe over that three-month period.”
Likewise, Ashwin Alankar of Janus Henderson Investors said that the growth of the global economy is solid thanks to the fact that financial conditions are still very accommodative. For example, in the US, the 10-year bond real rate is 80 bps, while outside the US real rates have remained well below zero across the developed world. But what does this indicate? The 10-year real rate of the Treasury bond indicates that the bond market estimates an average of real US GDP for the next ten years of 80 bps, that in Germany the average real GDP at 10 years is priced at -150 bps, the UK’s is priced at -100 bps and Japan at -50 bps. According to Alankar, while this does not mean an arbitrage opportunity, it does mean, however, that you could borrow in one of these economies and invest in others that have higher expected growth in real terms.
Along those lines, Paresh Upadhyaya of Amundi Pioneer Asset Management shared the opinion that the global economic backdrop is still very constructive, that financial conditions will continue to be highly accommodative and that monetary policy remains mostly stimulative. “Markets have started to shift from multi policies to policy convergence. The Fed is no longer the only central bank that is tightening its policy, so are the ECB and the BoJ, as well as other central banks worldwide. But in the last six weeks markets have become more concerned with economic indicators and price levels, which tend to show high frequency macroeconomic data and indicate whether they are above or below expectations. For most of the world, especially in Europe, these indicators are below expectations. It is very unlikely that we will see the same kind of growth that was seen last year and therefore, I think the fact that central banks are struggling to normalize monetary policy, with the Fed beginning to undo its balance, the ECB that will probably cease its QE program in the third quarter, and with the BoJ following not far behind. I think that normalization is leading to an increase in volatility, but it does not necessarily equate to bear markets on a global level, nor across all asset classes. We’ve seen the dollar’s rally in the last month, but there are forces still at play that indicate that it is very likely that the dollar will resume a bear market for one or two years. I think this is the result of the reemergence of the twin deficits and the capital deficit; and I believe trade policy still remains a real wildcard and historically has been a headwind for the dollar”
In turn, Matthew Claenson, Latin American Corporate Debt Manager at Investec Asset Management, said that prospects have changed dramatically in Latin America. “With a positive momentum and lower interest rates from which alpha can be obtained, the economies of Latin America are doing well. The main driver has been, and continues to be Brazil, which, after the worst years of recession the country has experienced in decades, has gone back from a growth of -3.5% to 2.5% this year. We continue to see a supportive environment from commodities incentives that keep that positive part of the cycle going. Obviously, there’s the question of this year’s elections and we can also talk about the big outlier in our region, which is obviously Venezuela, where the economy is imploding and we are talking about the chronicle of a train wreck foretold.”
The consequences of protectionism and trade wars
Twelve months ago, at Old Mutual Global Investors, they were somewhat concerned about the lack of equity markets’ reaction to the rise of populist movements, especially within the developed world. Justin pointed out we would have to go back some 30 years in order to find a similar political context. “It seems to have come with some lagged effect, but it has arrived, and the markets are reacting. This provides a good opportunity to capitalize on a short-term dislocation and to continue reacting and observing any changes in the structure of the market. In general, you have to be aware of the headlines.”
On the other hand, Ashwin pointed out that the main problem facing markets is the tremendous amount of information impacting markets these days, and spoke of the importance of figuring out a way to filter out fake news. “You must filter out what is reality from what is simply noise. At Janus Henderson Investors we have found the way, with discipline, backed by the strong belief that markets are smart, that the capital markets are intelligent, that the capital market existence is probably the most sophisticated system ever created; which is why it’s so difficult to earn alpha, it’s very difficult to beat the markets. Why not pay attention to what the markets are telling us? The markets tell us that the risks of a trade war have not yet been priced in, so we could come to the conclusion that the market thinks it’s simply noise; noise to which we should not pay too much attention.
Options are like insurance contracts, which are really the contracts that put a price on the risks. If the price of home insurance increases in Miami, it probably indicates that the hurricane season will be more severe and more frequent and therefore the price of insuring your home has increased. If we were entering a trade war, the options market should be pricing it in. And what we are seeing is that the S & P 500 is more attractive than the Russell 2000, indicating that the risk of entering a trade war with excessive tariffs is unlikely. At the moment, Canada looks very attractive, with the issue that the NAFTA treaty was going to be rescinded and that the country was going to suffer heavily. It is through systematic technology and listening to what markets tell us that we are able to separate what is noise from what they are made of. Nowadays markets tell us that the ideas of a long trade war are very unlikely.”
In turn, Matt nuanced between trade wars and trade tensions. “South America is somewhat further away from the scenario, but they are not isolated economies, for example, this is the case of Argentina and Brazil which are commodities’ exporters. Obviously, Mexico is the country that has been most affected, as the whole world has been paying attention to the struggles between the US and Mexican administrations. In particular, the Trump administration has verified the strong effort made by the lobbies of American companies to take a step back. “I don’t think a ‘NAFTA la vista scenario,’ where from one day to the next a great deal of investment disappears in Mexico, is the likeliest scenario. The focus seems to have now shifted to China, which has a much more consensual view in the US that its decline in revenue would be lower than in Mexico. The problem is that it’s election time, mid-term in the US and Presidential in Mexico, making it more complex to reach an agreement. Unfortunately, uncertainty will continue to haunt Mexico for a while.”
The impact of monetary and fiscal policies
According to Paresh, the effects of the recent fiscal reform in the US should begin to materialize from Q2 onwards. That’s when he expects US growth to approach 3% – 3.5%. “The Fed will have to assume that the relaxation of fiscal policies will have a greater effect on fixed income. The markets have 2 hikes priced in for the rest of the year, in the June and September meetings; however, I think the doors are ajar for a possible hike in December. I think there is a real difference of opinion between the Fed and the market for next year, the Fed anticipates two price hikes for next year, but we need to see clear signs that inflationary pressures are occurring. There is a possibility that inflation exceeds the 2% target. As we enter late summer, perhaps at the end of September, in the Federal Open Market Committee (FOMC), Powell must give a first signal that an additional hike could be given in December if growth rates of 3% continue. If the performance of the curve continues to steepen, that could be a sign that the market believes that the impact of the fiscal reform will boost the long-term potential growth of the US GDP. The fact that the curve has flattened indicates that the market doesn’t believe that the fiscal reform will increase the potential rate of growth in the long term, the truth of the matter is that for a few years we might not know the total factor of productivity, since it takes a few years to show and we start to see the whole growth. We will not know for two or three years, at least not in the short term, the reason for the flattening of the curve. The markets believe that the tax bill is going to be essentially a sugar high for the US economy that willstimulate growth in the next 6 quarters and that after that impulse in growth will disappear during the second half of 2019. This is what the curve says, we know that markets respond quickly, and if there are indications that productivity begins an upward trend, I think we will begin to see a greater steepening in the curve.”
From a currency perspective, Paresh explained that in his view it’s a good time to sell the dollar against some of the G10 currencies, such as the euro or the yen. “I think it’s a great level with the euro between 1,15 and 1,20 dollars, and the yen between 1,10 and 1,08”.
With respect to the curvature of the interest rate curve, Justin explained that the risk and structure of maturity are the factors that give it shape. “Investors demand a term premium; the main central banks have been containing the risks of interest rates. If the implied volatility of interest rates in the US is taken into account, it is at historical lows, the Fed has been managing interest rates volatility. It’s theoretically impossible for the term premium to comeback for the term structure to steepening when you have no volatility in interest rates. Until the Fed and the central banks of the rest of the world do not stop managing and moderating risks artificially in the bond market, term structure will remain flat. But once they start trading, to surprise the market, and start to hike unexpectedly or begin to change their interest rates, volatility should return. When volatility returns, you should theoretically see steepening in the curve. Currently, instead of paying attention to the rate curve, the Credit Default Swaps (CDS) curve should be examined. If the CDS curve is inverted, then there may be a problem. My recommendation is not to take the rate curve into account, because, although historically an inverted Treasury curve is bad news, at present, after a period of excessive monetary policies and intervention by central banks it cannot tell you anything. Just ignore it.”
Wikimedia CommonsPhoto: Sherpa Capital. Sherpa Capital to Launch a Mexican Equity Multi Factor ETF
Sherpa Capital, an independent investment advisor in Mexico with 50 billion pesos (equivalent to more than 2.6 billion dollars) in assets under management, has launched a Mexican equity multi factor ETF.
The QVGMEX, which trades on the Mexican Stock Exchange tracks the S&P / BMV Quality, Value and Growth Index.
Richard Ramirez-Webster, CIO of Sherpa Capital comments: “We are very proud to be part of this launch and be able to offer in the market an additional and complementary alternative to other ETFs that invest in the Mexican stock market and that are based on more general indices. The QVGMEX tracks a multi-factor index that seeks to invest in a selection of Mexican companies belonging to the IPC that stand out for being the best in QUALITY, VALUE and GROWTH and which seeks to generate more attractive long-term returns term that the Mexican stock market measured by the S&P / BMV IPC “.
With the QVGMEX, the firm that advises and manages resources of institutional, corporate, HNWI and family clients, seeks to invest in shares that are part of the S&P / BMV IPC allocating them with the highest combination of quality, value and growth factors. The S&P / BMV Quality, Value and Growth Index follows a unique fundamental approach and is the first index in Latin America that combines these three factors for the selection of stocks. “The QVGMEX offers an innovative perspective seeking to be a vehicle that helps in the diversification of investors’ portfolios,” concludes Sherpa Capital.
On April 25th and 26th, Thornburg Investment Management (Thornburg), a global independent asset management company, brought together for its annual event more than 40 professionals from the investment industry, most of them financial advisors from Bolton Global Capital, Insight Securities, Morgan Stanley Wealth Management, UBS Financial Services, and UBS International. The event was hosted by Vince León, Director, Offshore Advisory Channel and Miguel Cortabarria, Offshore Internal Sales Consultant.
In this new edition of its “2018 International Advisors Conference“, which, as usual, was held in the city where the company has its headquarters, Santa Fe, New Mexico, Jason Brady, Thornburg’s President, CEO and Managing Director, welcomed the attendees. In his speech, he explained the characteristics that make his company’s investment process different; which begins with the importance of the firm’s location, away from the noise of Wall Street, in order to accordingly process the huge volume of information that investment managers receive nowadays. With about 48 billion dollars in assets, the company consists mainly of private capital of which an important part is held by its Managing Directors and employees (1.88%). “We consider a wide range of opportunities, beyond the limits of the conventional, to find the best relative value. Thornburg uses a flexible perspective that benefits from the interaction of various investment teams in order to refine ideas, obtain better judgment and more competitive results for investors,” says Brady.
We feel that this leads us to better investment results for our clients. We look for a challenge, we focus on the objective and not on the reference indexes, which ultimately translates into conviction portfolios with a high active share. “Our investment approach is structured, in order that by being repeatable over time we can then achieve superior long-term results for our clients.” Specifically, the asset manager specializes in six asset classes, domestic and international variable income (value, growth and emerging), global fixed income, municipal bonds, multi-assets and alternative strategies (long/short in equities).
The Outlook for Emerging Equities
After Brady’s presentation, came emerging markets’ turn; these markets, representing 86% of the world’s population, 40% of the GDP and 21% of the market capitalization, usually translate into a greater demand for goods and services by an increasing middle class, with a much faster GDP growth. Something that already happened in the US during the past 50 years, and that Charlie Wilson, co-portfolio manager of the Thornburg Developing World portfolio, and Pablo Echavarría, Associate Portfolio Manager, recognize as a determining factor for long-term investment. In the last ten years, the composition of the MSCI Emerging Markets’ index has changed substantially, if a decade ago the extractive industry and banks dominated market capitalization, nowadays, it’s technological companies such as Alibaba or Tencent the ones that lead the market. In that regard, the Thornburg’s strategy prefers to leave the index aside and choose quality companies with attractive valuations that minimize the typical breaks in which this type of asset usually incurs.
“In order to assess company quality, we pay close attention to the alignment of corporate governance’s interests with those of minority shareholders. We also examine the company’s balance sheet in depth. What we seek above all is to hedge the downside risk, since that’s the way we can obtain a higher compound interest rate, providing higher quality and higher return rate return to the fund. We tend to invest in financially sound companies, companies with low leverage that show no deterioration in their cash flows. These two issues are the most important in a bear market. In addition, we pay attention to the valuations, mainly those expressed in terms of free cash flows, and we establish an objective for the return in order to create expectations about the company and to measure the impact of the investments,” said Echavarría.
They use an approach of three investment baskets for the portfolio’s construction, in the first one they include basic value companies, with securities that fall within the classic description of the investment value. In the second basket, the stocks that consistently earn profits, and in the third, the growth companies that they call emerging franchises. “This approach allows us to participate in the market cycle’s different tides. It allows us to be aware of relative growth and the performance profile adjusted by the risk of these companies. We search among the different baskets, focusing on building differentiation to address market expectations,” argued Wilson.
The Fixed Income Vision
Then came fixed income’s turn; Lon Erickson, Portfolio Manager and Managing Director, expects that international demand and the consequent pressure on the yields of fixed income will decrease in 2018 due to the weakness of the dollar. “The majority of international investors invest with a hedge in currency, but the cost of hedging increased considerably with the movements in exchange rates. Once this cost is added on, US returns do not look as attractive. In addition, the Fed is reversing its asset purchasing program, as is the ECB, and even the Bank of Japan is talking about how to eventually exit the QE program. If you believe, as do we, that the purchasing program kept rates at low levels, it is reasonable to think that it will put some pressure on rates once the stimulus is withdrawn,” he said.
According to Erickson, the main question is whether it will affect them for better or worse. “An experiment on the Fed’s balance sheet like this one has never been seen before. At the current rate of reimbursements, it will take up to 6 years to return to the previous balance of one trillion dollars, a considerably slow schedule that the market could absorb. But it’s not only the Fed that is withdrawing liquidity, the ECB has also begun the withdrawal; which is something that will reduce the demand for dollar assets and increase the pressure on rates. We expect more pressure on the returns of the 10-year bond, but we also believe that it will be contained, as there is still some uncertainty surrounding the robustness of the US economy.”
According to the asset manager, spreads are very compressed and leverage levels are historically similar to those maintained during a recession. Regarding inflation, he believes that the recent fiscal reform will add pressure. Finally, in relation to positioning, he explains that credit opportunities are less attractive, since the public and corporate balance sheets don’t look as solid. Opportunities in interest rates exist above all in the long term and in the cash position, which responds directly to the Fed rate hikes. “It’s where the opportunities can lie in the short term, whilst waiting for new opportunities in the curve,” he concludes.
The Power of Dividends
Then came the turn for the company’s flagship strategy; Brian McMahon, Thornburg’s Vice-Chairman, CIO and Managing Director, presented Thornburg Investment Income Builder’s capabilities; the strategy was designed for investing 75% in stocks and 25% in bonds, but currently allocates 90% in equities, since the actions of central banks during the past few years has displaced investors out of the bond market. “The central banks of the main developed economies, the US, the UK, Japan and the Eurozone, have bought a very high percentage of debt in relation to sovereign bonds issued by these countries. In 2013, the Fed bought two thirds of the bonds that were issued, leaving only one third for the rest of private investors. Also, in 2017, the Bank of Japan bought 250% more than the amount issued by the government. The European Central Bank’s behavior was similar, substantially reducing the offer of sovereign bonds of developed markets and making asset managers’ work more complicated,” said McMahon.
As for the choice of companies that pay dividends, Thornburg chooses companies that have a capital discipline, that only invest in capitalization expenses if they have good projects to invest in and which respect their dividend payment policy. “From 2011 to 2017, the average growth rate of dividends globally has been good. The dividend yield of the shares has become very competitive compared to high-yield fixed income, in fact, in Europe, it is slightly higher than yields of the high-yield bonds issued in the region.”
According to McMahon, the positioning of the portfolio responds to the search for opportunities between regions and sectors that offer the highest dividend yield. “We fish wherever there are fish. By geography, at the end of Q1, we give preference to Europe, excluding the UK, to North America as, despite the US offering one of the lowest dividend yield rates of 2.1%, we trust that there will be a change with the fiscal reform, and to the Asia Pacific region; while, by sectors, we favor the financial, telecommunications, energy and consumer discretionary companies. We maintain a low exposure to the sectors that have traditionally been related to attaining dividends, such as public utilities, materials and real estate; because at present they have been an asset sought as a refuge and are traded similarly to short duration bonds.”
They expect that 76% of positions in the portfolio increase their dividends within the next 12 months, and that of the 14% that will pay lower dividends, 66% are companies that had already paid a special dividend the previous year. However, what will happen when rates continue to rise? The asset manager acknowledged that strategies similar to that of Thornburg Income Builder have lost about $ 100 million in outflows from investors who fear an increase in US Treasury rates. But, in the past, the fund has managed to surpass yields obtained by fixed-income indices when the 10-year Treasury rate has risen by more than 40 basis points in 27 periods, exceeding in 24 of them the profitability of the US Corp Bond Index and the US Aggregate Bond Index, and in 20 periods the profitability of the US HY Bond index.
A Distinctive Approach
It all started on Thanksgiving 36 years ago, Garrett Thornburg, Founder and Chairman of the company’s Board of Directors, and who had previously been a partner of Bear Stearns & Co, as founding partner of its public finance division, and CFO of Urban Development Corporation, decided to focus on the management of investment strategies. Two years later,Brian McMahon left Northwest Bank to join Thornburg. Together, they launched a first municipal bond strategy, followed by government bonds’ strategies, US value equities, international value and growth. Thus, in 2002, the Thornburg Income Builder strategy was launched, and in 2006, Jason Brady joined the firm.
“Our main value is doing the right thing. It’s very simple; we act with integrity and put our clients’ interests first. Our portfolios are concentrated, so we are not always in sync with the fads that may be in the market. We focus on the long term and therefore our equity strategies outperform their indexes in all their categories. Our motto, “It’s not what we do, it’s how we do it”, is very representative. And, our way of investing is collaborative, the entire management team is in Santa Fe and they work together, in total 236 people who can find a good investment idea. It’s possible that this idea does not fit into a value strategy, but it may work for a growth strategy,” Garrett Thornburg commented during his presentation.
As the event progressed, they didn’t insist as much on the positioning of the portfolios when facing the markets as on the importance of asset managers adhering strictly to the investment process of each strategy. “We are not experts in guessing the future. We carry out a conscientious decision-making process and believe that excellence in investment should guide our decisions. We look for the best for our clients,” concluded Rob McInerney, Sales Manager and Managing Director for the management company, who also emceed the event.
Wikimedia CommonsPhoto: Mark Mobius. Mark Mobius is Launching a New Asset Management Firm
Less than four months after leaving Franklin Templeton Investments, the legendary investor Mark Mobius has founded a new asset management firm that specializes in emerging and frontier markets.
According to Bloomberg, the new company would carry its name Mobius Capital Partners LLP and has Carlos Hardenberg and Greg Konieczny, other Franklin Templeton veterans, as main partners. Everything seems to indicate that its operations would start this June.
“I was not ready to retire and I was ready for something new after 30 years at Franklin Templeton,” the manager, who worked for more than 40 years investing in emerging markets, told Bloomberg on Wednesday.
The manager has yet to attract external investors and aims to raise about one billion dollars in the next two to three years. According to Bloomberg, Mobius would start with a concentrated portfolio of about 25 stocks that will invest in India, China, Latin America and frontier markets.
Wikimedia Commons. Nordea Plans to Open an Office in Chile
Nordea, the largest financial services company in northern Europe, is planning to open an office in Chile between the second and third quarters of the year, local newspaper El Mercurio reported.
Nordea has maintained an agreement with BICE investments since 2012 to distribute its funds in the country, although its intention is to register its funds in Chile to reach a broader public.
The opening of an office in Chile intends to operate as a “hub” for the entire Andean region. Specifically, and based on statements by executives of Nordea to the aforementioned newspaper, the Scandinavian company will focus on offering its services to AFPs, insurers, family offices and high net worth individuals in Chile, Peru, Colombia and Mexico. The company currently has an office in Sao Paolo serving the Latin American region.
Nordea has over 330,000 million euros in assets under management. It has a customer base of more than 10 million, more than 650 offices and 29,719 employees.
The Trump National Doral is the setting in which Funds Society celebrated its fifth Investment & Golf Summit on April 12th and 13th . Nine Proposals in Equities, Debt, Convertibles and Multi-Assets from the Investment & Golf Summit 2018 Organized by Funds Society in Miami
Janus Henderson, Thornburg, Vontobel, GAM, RWC, AXA IM, Schroders, Columbia Threadneedle and MFS: are the asset management companies that took part in the fifth edition of the Investment & Golf Summit 2018, organized by Funds Society and held in Miami on the 12th and 13th of April at the Blue Monster golf course, at the Trump National Doral. While golf was the main feature on the second day, throughout the first day the management companies captured all the attention of around 80 fund selectors, financial advisers, private bankers, and professionals involved in making investment decisions for non US resident clients who attended the conferences.
On Thursday, the management companies presented their best ideas for a more volatile environment in which all eyes are on US inflation and the pace of rate hikes by the Fed; a context in which profitability can be obtained with strategies, in equities (global, European, emerging…), in fixed income (dynamic high yield, convertible bonds, MBS, emerging debt…) and in multi-assets. In equities, the ideas came from Janus Henderson, Columbia Threadneedle Investments, and Thornburg, with their respective strategies in Chinese stock market, small caps, and global stock market.
In emerging equities, Charlie Awdry, manager of Janus Henderson, reviewed what investors can expect in 2018 and where he believes the best opportunities in Chinese equities are. The manager was critical of the elimination of the two term presidential limit -which reduces the distinction between the Communist Party and the State-, but stressed that, in politics, not everything is negative in that country, pointing to President Xi’s focus in reducing inequality and financial risks, and mainly, reforms (both socially and economically, which will lead to greater consolidation in some of the country’s heavy industries). And above all, he explained that the reforms in the SOEs (the companies in which the State has a participation greater than 50%) will be positive for shareholders: “The reforms in the SOEs will begin to stimulate better decisions of capital allocation, including greater dividends.”
The asset manager also pointed out how the country has gone from having a focus on growth, to shifting its focus to reforms, fighting corruption (improving business efficiency) and, since last year, deleveraging, so that debt will be lower than in the past. And growth also: Awdry talked about shorter economic cycles and a current peak, predicting a somewhat lower growth after the summer, but without reaching a hard landing, which will begin to recover by the end of the year. As a positive factor, he pointed to a better relationship between the dollar and the renmimbi, more favorable than in the past, and spoke of three additional risks: trade wars (there will be more friction and competition, which will force greater negotiations with the US), North Korea, and Taiwan.
But, beyond the economic and political context, he pointed out the opportunities offered by some Chinese companies: “Many think that companies are not good, because of their state-owned nature or because of their low quality, but there are very interesting spaces in which to invest,” he said, pointing out the Internet segment, where the country is very innovative. In its fund, its main position is Alibaba, listed in New York, with a high percentage of market share in e-commerce, and the second Tencent, listed in Hong Kong (with data that invites investment, as is the fact that a third of its users spend more than 4 hours a day in the app.). The problem of some securities which represent the new China (technology, health, or consumption) is its price, so that its portfolio is currently divided equally between these segments and the most characteristic of old China (energy, materials, industries , banks or utilities), which are currently cheaper. In fact, the asset manager argued for the great opportunity in the H shares of the country’s banks (and also in some companies held by the state), which he bought in Q2 last year for the improvement in their fundamentals, for their attractive valuations and, tactically, for the annual dividends of 5% -6% which they offer.
Its Chinese equity fund seeks to find the best opportunities in three markets: Hong Kong (where it sees attractive valuations and which occupies two thirds of its portfolio), A-shares (which still offer a discount and represent slightly less than 20% of the portfolio) and Chinese stocks listed in the US. (Now, with less attractive valuations and a peak in the market, which suggests that it is time to sell and is the reason why they have reduced their positions). On the A-shares, the asset manager pointed out the attractiveness of the liberalization of Chinese markets and the potential that MSCI expects to include these shares in emerging stock market indexes soon. As an opportunity, also the fact that investors’ positions are below the 2013 levels. “China is a very interesting bet at the moment, it is a volatile market but there are opportunities. Our strategy is to leave behind the beta and to think more and more about the selection of values and the generation of alpha “, concluded the manager.
Smallcaps Opportunities
Continuing with opportunities in equities, a presentation by Mark Heslop, Small- caps Manager for the European equity team at Columbia Threadneedle Investments and of the Global Smaller Companies strategy -launched four years ago-, focused on the potential of small capitalization companies. History shows that these firms can provide higher returns and faster growth than large-cap companies and the reasons are several: First, the proportion of businesses in which the managers are also the owners of the company is greater in the small-caps segment, which means that, when making investment decisions, they do so with a longer-term horizon. “Many large-caps are managed with a view to the results of the next quarter and do not focus so much on creating value in the medium and long term.” In addition, smaller firms have the “humility and flexibility” to change business if they see opportunities, compared to large ones. “These are the reasons that justify the faster growth of small-caps and I hope this trend continues,” said the manager. As additional reasons for their attractiveness, a greater investment universe, and with higher levels of inefficiency, or lower hedging of these securities, are the factors that represent great opportunities to generate alpha within this segment.
And they also offer attractiveness from a quantitative point of view, risk adjusted profitability: “Some say that small-caps are a high-risk asset, but they are not, and it can be the same as when investing in large-caps. For a little more volatility, you can get double returns,” said the manager, who pointed out that if the returns of large companies at 20 years have been 4.1% with 15.2% volatility, those of small-caps have been 7.7% with a volatility of 17.6%.
The management company’s strategy in this segment is bottom-up and is focused on the quality of the companies, but also on growth (provided that this growth creates value for the shareholder). Due to its investment philosophy, the portfolio has structural underweights and overweights, depending on where they find high quality firms and good growth dynamics: They are overweight in industrials, a good area to find these firms, while on the other hand, it’s difficult to find names with these characteristics in financial or utilities, and in general, in highly regulated segments. By regions, the overweight is for Europe without the United Kingdom.
Beyond the small companies, in the global stock market, Josh Yafa, Director of Client Portfolio Management at Thornburg Investment Management, spoke of the opportunities in the asset, in his case also focusing the investment from a totally bottom-up perspective, although without losing sight of the macroeconomic situation, the analysis on the economic cycle and the valuations. In fact, the manager spoke of a positive economic context, with global PMIs expanding in the Q1 of the year, unemployment rates below the 1990-2017 average and other indicators that show that we are in a period of economic expansion.
On equity valuations, he pointed out that they are slightly below those of the end of 2006 (although above those at the end of 2008), and he stressed one positive factor: the net debt / EBITDA ratio, which, both at the end of 2008 and of 2006 was around 4.7 times, is now 1.8 times, a positive factor. The manager also spoke of a world in which, after the withdrawal of stimuli from the central banks, there will be more differentiation in the markets, which will benefit active managers, and also pointed out the fact that, according to the flows towards funds and ETFs, investors continue to show preference for bonds rather than for shares.
In this environment, Thournburg seeks to differentiate itself from other companies: Based in Santa Fe (New Mexico), it builds high conviction portfolios (its global equity portfolio has 30-40 names). “At Thornburg, we adopted a disciplined approach to the construction of portfolios, guided more by convictions than by conventions. Instead of using reference points as a starting point, we apply flexible and active management to find the best results for our clients,” added Yafa.
With a view focused on income, the entity also presented its global equity strategy that not only seeks capital appreciation but which also invests in firms willing to pay dividends, as well as a third multi-asset strategy, composed of equities – with about 50 names with a dividend yield of 3% – and fixed income (Investment Income Builder), and that it invests globally. “Companies that provide a higher payout ratio also tend to end up offering greater profit growth,” said the expert. The strategy, flexible in terms of geographical exposure and sectors, is positioned above all in segments such as financial and telecommunications companies and has low exposure in highly regulated firms such as utilities.
There are Still Opportunities in Fixed Income
There are still opportunities in fixed income, despite the dynamics of monetary normalization complicating this environment. Management companies such as Vontobel, GAM, AXA IM and Shroders, offered their ideas focused on obtaining income with a global focus, on the value that still exists in US high-yield, in emerging debt, or in the opportunity in the MBS.
Focused on obtaining income, and with its Strategic Income strategy -which aims to provide an attractive income level with capital growth as a second objective-, Mark Holman, CEO and manager of TwentyFour, a boutique of Vontobel AM, presented its strategy, which combines the best sources of income in the global debt segment in an unconstrained and unlevered portfolio, managed independently of the indices, with active management of interest rate and credit risks and focused in relative value and in liquidity. “2018 will be a tough year for fixed income: There is 85% of the market that I do not like but there’s still 15% that I do like,” he said.
If I had to buy a bond today, it would be in credit (not in the public debt area) and, given that the cycle and valuations are mature, it would have to be high-quality and well analyzed, to avoid the risks of default. In addition, it would have a short duration to avoid the risk of interest rates, but not too low, to be able to obtain “roll down” gains. And it would be in the currency of the country of origin, because currently said risk is too high. Such a bond would survive complicated market conditions, summarized the expert. Because this year is a year for caution, and their fund is better positioned to face it (it has a shorter duration than the index, 2.72 compared to almost 7, and a much higher yield, 5.24% as compared to 2.11%).
Within that 15% of the market where the asset manager sees value, by geographies he points out that there are more opportunities outside the US. – “an economy which is close to the end of the cycle” – that within the US, and has strong positions in Europe (29%) and especially in the United Kingdom (more than 30%), where it takes advantage of the Brexit premium. North America occupies 21% of the portfolio and the remaining 18% is mainly in Australian public bonds, “secure, because the country is not in a dynamic of rate increases”. By rating, it’s willing to take credit risk but avoiding the CCC segment, where many defaults are concentrated, and the B, while it’s positioned in the BBB and BB areas, more secure and with good returns. By sectors, it mainly focuses on banks… as the manager sees opportunities mainly in three segments: European CLOs, subordinated bank debt and emerging corporate debt in strong currency (the latter benefited from the coordinated global recovery that began last year). “The banking sector has never been as healthy as it is now, it has more capital than ever before,” he says.
As to what to avoid in 2018, he points out the interest rate risk, the sectors where the ECB focused its purchasing program, European public debt (especially the German Bunds), the British Gilts, the long-term investment grade credit and the CCC segment while it is willing to take credit risk, to take advantage of the “roll down” gains (favoring securities in the part of the curve from 3 to 4 years), stories with rating upside potential and the Brexit premium. In general, his watchword is that it’s a year to face credit risk (the end of the cycle is far away, and 2017 showed a scenario of global financial recovery), but taking care of the valuations (the markets are expensive, although the situation is justified by the fundamental forts, economic recovery and technical support). That is why its strategy is to gradually reduce this risk as the cycle progresses and focus on finding relative value by geographies, sectors and companies.
MBS & ABS Strategy
GAM’s idea in order to take advantage of this environment focuses on mortgage and asset-backed securities (MBS and ABS). Tom Mansley, Investment Director of GAM Investments and specialist in the analysis and management of these securities, argued for how these vehicles can offer a differentiated fixed income proposal for investors. A strategy that arises from the need to respond to two recent problems: One is correlation, because although in recent years the markets have been highly correlated in a positive way, the situation could change: “We are looking for something that provides diversification in the fixed income portfolios “. And the second is the lack of income and liquid income when investing in the asset. In response to these concerns, the entity has built a portfolio that invests in bonds backed by US mortgages, a market that has been growing in emissions in recent years, although with different dynamics depending on whether it is agencies’ MBS – with a majority of issues and considered lower risk -, CMBS or RMBS issued by other entities.
With the strategy which, thanks to their attractive valuations, has been increasing the positions in these latter securities that have no government guarantee, the idea is to offer returns in the mid single-digits, with very low volatility: “It is not an overly exciting market, but in a context in which many financial assets are expensive, we can offer those returns with very low volatility – below the index and also high-yield and correlation,” and always with the idea of making money (in 2013 within the context of the Taper Tantrum, with a downward bonds market, their strategy rose). This low volatility is helped by the fact that investors aren’t retailers, but institutional: According to the expert, pension funds and insurers are very comfortable with the asset, because the credit is “very solid”.
And it’s solid because the real estate market in the US is going through a sweet moment: The ratio of empty houses is already at historically normal levels, around 1.5%; the offer of existing homes for sale is below the average levels (so that in three months all would be sold); the number of houses under construction is also below normal levels (around 500,000); the home ownership ratio is lower than that of the levels prior to the crisis and around the average of the last decades which was 64%… these factors, together with the greater capacity to pay for a home, serve as a basis for an appreciation in the price of it. “The index that compares the average income with the average mortgage payment, and that, taking that income into account, measures ease of payment, shows that current generations can buy a house cheaper than their parents”- by measuring the relationship between price and income-, both because the price is lower and because of the income growth, characteristics which are totally the opposite to those of a few years ago.
Dynamic High-yield
Although some prefer fixed income alternatives, some others continue committed to more classic segments, such as AXA IM, which highlighted the opportunities for investing in high-yield debt from a dynamic perspective. Robert Schumacher, Chief US Strategist and Client Portfolio Manager of Fixed Income at AXA Investment Managers, explained why it’s still a good time to bet on high-yield, dismantling stereotypes that keep some investors out of the assets. “If the argument for not investing in US high yield is that the cycle is coming to an end, you can lose a great opportunity to obtain income,” he said. In the first place, because nobody can know when a cycle is going to last – and it is not clear that it will end soon -, and also because, even if it were true, the work of the managers is, as in other assets, such as variable income, to look for inefficiencies in those environments. “The argument for not investing cannot be that,” he said. Also, in his opinion, “cycles do not die of old age, but due to political errors.”
According to the entity, the moment is still good for the asset, and it can be an attractive alternative for those reluctant to invest in equities but looking for correlated returns with stocks with lower volatility. The management company’s US high- yield strategy has positions concentrated on names of great conviction, with the selection of credit as the main source of alpha, a volatility in line with the market (but with higher returns) and the possibility of using leverage derived from the use of CDS (up to 150%) -with the objective of improving returns in neutral and bull markets-. However, entity sources explain, it’s not a distressed strategy or a neutral market or negative exposures. Last year, it beat the market thanks to the selection of securities in debt and also to positions in CDS -which are not the main catalysts of returns, but are also a source for achieving them-; it also did so in 2016, despite being underweight in energy and with limited exposure to very cheap commodity issuers whose prices rebounded strongly. Since its launch, it has managed to limit the falls in difficult markets and offer alpha in periods of positive returns.
Also in fixed income, Schroders‘ bet focuses on emerging debt. John Mensack, Senior Investment Manager Emerging Markets for the management company, was very constructive with the asset: “Emerging debt is a main asset class and one in which investors are underinvested,” and which already represents 18% of the market of negotiated bonds. In addition, considering the growth of public debt issues in local currency and corporate bonds in hard currency, traditional indices become obsolete, so that investment in assets “deserves a more sophisticated approach; It’s time to be more sophisticated.” In addition, in seven of the last 10 years, the difference between the returns of the most and least profitable debt segments has been greater than 7%: Hence the importance of looking for a professional who only invests where the value is and moves away from areas that are expensive.
And that is precisely Schroders’ perspective, which combines in its strategy sovereign debt in strong currency, sovereign debt in local currency, and credit in hard currency; the latter is a sector in which it sees great opportunities while being less exposed, for example, than the second one: “Debt in local currency usually offers 100 basis points more profitability than that in hard currency, but now there is only 30 points difference -6.1% against 5.8% -, so it makes no sense to overweight the currency now. There are good stories like South Africa or Indonesia, but when we look at these cases of relative value we tend to underweight the areas that we see more expensive, as is now the case with local currencies.” In fact, less than a third of its portfolio is exposed to sovereign debt in local currency (27%), while the rest is debt in hard currency – corporate debt weighs 28% and public debt in hard currency, 40% -. In any case, the idea is to have around one third of the portfolio in local currency, which works better than the 50/50 strategies. The opposite occurs with corporate debt in hard currency, where it sees opportunities, with more than double the returns for the same level of risk in duration as US credit, and focusing on “great national champions,” that can achieve rating increases and that are mainly in the investment grade segment. In general, Schroders’ fund positions are low in interest rate risk, it’s overweight in credit risk -because countries are doing well and credit is improving- and underweight in currency risk due to low differentials (and high valuations) of the debt in local currency).
All in a strategy that offers greater diversification (thanks to lower volatility and a greater set of opportunities), a better opportunity to obtain income globally with good credit quality and low correlation with US Treasury bonds, which reduces the interest rate risk (specifically, 24% correlation, so that the Fed rate hikes will not condition the portfolio). On the dollar, the expert argued that, at the current level or lower – something that could happen, in his opinion, due to the deterioration of some US data, which will cause investors to look for opportunities in other markets, such as emerging markets-, would be positive for their strategy. “During the period of Taper Tantrum the dollar rose a lot but that reality has already been left behind and we believe in its moderate weakening,” Mensack added.
The Opportunity in Convertibles
Halfway between fixed and variable income, convertibles are also a good idea in this environment, according to RWC. Davide Basile, Head of the Convertible Bond Strategy team and Manager of RWC Partners, explained the benefits of the asset, capable of capturing a large part of the increases in equities (with between half and a third of its volatility) and offering bearish protection at the same time. “At present, a strange world is combined with global growth, and convertibles offer the best of both worlds: An appreciation when there are increases in the markets with the security of a bond”, commented sources from the management company, with a focus on understanding both the credit part and the equity of the asset, “understanding each name, the different components, how they move…”
“The asset has an additional ally in this environment: The increase in volatility. Thus, since the end of 2016 and during 2017, and due to the low volatility, convertibles have participated less in the rise of equities, but that could change. “When the volatility is higher, they also participate more in equity returns thanks to the exposure to optionality, so in these scenarios they tend to do better, as compared to shares”, explained the experts. And a more volatile environment also favors the issue of convertibles.
Due to their characteristics, experts recommend this asset, rather than as a substitute for shares, as an alternative to a debt market with already tight spreads – and with less potential for narrowing – and the risk of raising interest rates. In this segment, they would be a “good place for diversification, since they tend to have shorter durations” and protect them from these increases. “A few years ago convertibles offered lower returns than corporate debt, which can be explained by the cost of the option, but now the level of income they offer is comparable, so if you are comfortable with the characteristics of the convertibles, they could serve as substitutes for fixed income, in order to obtain a similar income level”. Even in a multi-active portfolio, its introduction does not usually involve surprises in terms of volatility, and provides diversification benefits.
Multi-asset: The Necessary Diversification
What all the experts agree on is that the environment makes portfolio diversification necessary, something that multi-asset strategies undoubtedly achieve. During this event, MFS was the management company that presented a strategy of this type to achieve diversification and a better performance adjusted to risk, in an environment of lower rates and in which, in order to achieve the same results as 20 years ago, greater diversification and taking more risk is required. The management company’s strategy has a historical allocation of approximately 60% in shares and 40% in fixed income, which facilitates the work of the managers, explained Gary C. Hampton, CFA, Product Specialist of MFS Investment Management. “The combination of stocks and bonds in a multi-asset portfolio offers investors diversification and the opportunity to achieve better risk-adjusted performance,” he explained.
Thus, the equity part focuses on investing in global companies and large businesses, selected from a value perspective (they must be global businesses, sustainable for years, generating cash flows, with strong balance sheets and that are well managed by good equipment, also with attractive valuations). Thus, their perspective of looking for high quality firms with attractive valuations is clearly differentiated from the so-called “deep value” managers, which look for highly undervalued firms, but which could belong to industries in difficult situations or have problems that justify those low prices.
In fixed income, the fund uses a top-down approach in the process of selecting countries and currencies, generally investing in investment-grade debt. “The correlation between high- yield and shares in bear markets is very high, so we think that the mix of equities with investment grade debt is a better mix for times of correction,” explained Hampton, recalling that in 2008, when the market fell by 40%, the fund only fell 15%. This perspective tends to cause overweight positions in the variable income sector and in sectors such as basic consumption, and underweight in technology, while in fixed income corporate credit is overweight and, for example, US public debt is underweight.
The management company also presented its MFS Meridian Funds-Prudent Capital Fund, with an exposure to global equities of between 50% and 90%, global credit of between 10% and 30% and up to 40% in liquidity, a concentrated portfolio in which preserving capital is key.
CC-BY-SA-2.0, FlickrPhoto: Rick Harris. How to Keep Today's Wealth Management Client Happy?
The wealth management industry has continued to change dramatically in the past several years. To stay competitive and meet new client expectations, successful wealth managers must develop strategies to engage with an increasingly digitally savvy client base.
According to Thomson Reuters‘ Digitalization of Wealth Management report 2018, made in collaboration with Forbes Insights, key factors defining today’s wealth management industry include keeping up with new technology, staying relevant to the next generation of investors and finding ways to integrate artificial intelligence (AI) into investment decision making as well as into the client-service process.
In order to better understand how wealth managers are using data and technology to adapt to changing client expectations, Thomson Reuters and Forbes Insights surveyed 200 wealth managers from North America, Europe and Asia Pacific. Key findings of the survey include:
68% say learning about and keeping up with new technology is the top challenge they face
69% are concerned about staying relevant to a younger generation of investors
41% say advanced analytics and cognitive technologies will have the greatest impact on the wealth management industry over the next three years
Only 27% currently have and are happy with their mobile platform, even though they believe this is the digital capability that clients value most
65% spend most of their time on client acquisition and onboarding, followed closely by providing advice, and client objectives and risk tolerance. Many believe technology can help them become more efficient with each of these tasks
72% see AI as an opportunity
“There is no doubt that wealth management firms and their advisors are now at a turning point, and have a great opportunity to reinvent themselves in order to both deliver an exceptional digital experience for the digital natives as well as to define a new generation of high touch services,” said David Akellian, managing director and global head of Wealth Management at Thomson Reuters. “The industry challenge and the opportunity, is helping ensure that wealth firms and their advisors are better equipped with the AI, advanced analytics, insight and technology necessary to meet their clients rapidly evolving investment and service needs.”
The report further notes that the role of the financial advisor could change dramatically in the next few years. Not only will many clients expect better tools of engagement, but advisors will likely be serving even more clients and for lower fees. They will want to “know” their clients with the speed and precision of machine learning. With trillions of dollars’ worth of managed assets at stake, advisors are clear about what they need from their technology going forward: Access to client information on one screen, prioritized for current events; Meaningful personalized advice at their fingertips or for their clients directly; Automation to free advisors to spend more time with clients; Communication tools for the next generation; and augmented decision-making capabilities for advisors and their clients.
Read and download the full Digitalization of Wealth Management report here.
Pixabay CC0 Public DomainWalkerssk. China’s Risks on the Road to a Modern Economy
At present, there are three different world powers that dominate their respective regions in terms of trade and growth: the United States, the Eurozone and China. The first two, the United States and the Eurozone, are clear, but the last, China, arouses some uncertainty among investors and management companies, who are monitoring its economy.
Due to the size of its economy, China continues to be a key economy globally, and not just for emerging markets. According to market consensus, China will be fundamental player in the current synchronized global growth, although analysts warn that it could slow it down.
Among its main risks is its high level of indebtedness, both public and private. State companies combine high leverage levels and low productivity in sectors where excess capacity is extreme. “In the wake of the global financial crisis, credit to non-financial entities has gone from 100% of GDP to 165% at present. This government – driven massive injection of credit has stimulated the economy and explains to a large extent the solid economic performance of the last ten years. The high level of indebtedness and low productivity are currently considered a risk,” explains Yves Longchamp, Head of Research at Ethenea Independent Investors.
And its main challenge is to make the leap to a modern economy, a path that has already begun, after the National Congress of the Communist Party of China in October 2017. “The implementation of the structural reforms program once again became a priority. The objective of the Chinese authorities is to direct growth towards quality and not only towards quantity. This will imply a rebalancing that is expected to reduce traditional industries such as steel in favor of new activities such as electric cars and high technology. In the coming months, this strategic adjustment is expected to lead to a slight economic slowdown, as suggested by the recent slowdown in public spending and the tightening of monetary conditions. Should the deceleration become too marked, public authorities have the necessary resources to quickly adjust the approach,” explain sources from Banque de Luxembourg Investments.
Risks and Opportunities
In Longchamp‘s opinion, China lives in perpetual transition. Among reforms proposed by the country there are three that are very interesting for investors, according to Longchamp: “The restructuring and strengthening of state enterprises, the deleveraging of the financial system and the slowdown in inflation of housing prices ; and the eradication of poverty and the improvement of the quality of growth “. These three are national objectives and aim to determine the main economic weaknesses and the fragility of the financial system, as well as to improve the welfare of Chinese citizens. In addition, there is the Chinese government’s desire to control and reorganize some sectors, such as the industrial sector and real estate. Therefore, they are reforms that could open opportunities in very specific sectors, such as financial, industrial or real estate.
However, the management companies are cautious about China. The company Flossbach von Storch identifies the Asian giant as one of the potential risk factors within the equity market, given the country’s rate of indebtedness. “Despite this, we are confident that China’s central government has the muscle to counteract the effects in the case of a recession or crisis,” explainedsources from the management company.
