CC-BY-SA-2.0, FlickrFoto: Gage Skidmore. La renta fija estadounidense sigue a la espera de Trump
As Trump continues to carry out his campaign promises and prepares to launch his stimulus plan, the Fed meets in the midst of a complicated state of affairs. The meeting will bring no surprises, especially after Janet Yellen said that the trend in wages does not guarantee that the Board which she presides will take additional measures this time.
However, several analysts agree that the market may be underestimating the expected pace of interest rate hikes. One of these analysts is Frank Dixmier, Global Head of Fixed Income for Allianz Global Investors.
“The difference between the Fed’s forecast report – known as the ‘dot plot’ – and market expectations is of particular importance. The points show the FOMC consensus expectations on three rate hikes this year and a further three in 2018. However, the market expects only four rate hikes in total over the next two years – a significant difference,” he explains.
The problem is that this gap between market expectations and the future pace of rate hikes shows that there is some fragility in US markets, “particularly given the increasing pressure from the labor market”, says Dixmier. It is in the interest of the Fed to clearly explain the pace of increases to allow markets to adjust fluently.
Eric Stein, Co Director of Global Income at Eaton Vance, admits that he was somewhat surprised when the Fed boosted its ‘dot-plot’ at the December meeting. “I had expected this to happen in March this year, when the market might have more information on the specific policies of President elect Donald Trump,” he states in the management company’s blog
“That said, I do think we could get more hawkish surprises on the dot plot in 2017. The economy was accelerating somewhat before the election, and inflation and inflation expectations had also been picking up pre-election as well. If we get regulatory reform, tax reform and infrastructure spending from the Trump administration and Congress in 2017 and the economy really gets going, then the Fed is going to hike more than investors expect.” Stein summed up.
And it’s that at this time the meetings of the Fed have a certain tone of state of war, but without open confrontation. All indications are that Trump is going to enact policies that will force the Fed to act. Similarly, the people he chooses to fill vacancies on the committee will determine to some extent the way the Fed moves. However, nothing has happened yet so everyone is waiting to receive more information.
“Much of it has to do with the appointments he will make to the Committee. If he implements some draft fiscal reforms, this should lead to higher rates, and to the strengthening of the dollar. However, a stronger dollar would not help the American producers, on whom Trump shows so much interest. If he tries to appoint candidates who are sympathetic to his political ambitions, then we might see how little he likes the independence of the central bank,” says Luke Bartholomew, fund manager at Aberdeen AM.
Markus Schomer, chief economist at PineBridge Investments, also believes that the Fed’s position is largely tied to the policies put in place by the new president of the United States. “The market’s performance in the first half of the year will depend on Trump’s projects. If he focuses on tax cuts and deregulation, the economy and markets are likely to take off. If it comes to trade restrictions and reduced health care coverage, sentiment could turn around and growth could slow down.
What if Trump puts all these policies in place at once?
The expert at Loomis, Sayles & Company, a subsidiary of Natixis GAM, agrees with the rest of analysts. “The introduction of fiscal stimulus could push inflation, prompting the Fed to tighten its monetary policy sooner than the markets are discounting,” says Gregory Hadjian, member of the firm’s macro team.
After two years of serving a select group of leading real estate investment managers, Juniper Square announced the launch and general availability of its market-leading investment management software.
Clients such as Beacon Capital, The Reliant Group, and Cortland Partners rely on Juniper Square to help them manage nearly 20,000 investment positions and over $25B in capital. More than 8,000 investors use Juniper Square to access reporting on nearly 1,000 investments, and Juniper Square customers are currently raising capital for more than 130 offerings using its software.
Juniper Square’s technology integrates many capabilities into a single capital markets software system: a CRM designed for real estate; a secure data room and automated subscription process to streamline fundraising; a powerful investment accounting system that can scale to the most complex funds; and an automated, best-in-class investor reporting capability designed to meet the needs of even the most sophisticated investors.
“Moving from our previous system to Juniper Square was like night and day. Having a common source for our latest fund and investor data has enabled our accounting, investor relations, and fundraising teams to work together more efficiently. In addition, our investors value having self-service access to comprehensive investment data through Juniper Square’s easy-to-use portal,” said Dane Rasmussen, Managing Director and Head of Investor Relations, Beacon Capital.
“Real estate managers today are buried under mountains of spreadsheets and struggle with antiquated systems that are hard-to-use and don’t talk to each other. Juniper Square puts an end to that with an easy-to-use, integrated system that supports the entirety of the capital markets operation, from front office to back. Whether they have ten investors or thousands, our software frees up managers to focus on what they do best: buying, selling, and leasing real estate, while providing an unparalleled experience for their investors,” said Alex Robinson, Co-Founder and CEO of Juniper Square.
Confirming this trend, in its 2016 Global Private Equity Fund and Investor Survey, EY found a “seismic shift” in the importance of reporting when investors select a manager, stating, “In just one year, we see a 400% increase in investors that now rank a private equity firm’s ability to handle reporting requirements as the most important when selecting a firm.”
Juniper Square’s modern, easy-to-use software helps real estate sponsors of all sizes respond to the growing demands of the industry. Whether the challenge is seamlessly managing relationships with thousands of individual investors, or meeting sophisticated institutional reporting needs, Juniper Square enables real estate firms to focus on the real estate instead of the back office.
The European Fund and Asset Management Association (EFAMA) published itin January is latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS for October 2016. 28 associations representing more than 99 percent of total UCITS and AIF assets provided with net sales data.
Bernard Delbecque, Senior director for Economics and Research at EFAMA commented: “Despite anemic net sales of equity funds since January 2016, UCITS continued to attract robust new investment in October thanks to net inflows into bond, money market and multi-assets funds”.
The main developments in October 2016 can be summarized as follows:
Net inflows into UCITS and AIF totaled EUR 62 billion, compared to EUR 51 billion in September.
UCITS registered net inflows of EUR 47 billion, up from EUR 30 billion in September.
AIF recorded net inflows of EUR 15 billion, down from EUR 21 billion in September.
Total net assets of European investment funds stood at EUR 13,756 billion at end October, compared to EUR 13,836 in September and EUR 13,320 billion at end 2015.
Going into further detail:
Long-term UCITS (UCITS excluding money market funds) recorded net inflows of EUR 22 billion, compared to EUR 28 billion in September.
Equity funds recorded net outflows of EUR 1 billion, compared to net inflows of EUR 2 billion in September.
Net sales of bond funds increased slightly from EUR 16 billion in September to EUR 17 billion in October.
Net sales of multi-asset funds decreased slightly from EUR 7 billion in September to EUR 6 billion in October.
UCITS money market funds recorded net sales of EUR 25 billion, compared to EUR 2 billion in September.
Secure growth companies could be forced out of the limelight by turnaround stories in US equity markets following a period of significant gains for online retailers and other internet stocks, according to Legg Mason affiliate ClearBridge Investments.
Margaret Vitrano, a manager with ClearBridge, says the dearth of economic growth in the US in recent years has caused investors to focus on ‘secure growth’ names.
However, she believes better opportunities to access higher growth rates have emerged in unloved sectors experiencing reversals in their fortunes.
“There is a dearth of growth and this explains why high-flying internet companies performed well in 2015 and 2016,” she said. “There has been a focus on secure return and a very low appetite for turnaround stories because of market nervousness.”
As a result, Vitrano argues that opportunities have arisen in cyclical sectors, with valuations too attractive to ignore. “Energy is a good example, as in a cyclical recovery we think companies in this sector have a lot of earnings growth ahead,” she says. “It has also had less focus recently from investors so you can find value there.”
As well as energy names, Vitrano is unearthing opportunities in the healthcare space, where valuations have lagged the wider market. “We have a very broad definition of growth – it is not just revenue growth, it can be margin expansion, and some of those diamonds in the rough look attractive to us,” she says.
“Healthcare and biotech in particular look really interesting right now. In the case of biotech stocks, they underperformed substantially last year so valuations are attractive.” Looking at broad market levels, Vitrano says that, although indices such as the Dow Jones are close to hitting all-time highs, valuations are only approaching “fair value” given the backdrop of record low rates and quantitative easing.
However, she cautions that financials appear expensive on current valuations, with the risk growing that too many rate hikes have been priced-in to forecasts for the sector. “Yes, rates are probably heading higher, but if there is one thing we have learned about what this Fed is doing, it is incorporating multiple data points – not just here but outside the US,” she says. “So I would caution that between here and 2018 a lot could happen to change the shape of the interest rate curve.”
Vitrano is avoiding large financial stocks such as money centre banks because, as a growth investor, such stocks cannot deliver the requisite rates of growth. However, she does see value in specific companies in the sector.
“We don’t own big financials as we think we can find better growth elsewhere, outside of the large money centre banks, but we are now entering a period where you may have a double whammy of potentially higher interest rates and less regulation, or even a triple whammy if we get tax cuts,” she says.
“The fundamental landscape has improved for the whole financials sector, and we do like Schwab, for example, as we see it as a secular growth opportunity which will also be a beneficiary of higher rates.”
Foto: Craig Sunter
. Betterment lanza un servicio que completa su oferta digital con humanos
Betterment, the largest independent online investment advisor, yesterday announced the next evolution of the company with the release of a new service offering, expanding the company’s platform beyond a single digital product to a multi-plan advice offering that includes access to CFP® professionals and licensed financial experts.
The company can now meet the needs of its customers however customers want to invest and receive advice, whether it’s through the existing digital offering or also working in conjunction with a team of licensed experts. This team will help customers monitor their accounts, answer their financial questions, and give them advice. The new plans give customers the best of both worlds— smarter technology and access to financial experts:
Betterment Digital: Customers gain access to our current award-winning technology, with tax-efficient algorithms and digital advice, at an incredibly low cost.
Betterment Plus: Customers receive an annual planning call from a team of CFP® professionals and licensed financial experts who also monitor their accounts throughout the year.
Betterment Premium: Customers get unlimited access to a team of CFP® professionals and licensed financial experts who monitor their accounts and give them advice and financial planning throughout the year.
Customers who would like a full-time, dedicated independent financial advisor can be referred to an RIA who uses the Betterment for Advisors platform to manage its clients investments through its recently announced Advisor Network.
The firm will now charge a flat 0.25% for its Digital plan, 0.40% for the Plus offering, and 0.50% for the Premium offering. The Plus plan requires a $100k minimum balance, and the Premium plan requires a $250k minimum balance. For all three plans, Betterment’s fees are only charged on the first $2 million of your balance. Betterment will waive its management fee on any assets over $2 million.
“I joined Betterment because it was a chance to help get financial advice in the hands of more Americans- millions of Americans,” said Alex Benke, CFP, VP of Financial Advice and Investing at Betterment. “As a traditional financial planner, you can only serve a few hundred clients at most. Through the last five years at Betterment, I’ve learned that while most Americans really need financial advice, not everyone wants it in the same way. Some never want to talk to a person, some need help from time to time, and others need careful, ongoing guidance. About a year ago, we set out to broaden and deepen our human-delivered advice offering, while making it more accessible. Our vision is to be your one-stop-shop for financial advice, available in whatever form or frequency you require, and always in your best interest, as a fiduciary.”
“We’re committed to empowering customers to do what’s best for their money, so they can live better,” said Jon Stein, Founder and CEO of Betterment. “At Betterment, we promise to always act in the best interests of our customers. From the beginning, we’ve built what our customers have asked us to prioritize, and what would have the biggest impact for them. Now, with our Plus and Premium plans, we can give customers the best of both worlds: our smarter technology and access to licensed financial experts.”
The firm manages more than $7 billion in assets for more than 210,000 customers.
Mark Mobius, Foto cedida. Mark Mobius: "Somos optimistas, México se ve muy bien"
In his latest visit to Mexico, Mark Mobius, Executive Chairman Templeton Emerging Markets Group, discussed President Trump, the dollar, Emerging Markets, and why he believes Mexico is a good investment.
The man who wrote the book in emerging-market investing, that is celebrating his 30-year anniversary with Templeton Emerging Markets Group this month, says that above all, Donald Trump is a negotiator and as such, he is aware that in any deal both parties should benefit in order to considerate it a success, so is not worried about what will happen to Mexico with a Trump administration.
In his opinion, the US President is using twitter as a smokescreen and manipulating the media. Mobius says Trump is interested in having a bilateral relationship with Mexico, and other countries, but multilateral agreements like NAFTA will be pushed aside. “Trump was the only candidate to flew down to mexico” he recalls before pointing out that “higher economic growth in the US will be good for everybody, including Mexico… and once Americans feel economic security the anti-immigration sentiment will decrease.” Mobius also expects the dollar to devaluate in order to boost exports.
The EM specialist believes that the recovery in emerging markets will continue aided by cheap valuations – vs US, Japan and Europe, improving sentiment – since people are realizing they are underweight in EM, Technology and favorable demographics.
In Latin America he likes Brazil, Argentina and Mexico. Speaking of Mexico, Mobius said that the country looks great. According to him, the rising inflation is offset by faster rising wages “so the consumer is going to be spending -and maybe faster- as a result of inflation.” Meanwhile, he believes the peso, from a purchasing power perspective is 15-20% undervalued so, after another dip -mandated by market sentiment, it should appreciate.
“Mexico has been bombed out, the currency and the market have been hit and everybody expects the worst to come but the reality on the ground is quite different… The recovery could be very surprising to a lot of people. We expect a big jump in the Mexican market” He points out. The sectors Mobius and his team like in Mexico are consumption and those with regards to gold. They currently do not hold positions in any tech firms.
Another area of opportunity he identifies is the Energy sector. While in most countries Energy and Utilities represent an important part of the index, Mexico’s energy participation in the market is still incipient and Mobius expects the US and Mexico to work together in energy related sectors, like oil field equipment. “This could be very big.” He concludes.
According to a press release, EFAMA welcomes the FSB Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities on 12 January 2017, which come as the result of an extended consultation process in which EFAMA has participated very actively.
Peter De Proft, EFAMA Director General, commented: “EFAMA particularly welcomes the fact that the FSB recommendations reflect a more balanced view of the asset management industry, and acknowledge the risk mitigants already in place under the current EU regulatory framework and in market-based best practices. We also welcome the mandate given to IOSCO to lead the work in the identified fields and look forward to continue engaging with IOSCO in the months ahead”.
The document sets out 14 final policy recommendations to address four “alleged” structural vulnerabilities from asset management activities that could potentially present financial stability risks:
Liquidity mismatch between fund investments and redemption terms and conditions for open-ended fund units;
Leverage within investment funds;
Operational risks and challenges for asset managers in stressed conditions, particularly with regard to the transfer of client mandates;
Securities lending activities and related indemnification programmes offered by certain asset managers.
From a preliminary assessment, EFAMA believes that the final recommendations go in the right direction, in the sense that they do not identify a need for any substantial regulatory reviews of existing standards, and recommend that IOSCO develops additional and more detailed guidance to be carried out by end-2017 and end-2018.
Additionally, below are some general remarks on issues raised in the FSB Report.
Despite the fact that some of the speculative narrative around potential risks stemming from liquidity mismatches in open-end funds has been retained in the final report, we welcome that fact that several of the risk-mitigants highlighted by EFAMA in our responses have been acknowledged by the FSB in its final Report.
EFAMA views it as positive that the first nine liquidity management-related recommendations call on IOSCO to review/enhance its existing guidance by end-2017, as well as develop a set of harmonised data points for authorities to monitor the build-up to liquidity risks in funds.
Also positive is that certain recommendations introduce sufficient flexibility for national authorities to take action only “where appropriate” or “where relevant”, including the possible consideration of system-wide stress-testing judging on the relative systemic importance of actors in each jurisdiction and once better data become available;
Regarding leverage, EFAMA welcomes that the FSB recommendations on data on leverage in funds be aggregated and made consistent across the global jurisdictions. We support the work to be undertaken by IOSCO in collaboration with national authorities by the end of 2018.
As to operational risks, EFAMA believes that these remain overstated. In this regard, EFAMA stresses that the current EU regulatory framework as well as industry best practices largely already address the FSB’s concerns.
Finally, EFAMA believes that the potential risks with regard to securities lending as a potential source of systemic risks, via the indemnification of clients where asset managers are also agent-lenders, are overstated.
CC-BY-SA-2.0, FlickrRobert Wescott & Franceso Sandrini. Robert Wescott: “The Market is Not Evaluating the Risks Involved in Donald Trump's Policy”
Robert Wescott served as an advisor to President Bill Clinton in the late 1990s and for the last two decades has been a member of the Pioneer Investments Global Asset Allocation Committee. His long history analyzing the world economy does not preclude his surprise at the positive reaction of the markets after Donald Trump’s victory. Is it justified? During a lunch-conference with reporters in Madrid, Wescott pointed out that “the Dow Jones above 20,000 points reflects all the good news because the market expects Trump to make many economic decisions, but what are not being evaluated are the risks”.
And it is precisely the small companies that are most optimistic about the increase in spending that could further boost economic growth. “Companies’ high profits combined with more public spending are good news for the market,” said Francesco Sandrini, Head of Multi-Asset Solutions at Pioneer Investments. He says that in this sense we find ourselves in a period of transition from the so-called “secular stagnation”, “from fear of deflation to fear of inflation.”
But the risk, although not perceived yet, is there, and is mainly called China. And, according to Wescott, is not only because of the evolution of its economy, but also because of the political tensions generated by Taiwan’s diplomatic recognition. Trump’s words during his recent interview with The Wall Street Journal in which he admitted that “everything is in negotiation” are as explosive as a lit wick near a barrel of oil.
But the nature of the new president’s relationship with Russia is also a source of uncertainty. It could even be the trigger for a process of “impeachment” if it were demonstrated that “secret connections” exist. Wescott acknowledges that during his lectures in Europe, “everyone has asked me about the possibility of this process being initiated against Trump.” But the truth is that the new president, ” surrounds himself only with people who always agree with him and who flatter him “
“The Mexican wall is a symbol, there are many ways to cross that border”
Trump, who since the election campaign, has been firmly anchored in transmitting the message that everything is terrible, and identifying immigrants as terrorists “who have come to kill our women,” has as his main objective to keep America safe. However, as Wescott admits, the wall he wants to build between the US and Mexico, has been in operation since the mid-1990s when, to be precise, the Clinton administration, for which he was an advisor, authorized its construction in small areas of the border, such as San Diego or El Paso. “The wall is only symbolic, there are many ways to cross that border, but the wall symbolizes that the US does not want immigrants,” he says.
Another point of friction will be with the Republican Party itself. According to Wescott, “Republicans want little regulation, low taxes, and little spending. Trump agrees on everything except spending, and this is what can create tension.” Expenditure which will be focused on infrastructures and that will seek the support of the private sector. “Everybody looks at the big infrastructures, but there are many other microprojects that can be put in place,” says Sandrini.
On the continuity of Janet Yellen at the helm of the Fed, Wescott is very clear: “The chances of Trump holding on to Yellen are zero” and he points to Jack Welles as a possible candidate, despite his advanced age. In his final message, the expert points out what, in his view, is an “imperative for the future, we need economic growth.”
CC-BY-SA-2.0, FlickrPhoto: olnetchannel
. The Future of Monetary Policy – Normalization or New Norms?
In its new report “The Future of Monetary Policy”, the Credit Suisse Research Institute looks at the transformative changes central banks in advanced economies have undergone since 2008. The report concludes that the key issue for decision-makers globally remains to consider which fundamental direction monetary policy ought to take next, assessing two alternative scenarios that may evolve: a return to a pre-crisis “normal”, or an extension or amplification of recent policy trends, leading to a further blurring of boundaries between monetary, regulatory and fiscal mandates.
In response to the extraordinarily challenging environment in the immediate aftermath of the global financial crisis of 2008, central banks in leading advanced economies have seen their mandates broadened from fairly narrowly defined macroeconomic targets, such as price stability and employment, to include financial stability.
Moreover, to achieve their targets, central banks have adopted an ever-broader range of previously untested “unconventional” policy tools, including quantitative easing and negative interest rates. As a result, central banks have become prominent providers of assets and liquidity for sovereigns, financial institutions and shadow banks, reflected also in a manifold expansion of their balance sheets.
Oliver Adler, Head of Economic Research International Wealth Management, Credit Suisse: “Since 2008, central banks have changed their policy-making in dramatic ways, initially to prevent a major destabilization of the financial system in the immediate aftermath of the financial crisis, and thereafter to offset evolving deflation risks. The coming years will be decisive in relation to the future direction of central bank policy, depending on both economic and political developments. Even if the influencing factors are difficult to predict, we believe that the discussion of the future of monetary policy needs to be reinforced.”
CC-BY-SA-2.0, FlickrPhoto: Buvette. More than 25,000 Investment Professionals Worldwide Pass the Level I CFA Exam
CFA Institute, the global association of investment management professionals, reports that 43 percent of the 59,627 candidates that took the Chartered Financial Analyst (CFA) Level I exam in December 2016 have passed. These successful candidates now progress to Level II of the CFA Program, charting a course to build an investment profession dedicated to professional excellence. The December 2016 exam saw continued growth with an increase of 14 percent from the previous year in the number of Level I candidates tested for the CFA Program, a globally recognized, graduate level curriculum that links theory and practice with real-world investment analysis, and emphasizes the highest ethical standards.
“CFA Institute is dedicated to shaping a trustworthy investment management profession, and the CFA Program prepares candidates from around the world to have the highest level of professional knowledge within the industry to better serve investors and society at large,” said Paul Smith, CFA, president and CEO of CFA Institute. “Congratulations to this next generation of investment professionals, who have already displayed a commitment to raising standards in the industry, and are one step closer to becoming CFA charterholders.”
To earn the CFA charter, candidates must pass all three levels of exam (successful candidates often report dedicating in excess of 300 hours of study per level); meet the work experience requirements of four years in the investment industry; sign a commitment to abide by the CFA Institute Code of Ethics and Standards of Professional Conduct; apply to a CFA Institute society; and become a member of CFA Institute.
The CFA Program curriculum develops knowledge and competencies that investment professionals deem necessary in today’s ever changing marketplace. It covers ethical and professional standards, securities analysis and valuation, international financial statement analysis, quantitative methods, economics, corporate finance, portfolio management, wealth management and portfolio analysis. Level I exams are offered in both June and December and Levels II and III are offered only in June. It takes most candidates more than three years to complete the CFA Program, and requires dedication and determination.
The December 2016 Level I exam was administered in 104 test centers in 72 cities across 40 countries worldwide. Examples of countries and territories with the largest number of candidates that took the Level I CFA exam last December are Mainland China (14,181), the United States (12,187), India (6,357), Canada (4,210), United Kingdom (3,790), Hong Kong (2,210), Singapore (1,577), South Africa (1,327), and United Arab Emirates (1,207).
