The UK Supreme Court rejected the government appeal that it could trigger Article 50 without Parliamentary approval. Financial markets posted little reaction with the 2-year and 10-year yields barely moving on the announcement, however, sterling retreated by around 0.5%, which supported a modest pick-up in equities, with the FTSE 100 up 0.25% after the reaction. Responding to the ruling, David Davis, the Brexit secretary, said a bill to trigger article 50 would be published “within days”.
In itself, and according to Axa IM strategist, David Page, the rejection was expected, given the High Court decision. He believes that the sting has been removed from this decision by a Parliamentary vote in December to back Prime Minister May’s timetable by 461-89 on the condition that the government spelt out its negotiating objectives and Parliament got a final say on the vote. “PM May fulfilled the first part of this in her 12-point Brexit plan last week and committed to a Parliamentary vote at the end of the process.”
In his opinion, procedural difficulties may remain. The Supreme Court ruled that an Act of Parliament will be required to trigger Article 50. “There is a risk that procedural challenges and proposed amendments may make the end-March timetable challenging.” The Scottish National Party has already suggested an intention to amend the Act. However, the Court did rule that the government does not need to consult regional assemblies. “This removes one of the larger remaining potential hurdles for PM May’s ambitious timetable. As such, there is a good chance that PM May manages to trigger Article 50 according to her timetable of end March, with only some risk of a small procedural delay to this.” He concludes.
CC-BY-SA-2.0, FlickrPhoto: Vladimir Kud
. Northern Trust Strengthens South Florida Wealth Management Team
Northern Trust has promoted Rick Fernandez to Managing Director of one of its Wealth Advisory teams in its Miami office, and has hired Xavier Martinez as Senior Portfolio Manager within that team.
Fernandez, who joined Northern Trust in 2002, has responsibility for overseeing a team of professionals who serve high net worth clients and families with comprehensive wealth management services incorporating investment management, trust, and banking solutions.
Martinez will be directly reporting to Fernandez. He most recently served as Chief Investment Officer for Coconut Grove Bank, and immediately prior to that spent nine years with Fiduciary Trust International, where he managed high net worth client portfolios for more than nine years as Managing Director of Investments.
Alexander Adams, Northern Trust Senior Market Executive for Miami-Dade County, said, “These moves greatly strengthen our team, as Xavier brings to us deep expertise and experience in the precise type of clients we serve, while Rick’s extensive experience meeting our clients’ complex needs makes him extremely qualified to lead our talented team of professionals.”
Fernandez earned his MBA from the Darden Graduate School of Business at the University of Virginia, and his BBA in Finance from Florida International University. He is a Certified Private Wealth Advisor (CPWA). He is a Director of Make-A-Wish Southern Florida.
Martinez received a Bachelor of Science degree in Civil Engineering from Tulane University where he graduated Magna Cum Laude, and earned a Juris Doctor degree with honors from Duke University School of Law, where he was honored as a member of the Order of the Coif. He is a Chartered Financial Analyst (CFA). He is the President of the College Assistance Program, Inc. and the Secretary of the Board of Advisors for Belen Jesuit Preparatory.
Northern Trust’s Miami office is located at 600 Brickell Avenue, Miami, Florida.
The asset management industry in Asia is set for a turbulent year in 2017, with the impending Donald Trump presidency in the U.S. and its impact on the global economy. For asset managers, the institutional space is becoming more interesting, with a growing trend of outsourcing by institutions.
After a very challenging 2016 in Asia’s asset management industry, what does 2017 hold? That is the question that underpins this quarter’s The Cerulli Edge – Asia-Pacific Edition which highlights key developments in 2016 in eight of the Asian markets we cover, namely, China, Hong Kong, India, Indonesia, Korea, Singapore, Taiwan, and Thailand. We also make some predictions on potential trends in each of those markets for 2017.
The impending Trump presidency and the geopolitical turbulence tipped to come with it will drive global macroeconomic factors in 2017. Although the repercussions remain to be seen after his inauguration in January, one thing that the Asian asset management industry will be closely watching is how his pledge to bring manufacturing jobs back to the United States pans out. This issue will be particularly important to Asian countries as many of them count the United States as one of their top-five trading partners. If the trade faucet to the United States begins to shut, this will inevitably lead to some restructuring as these economies seek and find new exports markets or new export products.
From an asset management perspective, a widespread restructuring will have an impact on asset allocations in Asian markets. However, this will be a long-term process. Any short to medium-term pain felt by Asian retail and institutional investors in the face of such changes would be the price they have to pay for longer-term gains.
Cerulli has observed that retail investors in the region have notoriously shorter-term investment horizons than their Western counterparts. Asset retention is a constant struggle, but likely more apparent in North Asian markets including China. Another commonality is that investor sentiment for financial products, including mutual funds, tends to be driven by stock market sentiment. Consequently, we tend to see outflows from equity funds when stock markets are falling.
In the recent past in Asia ex-Japan, this has led to some funds being diverted to bond funds or balanced funds. However, with growing expectations that interest rates may head higher in 2017, led by rate hikes by the Federal Reserve, bond funds and balanced funds may not be viewed as safe havens for a while. In such market conditions, we may see retail investors go back to their default positions, namely bank deposits. This would put the asset management industry back to square one in the region, after a lot of effort has been expended in recent years to mobilise people’s savings toward riskier financial products.
Having said that, across Asia, regulators all stand firm on investor protection–that is ostensibly one of their highest priorities. Their basic stance is that riskier products should only be sold to accredited or wholesale or high-net-worth investors. Plain-vanilla mutual funds and exchange-traded funds are seen as more desirable for ordinary investors. Further, most Asian regulators share a keenness to develop their local mutual fund industries, and offer incentives to asset managers who show commitment to the domestic market. A prominent example is Taiwan’s scorecard that incentivizes foreign asset managers to set up shop on the island.
Cerulli has also noticed asset managers’ burgeoning interest in targeting institutional assets in the region. Institutional investors are increasingly searching for yield outside their comfort zones, and will typically outsource to asset managers with strategies that they do not have internal capabilities in, including foreign investment and alternative asset investment strategies. Cerulli predicts that outsourced assets will maintain an uptrend through to at least 2020, which will be good news for asset managers in the region.
Foto: Sander van der Wel
. Byron Wien predice las 10 sorpresas que nos puede dar 2017
Byron R. Wien, Vice Chairman of Multi-Asset Investing at Blackstone, has issued his list of Ten Surprises for 2017. This is the 32nd year Byron has given his views on a number of economic, financial market and political surprises for the coming year. Byron defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable,” having a better than 50% likelihood of happening.
Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a senior advisor to both the firm and its clients in analyzing economic, political, market and social trends.
Byron’s Ten Surprises for 2017 are as follows:
Still brooding about his loss of the popular vote, Donald Trump vows to win over those who oppose him by 2020. He moves away from his more extreme positions on virtually all issues to the dismay of some right wing loyalists. He insists, “The voters elected me, not some ideology.” His unilateral actions throw policy staffers throughout the government into turmoil. Virtually all of the treaties and agreements he vowed to tear up on his first day in office are modified, not trashed. His wastebasket remains empty.
The combination of tax cuts on corporations and individuals, more constructive trade agreements, dismantling regulation of financial and energy companies, and infrastructure tax incentives pushes the 2017 real growth rate above 3% for the U.S. economy. Productivity improves for the first time since 2014.
The Standard & Poor’s 500 operating earnings are $130 in 2017 and the index rises to 2500 as investors become convinced the U.S. economy is back on a long-term growth path. Fears about a ballooning budget deficit are kept in the background. Will dynamic scoring reducing the budget deficit actually kick in?
Macro investors make a killing on currency fluctuations. The Japanese yen goes to 130 against the dollar, stimulating exports there. As Brexit moves closer, the British pound declines to 1.10 against the dollar, causing a surge in tourism and speculation in real estate. The euro drops below par against the dollar.
Increased economic growth, inflation moving toward 3%, and renewed demand for capital push interest rates higher across the board. The 10-year U.S. Treasury yield approaches 4%.
Populism spreads over Europe affecting the elections in France and Germany. Angela Merkel loses the vote in September. Across Europe the electorate questions the usefulness of the European Union and, by the end of the year, plans are actively discussed to close it down, abandon the euro and return to their national currencies.
Reducing regulations in the energy industry leads to a surge in production in the United States. Iran and Iraq also step up their output. The increased supply keeps the price of West Texas Intermediate below $60 for most of the year in spite of increased world demand.
Donald Trump realizes he has been all wrong about China. Its currency is overvalued, not undervalued, and depreciates to eight to the dollar. Its economy flourishes on consumer spending on goods produced at home and greater exports. Trump avoids punitive tariffs to prevent a trade war and develops a more cooperative relationship with the world’s second largest economy.
Benefiting from stronger growth in China and the United States, real growth in Japan exceeds 2% for the first time in decades and its stock market leads other developed countries in appreciation for the year.
The Middle East cools down. Donald Trump and his Secretary of State Rex Tillerson, working with Vladimir Putin, finally negotiate a lasting ceasefire in Syria. ISIS diminishes significantly as a Middle East threat. Bashar al-Assad remains in power.
Also rans:
Every year there are always a few Surprises that do not make the Ten either because he does not think they are as relevant as those on the basic list or he is not comfortable with the idea that they are “probable.”
Having grown weary of Washington after a year in the presidency, Donald Trump moves the White House to New York from April to December and to Palm Beach from January to March. He makes day trips to the Capitol on Air Force One for legislative and diplomatic purposes.
The Democratic Party is sharply divided on strategy, with Bernie Sanders and Elizabeth Warren arguing for a shift to the left and others wanting to remain in the center. A lack of leadership gives rise to widespread speculation about sharp losses in the 2018 congressional elections.
Donald Trump’s intimidation tactics prove effective in discouraging companies from moving some U.S. manufacturing abroad, but he fails to bring jobs back. The wage differential is just too great. This becomes his biggest first-year disappointment.
Trump’s first major international confrontation comes, not unexpectedly, from North Korea. Kim Jong-un threatens to set off a nuclear bomb in the mid-Pacific, calling it “a test.” Trump’s advisors try to restrain his desire to punish the country severely.
India comes back into the investment limelight. Its economy grows at 7% and corporate profits for established companies are strong. Its stock market leads other large emerging countries, along with China.
Trump’s efforts to get out of the Iran deal fail. The other countries signing the agreement believe Iran’s weapons-grade nuclear production has been restrained and force the U.S. to remain a participant.
Foto: ƝƖƇƠ ƬƖMΣ ™
. Los inversores prefieren los fondos de acciones que de bonos
Investors ended the year by favoring passively managed U.S. equity funds over actively managed funds by a record margin, placing an estimated $50.8 billion in passive funds in December. On the active side, investors pulled $23.0 billion out of U.S. equity funds during the month. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETFs by computing the change in shares outstanding.
Investors’ preferences have shifted to favoring stock funds over bond funds, amid growing optimism about the U.S. economy and continued rising interest rates and inflation. The overall inflows tally for U.S. stock funds hit its highest monthly total since April 2000, at $27.8 billion. Taxable bond funds saw overall net inflows of $14.6 billion in December.
December 2016 saw overall outflows from alternative strategies of $4.4 billion, with full-year outflows of $4.7 billion. This marked the worst showing for alternative funds since 2005 and is a significant reversal from 2015 when they took in $13.3 billion.
Morningstar Category trends for December showed bank-loan funds as a leading category with inflows of $6.0 billion on the active side and $1.4 billion for passive strategies, continuing a recent trend of growing interest in these funds.
Vanguard dominated the flows landscape in 2016. The firm took in $277.0 billion in total new money during the year, finishing at $3.4 trillion in long-term assets. American Funds saw $4.9 billion in active outflows during 2016, while Fidelity Investments offset some of the bleeding on the active side with $37.2 billion in passive inflows.
Among index-fund and exchange-traded funds, SPDR S&P 500 ETF took in the most assets at $14.3 billion for December 2016, followed by three Vanguard funds with offerings for U.S. stocks, international stocks, and U.S. bonds.
PIMCO Income, which has a Morningstar Analyst Rating of Silver, is the top active individual fund in terms of inflows; the fund took in $1.5 billion in December and $13.7 billion for 2016. Bronze-rated Franklin Federal Tax Free Income bucked the trend for outflows in December among active municipal-bond funds, seeing inflows of $1.4 billion.
CC-BY-SA-2.0, FlickrPhoto: Chad McDonald
. Snowden Lane Partners Welcomes Former Wells Fargo International Advisory Team to San Diego Office
Snowden Lane Partners, an independent, advisor-owned, wealth advisory firm dedicated to providing client-focused advice in a values-driven culture, announced that David Lautz and Francisco Malfavon, both internationally-focused advisors from Wells Fargo, have joined the firm’s San Diego office.
Lautz and Malfavon, each a Partner and Director, are forming the LEM Group and bring $125 million in client assets to Snowden Lane, increasing Snowden Lane’s total client assets to over $3 billion.
“David and Francisco bring extensive knowledge of Latin Americans’ financial planning needs, the kind that can only be had by their personal experience in Latin America and from several decades of working in the industry,” said Alison Murray Burkett, Partner, Managing Director and Head of Enterprise Development. “We look forward to their future contributions to making Snowden Lane a significant player in this global wealth management category.”
“The San Diego office continues to grow and thrive given increased demand for financial advisory services among international clients,” said Greg Franks, Managing Partner and Snowden Lane’s President. “This highly-skilled, globally-minded and well-regarded team will be a significant contributor to the Snowden Lane franchise, complementing the services we provide U.S. resident clients from our other offices, and we’re thrilled to bring David and Francisco on board.”
Added Snowden Lane Managing Partner and the firm’s CEO, Rob Mooney: “This is our first team from Wells Fargo and they represent our commitment to serving high-quality non-resident clients, and to leverage our team’s extensive international experience. As we’ve said before, global banks have left a gap in the cross-border business and talent like this puts Snowden Lane in an optimal position to fill that gap.”
Lautz has been a financial advisor for more than two decades specializing almost exclusively in working with Latin America-based clients. He previously held senior-level positions at Prudential Financial and Fidelity Investments. He worked at Wells Fargo Advisors where he most recently served as a vice president.
Malfavon was an assistant vice president at Wells Fargo Advisors International Group. He began his career at Wells Fargo Bank in 2003 where he served as a regional private banker developing international high net worth client relationships and subsequently became a financial advisor. His key focus areas are wealth and asset protection, trusts and estate planning, and asset management.
“We’re excited to join such a dynamic and universally qualified team to capture the opportunity that exists in the Latin American market,” said Lautz. “We intend to help Snowden Lane to continue to be a stand-out player in this important market.”
2017—China’s banks are increasingly exposed to policy and other risks, but a crisis is not imminent, S&P Global Ratings said in its report, “Is This The Year For A Chinese Banking Crisis?”
“A banking crisis is likely to be avoided yet again in 2017, in light of another year of GDP growth exceeding 6%, and a change in the credit mix to relieve asset quality. However, the current trajectory is not sustainable,” said S&P Global Ratings credit analyst Qiang Liao.
Credit growth in China has surpassed economic growth for several years running, a dynamic that is gradually depleting Chinese banks’ once-ample funding bases. While overall deposit levels still exceed outstanding credits, the banking sector’s funding and liquidity buffers are thinning.
In 2016, Chinese banks accelerated their lending to the public sector and households, as new loans to the riskier corporate sector slowed. This change in the debt mix has helped keep a lid on nonperforming loans as a proportion of the total. However overall economic leverage continues to rise, diminishing funding buffers and making banks more vulnerable to tail risks.
“Crisis or not, we maintain and re-emphasize our negative credit outlook on China’s banking sector,” said Liao.
“Tail risks for Chinese bank credit profiles include policy risks related to China’s exchange rate, shadow banking, local government debt and corporate bond defaults, a property market correction, and external shocks,” Liao added. There is wide divergence of credit quality within the banking sector.
“We believe public confidence in China’s smaller institutions is much lower than for the megabanks and national banks. It’s not yet apparent if the smaller banks could withstand a stress event, such as a run on deposits,” said Liao.
“Given that many of the smaller Chinese banks are still aggressively expanding credit, and may lack sophisticated risk management, they are more likely to be caught off guard if market conditions rapidly weaken,” Mr. Liao added.
The article notes that smaller Chinese banks are still aggressively expanding credit, but may lack the sophisticated risk management to cope should market conditions rapidly weaken.
CC-BY-SA-2.0, FlickrFoto: Craig Sunter. AXA IM: "Secular Stagnation is an Over-rated Concept"
Research & Investment Strategy of AXA Investment Managers team publishes its prospects for next year focusing not only in 2017, but choosing a theme and medium-term approach to examine the thesis of a secular stagnation, the normalization of economic growth and inflation. They review in turn the root causes of the lack of demand, the low productivity growth based on the absence of technical progress, the drivers of the saving gluts and the end of globalisation. Ultimately their conviction is that secular stagnation is an over-rated concept.
The global lack of demand is fading and can be addressed by an appropriate mix of monetary and fiscal policies. Monetary policy will never be the same as before the Global Financial Crisis: the extension of the tool box is there to last. Fiscal policy has to play its role where possible and this is particularly the case in the euro area, where some, but not all countries, have fiscal space.
In the medium term, the saving glut is set to resorb, while productivity will regain some strength and may even be boosted by the digital economy, especially if structural reforms provide a tailwind. They dispute the idea that technology is “everywhere but in the data” and believe the countries investing most heavily in the digital economy will benefit extensively.
Taking into account their growth estimates and modelling the term premium, AXA IM estimates that US long-term rates should return to 3.4% in the coming five years. This is certainly far from current levels, implying a multi-year normalisation that should radically affect asset allocations.
Given that previous episodes of rising rates have scarcely been smooth operations, they also take a deep dive into financial market stability analysis. The key ingredients of another financial crisis are mostly absent at the current juncture but certain elements may be a cause for concern, such as stretched fixed income valuations and constrained market liquidity.
BNY Mellon, a global leader in investment management and investment services, announced that Jeff McCarthy has joined the company in the newly-created role of Chief Executive Officer, Exchange Traded Funds, and will report to Frank LaSalla, Chief Executive Officer of BNY Mellon’s Global Structured Products and Alternative Investment Services business.
“Jeff brings extensive experience in global exchange traded funds platforms and trading markets,” said LaSalla. “His deep knowledge and track record of results in developing and delivering on trade revenue expansion strategies for ETF’s with a strong emphasis on delivering strong partnership solutions will play a critical role for BNY Mellon in serving a market that is likely to at least double in size over the next 10 years.”
In his role as CEO, Exchange Traded Funds, McCarthy will lead and execute the long-term strategy to drive growth in BNY Mellon’s ETF business. As part of this mandate, he will play a critical role in the successful enterprise-wide delivery of comprehensive ETF solutions to the marketplace, and work to further develop long-lasting partnerships for BNY Mellon in the ETF industry.
McCarthy joins from NASDAQ, where he was Vice President and Head of Exchange Traded Product Listings & Trading, having led the strategy and business execution of the Nasdaq Exchange Traded Product Listing (ETP) and Trading Market. Prior to his role with NASDAQ, McCarthy was Head of Global ETF Products and Co-Head of ETF Trading & Investor Services in Asia Pacific for Citigroup. Earlier in his career, McCarthy was Global ETF Product Head for Brown Brothers Harriman & Co., where he created the firm’s global ETF service model.
As an acknowledged thought leader on a wide range of ETF issues, including global trends, product construction, distribution and market development, McCarthy is frequently quoted by media on ETF topics and speaks regularly at industry conferences. He holds a BA in History and Business Studies from Providence College.
CC-BY-SA-2.0, FlickrPhoto: OnePoint Services
. Raymond James Will Work With AxiomSL
AxiomSL, a risk data management and regulatory reporting technology for financial services firm, will provide an array of broker dealer (BD) and bank holding company (BHC) data aggregation and reporting solutions to Raymond James, the St. Petersburg, Fl.-based diversified financial services firm.
The partnership with AxiomSL grew out of a goal from Raymond James’ larger enterprise data strategy to automate the existing, largely manual processes and tactical functions which were straining under increasing regulatory reporting requirements.
The wide-ranging coverage will include Daily Net Capital (15c3-1) and Customer Reserve (15c3-3) calculations, along with TIC (Treasury International Capital) and FOCUS reports for the BD. In addition, the BHC will be integrating several reports for the Federal Reserve’s FR Y-9C, Call reports, and Basel Risk-Weighted Asset (RWA) calculations.
“As part of our larger goal of data management transformation, Raymond James was looking for a strategic technology partner that could help with a significant portion of our critical reporting,” says David Lesser, senior vice president of technology at Raymond James. “AxiomSL’s expertise working with complex, diversified institutions and ability to implement these solutions over a number of years was exactly what we were looking for.”
Alex Tsigutkin, CEO at AxiomSL adds: “Today, broker dealer firms like Raymond James are looking to reengineer their reporting function in their efforts to keep up with new prudential regulation demands and as part of broader institutional automation. We are very pleased to work with such a well-respected firm as Raymond James and look forward to providing these solutions for them in the years to come to meet new and evolving regulatory mandates.”
The AxiomSL change management platform enables firms to address quickly and seamlessly internal and external changes while achieving data lineage, risk aggregation, workflow automation, computation, validation and audit as well as disclosures in any format. Further, the AxiomSL’s visual business rules can be easily understood by users who do not have specialist-coding knowledge. These features give clients confidence in the automation of complex reporting business logic, data quality, governance and control in meeting stringent timeframes.
