De izquierda a derecha, Jean-Luc Hivert y Laurent Jacquier Laforge. Fotos cedidas.. La Française Reorganises its Securities Fund Management Division
Over the last five years, La Française has experienced strong growth through its expansion and through the internationalisation of its expertise, thanks to its strategic partnerships that have allowed the group to strengthen its skills.
So as to create synergies between the various group affiliates and divisions, La Française has reorganized its Securities Fund Management Division.
Accordingly, under the leadership of Pascale Auclair, Global Head of Investments, Jean-Luc Hivert and Laurent Jacquier Laforge are heading the two divisions of expertise: “Fixed Income and Cross Asset” and “Equity”, respectively.
Jean-Luc Hivert, with nineteen years of asset management experience, becomes CIO Fixed Income & Cross Asset. He is responsible for €30 billion in assets under management and heads a team of twenty-six experts. Accordingly, he is entrusted with the Group’s Cross Asset management, discretionary portfolio management and targeted management, for which Odile Camblain-Le Mollé holds operational responsibility. Jean-Luc joined La Française des Placements in 2001. As Co-Head of Bond Management, Jean-Luc innovated and contributed to the launch of the fixed maturity fund concept, one of the key differentiation factors of La Française. He holds a specialised post-graduate diploma (DESS) in Finance from Université Paris VI (1996), a MIAGE (Computer science applied to business management) degree (1995) and a MASS (Applied mathematics and social sciences) degree from Université Paris XII (1993).
Laurent Jacquier Laforge, with more than thirty years of experience, becomes CIO Equities Global. He is responsible for the entire SRI Equity range offered by La Française, small caps management and the monitoring of partnerships, such IPCM, an extra-financial research firm, Alger and JK Capital Management. For several years, La Française has been building strategic partnerships with specialised foreign management companies. As group CIO Equities Global and in the interests of investors, Laurent Jacquier Laforge will identify potential collaborations on products and research synergies. Laurent joined La Française in 2014. Since then, he has transformed the range of funds offered by La Française Inflection Point by incorporating the philosophy of Strategically Aware Investing (SAI) which includes an additional responsible dimension and was developed by IPCM, the London research firm with which the group has established a strategic partnership. Laurent Jacquier Laforge holds a DESS-DEA postgraduate degree in Economics from Université Paris X in Nanterre. Laurent is a member of the SFAF (French Financial Analysts association).
CC-BY-SA-2.0, FlickrPhoto: Elite Fuegos Artificiales
. 2016, a Good Year for Hedge Funds
Markets closed 2016 on the right foot with the way cleared from the Italian wildcard. The post-Trump election rally extended to December, benefiting DM markets globally while EM markets lagged. The upbeat tone also echoed the global agreement to scale back oil production. The surge of Brent to $56 supported the US High Yield segment.
Meanwhile, and according to Lyxor AM´s monthly barometer, the fixed income space continued to witness the great divergence in monetary policies. The Fed hiked rates by 25 bps mid-month while the ECB delivered a dovish tapering: it extended the program until end-2017 but reduced monthly purchases. Yields spread between Treasuries and German Bunds hit record highs. That led to further strengthening of the USD vs. major currencies while gold sold-off.
“In 2017, we expect less monetary accommodation, more fiscal boost and more policy ruptures to support rising rates and inflation. That would result in greater asset prices dispersion and more fundamental pricing, especially in the US where the process is more advanced. These factors would benefit Macro managers. However, the strategy is likely to remain constrained by elevated political uncertainty, prompting funds to be either overly hedged or endure volatility in their returns. We maintain a slight overweight on the strategy but we expect rising fund performance differentiation.” said Jean-Baptiste Berthon, Senior Cross-Asset strategist at Lyxor Asset Management
The risk-on environment supported hedge funds, with the Lyxor Hedge Fund Index up 1%. Global Macro delivered strong returns thanks to their long on equity markets and USD crosses. On the flip side, L/S Equity funds lagged due to the underperformance of Neutral funds.
Global Macro funds continued to gain traction and confirmed their year-end recovery. Managers benefited from the strong rally in European equities past the Italian referendum, while the depreciation of the EUR and GBP against USD added to gains. Overall, Macro funds’ positions became more homogeneous in December. Most of them bet on the reflation trade in Europe (long equities, short bonds and short EUR), while playing out rising inflation in the US and a stronger dollar (long bonds and USD, but short equities). In that regard, the divergence that took place in the fixed income space proved costly for portfolios this month. Finally, funds caught up the swift jump in energy but the sell-off in gold was detrimental.
In December, CTAs regained a meaningful chunk of the lost ground. The negative correlation between equities and bonds was supportive for models as they slashed their long fixed income allocations and re- weighted equities. Long USD vs. EUR and GBP was also a strong driver of returns. The commodity bucket remained overall mixed, but their long stance on energy paid off.
Special Situations outperformed within Event Driven, supported by the year-end rally. Sector wise, they benefited from core investments in Basic Materials, Consumer Non-Cyclicals, Financials and Technologies. Merger Arbitrage funds benefited from spread compression across a number of deals. The completion of the LinkedIn/Microsoft deal on Dec 8th paid off. In aggregate, managers closed the year cautiously exposed, with sizeable exposure to Consumer Non–Cyclicals and Technology. Heading into 2017, higher US corporate activity would foster Event Driven. Prospects of deregulation in some industries, corporate tax cut and cash repatriation would offer fresh opportunities for the strategy.
L/S Credit Arbitrage enjoyed healthy returns and closed 2016 up 5.4% with a very low volatility. Credit markets were supportive, in particular in the High Yield segment. Additionally, fixed income funds delivered healthy returns as well. Relative value investors navigated well the rising bond yield environment.
L/S Equity strategy delivered poor returns in December, but this hides disparate returns across regions and styles. On one hand, the longest biased funds continued to extend gains this month, and closed the year up 4.5%. Long books were the main source of alpha, especially within the financial sector. Some variable biased with a value-tilt recorded strong results. On the other hand, Asian and European Market Neutral funds were hardest hit by sector rotation. Overall, L/S Equity funds dramatically increased their positions towards Cyclicals vs. Defensives. They moderately increased their net exposure to equities throughout the month.
CC-BY-SA-2.0, FlickrPhoto: Pedro Ribeiro Simões
. Investor’s Attention Shifts to Passive in European Equities
Very disappointing results of active European equity fund managers in 2016 may have caused an acceleration of the shift into passive solutions, says www.fundinfo.com.
Active European equity managers got wrong-footed on sector allocation in 2016, adds the website. As ifund revealed this week, only 8% of European equity managers outperformed the MSCI Europe NR net of retail fees and just 24% did so gross of fees.
This may have caused an acceleration of the shift into passive solutions: while one year ago active European equity funds accounted for about 75% of all document views this number has most recently collapsed to 54%. This shift was most pronounced within public channels for German investors but was also remarkable for Swiss, Italian and UK investorss.
Andrew Balls, courtesy photo. PIMCO Launches Global ESG Investment Platform
PIMCO, a leading global investment management firm, has launched a dedicated Environmental, Social and Governance (ESG) investment platform globally, offering a range of fixed income solutions to investors seeking attractive returns while making a positive social impact. As part of this effort, the PIMCO GIS Global Bond ESG Fund has been launched in EMEA.
PIMCO applies a robust framework across its ESG solutions, delivering maximum impact for investors. This framework includes three key elements: exclusion, evaluation and engagement. Companies with business practices that are misaligned with sustainability principles are excluded from PIMCO’s ESG portfolios. Companies are also evaluated on their ESG credentials and those with best-in-class ESG practices are favored in these solutions. Critically, the team engages collaboratively with companies, encouraging them to improve their ESG practices and influence long term change.
The newly launched PIMCO GIS Global Bond ESG Fund invests in a range of sovereign and investment grade corporate bonds from around the world. The fund aims to maximize total return whilst favoring issuers with best-in-class ESG practices and those that are working to improve them. The fund is managed by a team led by Andrew Balls, Managing Director and CIO of Global Fixed Income and Alex Struc, Portfolio Manager co-heading the ESG initiative at PIMCO.
In addition, PIMCO has enhanced two of its socially responsible funds in the U.S. to incorporate a wider range of ESG considerations into the investment process. These funds are managed by a team led by Scott Mather, Managing Director and CIO for US Core Strategies and Alex Struc.
Andrew Balls said: “For many investors, screening out undesirable investment categories isn’t enough anymore; they want to use their investments to promote change in the world. Our ESG platform provides the tools to do that without compromising on returns.”
Alex Struc said: “Historically, this type of strategy has been pursued by equity investors but we firmly believe that engagement as a debtholder is equally important. Across the vast fixed income universe, small change can have an enormous positive impact.”
Foto: Alexas_Fotos. Los inversores globales aumentaron sus posiciones en efectivo durante diciembre
The BofA Merrill Lynch January Fund Manager Survey shows investors geared up for stronger growth and inflation, but are still reluctant to slash cash.
“Ahead of the US presidential inauguration, investors are positioned for stronger growth and inflation, but are not willing to turn fully bullish with China-related risks on the horizon,” said Michael Hartnett, chief investment strategist.
Manish Kabra, European equity quantitative strategist, added that, “Fund managers have returned to Europe amid improvement in the macro outlook, but UK remains the most underweighted region.”
“USD/JPY and Japanese stocks have been bought as inflation assets,” noted Shusuke Yamada, chief Japan FX/equity strategist. “Whether the post-election market trend reaccelerates or unwinds, these two asset classes are likely to be among the most impacted.”
Other highlights include:
Investor expectations of global growth improve to 2-year highs (net 62% from net 57% in December), while global inflation expectations remain elevated, with the fifth highest reading on record (net 83% from net 84% last month)
The percentage of investors expecting “above-trend” growth and inflation is at a 5.5-year high (17% from 12% in December)
Investors continue to identify Long USD as the most crowded trade (47%), while the highest percentage since April 2003 thinks that the Euro is undervalued (net 13%)
Big jump in percentage of investors expecting corporate earnings to rise 10% or more in the next 12 months (improved to net -22% from net -47% last month), the most bullish reading since June ‘14
However, cash levels rose to 5.1% from 4.8% in December, well above the 10-year average of 4.5%
The three most commonly cited tail risks are trade war/protectionism (29%), US policy error (24%), China FX devaluation (15%)
In January, investors said they were buying Eurozone, tech, equities and REITs, while selling industrials, EM equities and commodities
Allocations to Eurozone equities rose sharply to net 17% overweight from net 1% underweight last month
Allocation to Japanese equities remains unchanged from December at net 21% overweight, but optimism has room to grow
In closing a year of remarkable geopolitical events, there are still many unknowns that will only be revealed when the dust settles from the major elections and referendums across the globe. Natixis Global Asset Management and one of its leading affiliates focused on alternatives, AlphaSimplex Group, LLC. talk about volatility Ahead.
Downside risk is currently elevated at above average, appoints the firm, although not at extreme levels for international and emerging market stocks. For U.S. stocks, the measure is slightly below average. This may seem counter-intuitive given the modest gains delivered by stocks thus far in 2016 and the relatively positive market reaction to the U.S. presidential election results. But perhaps it isn’t all that surprising.
Recall the rollercoaster stock market of the first quarter of 2016, when investors became concerned about the slowdown in Chinese economic growth. Almost a year later, points out Natixis affliates, the health of the Chinese economy continues to be a global risk. Add to that the wildcard of the direction of U.S. and Chinese trade relations post-election. Other concerns weighing on global markets include rising interest rates in the U.S., a weak European recovery weighed down by immigration complexities and a refugee crisis. Mid-year, Brexit also added a pint of uncertainty to the world order.
“Against this backdrop, it appears the only certainty is persistent uncertainty. This uncertainty has contributed to a relatively wild ride in the U.S. stock markets over the year, where we have seen a trough to peak move in the S&P 500 Index of over 20%.2 While we do not view global equity risk at extreme levels, we do believe investors should proceed with caution”, conclude AlphaSimplex Group´s team.
New research from global research and consulting firm Cerulli Associates finds that women offer a solution to the industry’s impending succession crisis and talent shortage as advisor retirement accelerates. “Women represent only 15.7% of the 310,504 financial advisors in the industry,” states Marina Shtyrkov, analyst at Cerulli. “Women remain outnumbered in financial advisor communities despite efforts to recruit more female advisors; only 16 in every 100 advisors are women.”
“Close to 40% of advisors plan to retire within the next 10 years, leaving the industry scrambling to groom replacements,” Shtyrkov explains. “Women present an untapped talent pool that offers a solution to the industry’s recruiting problems. By expanding their focus and altering their recruiting strategies to appeal directly to female candidates, broker/dealers (B/Ds) and RIA custodians can help fill the gaps left by retiring advisors.”
The reasons driving women to become advisors can differ from those that inspire men to enter the industry. “Nearly all female rookie advisors consider the desire to help people reach their goals to be a major factor for becoming an advisor,” Shtyrkov says. “B/Ds and custodians will have better success recruiting prospective women advisors and safeguarding against a future headcount shortage if they accentuate the social impact that an advisor has when working with people to achieve their financial goals.”
“A B/D’s most powerful tool in recruiting female rookies is its existing group of established women advisors,” Shtyrkov adds. Cerulli believes that established women advisors can dispel negative perceptions about the industry that deter some women from considering advising a career option. By sharing their experiences, these women can address misconceptions about what it means to be an advisor as well as offer transparency into the profession.
These findings and more are from the first quarter 2017 issue of The Cerulli Edge – Advisor Edition, which discusses the role women advisors play in an evolving wealth management landscape, including how to attract more women to the industry, how to support established women advisors, and the concrete business advantages of gender diversity.
CC-BY-SA-2.0, FlickrSasha Evers, courtesy photo. Sasha Evers Will Lead the Latin America and Spanish Business of BNY Mellon
BNY Mellon Investment Management (BNY Mellon IM), the world’s largest multi-boutique asset manager with 1.7 trillion dollars in assets under management, announced that Sasha Evers, Managing Director for Iberia, expands his role to lead the Latin America business.
Antonio Salvador Nasur will continue in his regional role based in Santiago, Chile, reporting directly to Sasha Evers, based in Madrid, Spain.
Under Evers’ leadership BNY Mellon IM opened its Madrid office in 2000 to successfully grow BNY Mellon IM’s presence across Iberia (Spain, Portugal and Andorra), where current assets under management are USD 3,537 bn (EUR: 3.730 m).
Sasha Evers, Managing Director of BNY Mellon IM for Iberia, said: “The Latin American region offers a strong long-term growth story for our business. I am looking forward to working closely with Antonio to further build upon our business in the region.”
Matt Oomen, Head of International Distribution at BNY Mellon Investment Management, commented: “While setting in stone our longer term distribution strategy to grow assets in Latin America, we saw many synergies between Iberia and Latin America. Sasha’s experience and leadership puts him in the best position to further grow our presence in the region, following his success leading BNY Mellon IM Iberia.”
Nicolas Walewski, who heads Alken, has been in Madrid recently. Courtesy photo.. “It’s Dangerous to Be Negative in Banks: We See Conditions for Greater Growth and Margins in Europe”
Everyone is aware that last year was a complicated one for the funds of Alken, Nicolas Walewski’s fund management company. His compliance and convictions for the cyclical sectors took their toll due to events such as Brexit, which penalized his funds. But the market has been turning around for months, and in 2017 things have begun to unfold differently: “Taking panic and redemptions in European equities into account, 2016 was a year for buying,” Walewski said recently during a presentation with clients in Madrid.
The fund manager considers that, after three years of “destocking” in companies, this year begins a new “restocking” cycle, in which firms begin to invest again… and Walewski points to these new investments, to the recovery of industrial activity, and to the fact that many industries are boosting their pricing power -in addition to the fact that American and Asian investors have returned to the European market only very marginally- as positive indicators for European Equities. “Companies have invested little, overall, there are no excesses globally, so there is no reason to be pessimistic,” he says.
On the contrary, there are numerous indicators giving him the go ahead for buying equity and selling fixed income and shares with a behavior similar to bonds. “We’ve seen years of better behavior in bond-like securities while cyclicals lagged behind,” he recalls, but the story will change. In fact, this rotation from the defensive to the cyclicals is already occurring in the markets and he advises: those investors who are underweight or negative in sectors such as banking will be motivated to rotate their portfolios.
“Value will offer better returns as rates rise,” he says, “with the higher rates, the 10-year profits will be reduced, so that the growth style will offer lower returns” and lose its appeal.
In fact, this story is now rewarding the fund manager’s loyalty to the cyclical sectors, which weighed negatively last year. Walewski is still strongly committed to them this year.
Opportunity in banks
Among these sectors, and although Alken European Opportunities is still underweight in the financial sector (it underweighs the insurance sector), the fund manager points out the opportunity in banks. Thus, in the face of recent negative factors such as regulation, higher capital requirements and QE policies (“good for the cycle but terrible for banks”), the fund manager now sees positive factors, such as Real Estate price recovery (the main liability of banks), the deleveraging of individuals and companies (which allows capital reinforcement), or greater clarity in the Italian banking system. “We see conditions for higher growth and higher margins of banks in Europe, which is positive for shareholders,” says the fund manager. Although there are still many entities that are not to his liking (which is why they have not yet overweighed the sector), Walewski considers that it is “dangerous to be negative in banks”.
Cyclical sectors
One of the sectors to which he continues to be strongly committed is discretionary consumption (with an overweight of more than 22% in Alken European Opportunities), especially because of his conviction in the automotive sector, where he is beginning to see greater investments and anticipates a strong rally. He likes names such as Peugeot or Renault: the fund manager considers the latter as “the Ryanair of the automotive market”, due to its attractive low cost offer to which investors have not put a price and taking into account the great business opportunity currently opening in this business segment. As a matter of fact, Ryanair is another one of his big commitments, due to its price, to its strong growth in Germany and to the improvement of its cost structure. He also likes the luxury sector, which has been recovering in recent months (fuelled by demand stabilization in China) and whose rally will continue, he says. He is also committed to Wirecard, or B & M Value Retail, which he considers to be one of the best operators in the British retail market and which has been severely damaged by Brexit, but which could be revalued by up to 25%.
In its European stock fund, the fund manager also overweighs the industrial sector, where he sees greater business volumes and increasing power to establish prices. He speaks of Leonardo, an Italian defense company -and a case of restructuring- as a good investment in an environment of strong demand for the sector, which could boost its price up to 30%.
Healso overweighs Information Technology and the materials sector, and points out the opportunity at Glencore. “There is great skepticism about this sector, but it was the best last year and it will benefit from a more positive framework in the relationship between supply and demand.” He is cautious in energy but has increased the weight somewhat, although he admits that it is a sector that requires being very selective. Within this sector, he is still committed to renewable energy, a structural tendency “in spite of Trump”. Among his main underweights are telecommunications, health, utilities, or basic consumption sectors.
Due in part to the fact that many bond-like securities are in the large-cap segment, this year the fund manager glimpses opportunities in small caps. Last July, the management company opened its fund that invests in small capitalization firms, which had been closed to new subscriptions since 2013.
Alken, which admits to two management mistakes in recent times: the investment in Monte dei Paschi (“with the added lesson of not trusting an Italian banker”), and the fact of not seeing the “destocking” in 2015, currently has 4.5 billion Euros in assets under management.
The political impact
On the risks posed by politics this year, Walewski is cautious: in Europe, he sees evidence that much of the risk has already been accounted for with the strong capital outflows last year. “It takes a lot for this risk to prevail over fundamentals: banks are improving, valuations are cheap, industrial firms are improving their pricing power… it takes a lot,” he says. In fact, he believes that the truly important elections will be the French ones, because the risk is the lack of integration in the Union: “The risk is the lack of solidarity in Europe. Apart from the ECB, there is not much integration,” he says, and he believes the French stance toward more federalism, or its rejection, is the key.
As regards Brexit, which last year provided a buying opportunity for British domestic companies, he believes that “everything is negotiable” –you only need to see the Swiss case, he says, in which some sectors enjoy more protectionism, while others enjoy greater openness– and that it will take years. “The deadline for triggering Article 50 is artificial,” he adds. Although there may be more volatility, he believes that some of the impact is already accounted for. He is also cautious about Trump and explains that the reaction of the markets will depend on their measures. Of course, he believes that over time it could lead to some disappointments, but he does not see it as an immediate threat to the markets.
Finally, while recognizing that China will limit its growth, he points out that the debt is in public hands, rather than in private, which limits the problems, so he does not consider that to be an immediate threat.
The surprise election of Donald Trump has the potential to significantly reshape the United States’ domestic policy landscape and the country’s relationship with the world. In the latest edition of Global Outlook, Chief Economist Jeremy Lawson examines the trajectory of global growth and the possible economic implications of a Trump presidency.
The incoming president will inherit a supportive economic backdrop. Prior to the election, we saw increasing evidence that global activity had been improving. Stronger nominal growth also means a return to positive corporate profit growth and we are anticipating that this will continue to improve over the next 12 months.
Standard Life Investments believes there are a number of factors that will determine whether the first year of a Trump presidency amplifies the current trends or results in a change of direction. Significant factors would include an aggressive loosening of fiscal policy, a dismantling of President Obama’s domestic agenda and reorientation of American foreign and international trade policy.
Jeremy commented: “The near-term pro-growth aspects of the policy package promised by Donald Trump have been welcomed by investors after such a disappointing recovery from the financial crisis. The return of Republican majorities in the House and Senate should help to reduce the political stasis in Washington, particularly regarding fiscal stimulus where the President-elect and his party have the most common ground. A raw fiscal stimulus of more than 1% of GDP in 2018 is possible, which could lift growth a touch above 3%. This is almost a whole percentage point higher than our forecasts without stimulus. In turn, stronger US growth would have knock-on benefits for import demand from the rest of the world, though it would also be pulling future growth forward and probably bring higher Fed policy rates with it.”
He added that “other than tighter monetary policy and a stronger dollar, the biggest macro and market downside risks from a Trump presidency arguably derive from his trade agenda – such as his pledges to withdraw from the Trans-pacific Partnership, declare China a currency manipulator and lift tariffs. A new era of protectionism would be negative for the global economy. Hence the importance of identifying Trump’s real intentions as President. We believe the most likely scenario is that heightened rhetoric is ultimate used to secure better access to foreign markets for US companies and incentives to keep production at home. However, the views of Trump’s nominees for key trade policy roles in his administration shows that there is a significant risk that Trump means what he says.”
“Ultimately, America is not the only source of political risk for the global economy; Europe also faces a number of political challenges. Destabilising outcomes would likely reinforce the peripheral European spread widening that has already taken place recently amid speculation that the ECB backstop has become more equivocal, though we doubt policymakers would stand still in the face of movements that threatened to undermine four years of policy and economic repair.” Lawson concludes.
