Bank of America Merrill Lynch Research Team has published the 2016 year end Funds Flow Report. “QE drove fund flows in 2016, but the past two months has been all about reversing this trend. Even though high-grade and EM debt funds have been the main beneficiaries of QE-mania, recent developments have shifted momentum to the negative side.” They find.
Equities have been the biggest loser in 2016, with outflows mounting to $100bn, as investors flocked to QE-eligible assets. HY funds closed the year on negative territory in terms of flows, despite the recent rebound. Commodities were the biggest winner for most of 2016, but rising rates reversed the strong inflow seen over the first part of the year.
Last week of the year…
High grade funds had their first week of inflows after seven weeks of outflows, and the inflows were spread across a wide range of funds. High yield funds continued to see inflows for a fourth week, at a strong $1bn+ rate. The inflows of the last week of the year came across the board. Global, US and European-focused funds in Europe recorded strong inflows.
Government bond funds flows flipped back to positive territory after two weeks of relatively heavy outflows. Money market funds weekly flow data point to a third week of outflows, albeit marginal. Overall, fixed income funds flows flipped back to positive after seven weeks of outflows. European equity funds recorded a marginal outflow last week.
French asset management giant Amundi has soft-launched a water fund, the Amundi KBI Aqua fund on 16 December 2016.
The inception of this new strategy comes after the acquisition of KBI Global Investors (formerly Kleinwort Benson Investors) by Amundi in August 2016. KBIGI runs four natural resources strategies including the KBIGI Water Strategy for institutional clients.
The Amundi KBI Aqua fund, domiciled in France, aims to invest globally in companies of the water sector, an investment universe of around 150 stocks. It will consist of a portfolio of 50 stocks.
Stocks selected will be these of companies that provide solutions to prevent and/or address water shortage issues, make a significant part of their turnover or that are recognized as leaders in the water sector.
Services, infrastructure and technology remain among sectors targeted by the Amundi KBI Aqua Fund.
According to fund literature, the stock selection will rely on a qualitative and fundamental approach including the assessment of the earning growth potential of companies and of their capabilities to achieve constant growth over the long term; the assessment of specific risks by studying the companies’ business models, management, long-term strategies, competitive edges and financial health; the assessment of the companies’ relative and absolute values.
The equity exposure of the fund will be comprised between 80% and 120% of its net assets, regardless of geographic areas or market capitalization.
The Amundi KBI Aqua fund can also invest up to 30% in companies with headquarters in emerging markets.
Amundi has over EUR 1 trillion in assets under management as of end of September 2016.
Many times while speaking to service providers, fund managers, and industry-insiders there is talk about how the ultra-wealthy are thrifty or cheap. Typically this talk comes from those trying to get money or fees from these families, but the topic has come up enough that Richard C. Wilson, CEO & Founder of the Family Office Club wanted to address it directly from what he has found to be true.
Top 6 reasons Billionaires are seen as Cheap:
Bigger Target: As families reach a billion dollars in net worth it is harder for them to hide because of their number of employees, and accomplishments in selling a business or owning a large operating entity. Also, the very fact that they are worth around $1B or more and not just $20M or $100M makes every person who hears of the family likely to tell others about them, further making it harder to “fly under the radar” and avoid a constant line of sales pitches. As a bigger target billionaire families get pitched many times a day by service providers, consultants, fund managers, politicians, non-profits, impact investment groups, and their own friends and family for money. This forces them to build walls around them, a thicker skin, and most times thinner patience for such activity.
Control: As you may have read about in my recent book “The Single Family Office,” many of the world’s wealthiest families became so through controlling a large stake in an operating business. This level of influence on where a company is going and being able to manage the details becomes part of who they are. I have seen that this carries over to service providers as well, the families may want to work with someone local, or not hire anyone at all as they may feel more comfortable and in control of costs and delivery by hiring some of the best talent and having them work internally on their IT, accounting, or investment management work rather than outsourcing.
Budget Perception: One reason I believe many see billionaire families as overly thrifty is a misconception on their budgets internally. Just about every family I speak with talks about being resource constrained, even if they are worth $20B as one middle east family I know relatively well, they are not a $150B asset manager or sovereign wealth fund, and they have real team and due diligence constraints. An IT service provider for example may see that a customer service business is owned by a $1B+ net worth family and may think they want the best of the best, top of the line solution for their cloud security. That customer service business may only be doing $10M a year in revenue, so the billionaire family may only sign off on spending $10,000 a year on a cloud solution and not $150,000 a year as the IT consultant “knows” they should as a best practice. The problem is that the IT person believes the family is going to throw money at something based on the family’s net worth and not the business unit’s budget.
Leverage: Many investment funds and service providers would like to brag about having a billionaire family as a client, and these families know that. For example, in our Family Office Executive Search subsidiary, we landed a billionaire family and their foundations as a client last month, and we were open to charging a slightly lower fee simply because it was a great family to be serving, well-known globally, and most importantly we wanted to grow that relationship long-term for other ways to work together such as speaking at one of our Wilson Conferences or exploring our $400M AUM Platinum & Gold Storage & Investment Partnership (precious metals).
Necessity: Many families have weathered depressions and downturns in their business to get to where they are, so they know when things get tough that they need to either already be lean or know how to strip the business down to what is critical for core operations. This breeds a mindset of wasting less, and when something is not critical to raising revenue or profits then the family more carefully allocates resources to it. There is also a lack of blind trust placed in all but the top-tier most trusted service providers, such as a world-class attorney or CPA, in believing what is being recommended to the family. The trouble with outsourcing or relying upon outside counsel in many areas such as IT, insurance, staffing, etc. is that often times the more informed person in the room, recommending how the family spends their money is also the person profiting from that spend (IT consultant, insurance broker, executive search firm, etc).
Stewardship: Finally, those who have reached $100M or a $1B in wealth are in some cases superior stewards of their wealth, mostly in terms of building it, but also defending it against those who would want to take some of it from them whether it be competitors, litigators, etc. They have learned over time that everything is negotiable and many families have built their wealth by buying distressed assets, not overpaying staff, and slashing expenses after taking a company over. These families pride themselves on running operations lean to maximize their bottom line on a business.
“Are billionaires cheap? There are examples of giving away a Ferrari to a friend and washing out Ziploc bags to re-use them that show extremes on both ends of the spectrum, but the next time someone complains that an utlra-wealthy family is “cheap” I believe the points above would explain a good portion of the drivers behind that perception.” He concludes.
Foto: Falkenpost. Deutsche Asset Management incorpora a Robert Thomas como co director de Real Estate Securities en las Américas
Deutsche Asset Management’s Alternatives business has announced that Robert Thomas will join the firm as Co-Head of Real Estate Securities for the Americas and Co-Lead Portfolio Manager. Bob will work alongside David Zonavetch, who holds the same position. Bob will be responsible for the co-portfolio management of US real estate securities strategies and the Americas real estate securities allocation within the global real estate securities strategies. Bob will report to John Vojticek, Head and Chief Investment Officer – Liquid Real Assets, and will be based in Chicago.
“We are pleased to welcome Bob to the firm and look forward to working with him. His professional experience and the passion he brings for real estate securities investing, including a similar investment philosophy, are a complementary fit for our team,” said John Vojticek, Head and Chief Investment Officer – Liquid Real Assets.
Bob has more than 15 years of experience in the analysis and management of public and private real estate securities. Prior to joining Deutsche Asset Management, he served as the Head of North American Property Equities and Portfolio Manager at Henderson Global Investors. Before this, Bob was the co-head of a four-person North American team and part of a 15-person global team responsible for managing global listed real estate strategies for institutional and retail clients at AMP Capital Investors. Bob also has extensive experience as a senior research analyst covering real estate securities across a wide range of property sectors.
The company recently announced the appointment of Petra Pflaum, as CIO for Responsible Investments, and David Bianco as Chief Investment Strategist for the Americas and Head of Equities in the US.
Pixabay CC0 Public Domain. ‘Lower for longer’: ¿Dónde se puede encontrar rentabilidad actualmente?
2016 was certainly the year of surprises –with Brexit and Trump shocking the world. Yet, besides short-lived market sell-offs, global markets were relatively resilient. So what might be on the horizon for investors in 2017? William Nygren , Partner and Equity Manager at Harris Associates (Natixis Global Asset Management), explains his views about growth in 2017, answering three key qestions.
1. Anemic growth?
“For several years, we’ve been anticipating that global growth would return to near the pre- Global Financial Crisis levels. And each year the World Bank started out by projecting that reasonable growth was just around the corner. Then as the year progressed, they had to consistently cut their expectations. Low growth has allowed interest rates to remain at near-zero levels, has allowed commodity prices to remain below prices needed to justify new exploration, and has resulted in the earnings of cyclical companies being below trend”.
2. Growth momentum?
“If 2017 is finally the year when growth surprises to the upside, it would likely be accompanied by very different sectors leading the stock market. That is why we favor companies that may benefit from rising interest rates (banks and other financial companies), rising commodity prices (energy companies), and higher earnings from industrial cyclicals”.
3. Unknowns of Trump administration.
“The U.S. political scene will be of key importance in determining whether or not global growth accelerates. Throughout a very nasty presidential campaign, many policies were promised from the prevailing party that were both pro-growth and anti-growth. If the new Trump administration focuses on tax reform and reducing the burden from regulations, the result would likely be a meaningful increase in growth. If instead the focus is on restricting global trade and deporting illegal immigrants, growth would likely decrease”.
“We believe the likelihood is much higher that pro-growth policies will prevail, but would also add that over many years the forces of global growth have proven strong enough to overcome misguided government policies. As long-term investors, we believe the valuations are compelling for the companies that would most benefit from renewed economic strength”.
One surprise that could catch us off guard
According to the expert, a return to growth could create a very unpleasant surprise for many investors, as investments widely perceived as safe could be riskier than those perceived as risky. “Investors tend to look at the risk of a stock as being the potential deviation of earnings from the anticipated level, and pay little attention to price. We have been saying for some time that low-volatility businesses priced at historically high relative P/E ratios are riskier than higher-volatility businesses priced at low relative P/Es. With interest rates so low, the stable, low-growth businesses that pay out a high percentage of profits as dividends have become favorite “bond substitutes” for investors seeking higher yield than is available in the bond market. These companies have typically been priced at lower-than-average P/Es, but today sell at substantial premiums”.
“Even if the businesses perform about as expected, there is substantial risk should the P/E ratios revert to their long-term averages. If interest rates rise, as we expect, then P/E reversion is the likely outcome. This is why we currently find most electric utilities, telecom providers, or U.S.-based consumer packaged goods businesses unattractive.
Additionally, in a higher interest rate environment, stocks would likely prove less risky than the long-term bonds that investors have bid up to historically low yields. 2017 could be a year that turns investor thinking about risk upside down”.
Pixabay CC0 Public DomainPhoto: mainblick. M&G: We Have Arrived at a Pivotal and Potentially Critical Moment in Time
For the M&G Multi Asset team, 2016 was not so much about learning new lessons as being reminded of some of its key rules for investing: avoid getting caught up in short termism, do not waste time on forecasting, and beware lazy assumptions about what ‘should’ happen based on previous experience.
They consider Brexit and Trump have been surprises, but even if we could have predicted the results, subsequent price action went against the consensus view. Markets bounced back quickly from an initial ‘Brexit’ sell-off and the ‘risk-off’ volatility expected to be triggered by a Trump victory in the US presidential elections did not materialize.
The team feels this demonstrates the point that it is more important to focus on the facts we can know today about asset pricing and the fundamental economic backdrop, than attempting to predict how geopolitical events will be interpreted by the market. In their opinion, it also proved that no asset will be a ‘safe haven’ at all times, as mainstream bonds sold off strongly after the US election, from the historically low yields they had reached in the summer of 2016. This supports their view that the risk characteristics of asset classes are not static, rather value should be the starting point of assessing risk.
“We have arrived at a pivotal and potentially critical moment in time, where a material change in investor thinking and behavior is needed. The strategies that have been successful for the last decade are now likely to struggle”. They say.
So when looking ahead to next year and beyond, it is not about predicting what events will dominate headlines, but about being ready to respond to the changing mood of the market. The team adds: “The biggest risks investors will face next year are probably ones that we are not even aware of today, or that have faded from the headlines.”
The market appears to be pricing in a more favorable environment, with profits picking up globally and positive trends in data such as Purchasing Managers’ Indices and employment in certain areas. There is also a perception of inflation picking up and we have seen breakeven move a long way.
“While global equities in aggregate may not be as compellingly valued as at the start of the year, there are still very attractive opportunities at regional and sector level. We are still strongly favouring Europe and Asia (including Japan), as well as US banks. There are also plenty of interesting opportunities within non-mainstream government bond and credit areas of fixed income.” They conclude.
Courtesy photo. Deutsche AM appoints Petra Pflaum as CIO for Responsible Investments
Deutsche Asset Management has announced the appointment of Petra Pflaum as Chief Investment Officer for Responsible Investments, effective immediately.
In this new role, Pflaum will manage a dedicated Environmental, Social and Governance (ESG) team responsible for the further integration of Deutsche AM’s ESG capabilities into its investment processes and growing its client offerings across its Active, Alternatives and Passive businesses. The existing ESG thematicresearch and governance teams will report to her.
Pflaum will continue in her role as EMEA Head of Equities for Deutsche AM, and will be joined by Britta Weidenbach who will become EMEA Co-Head of Equities effective immediately. Pflaum will also become a member of the Management Board of Deutsche Asset Management Investment GmbH representing Deutsche AM’s Equity and Equity Trading businesses.
Pflaum joined Deutsche AM in 1999, and prior to her current role served as Co-Head of Global Research and Global Head of Small & Mid Cap Equities. Weidenbach is currently Head of European Equities and has also been with Deutsche AM since 1999. She has managed European equity funds since 2001.
Nicolas Moreau, Head of Deutsche Asset Management and Member of the Deutsche Bank Management Board, said: “Deutsche AM has recognised the importance of ESG within its investment approach for many years. We are proud to have been amongst the early signatories to the UN supported Principles for Responsible Investment (PRI) in 2008. It is important we build on this heritage, and use our expertise to help clients who want support in this important investment area.”
“I am delighted that someone of Petra Pflaum’s capabilities will take on this important position as CIO for Responsible Investments and member of the Management Board for Deutsche Asset Management Investment GmbH, and that Britta Weidenbach will join her as EMEA Co-Head of Equities. Both are outstanding talents who have held a number of leadership roles over many years within Deutsche AM.
Foto: Geralt. Cuatro posibles escenarios para el asesoramiento digital
The CFP Board Center for Financial Planning announced the findings of its blue-ribbon panel of experts who explored the future impacts of digital advice on the financial planning profession.
Known as the Digital Advice Working Group, thought leaders and senior executives from the worlds of technology and finance gathered to explore the future of digital advice and the role humans will play in delivering financial advice. The goal was to stretch the professional’s way of thinking about how future environments and events may lead the industry down several conceivable paths.
“We convened this group of luminaries to look into the future and identify the challenges and opportunities we face as the worlds of human and automated financial advice collide,” said CFP Board CEO Kevin R. Keller. “The group’s insights and recommendations will prove valuable as our profession evolves to meet the needs of current and future clients.”
Utilizing a scenario-planning approach facilitated by the consulting firm Heidrick & Struggles, the group created a matrix of four potential future outcomes, taking into consideration the nature of consumer demand for integrated advice and the level of consumer trust pertaining to the digital experience.
“In a fast-changing and volatile world, business leaders must operate with speed and agility, and take advantage of strategic tools like scenario planning,” said Toomas Truumees, partner in Heidrick & Struggles’ Leadership Consulting Practice. “This is certainly true for the financial planning profession with with digital disruption on the immediate horizon.”
The four scenarios were:
Everyone Goes Digital – In this scenario, the same sophisticated digital advice platforms underpin both the direct-to-consumer online experience as well as the tools used by human financial advisors. While technology continues to advance within silos, regulatory concerns have prevented the creation of an integrated, holistic experience for seekers of financial advice.
Judgment Day – This scenario assumes that digital advice accelerates to the point of ubiquity, with some form of financial advice available for free to most consumers. Thanks to advances in machine learning, digital advice platforms can now “think” like a financial advisor and provide comprehensive financial plans that span investment management, wealth management, tax planning, retirement, and multiple other financial disciplines.
Rise of the Humans – In this scenario, growing complexity of financial products extends the time horizon to realize greater automation of financial advice. Unforeseen market events that catch robo advisors by surprise reduce credibility in the eyes of consumers and drive hiring of human advisors to emphasize the “human touch.” As digital advice platforms shift more of their focus to the B2B market, back office automation helps advisors reduce costs, reduce staff, and greatly scale their client portfolios.
Back to the Future – In this scenario, a cyberattack directed at an online digital advice platform turns consumers away from human-less systems and drives a preference for the financial advisor. Advancements in back office technology and automation, however, do not slow, freeing time for the advisor to focus on the delivery and implementation of advice. Elevated fiduciary standards in this future prevent advisors from providing more holistic advice that integrates all aspects of a consumer’s financial well-being.
“A great deal of uncertainty continues to surround the digital advice revolution,” said Joe Maugeri, CFP®, Managing Director for Corporate Relations at CFP Board. “The Digital Advice Working Group was born from the recognition that the fast-moving digital trend continues to cloud the future. “By looking at multiple probable outcomes – as opposed to just one scenario – we’re not banking our future on just one outcome, and participants were encouraged to imagine alternate futures where their business models might not be as successful as they are today or hope to be in the future.”
The world’s first sovereign green bond, issued by the Republic of Poland, lists at the Luxembourg Stock Exchange (LuxSE). The EUR 750 million green bond will, in parallel, be displayed on the Luxembourg Green Exchange (LGX).
“Poland is one of the leading sovereign issuers listed on our exchange. We are delighted that we were chosen as the listing venue for the country’s first green bond; it is at the same time the first sovereign green bond issued in international capital markets,” comments Robert Scharfe, CEO of LuxSE.
Asked about the selection criteria when choosing the listing venue for the green bond, Poland’s Deputy Minister of Finance, Piotr Nowak, explained: “LuxSE is one of the biggest stock exchanges for international bonds in Europe, and a very innovative one. The recent implementation of the Green Exchange is a proof of an open-minded approach towards the needs of financial markets. On top of that, we received strong recommendations from market participants to list there”.
Poland lists EUR 50 billion worth of bonds in Luxembourg. The green bond is listed on the EU-regulated market and its maturity date is 20 December 2021. The proceeds, as stated in the framework and prospectus, will be used for renewable energy, clean transportation, sustainable agriculture operations, afforestation, national parks and reclamation of heaps.
Pixabay CC0 Public DomainFoto: hugorouffiac. Apex Fund Services nombra a Daniel Strachman como director de desarrollo de negocio para Estados Unidos
Apex Fund Services has announced the appointement of Daniel Strachmanas as Head of US Business Development. Strachman is a well known industry expert who boasts an impressive background in the investment management industry.
He brings with him more than twenty years of in-depth financial services experience having held positions at Cantor Fitzgerald & Company, Morgan Stanley & Company and having led A&C Advisors LLC for sixteen years delivering strategic guidance, counsel and support to investment management companies and institutional investors.
Strachman is the author of nine investment strategy books including ‘The Fundamentals of Hedge Fund Management and Getting Started in Hedge Funds’. In his new role at Apex he will drive U.S. growth initiatives and deliver fund management clients with proactive fund administration solutions.
Peter Hughes, Founder & Chief Executive Officer, Apex Fund Services, said:
“Daniel is a really important addition to our US team at this time and he brings with him unrivaled experience of the local asset management space. The appointment of such an experienced investment expert demonstrates our commitment to expanding Apex’s US market presence and providing clients with the best and most knowledgeable local support available. Daniel’s career speaks for itself and his background and subsequent knowledge base will help drive our North American presence forward as we continue to expand our local footprint.”
Daniel Strachman, Head of US Business Development, Apex Fund Services (US) Inc, said:
“I am truly excited and thrilled to be joining Apex at this pivotal time in the fund management industry. Never before has the industry been under so much market, fee, performance and regulatory pressure where a truly independent fund administrator is needed and warranted by investors and managers alike. I look forward to expanding Apex’s reach in the market by delivering exactly what the market needs.”
