Standard Life Investments believes that it is time for a reset of fiscal policy to address both short and long-term challenges in the UK economy. A well-targeted stimulus would help cushion an expected slowdown in growth following the UK’s vote to leave the European Union. It would also provide ammunition to address the deterioration in growth rates seen over recent years, through targeted investment and structural reform. With markets concerned over the long-term effects of leaving the European Union, these priorities have become even more pertinent.
‘Time to rewrite the UK’s fiscal rulebook’ is the first in a series of Public Policy Perspectives, a new research publication which aims to broaden the debate on policy issues across a range of economies and make neutral, evidence-based recommendations. The paper argues that a coordinated fiscal and monetary stimulus would represent a much more effective policy mix than monetary easing alongside further fiscal austerity. The upcoming Autumn Statement provides an ideal opportunity for a step change. We would advocate:
A new fiscal framework which provides scope for a sustained loosening in policy and increased public investment through the business cycle. Under this new framework, the government should announce an immediate stimulus of 1.25% of GDP, with policy in subsequent years conditioned on the performance of the economy.
Action should be weighted towards an increase in infrastructure investment (0.75% of GDP) to be sustained over a number of years. This should be tilted towards smaller scale local transport projects, which provide the largest return.
Increased public investment should be complemented by progressive welfare spending to support consumption. Funding should also be earmarked for the ‘Sure Start’ and ‘Post 16 Skills’ programmes to help address the UK’s skills shortfall.
The Government should actively address inefficiencies in the tax system. In the short-term it should address capital allowances and establish a consistent tax system for the financial sector.
Longer-term priorities should include a shift in taxation away from property values/transactions towards land, and a tax allowance for corporate equity that reduces the bias towards debt financing.
A redoubling of efforts to increase housing supply through further planning reform and increased incentives for building.
‘Time to rewrite the UK’s fiscal rulebook’ is co-authored by James McCann, UK & European Economist, and Stephanie Kelly, Political Economist, Standard Life Investments.
James commented “Monetary policy has been overburdened since the financial crisis, with fiscal policy actually working against the recovery. A large fiscal push in the Autumn Statement would complement the easing measures implemented by the Bank of England over the summer. It would also help lift long-term growth rates, primarily through targeted infrastructure spending and structural reforms.”
SEC Chair Mary Jo White, after nearly four years as the agency’s head, today announced that she intends to leave at the end of the Obama Administration. Under Chair White’s leadership, the Commission strengthened protections for investors and the markets through transformative rulemakings that addressed major issues highlighted by the financial crisis. The Commission also instituted a new approach to enforcement that has resulted in greater accountability and record actions through, among other things, the use of admissions of wrongdoing and enhanced data analytics and technology.
Chair White, who became the 31st Chair of the SEC in April 2013, will be one of the SEC’s longest serving Chairs.
“It has been a tremendous honor to work alongside the incredibly talented and dedicated SEC staff members who do so much every day to protect investors and our markets,” said Chair White. “I am very proud of our three consecutive years of record enforcement actions, dozens of fundamental reforms through our rulemakings that have strengthened investor protections and market stability, and that the job satisfaction of our phenomenal staff has climbed in each of the last three years. I also want to express my appreciation for the engagement and dedication of my fellow Commissioners and my financial regulator colleagues, past and present.”
In addition to completing the vast majority of the agency’s mandates under the Dodd-Frank Act and all of its mandates under the JOBS Act, Chair White’s leadership has advanced the agency’s mission through other critical rulemakings and built robust and effective frameworks for the SEC’s regulatory regimes going forward.
“My duty has been to ensure that the Commission implemented strong investor and market protections, and to establish an enduring foundation for future progress in the most critical areas – asset management regulation, equity market structure and disclosure effectiveness,” said Chair White. “Thanks to the hard work and dedication of the SEC’s staff, we have accomplished both.”
Chair White drove many important rules and other policy measures to completion. Under her leadership, the Commission advanced more than 50 significant rulemaking initiatives, including:
Fundamental reforms to the money market fund industry and unprecedented new disclosures and protections for mutual fund investors in a major initiative to strengthen regulation of the $67 trillion asset management industry
Enhanced equity market structure oversight, including wide-ranging new controls on how key market participants handle technology and systems issues
A comprehensive framework for enhancing the effectiveness of corporate disclosure for investors
Extensive new safeguards for the financial system and for investors in the more than $7 trillion security-based swap market
New ways for smaller companies to raise capital needed to grow their businesses
New post-crisis restrictions on proprietary trading and investments by broker-dealers and other financial institutions through the Volcker rule
Major enhancements to transparency and risk management for asset-backed securities, which were a significant contributor to the financial crisis
Strong operating standards for the clearing agencies that stand at the center of our financial system
Extensive reforms to the regulation of credit rating agencies and how they address conflicts of interest that can harm investors
First-ever regulatory framework for municipal advisors who are critical to the capital raising activities of thousands of local governments
Modernized rules of practice for conducting administrative proceedings, including providing expanded rights of discovery
To enhance accountability of those who violate the securities laws, Chair White implemented the Commission’s first-ever policy to require admissions of wrongdoing in certain cases where heightened accountability and acceptance of responsibility is appropriate. Thus far, the Commission has required admissions from more than 70 defendants, including 44 entities and 29 individuals.
During Chair White’s tenure, the Commission brought more than 2,850 enforcement actions, more than any other three-year period in the Commission’s history, and obtained judgments and orders totaling more than $13.4 billion in monetary sanctions. The Commission charged over 3,300 companies and over 2,700 individuals, including CEOs, CFOs, and other senior corporate officers.
The record number of enforcement actions over the last three fiscal years against companies and senior executives involved many “first of their kind” cases in asset management, market structure and public finance. Other major cases involved insider and abusive trading, violations of anti-corruption rules and misconduct in accounting and financial reporting. In the last year alone, the Commission brought a record 868 enforcement actions. And for the first time, the Commission devoted significant resources and emphasis on using cutting edge data analytics to uncover and investigate misconduct resulting in numerous enforcement actions involving insider trading, asset management and complex financial instruments.
As a result of the successful whistleblower program, the Commission has awarded more than $100 million, since inception — virtually all during Chair White’s tenure — to whistleblowers who provided key original information that led to successful enforcement actions.
Under Chair White’s leadership, the Commission made significant enhancements to its examination program, including increasing staff by about 20 percent by hiring new examiners where funding permitted and redeploying staff from other program areas to heighten focus on the fast-growing investment management industry.
The exam program also increased its use of advanced quantitative techniques to enable examiners to detect misconduct by more quickly analyzing large amounts of data. Over the past year, the examination program conducted more than 2,400 formal examinations of registrants, an increase over each of the prior seven fiscal years. The Commission also enhanced technology in its examination program through the National Exam Analytics Tool (NEAT), which enables examiners to analyze large volumes of trading data much more efficiently.
Chair White serves as a member of the Financial Stability Oversight Council and on several other domestic and international organizations, including the International Organization of Securities Commissions, the Financial Stability Board, the International Financial Reporting Standards Foundation Monitoring Board, the Financial and Banking Information Infrastructure Committee, and the Federal Housing Finance Oversight Board.
Chair White added, “It has been and will always be critical for this agency and the public that the SEC remain truly independent. That independence is crucial to our ability to protect investors, safeguard our markets and facilitate the capital formation that fosters innovation and the growth that is essential to our national economy.”
Prior to her arrival at the Commission, Chair White spent decades as a federal prosecutor and securities lawyer. As the U.S. Attorney for the Southern District of New York from 1993 to 2002, she prosecuted cases involving complex securities and financial institution frauds, other white collar crime and international terrorists. She also served as an Assistant U.S. Attorney and was Chief Appellate Attorney of that office’s Criminal Division. She served as Acting U.S. Attorney for the Eastern District of New York as well as the First Assistant U.S. Attorney. In private practice, she was a litigation partner and chair of the litigation department of Debevoise & Plimpton LLP, overseeing more than 200 lawyers. Chair White is also a member of the Council on Foreign Relations and the American College of Trial Lawyers.
CC-BY-SA-2.0, FlickrFoto: courtesy photo. Dos estrategas de BNY Mellon Wealth Management han sido reconocidos por The American College of Trust and Estate Counsel
Wealth Strategists Pamela Lucina and Justin Miller of BNY Mellon Wealth Management have been elected as Fellows of The American College of Trust and Estate Counsel (ACTEC) in recognition of their professional accomplishments. ACTEC is a nonprofit association of lawyers and law professors skilled and experienced in the preparation of wills and trusts, estate planning, probate procedure, and administration of trusts and estates. Lawyers and law professors are elected to be ACTEC Fellows based on their outstanding reputation, exceptional skill, and substantial contributions to the field by lecturing, writing, teaching and participating in bar activities.
Chicago-based Lucina is Managing Director, Head of Global Family Wealth Strategy. Miller, a National Wealth Strategist, is based in San Francisco where he also is an adjunct professor at Golden Gate University School of Law.
Lucina joined BNY Mellon Wealth Management in 2014 and has nearly 20 years of financial services and wealth planning experience. Over her career she has held several leadership roles providing wealth and estate planning to high net worth clients and is recognized for her expertise in serving those with highly complex needs. She earned a Juris Doctor degree from DePaul University College of Law, where she was a member of the Business Law Journal, and she received her bachelor’s degree from Marquette University. Lucina is a frequent speaker at national professional associations and conferences on myriad estate and tax planning topics, and has published in Trusts & Estates as well as other leading professional journals. Among the many professional and community groups she is involved with, Lucina is a board member of the Chicago Estate Planning Council, and sits on the short course planning committee for the IICLE.
Miller joined BNY Mellon Wealth Management in 2011 and works collaboratively with other advisors to provide comprehensive wealth planning advice to clients and their families. Prior to that he was an attorney at a major law firm, where he advised high net worth clients regarding tax-efficient estate and business succession planning, trust law and management, and asset preservation. He earned a Master of Laws in taxation and a Juris Doctor from New York University School of Law and a bachelor’s degree from the University of California at Berkeley. Miller is a frequent speaker on tax, estate planning and family governance topics at leading conferences throughout the country. He has published numerous articles, and is frequently quoted in the media. Miller has served as an executive committee member of the State Bar of California Taxation Section, and is the former editor-in-chief of the California Tax Lawyer.
Foto: Doug Kerr
. Fieldpoint Private refuerza su negocio latinoamericano con la incorporación de Juan Castañeda
Fieldpoint Private, the wealth advisory and private banking firm serving ultra-high-net-worth families and institutions, has announced that Juan Castañeda has joined the firm as Managing Director and Senior Advisor. His practice is based in Fieldpoint Private’s New York City office.
Mr. Castañeda joins Fieldpoint following a decade with UBS, where he served in a series of positions on behalf of Latin American families and institutions. Most recently, he was Executive Director of Emerging Market Credit Sales and Head of Latin America. In that role he worked with family offices, banks and pension funds across a range of capital markets and structured lending services. Prior to that, Mr. Castañeda was Executive Director and Head of Latin America for UBS’s Global Relationship Banking unit, based in Sao Paolo, Brazil, and a director in that business unit’s New York office, developing institutional relationships across Mexico, Central America and the Caribbean.
Mr. Castañeda said he came to Fieldpoint because he was looking for a firm in which putting the client first is a matter of practice, rather than simply rhetoric. “I had grown concerned about conflicts of interest and perverse incentives in large, traditional firms,” said Mr. Castañeda, noting that Fieldpoint Private is unusual in that it is fully unconflicted, with no in-house investment products and a strict philosophy against revenue-sharing arrangements with money managers.
“My clients have always had to accept the reality that having investment assets with big banks means tolerating conflicts of interest, whether with in-house products or so-called ‘open architecture’ platforms that collect fees from money managers,” he added. “They have become so accustomed to this, frankly, that it takes them a little while to fully realize that it doesn’t have to be this way.”
Fieldpoint Private President and CEO Robert Matthews said that Mr. Castañeda’s Latin American clientele is feeling increasingly unwelcome at larger global banks. “Conflicts of interest are only part of this picture. More and more, the major global banks are creating hurdles for international clients who wish to do business with them, from shutting down advisor teams to asking clients directly to take their business elsewhere,” he said. “We welcome this business, and we’re so pleased that Juan has decided that Fieldpoint is the right home.”
CC-BY-SA-2.0, FlickrPhoto: Antonio de la Mano, Flickr, Crative Commons.. The European Commission Wants to Align the Application of PRIIPs and MiFID II
The European Commission announced on November 9th that it will take the necessary legal steps to postpone the PRIIPs Regulation for 12 months. The announcement aligns the dates of application of PRIIPs with MiFID II.
The European Fund and Asset Management Association (EFAMA) stated in a press release that they very much welcome the proposal by the Commission to delay the application date of the PRIIPs Regulation by 12 months.
In order to do so, the European Commission will publish its proposals in an amending draft Regulation, which must be quickly passed by Parliament and Council if the existing 31 December 2016 application date is to be successfully pushed back by one year.
“There is only one reason why we considered a delay absolutely essential, and this is because it is materially impossible and simply unrealistic for product manufacturers and distributors to meet the original 31 December 2016 deadline.”
A postponement therefore proved necessary and will now materialise in a more realistic timetable to comply with the Regulation.
They believe that this delay will allow companies to appropriately implement the new rules.
“Equally important is the fact that this postponement will also ensure more time is available for solutions to be found on the revised RTSs. Allowing past performance, and fixing the misleading methodology of transaction costs must absolutely be addressed. This remains a crucial part of ensuring the KIDs’ success.” EFAMA concluded.
Paris-based Tikehau Capital has agreed with Lyxor to manage Lyxor’s European senior debt funds.
Through the transaction, subject to regulatory approval, Tikehau will expand its leveraged loans & CLO business from €1.9bn in assets under management to €2.6bn, hence raising its total AUM to €9.8bn.
Tikehau Investment Management, the asset management branch of Tikehau Capital, will replace Lyxor UK, as investment manager of Lyxor’s four European senior debt funds, with a total of €700m in AUM.
It is understood Lyxor UK’s European senior debt operational team will join Tikehau IM in London and that Lyxor will remain the management company of these funds, providing second-level supervision of risks and valuation.
Mathieu Chabran, co-founder of Tikehau Capital and managing director of Tikehau IM commented: “We are delighted to have signed this agreement with Lyxor, which allows us to expand in the United Kingdom and to continue developing our expertise in leveraged loans and European credit markets.”
Lionel Paquin, CEO of Lyxor, said: “This agreement plays to Lyxor’s well-recognized strengths for working in partnership with external asset managers, a field in which we have a nearly 20-year track-record. By remaining the management company of the funds, Lyxor continues to accompany its clients. We are confident that Tikehau Capital, thanks to its well-regarded expertise in European debt markets, will greatly contribute to the quality and future development of this activity. Furthermore, fixed income investments, which benefit from our deeply-rooted innovation and risk management culture, remain an important focus for Lyxor.”
As of 30 September 2016, Tikehau Capital managed €8.7bn in assets.
Donald Trump’s unexpected victory in the Nov. 8 US election rattled global financial markets, sending US Treasury and most European sovereign yields higher. Initially U.S. stock futures and the dollar tumbled and havens such as gold and the Japanese yen were lifted, pairing movements after the President elect’s speech however, investors eventually embraced the result of the election, buying stocks and selling bonds.
On Wednesday the Dow Jones, led by a rally in financial and health-care firms, rose 257 points while the US 10 year Treasury yield, a price reference for almost everything in the world, rose to 2.07%, its highest level since January.
Pioneer’s CEO and Group CIO, Giordano Lombardo, comments: “While the US election outcome is a surprise, it is by no means a “black swan” event. Markets had been strangely complacent leading up to the election, which was highly reminiscent of the pre-Brexit build-up.” while Monica Defend, Head of Global Asset Allocation Research said they believe “Trump’s policy agenda – although still unclear – may be bearish for income-related investments and could lead to a steeper yield curve.”
Neuberger Berman notes that “A Trump administration is likely to be better for the traditional energy sector, and less damaging to the healthcare and financial sectors, than a Clinton Presidency. United government may also remove the partisan obstacles to meaningful infrastructure spending and corporate tax reform, particularly the issue of profit repatriation—although it’s useful to remember that Trump is far from popular among many traditional Republicans.”
Chris Iggo, CIO Fixed Income, AXA Investment Managers believes that “in the end a stronger US is good for the world economy.” He also believes that “if actions follow promises, and it is a big if, then the forces that have kept rates expectations down might work to revise them higher.”Iggo points out similarities between the Trump election campaign and Brexit like the ineffectiveness of the polls, the similarities in the underlying economic anxieties and frustrations at the ineffectiveness of the “elite”, official institutions and big business which took for of bigotry and the fact that the outcome delivers uncertainty on the economic outlook. “However, the big differences are that with Brexit, the outcome of the referendum created the prospect of a huge negative shock for the UK economy, while Trump’s win means a potential economic boom to the US. Secondly, the UK has largely lost control of its economic destiny for the time being while, assuming Trump has a modicum of support in Congress, the new President will be very much in control. He may not have an overwhelming popular mandate, but the Republican Party, of which he is now the leader, is in control of all parts of government.”
According to Ian Heslop, Head of Global Equities at Old Mutual, and Manager of the Old Mutual North American Equity Fund: “Looking further ahead, several of Trump’s policies, for example his protectionism, his desire to scrap existing international trade deals, and to deport illegal immigrants, have the potential to contribute to longer-term market volatility; but others, for example his plans to slash taxes, including reducing the business rate from 35% to 15%, his plans to encourage repatriation of corporate profits held offshore, and to embark on massive infrastructure spending, could stimulate the US economy, lifting equities. Much is uncertain, not least because his campaign promises have been long on rhetoric and short on policy detail.”
EM selection – a lesson for Trump survival
According to Legg Mason, EMs were one of the most hit sectors following Trump’s victory, as his well-known protectionist views could hinder EM exports to the world’s largest economy. The Mexican peso was again the proxy for the inversely correlated Trump-EM trade, plunging to historic lows. Other export-dependent currencies, such as the South African rand and the Colombian peso, also fell. Despite this pessimism, some EM local bonds and currencies rose, a sign of how investors are increasingly differentiating within the asset class, which once traded almost as a bloc. Yields of India’s local bonds, for instance, fell, given the country’s lower ties with the US and on the back of its more domestically-focused economy. The Indian rupee was one of the few currencies to rise against the greenback. Eastern European local sovereign bond yields also fell, as the region is more dependent on Europe than on the US.
While the Mexican peso plunged 13% to lifetime lows, officials held back from taking action to support the currency and will not make a monetary decision until their meeting next week.
From a Mexican Equity point of view, Barclays recommends investors to not overreact. While the MXN has weakened, the Mexican Equity market is indicated to be down by about 1-2% in local currency terms. They believe that many of Trump’s reforms would likely encounter opposition in Congress and are likely to require compromises. In their view, mexican sectors that are likely to underperform are manufacturing, industrial real estate and low-end consumption. To the opposite they believe large cap financials, large cap consumer stocks (mainly staples), telecom and infrastructure stocks are likely to outperform on a relative basis to the Mexican benchmark index.
While uncertainty has increased in the wake of Trump’s victory, financial markets ultimately tend to reflect long-term fundamentals. However, the short-term market volatility may also create positive buying or selling opportunities for active managers.
Looking in the near term, Morgan Stanley Global Fixed Income continues to expect an environment of dampened interest-rate volatility, which means a good environment for carry. “We expect contrasting forces of slow but stable global growth but perhaps higher inflation expectations to keep long-end rates trading in a range with a slight upward bias.” They explain.
However, given ongoing policy reconsiderations at central banks and a predilection to believe global growth will be higher next year is wary of sharp curve steepening and thinks underweights in risk-free rates provide a good hedge to carry oriented strategies.
“We remain optimistic about the prospects for emerging markets (EM) fixed income for the remainder of the year as fundamentals, technicals and the macro environment remain supportive,” the firm states, adding that, the various factors both pushing and pulling investors into EM fixed income remain in place: Developed market yields remain very low, economic data in EM appears to have stabilized, fears of multiple Federal Reserve (Fed) rate hikes have subsided and concerns of a sharp slowdown in China have diminished. However, Morgan Stanley Global Fixed Income believes U.S. elections reflect a major event risk for some key EMs and the outlook for global trade.
“Accommodative policy and low global yields remain supportive of global credit, particularly U.S. credit, and we continue to believe the strong technical environment in global credit markets suggests a slow grind tighter into year-end. We remain cautious, however, as we enter the last quarter of 2016, and continue to watch for potential risks,” they conclude.
The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.
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The election results are a surprise to markets, say Hersh Cohen and Scott Glasser, Co-CIOs, ClearBridge Investments – a Legg Mason company.
“We believe it is too early to draw firm conclusions and prefer to see detailed policy proposals rather than relying upon campaign rhetoric. In our view, there are likely positive and negative implications for the U.S. economy and financial markets from a Trump presidency and a Republican Congress”.
The potential positives include tax reform, regulation and infrastructure investments. The co-CIOs have long advocated for tax reform and they believe a restructuring of the tax code for corporations and individuals – along with a more efficient vehicle to repatriate foreign cash – will be beneficial for economic growth and spending. They also expect a less stringent regulatory environment and “friendlier” oversight for consolidation (through mergers and acquisitions) to support market valuations. Finally, -they add- the country will benefit from strong fiscal policy to rebuild infrastructure. They view all of the aforementioned as market-friendly and stimulative to growth.
They also have some concerns including trade, monetary policy and the direction of interest rates. “Our biggest concern stems from commentary on trade and the potential impact of modifying existing treaties and agreements. We view potential restrictions on trade and any attempts to isolate or protect the U.S. from foreign trade as highly negative. In fact, this type of protectionism invokes memories of the 1930s when trade tariffs resulted in retaliation and caused the economy to eventually tumble into depression. While we do not expect this type of extremism, slower trade has the potential to mitigate some of the growth-oriented proposals”.
Lastly, monetary policy and interest rates remain a critical variable for both the markets and the economy generally, they note. “The proposed Trump policies are growth stimulative but also have the potential to push inflationary pressures back towards historical levels, thereby pushing up interest rates. While in the long run we believe this would eventually be healthy for savers and pensions and positive for spending, U.S. markets are very sensitive to changes in interest rates which have been excessively low for seven-plus years. Increased interest rate volatility would likely result in shorter-term market dislocations”.
They have had modest expectations for stocks for the last year and a half, primarily due to a combination of lackluster growth and elevated valuations, but believe sticking with a diversified approach across a portfolio that emphasizes companies with shareholder-friendly capital allocation policies is the prudent course as we enter a new presidential cycle.
Markets around the world were in awe while the US election results were called on November 8th. At the end of the count, the House, the Senate and the Presidency were all red, and so were the markets. The Mexican peso, which throughout the campaign had been seen as a proxy for the President Elect‘s prospects, sank to its lowest level in history, plunging over 13% having its biggest fall since the so-called Tequila Crisis, in 1994.
Throughout his campaign, Donald Trump proposed increasing import tariffs, scrapping regional and global trade deals, and blocking worker remittances to Mexico. According to Nuno Teixeira, Head of Institutional & Retail Solutions Investment and client solutions investment division at Natixis, Donald Trump’s program seems more positive for equities, “with his proposal to cut back the maximum corporation tax rate from 35% to 15%, but his ultra- protectionist stance would dent companies with the most international exposure.” However the market’s first reaction was a sell-off.
While policy uncertainty will no doubt taint the markets, Natixis believes industrials, defense and oil would benefit from a Trump Presidency. Gold, is also expected to gain. Meanwhile, healthcare might get a surge given Trump wants to call into question the universal healthcare program implemented by the 2010 Obamacare legislation.
Emerging Markets, with the exception of Russia are expected to suffer in the short term. However, “in reality, if Trump were to keep to his Mexico trade agreements campaign promises, he may find punitive trade measures counterproductive given Mexico is the US’s second largest export destination and trade between the US and Mexico is interlinked.” Said Olga Fedotova, Head of Emerging Market Credit Research at AXA IM. Trump himself said in his speech, that he would be working with other countries.
According to Marco Oviedo, Barclay‘s Mexico Chief Economist and a former Mexican President Advisor the peso could fall to 22 per dollar, from an original level of 18.35 right before the election results. During the days prior to the election, the peso posted a four-day rally while expectations of a Democratic win grew. Mexico’s Central Bank Governor Agustin Carstens and Finance Minister Jose Antonio Meade have prepared a contingency plan but they informed in Mexico that they will not raise rates out of schedule. The next raise is expected to happen next week at their policy meeting.
