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Hillary or Trump? How Much Does it Matter to Markets?

Democratic presidential candidate Hillary Clinton is leading Republican Donald Trump in opinion polls, though her edge over the billionaire has narrowed. What might the outcome, as well as all of the heated political rhetoric, mean for the global economy and financial markets? Are concerns mounting among investors? Is it time for investors to re-adjust portfolio allocations?

According to David Lafferty, Chief Market Strategist at Natixis, when speaking to investors both in and outside of the U.S., the presidential election is almost always the number one question on their minds. He mentions their first caveat is to remind investors that proposal differences pre-election are always bigger than implementation differences post-election; divided government ensures that presidents get only a small portion of what they want. In general, this means that investors tend to put too much weight on election outcomes vis-à-vis portfolio expectations. “Guessing whether Mrs. Clinton will be bad for healthcare stocks or Mr. Trump will be good for defense/military stocks is a poor way to build a durable portfolio.”

Second, there is still a lot of time left. Due to the Electoral College math and superior fundraising and organization, Mrs. Clinton seems the odds-on favorite to win. But we still have a few weeks left. We’ve got one more debate to go, and with these two candidates, the final weeks offer a higher-than-usual chance for more bombshells (perhaps something in Donald’s tax returns or Hillary’s missing e-mails?).

“For sport, we’ll continue to handicap the outcome like everyone else, but if Brexit has taught us one thing, it’s that betting on the conventional wisdom can be dangerous. With too many variables still unknown, including the election winner, the make-up of Congress, or how proposals will morph into policy, long-term market implications are uncertain. To be sure, neither candidate has presented a convincing pro-growth policy that would boost economic activity or the equity markets. Regardless of the winner, Washington gridlock won’t likely produce major policy changes, although some modest corporate tax reform is possible. While long-run return implications are uncertain, we still believe that Mr. Trump’s newcomer status and lack of policy history would make him the source of more short-term volatility.” concluded Lafferty.

Natixis’ latest 2016 Global Financial Advisor Survey top findings include:

U.S. advisors say neither candidate will be better

U.S. advisors appear to be ambivalent or unconvinced when it comes to who they think could have the most positive impact on five key factors: the stock market, bond market, global economy, global trade, and geopolitical risk.

Given the choice between Clinton, Trump, either, or neither, 40% of respondents in the U.S. chose “neither” for all factors with the exception of global trade, where 32% believe Clinton will fare better, and geopolitical risk where Clinton received the highest number of responses at 35%.

Globally, advisors say Clinton will be better

Outside the U.S., it appears that financial professionals believe Hillary Clinton would have a more positive impact on all five factors. Clinton’s numbers in each run in the mid-40s and mid-50s, while those believing Trump would result in better outcomes numbered in the mid-teens. Country to country there are some variances in responses. But overall, advisor sentiment was relatively consistent from country to country.

What advisors think about next U.S. President
-Stock markets
U.S. respondents over the age of 47 believe Trump will be better for the market
(34%) compared to Clinton (21%) while 37% answered neither.
57% of women advisors globally believe Clinton will be better for the stock market.
– Bond markets
47% of advisors globally give Clinton the edge for bonds compared to 14% who believe Trump will be best.
Colombia (65%), Chile (61%), Spain (57%), Italy (55%) and Panama (55%) report the strongest inclination that Clinton will be best for bonds. France is a significant outlier from this trend with 47% of advisors choosing “neither.”
– Global economy
43% of U.S. women advisors believe Clinton will be better for the global economy
compared to 19% who believe Trump will be better.
Globally, 44% of advisors favor Clinton on the global economy, 27% say neither, 16% favor Trump and 13% call it a toss-up.
– Geopolitical risk
42% of U.S. Independent Advisors and 45% of U.S. women advisors believe Clinton will be better on geopolitical risk. For women globally, the number reached 62%.

1% of advisors with books of business above average ($29.5 million is sampling’s average size) favor Clinton on geopolitical risk, 29% say neither and 23% say Trump. Those with books below average are more likely to say neither (39%).

Chris Wallis, CIO Vaughan Nelson Investment Management, recommends investors to ignore the election, reminding them that looking back at U.S. presidential history for over 180 years, one can see that the elected president has never really had a big impact on the financial markets. “There is no doubt about it – the U.S. has an interesting pair of presidential candidates this election season. They are offering very different policy choices across the board – from foreign, trade, tax, economic, healthcare to immigration policy. But that being said, I really don’t believe it makes any difference to the markets and long-term investors’ portfolios whether Hillary Clinton or Donald Trump wins on November 8.”

Fund Selectors and Buyers Got Together with Four Management Companies at the Funds Society Fund Selector Forum New York 2016

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Selectores y compradores de fondos se reunieron con cuatro gestoras en el Funds Society Fund Selector Forum New York 2016 — Photos of the Funds Society Fund Selector Forum New York 2016. Fund Selectors and Buyers Got Together with Four Management Companies at the Funds Society Fund Selector Forum New York 2016

The first Funds Society Fund Selector Forum New York was held a few days ago following the success of the two editions of the Summit in Miami, which Funds Society also organized in collaboration with Open Door Media. In this first edition, 20 fund delegates / selectors and financial advisors within the US offshore sector met at the Waldorf Astoria hotel in Manhattan to listen to the explanations of experts from Brandes Investment Partners, Carmignac, Edmond de Rothschild Asset Management, and Henderson Global Investors.

Kevin Loome, Head of US Credit, highlighted key aspects of Henderson Global Investors’ high yield debt investment philosophy; Sandra Crowl, a member of Carmignac Investment Committee, outlined her vision of leadership in global asset allocation; Kevin Thozet, product specialist of Edmond de Rothschild Asset Management, spoke about how to generate absolute returns in the fixed income universe; and Jeffrey Germain, of Brandes Investment Partners, shared his vision on the ‘value’ opportunities in European equities and emerging markets.

According to Loome, between 6 and 8 billion dollars in fixed income are yielding negative results “which we, as investors, must fight against.” Referring to the risk of corporate default, the Henderson executive pointed out the extensive repair damage that has occurred, and said he had noticed better quality in newly issued debt. The fixed income market is an inefficient market composed of 1,700 companies globally, while ETFs are limited as to what they can access, he explained. In reference to the daily liquidity, according to Loome, the global high yield market is “impossible to index”. Loome affirmed that his company’s analysts are finding incorrectly rated bonds, with CCC, for example, and that in the seventh year of the credit cycle it is increasingly important to analyze them, and not to simply follow the ratings. Finally, regarding the energy sector, he pointed out that markets are open to buying new issues of companies in the sector with oil at $ 50, but that at 70 would be even better.

Following Loome, Sandra Crowl was of the opinion that the Chinese situation is a key factor for macro evolution. Government movements in China have had an effect on the price of commodities and on private credit growth and a stabilizing effect is taking place. With regard to oil prices, she said she expected it to reach $ 70 within 18 months and said she could see evidence of recovery, for example, in recent US corporate results, but believes it is too early for rejoicing yet. Regarding Europe, the speaker from Carmignac said she expects changes in government policy, and encourages greater fiscal involvement, because the QE program is not working as intended, and believes the British government will have no choice but to negotiate a smooth exit, given the strong impact of Brexit in its economy. As regards the United States, she seems convinced that regardless of who wins the elections, infrastructure spending will be increased; and advised that it is prudent to reduce exposure to equities before the US elections and before the Italian referendum, as it was prior to the British referendum on Brexit. Finally, she pointed out that in future, natural sources of alpha will be related to millennials, technology, longevity and growth in emerging markets, and declared she was buying Argentinean government debt denominated in dollars, and that she found Polish public debt attractive.

Jeffrey Germain followed, and focused on value investing; he said that it’s easier to find “value” opportunities in Europe than in the United States and that European stocks are at historic lows, setting Russia as an example, which is so cheap that “you are paying for the cash balance “. He pointed out that some British value companies could benefit from the post Brexit inflation, and mentioned British Isles food sector companies as an attractive sector for value investing. Furthermore, the Brandes Investment Partners representative said that copper has good behavior as compared to iron, competing increasingly stronger in the Chinese market, where it’s pushing prices downward. Finally, he agreed with the preceding speakers pointing out that oil is cheaper than it should be given the current economic situation.

Finally, Kevin Thozet was optimistic with respect to bonds linked to inflation ,and said it is unlikely that the rates of short –term debt in Germany, Austria, Holland, Belgium, and France fall below those of deposits the European Central Bank. Regarding emerging markets, he was of the opinion that although the risk may be lower than what the consensus on emerging markets suggests that there are still risk factors involved such as US interest rates and fluctuations in crude oil prices. The Product Specialist from Edmond de Rothschild Asset Management does not expect a hard landing for the Chinese economy, but noted that debt related to real estate weighing 20% of GDP, is a risk factor. Finally, he pointed out that emerging market debt is 12% of global debt and that market size has implications on liquidity.

Eaton Vance to Acquire Calvert Investment Management

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Eaton Vance anuncia la compra de Calvert Investment Management — CC-BY-SA-2.0, FlickrPhoto: Joe Cheng. Eaton Vance to Acquire Calvert Investment Management

Eaton Vance recently announced the execution of a definitive agreement to acquire the business assets of Calvert Investment Management, an indirect subsidiary of Ameritas Holding Company. In conjunction with the proposed acquisition, the Boards of Trustees of the Calvert mutual funds have voted to recommend to Fund shareholders the approval of investment advisory contracts with a newly formed Eaton Vance affiliate, to operate as Calvert Research and Management, if the transaction is consummated.

Calvert is a recognized leader in responsible investing, with approximately $12.3 billion of fund and separate account assets under management as of September 30, 2016. The Calvert Funds are one of the largest and most diversified families of responsibly invested mutual funds, encompassing actively and passively managed U.S. and international equity strategies, fixed income strategies and asset allocation funds managed in accordance with the Calvert Principles for Responsible Investment. As a responsible investor, Calvert seeks to invest in companies that provide positive leadership in their business operations and overall activities that are material to improving societal outcomes.

Founded in 1976, Calvert has a long history in responsible investing. In 1982, the Calvert Social Investment Fund (now Calvert Balanced Portfolio) was launched as the first mutual fund to oppose investing in South Africa’s apartheid system. Other Calvert innovations include the first responsibly managed fixed income and international equity funds, and pioneering programs in shareholder advocacy, corporate engagement and impact investing.

“I am extremely pleased that Eaton Vance has chosen to make Calvert the centerpiece of its expansion in responsible investing,” said John Streur, President and Chief Executive Officer of Calvert. “By combining Calvert’s expertise in sustainability research with Eaton Vance’s investment capabilities and distribution strengths, we believe we can deliver best-in-class integrated management of responsible investment portfolios to investors across the U.S. and internationally. Eaton Vance is the ideal partner to help Calvert fulfill its mission to deliver superior long-term performance to clients and achieve positive impact.”

“As part of Eaton Vance, we see tremendous potential for Calvert to extend its leadership position among responsible investment managers,” said Thomas E. Faust Jr., Chairman and Chief Executive Officer of Eaton Vance. “By applying our management and distribution resources and oversight, we believe Eaton Vance can help Calvert become a meaningfully larger, better and more impactful company.”

Completion of the transaction is subject to Calvert Fund shareholder approvals of new investment advisory agreements and other closing conditions, and is expected on or about December 31, 2016. Because the transaction is structured as an asset purchase, liabilities in connection with Calvert’s previously disclosed compliance matters and other pre-closing obligations will remain with the seller. Terms of the transaction are not being disclosed.

China Oceanwide To Acquire Genworth Financial

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Genworth Financial pasará a manos de China Oceanwide — CC-BY-SA-2.0, FlickrPhoto: Joey Gannon . China Oceanwide To Acquire Genworth Financial

China Oceanwide Holdings and Genworth Financial, have announced that they have entered into a definitive agreement under which China Oceanwide has agreed to acquire all of the outstanding shares of Genworth for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. The acquisition will be completed through Asia Pacific Global Capital, one of China Oceanwide’s investment platforms. The transaction is subject to approval by Genworth’s stockholders as well as other closing conditions, including the receipt of required regulatory approvals.

As part of the transaction, China Oceanwide has additionally committed to contribute to Genworth $600 million of cash to address the debt maturing in 2018, on or before its maturity, as well as $525 million of cash to the U.S. life insurance businesses. This contribution is in addition to $175 million of cash previously committed by Genworth Holdings. to the U.S. life insurance businesses. Separately, Genworth also announced preliminary charges unrelated to this transaction of $535 to $625 million after-tax associated with long term care insurance (LTC) claim reserves and taxes. Those items are detailed in a separate press release. The China Oceanwide transaction is expected to mitigate the negative impact of these charges on Genworth’s financial flexibility and facilitate its ability to complete its previously announced U.S. life insurance restructuring plan. Genworth believes this transaction is the best strategic alternative to maximize stockholder value.

James Riepe, non-executive chairman of the Genworth Board of Directors said, “The China Oceanwide transaction is the result of an active and extensive review process conducted over the past two years under the supervision of the Board and with guidance from external financial and legal advisors. The Board is confident that the sale of the company to China Oceanwide is the best path forward for Genworth’s stockholders.”

Upon the completion of the transaction, Genworth will be a standalone subsidiary of China Oceanwide and Genworth’s senior management team will continue to lead the business from its current headquarters in Richmond, Virginia. Genworth intends to maintain its existing portfolio of businesses, including its MI businesses in Australia and Canada. Genworth’s day-to-day operations are not expected to change as a result of this transaction.

China Oceanwide is a privately held, family owned international financial holding group founded by Lu Zhiqiang. Headquartered in Beijing, China, China Oceanwide’s well-established and diversified businesses include operations in financial services, energy, culture and media, and real estate assets globally, including in the United States. Businesses controlled by China Oceanwide have more than 10,000 employees globally.

“Genworth is an established leader in both mortgage insurance and long term care insurance, which are markets that present significant long-term growth opportunities,” added Lu, Chairman of China Oceanwide. “We are impressed by Genworth’s purpose and its focus on helping people manage the financial challenges of aging as well as achieving the dream of homeownership. In acquiring Genworth and contributing $1.1 billion of additional capital, we are providing crucial financial support to Genworth’s efforts to restructure its U.S. life insurance businesses by unstacking Genworth Life and Annuity Insurance Company (GLAIC) from under Genworth Life Insurance Company (GLIC) and address its 2018 debt maturity. In order to close the transaction and achieve these objectives, we have structured the transaction with the intention of increasing the likelihood of obtaining regulatory approval.”

Tom McInerney, President & Chief Executive Officer of Genworth concluded, “We believe that this transaction creates greater and more certain stockholder value than our current business plan or other strategic alternatives, and is in the best interests of Genworth’s stockholders. China Oceanwide is an ideal owner for Genworth going forward. They recognize the strength of our mortgage insurance platform and the importance of long term care insurance in addressing an aging population. The capital commitment from China Oceanwide will strengthen our business and increase the likelihood of obtaining regulatory approval.”

Amundi: European Debt Does Not Lose Its Appeal Because Central Banks Hold It

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We spoke with Marie-Anne Allier, Head of European Fixed Income, Amundi, attempting to discover where to look for the opportunities this fall. According to the expert, these are wherever you can still obtain some yield, and this must be understood as corporate debt- including high yield– and in emerging markets, where you can still find attractive yields relative to risk. There are still good opportunities in European government debt, which central banks continue to hold; and, in the United States, although the expected hike in interest rates would make its market disappointing compared to the European markets.

Emerging Markets

In Allier’s opinion, attractive risk-return tradeoffs can be found in emerging markets, in both sovereign debt and in some of the corporate debt. On the other hand, she says, the risk is not so high, especially after the decline in emerging markets’ valuations. For those who do not want to take too much risk, or are not as confident, she points out the option of entering into emerging debt –either sovereign or corporate- without suffering the greater volatility of the currency, i.e. not entering local currency but in hub currency. Emerging debt in hub currency offers a return to risk which is increasingly comparable to what can be found in developed markets.

Europe

That said, there are still good opportunities in government debt. If you look at the Euro zone, the best performances belong to government debt, for the simple reason that it is the area in which the central banks are buying debt. We are seeing that buying Italian, Spanish, and Portuguese debt, even government debt, is currently an opportunity, simply because the central banks are buying debt. There are no financial or economic reasons; it is a conjectural reason: the ECB. “In fixed income there are still many opportunities. That said, you will not have a double-digit return. “

In Europe, corporate debt is appealing only because of the ECB’s CSPP (corporate sector’s purchase program). It’s like a ‘stop loss,’ Allier explains, at the end of the day the central banks buy. The situation in Europe is defined by the lower leverage of corporations and increasingly less appetite for debt issuance -because their needs are less-, and the increasing number of investors. “Prices will go up,” says Allier.

European companies do not need to issue debt because investments have been reduced. Alos, Allier thinks they are managing their balances in a more reasonable manner than before, after two credit crunch crisis in Europe over the last ten years. Companies’ CFOs are not currently looking to make money through financial management, but through the business plan, and are leveraging less, they want to be sure that they can manage the current business, even during a crisis situation.

In fact, after the crisis, in which access to credit has been so difficult, companies are taking advantage of those opportunities when the market has been better, to buy back short-term debt and issue at very long term. So now, there are no previous issues that will be redeemed in the short term, and therefore the financial needs of corporations in the next two to three years will not be as high.

In short: “there is currently no issuing, but investors are seeking, so it is an opportunity. Again, not to obtain 6, 7, or 8%, but it is an opportunity when compared to your money earning nothing or leaving it in a bank.”

Until when is necessary for central banks to continue to act in Europe?

Until 2018, or even 2019, according to the Head of European Fixed Income at Amundi. “In order to change, we need to be able to boost inflation slightly and growth in the Euro zone, and that is not something that is in the hands of central banks, as it is more a matter of budgets and policies.” So when governments can boost the potential for growth through reforms, central banks will be able to exit the market. “What central banks are doing is to buy time for governments to act. The answer is in the hands of governments: if they are able to reform, to boost inflation and growth, then central banks will relax the current accommodative policy,” she added.

United States

It seems that the yields in the US are better now, but by buying European debt, which is held by the central banks, and hedging the currency, diversification is achieved. In addition, we must take into account the possible actions of the Fed. “If we are right and the Fed hikes rates by 2017, at one point there will be losses in the US bond market, so this could be disappointing as compared to the European markets, where central banks will not relax their policies in 2017. “

A final comment: The executive draws attention to the existence of a certain bias that invites us to think that bonds are expensive. “We have to change our mentality.”

And a sector in which is better to be with fixed income than with equities: Banks are better capitalized than they were in 2008 or 2011, the ECB is doing a great job, says Allier. “I would be more worried as an equity holder than as a bond holder. The return on equity of the banking industry is not very good “because the industry faces many challenges, and in Italy -for example- new banks will go public. However, from the point of view of debt, banks have more capital and are more supervised than before. Not all banks are the same, but the overall picture is better today than it was in 2008, she concludes.

Ricardo Morean Joins Bolton Global

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Bolton Global Capital has announced that Ricardo Morean has joined the firm. With this addition, Bolton hopes to leverage Morean’s successful career of growing the international wealth management businesses of Merrill Lynch, Wells Fargo, and RBC where he was in charge of major branch complexes in New York, Miami and Latin America.

Morean will be responsible for business development for Bolton Global as well as GEA Capital, an affiliated advisory group based in Miami specializing in asset management for institutions and high net worth clients.

More recently, Morean was Senior Managing Director of RBC’s International Advisor Group, covering Latin America and Europe, as head of the company’s offices in Miami, New York and San Diego until the RBC closed its non-US client business in 2015.

Morean began his career as a financial advisor with Merrill Lynch in 1992. After holding senior positions in business development and branch management with Merrill Lynch’s Latin American operations, he was promoted in 2005 to Regional Managing Director for the firm’s international financial advisors in the New York, Miami and San Diego offices. After Merrill Lynch was acquired by Bank of America in 2008, he joined Wells Fargo as Regional Managing Director responsible for the firm’s international advisors in Miami and New York.

He is a graduate of Ohio State University and holds a Masters in International Management from the Thunderbird School of Arizona State University.

Natixis Global Asset Management and AlphaSimplex Bring Managed Futures Alternative Strategy to Europe

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Natixis Global Asset Management y AlphaSimplex lanzan en Europa su estrategia de futuros gestionados — CC-BY-SA-2.0, FlickrPhoto: Wealth Gail. Natixis Global Asset Management and AlphaSimplex Bring Managed Futures Alternative Strategy to Europe

Natixis Global Asset Management has strengthened its European SICAV range with the launch of a new managed futures fund from one of its leading affiliates focused on alternatives, AlphaSimplex Group, LLC.

AlphaSimplex’s Managed Futures Fund will invest in futures and forward contracts across a broad range of markets including equities, fixed income and currencies and aims to profit from current trends in the markets, taking long positions in assets in a rising price trend and short positions in those that are in a falling price trend. The fund also has indirect exposure to commodity markets.

The new fund will be quantitatively driven with full transparency and will be co-managed by a team of five Portfolio Managers. Although the fund has only recently become available to European investors, AlphaSimplex has a six year track record in the U.S. managing over $3.5bn in its Managed Futures strategy.

“In a world that has become more and more interconnected, correlation has increased”, said Duncan Wilkinson, CEO of AlphaSimplex. We believe this product can be implemented as a strong diversifier in an equity-dominated portfolio.”

Commenting on the new fund, Chris Jackson, Deputy CEO – International Distribution at Natixis Global Asset Management, said: “Through Natixis’ regular investor surveys we believe that individuals are becoming increasingly aware of the need to have an allocation to alternatives within a portfolio. As managed futures are typically uncorrelated to other asset classes, these strategies can be a useful way of diversifying an investor’s portfolio. AlphaSimplex has a solid track record, supported by an experienced team of managers and we believe that this successful offering will resonate well in the European marketplace.”

Brazil – The Comeback Kid?

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An economy set to rebound. A president committed to implementing reform. A government of competent technocrats. A crackdown on corruption. A set of new CEOs to oversee inefficient state-owned companies. A central bank embarking on a rate cutting cycle. A country with deep, liquid capital markets.

Would anyone believe us if we said this is Brazil?

According to Yacov Arnopolin and Lupin Rahman, emerging market portfolio managers at PIMCO, “before tagging on the requisite caveats, we tip our hat to the country’s impressive turnaround in policymaking. As always, much will ride on the ability to push through fiscal reforms and improve the supply side of the economy. But with confidence in the government returning, Brazil could be set for a comeback ‒ one that could restore nominal interest rates to single digits and put credit rating upgrades back on the table.”

Not politics as usual

On their recent trip to Brazil they witnessed a stark change in what the International Monetary Fund (IMF) called the “counterproductive” politics and policymaking of the previous administration. “Impeachment has paved the way for a centrist, business-friendly government under President Michel Temer, who has a team that can get things done. This coincides with Brazil starting to exit the worst recession in its history and a turn in inflation from double-digit figures earlier in the year.”

They believe the change in sentiment has sparked a strong rally in Brazilian assets, but as the new administration’s honeymoon draws to a close, the country’s prospects ride on reform. Will the government’s proposals be enough to bring about the necessary changes?

Brazil’s challenges ahead

The positive sentiment for Brazil notwithstanding, they see three main risks to President Temer’s plans.

Brazil’s debt-to-GDP is set to reach 90% of GDP by the end of this decade. While the vast majority of the debt is in local currency, that level still ranks among the highest in the emerging markets. Reforms cannot change the near-term fiscal and debt path; they can merely seek to avoid an even more dire scenario. And they will take more than one political cycle to be effective.
Disinflation could be lower than expected. Years of indexation and supply-side bottlenecks could limit the disinflationary pressures from high unemployment and a large output gap and keep inflation “stuck” at high levels. Moreover, the multiple levels of subsidized lending that de-fanged monetary policy may take years to unwind or simplify.
Public opinion may prove to be more sensitive to increasing unemployment and the realities of lower social security and pension benefits. In fact, Brazilian voters still generally favor large governments and a strong social safety net. In addition, Lava Jato (“Operation Car Wash”) corruption investigations could spill over to the government. The risk is that Temer’s popularity fades and political noise around the 2018 election race increases.

The positive scenario

If Temer’s reforms are successful, PIMCO believes they could trigger a virtuous circle of deeper reforms after the 2018 elections. A sustained return of confidence would likely increase foreign direct investment and portfolio flows; and a return of “animal spirits” would lift consumption and prompt faster lift-off for the economy. All of this bodes well for the currency. And while the real is unlikely to have the same uninterrupted climb as in recent months, its high carry of nearly 13% offers a decent cushion against potential weakness.

“The Brazilian Central Bank has recently initiated what we anticipate will be an extended cutting cycle, lowering the overnight rate by 25 bps to 14%. Although the local yield curve is pricing in cuts of just over 320 basis points (bps) to January 2018, we believe the total cycle – subject to meeting the requisite fiscal milestones – could total about 500 bps or more, bringing nominal rates back to single digits. Thus, while local rates are less attractive than they were at the height of the political crisis, they offer potential to rally further, particularly given their starting point which is by far the highest in the G-20! An even bigger prize would be to reduce the high real rate burden the country is facing – nearly 6%. Just as poor fiscal management took Brazilian securities into a downward spiral, reform could improve valuations on Brazilian sovereign and corporate credit versus those of higher-rated EM peers. As a result, we believe the country’s fixed income assets continue to present compelling opportunities.” They conclude.

The UHNWI, the 0.004% of the World’s Adult Population that Control 12% of the World’s Wealth

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Los UHNWI, el selecto club al que pertenece el 0,004% de la población adulta y que controla cerca del 12% de la riqueza mundial — CC-BY-SA-2.0, FlickrPhoto: Pexels. The UHNWI, the 0.004% of the World’s Adult Population that Control 12% of the World's Wealth

According to the World Ultra Wealth Report 2015-2016 produced by Wealth-X, there are 212,615 ultra high net worth (UHNW) individuals globally, holding a combined wealth of US$30 trillion in net assets.

The fourth edition of this leading report on the world’s ultra wealthy population shows almost flat growth in 2015 as the number of individuals with US$30 million or more in net assets grew just 0.6% and total UHNW wealth increased by 0.8%. Despite this meager growth, UHNW individuals, who account for just 0.004% of the world’s adult population, still control 12% of its wealth.

Regional Differences in UHNW Growth Trends

In Europe, the Middle East and Africa UHNW wealth fell 2.4% as equity markets, local currencies and gross domestic product collectively experienced negative net returns. By contrast, Asia-Pacific experienced a 3.9% rise as the ultra wealthy in certain markets continued to benefit from dynamic business expansion and economic growth. In the Americas, it was Latin America, rather than North America, that helped the region achieve a modest 1.5% growth in ultra wealth value.

Across all geographic regions, it is the highest ranks of the UHNW population who are experiencing the most success. The report highlights that in 2015 billionaires saw their wealth grow 5.4%, more than double the rate of global economic growth, while collectively other tiers saw their wealth shrink by 0.6%.

Driven by Wealth-X’s unparalleled collection of hand curated dossiers on the global UHNW population, the World Ultra Wealth Report contains detailed analysis of the wealthiest individuals in the world with a focus on geography, lifestyle, social networks, philanthropic behaviors, motivations and legacy.

Additional key findings from the report include:

UHNW global wealth is expected to reach US$46.2 trillion by 2020

UHNW wealth is expected to grow at a compound annual growth rate of 9%.
The UHNW population is expected to exceed 318,000 by 2020.

Female UHNW individuals saw their wealth decrease

While the female UHNW population remained steady at 13%, their share of total UHNW wealth fell from 14% to 11% this year. Average female high net worth wealth dropped from US$147 million to US$126.3 million.
Male wealth increased 2.4% from US$139.8 million to US$143.1 million, reflecting a greater focus on self-made wealth and a higher-risk asset composition.

Finance, banking and investment remains the top UHNW industry

Though its lead among other UHNW industries continues to shrink as manufacturing grows in importance.
In two out of three cases, wealth is purely self-made rather than inherited. As wealth matures in younger economies, the transfer of wealth has seen a growing class of second-generation ultra wealthy emerge.

Wealth continues to rise generation by generation

The under-30 demographic accounts for just 1% of the world’s ultra wealthy population and 0.3% of global UHNW wealth.
UHNW individuals aged 80 or over are seven times wealthier than those under 30 and are worth nearly double that of the average UHNW individual globally.

Cash Allocations are Close to 15-Year Highs

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The BofA Merrill Lynch October Fund Manager Survey shows global investor risk-aversion is growing as cash allocations increase to near-15-year highs. “This month’s cash levels indicate that investors are bearish, with fears of an EU breakup, a bond crash and Republicans winning the White House jangling nerves,” said Michael Hartnett, chief investment strategist at BofA.

Manish Kabra, European equity quantitative strategist, added that, “Although investors see an EU-disintegration as a big tail risk, European fund managers surveyed are more optimistic about the economic growth outlook for the Eurozone and expect stronger inflation.”

Other highlights include:

Cash levels jumped from 5.5% in September to 5.8% this month. Investors’ average cash balance was last this high in July 2016 (post-Brexit vote) and in Fall 2001.
Investors identify fears of an EU breakup, a bond crash and a Republican winning the White House as the most commonly-cited tail risks.
With inflation expectations at a 16-month high and perceptions of developed market equity and bond valuations at record highs, investors are no longer underweight in commodities for the first time since December 2012.
Rotation out of healthcare/pharma, REITs and bonds, into banks, insurance, equities, commodities and EM.
Investors cite Long high-quality stocks, Long US/EU IG corporate bonds and minimum volatility strategies as the most crowded trades.
Allocation to EM equities rises to the highest overweight in 3.5 years, from 24% last month to 31% in October.
Allocation to U.S. and Eurozone equities is unchanged from last month, while allocation to UK equities falls to net 27% underweight from net 24%.
Allocation to Japanese equities improves modestly to net 3% underweight from net 8% underweight last month.

You can download the report attached.