Exchange-traded funds aimed at generating income have become one of the fastest-growing sectors in Europe as investors in search of yield increasingly shun costly active products, according to The Cerulli Edge-European Monthly Product Trends Edition.
Cerulli Associates, a global analytics firm, also notes that investors are increasingly using ETFs for tactical as well as strategic allocation, pointing to the lead role ETFs played in the recent resurgence of flows into emerging market funds. Cerulli believes that the trend towards negative government bond yields may further encourage the use of ETFs as investors look for vehicles that allow easy access and easy exit in the face of volatility caused by factors such as Brexit.”While the majority of assets under management (AUM) in European-based ETFs are admittedly equities, fixed-income ETFs are growing faster,” says Barbara Wall, Europe managing director at Cerulli.
Cerulli says that low-volatility ETF products are also attracting more interest from cautious investors, partly because such strategies have tended to outperform, thanks to phenomena such as the low-volatility anomaly. By combining low volatility with high dividends, providers such as Invesco PowerShares have added an extra dimension.
“Europe still has some way to go before its ETF market catches up with that of the United States. Nevertheless, income-oriented products may well offer the best growth opportunities for providers,” says Wall.
CC-BY-SA-2.0, FlickrPhoto: ING Group
. Asset and Wealth Management Sector Seems Oblivious of FinTech Opportunities
PwC’s 2016 Global FinTech Survey ranked the asset and wealth management sector as the third most likely to experience the game-changing impact of FinTech startups. In order to succeed in this new landscape, asset and wealth managers need to adapt and engage with FinTechs.
60%of asset and wealth managers think that at least part of their business is at risk to FinTech. When asked about any type of threat, asset and wealth managers were the least concerned of all financial services industry players. They believe FinTech will have only a limited impact on their businesses, with 61% of respondents expecting an increased pressure on margins, followed by concerns around data privacy (51%) and loss of market share (50%).
Julien Courbe, PwC’s Global FS Technology Leader, says: “Banking and payments industries offer palpable examples of FinTechs changing the financial sector by offering new solutions that are visibly disturbing traditional players. This should be an eye-opener for asset and wealth managers as they are next in line, while their FinTech mind-set is still in its infancy. For instance, over a third (34%) do not yet engage with FinTech companies at all, while collaboration with FinTechs is crucial and will be the only way for the traditional firms to deliver technological solutions at the speed expected by the market. We strongly believe incorporating FinTech solutions will visibly strengthen their market position.”
Data analytics was identified by 90% of the asset and wealth managers as the most important trend for the next five years. Followed by automation of asset allocation as “robo advisors” are putting pressure on traditional advisory services and fees. Unsurprisingly, when it comes to investments asset and wealth managers choose new technologies related to data analytics and automated asset allocation rather than expanding their digital and mobile offerings. Only 31% of asset wealth managers provide their clients with mobile applications, lagging behind all other financial players.
Julien Courbe says: “With ‘robo advisors’ becoming more sophisticated, they create an opportunity for asset managers to target the mass affluent who are looking for cheaper alternatives to receive advice on how to manage their assets. The key is to find the balance between human and technological interaction to create an omni channel experience at the speed expected by the market.”
CC-BY-SA-2.0, Flickr. Luciane Ribeiro Left Santander AM in Brazil
Luciane Ribeiro, Banco Santander Asset Management CEO in Brazil has stepped down after 10 years in the company.
According to Bloomberg, Conrado Engel, chairman of the asset-management business in the South American country, will take over Ribeiro’s role until a new CEO is named.
Brazil is Santander AM’s second-largest market with 54 billion euros ($60 billion) in assets under management and 87 employees, according to its website.
In July, and after 20 months in negotiations, UniCredit and Banco Santander broke off negotiations entered into on 11 November 2015 to combine Pioneer Investments and Santander Asset Management. The merger would have created one Europe’s leading asset managers with around 370 billion euros (almost $400 billion) in assets under management, of which close to 174 were from Santader.
CC-BY-SA-2.0, FlickrPhoto: Tony Webster. Deutsche Might Prepare a Public Listing of its Asset Management Division
Deutsche Bank is reported to consider floating its asset management unit, in a bid to boost its cash ratio, amid a multi-billion-dollar charge by the US government over alleged misselling of mortgage-backed securities.
As the Financial Times reports, Deutsche is planning to prepare a public listing of its asset management division, however, an IPO would only take place following the completion of the settlement with US authorities. Deutsche Bank declined to comment on the report.
As of June 2016, Deutsche Asset Management covered €710bn of assets under management and according to its latest annual report, it is one of the strongest performing units, with pre-tax profits increasing by 23%, compared to a struggling investment banking division.
The group has faced a plummet in its share prices following an announcement by US regulators that it faces a $14bn (€12.57bn) fine due to alledgedly misspelling mortgage backed securities. As a result of falling share prices, Deutsche’s market value has halved sicne the beginning of this year.
Other options being speculated for the German lender are an outright sale of its asset management division, an option which has been explicitly denied by Deutsche Bank CEO John Cyran, or to increase the number of shares in circulation, however, the latter is unlikely to be sufficient in covering the scale of litigation charges.
For PIMCO, the events over the weekend have only underscored the unconventional – and some would argue unstable – nature of this year’s presidential election cycle. Reeling from the release of a video in which he made lewd comments about women, a vital demographic constituting 53% of the electorate, Trump’s objective going into Sunday night’s debate was to stop the bleeding and tame the calls for him to leave the race.
According to Libby Cantrill, PIMCO’s head of public policy, in this regard, Trump succeeded. “Although he floundered in the first 20 minutes, he regained his footing later on by attacking Clinton constantly on those issues where she is most vulnerable, including her emails and paid speeches to Wall Street. Clinton, for her part, came off as prepared and policy-oriented, but left some unsatisfied with a number of her answers and failed to land any serious blows.”
“While Trump may now be off life support, his debate performance is unlikely to achieve what it needed to do: Broaden his appeal and convince the higher-than-usual proportion of undecided voters this election to support him. There was plenty of red meat for his base, including many assertions that would likely be disqualifying in any other election cycle, including a call for Clinton’s imprisonment. But those personal attacks are unlikely to draw-in the needed swing voters, especially undecided women.” She states.
What should investors look out for in the remaining days until the election?
The third and final debate will be held next Wednesday, October 19th and will be another important inflection point in the race. In the meantime, Cantrill recommends paying attention to how the Trump videotape plays out over the coming days, and specifically whether it leads to any further disavowals from establishment Republicans. Whether vice presidential candidate Mike Pence remains on the ticket will also be critical. “While still a low probability, Pence leaving the ticket could be yet another destabilizing event in what has already been a volatile election cycle.”
Lastly, she recommends watching the polling in the ten key swing states that will likely dictate the outcome in November, with a specific focus on Florida and Ohio. “These are two must-win states for Donald Trump, and two in which he is now trailing Clinton. If Trump can claw back and overtake her lead in those states, he may have a fighting chance to win the White House. But without them, it is difficult to imagine a scenario in which he secures the needed 270 electoral votes required for victory in November.” She concluded.
CC-BY-SA-2.0, FlickrPhoto: martathegoodone
. Santander Might be Considering Selling its Stake in Allfunds Business
Santander Asset Management could be weighing options for its holding in its Allfunds Bank investment platform, including a sale of its stake, Bloomberg reports citing people familiar with the matter, which let them know that the discussions are at an early stage and the company may decide to hold on to its stake.
Santander currently owns 50% of the business while Italian Intesa Sanpaolo holds the other 50% stake.
Their sources, who asked not to be identified because the deliberations are private, believe the entire business could be valued at about 2 billion euros ($2.2 billion) and attract interest from private equity firms.
Santander Asset Management is controlled by Spanish Banco Santander and U.S. buyout firms Warburg Pincus and General Atlantic. Santander created Allfunds in 2000 to help financial institutions get access to so-called open architecture funds. Italian lender Intesa acquired a stake in 2004 as part of Allfunds’s international expansion. The company has offices in Spain, Italy, the U.K., Chile, Colombia, Dubai, Luxembourg and Switzerland.
Allfunds reported profit of 69 million euros in 2015, up from 46.4 million euros a year earlier, according to the company’s financial report.
CC-BY-SA-2.0, FlickrPhoto: Citigroup. Citi Sells its Consumer Business in Brazil and Argentina
Citi has reached a definitive agreement to sell its consumer banking business in Brazil to Itaú Unibanco, and its consumer banking business in Argentina to Banco Santander Rio subject to regulatory approvals.
The sale in Brazil, where Citi has operated for over a century, constitutes approximately US$2.8 billion in assets for Citi and includes credit cards, personal loans and deposit accounts, as well as Citi Brazil’s retail brokerage business. Citi’s consumer banking operations in Brazil will continue to operate in the ordinary course through the transition to Itaú Unibanco. Upon the conclusion of the transaction, Citi will continue serving clients of its corporate and investment bank, commercial and private bank businesses in the country.
“Brazil is a strategic market for Citi and is an essential part of our footprint and global network,” said Jane Fraser, Citi Latin America CEO. “We have been in Brazil for more than 100 years and we will continue to grow our market leading franchise serving our institutional and private bank clients, leveraging our global presence and generating better returns on our assets and capital for our shareholders.”
The sale in Argentina involves approximately US$1.4 billion in assets for Citi and includes credit cards, personal loans and Citi Argentina’s retail brokerage business, as well as deposit accounts. Citi’s consumer banking operations in Argentina will continue to operate in the ordinary course through the transition to Banco Santander Rio. Citi will continue serving its commercial banking and corporate and investment banking clients in the country.
“Argentina is one of Citi’s most important markets in Latin America and its future is extraordinarily promising,” said Fraser. “We have been in Argentina for more than 100 years and are committed to supporting growth and progress in the country. We will continue to invest in and grow our market leading institutional franchise there as recently announced by our CEO Mike Corbat.”
Meanwhile, last week, Citi announced that it will invest more than US$1 billion in its Mexican business, historically known as Banco Nacional de México or Banamex and now called Citibanamex. Fraser then said, “Citibanamex will honor our rich history in the country while acknowledging that together we offer more talent, experience and ideas that will help enable economic growth and progress for Mexico.”
Canadian asset manager Fiera Capital has announced an agreement has been reached for a cash transaction including the full acquisition of emerging markets boutique Charlemagne Capital and the payment of a special dividend by Charlemagne Capital.
If completed, the deal will provide Fiera Capital with an entry into the emerging and frontier markets asset class and create a European platform to boost the growth and distribution of Fiera Capital’s existing investment funds.
“Under the terms of the Transaction, Charlemagne Capital shareholders will be entitled to receive 14 pence in cash in aggregate for each Charlemagne Capital share. The 14 pence is composed of 11 pence in cash for each Charlemagne Capital share and a special dividend of 3 pence per Charlemagne Capital share conditional on the Scheme becoming effective,” Fiera Capital said.
The 11 pence per share to be paid by Fiera Capital together with the special dividend of 3 pence per share, values the transaction at approximately £40.7m, the firm specified.
“The acquisition of Charlemagne Capital would be an important step in advancing our global presence by teaming up with a high quality emerging and frontier markets specialist, with an excellent track record of performance, a proven team of investment professionals and a strong culturally aligned management team,” said Jean-Guy Desjardins, chairman and CEO of Fiera Capital.
“The addition of emerging and frontier markets strategies to our strong global offering in equities would benefit our clients who are consistently looking for diversification opportunities,” he added.
Jayne Sutcliffe, Chief Executive Officer of Charlemagne Capital, commented : “Fiera Capital is a performance driven, client-focused firm with a strong emphasis on teamwork. As such, Fiera Capital has committed to preserve and support the culture and infrastructure of Charlemagne Capital. Our board believes that this transaction is an excellent solution for our broad range of institutional and wealth management investors, who will benefit from being part of Fiera Capital with its complementary culture, financial strength and North American distribution network. In our view, as the fund management industry evolves, investors will increasingly take comfort from entrusting assets with a firm which has a strong balance sheet, diversified product offering and global distribution.”
Charlemagne Capital was founded in 2000 and has currently assets under management in excess of $2bn (€1.78bn).
Fiera Capital has C$109bn (€74bn) of assets under management.
CC-BY-SA-2.0, FlickrPhoto: Colin Tsoi
. Hong Kong will Overtake Switzerland to Have World’s Richest Citizens by 2020
Switzerland tops the current ranking of the world’s wealthiest territories measured by savings per capita, with the average Swiss citizen holding more than $186,000 in liquid assets, according to financial services research and insight firm Verdict Financial. The US and Hong Kong follow in second and third place respectively.
The company’s latest report, which analyses 69 wealth markets across the globe, indicates that by 2020 the rankings will change, with Hong Kong taking the lead, and Switzerland falling to third place.
Bartosz Golba, Verdict Financial’s Senior Analyst for Wealth Management, explains: “With a forecast compound annual growth rate of 7%, Hong Kong will be the third quickest growing developed wealth market over 2016–20. Hong Kong’s growing importance is not a big surprise. The market is exemplary in regard to explaining why the majority of global wealth managers put Asia-Pacific at the center of their growth strategies. In real terms – taking inflation into account – no other region will see its value of liquid assets grow at a greater pace.”
“What makes Hong Kong unusual is the local investors’ preference for near-cash products. Almost 85% of liquid onshore assets of retail investors in Hong Kong are allocated to bank deposits, while the developed markets’ average stands below 62%. This protects portfolios from capital markets volatility, and at the same time provides a significant cross-selling opportunity for wealth managers operating in Hong Kong.”
On the other hand, Verdict Financial’s savings per capita ranking highlights the unequal distribution of global wealth. Golba continues: “Look at India, for instance, which is already the world’s tenth biggest market in terms of total assets held by high net worth individuals. It will be ranked sixth by 2020, by which point Indian millionaires will hold more wealth than their Australian counterparts. At the same time, however, the average individual’s savings stand below $2,000, making India one of the worst performers in our assets per capita classification.”
According to Golba, the low penetration of affluent individuals as part of overall population is typical for developing nations. He explains: “The higher the country’s development level, the larger the penetration of the world’s wealthiest people. In the US, almost two thirds of the population can be considered affluent. As a country in which almost 2% of citizens are millionaires, it remains an attractive market for private banks and wealth managers.
“While we are in a period characterized by volatile financial markets and wealth managers looking for optimal business strategy, there is one thing that remains constant. In aggregate terms, the US has been, and will remain, by far the world’s largest wealth market.”
CC-BY-SA-2.0, FlickrImran Ahmad. Imran Ahmad Joins Standard Life Investments as Investment Director EMD
Standard Life Investments has added to its team of five emerging market debt specialists with the appointment of Imran Ahmad as Investment Director – Emerging Market Debt (EMD). Imran, who has 12 years’ experience in the industry, joins the company from JP Morgan Asset Management where, since January 2013, he held the role of Currency Portfolio Manager.
Reporting to Richard House, Head of Emerging Markets Fixed Income, Imran will be based in London and will have primary responsibility for emerging market currency overlay strategies across the entire EMD suite of funds.
Richard House said of the appointment: “Imran’s appointment reflects our commitment to, and belief in, the long term opportunities the EMD asset class has to offer. Imran’s skill set compliments the team’s approach to managing EM fixed income portfolios, namely high conviction macro based investing. The team which has over 77 years’ experience in the industry, works ‘hand-in-hand’ with the 40 strong fixed income and global emerging market equities teams, allowing us to seek out the best investment ideas and opportunities for our investors.”
Standard Life Investments this week announced the launch of an Emerging Market Debt (EMD) Unconstrained SICAV – the fourth Emerging Market Debt strategy in the suite of EMD products they offer to both retail and institutional investors. The SICAV was launched in response to demand from European investors for access to the increasingly popular asset class and will be co-managed by Richard House and Kieran Curtis.
