CC-BY-SA-2.0, FlickrPhoto: Aiky RATSIMANOHATRA
. The Growing Role of Smart Beta In New Investment Strategies
Lyxor Asset Management has led a research that highlights the growing importance of risk factors and other Smart Beta strategies in generating performance in the current challenging market conditions.
In this research piece, that considers the performance of 3,740 active funds representing €1.2 trn in AUM compared to their traditional benchmarks over a period of ten years, the firm found that European domiciled active funds had a more positive year in 2015, with an average of 47% outperforming their benchmarks, significantly more than 2014 where just 25% outperformed on average.
Looking at the source of this outperformance, the team found a significant part could be attributed to specific risk factors. These ‘risk factors’ describe stocks that exhibit the same attributes or behaviours. Lyxor has identified five key risk factors: Low Size, Value, Quality, Low Beta and Momentum, which together account for 90% of portfolio returns.
European active fund managers for example were overweight Low Beta, Momentum and Quality Factors in 2015, which all outperformed benchmarks. Another aspect of the research compared active fund performance with Minimum Variance Smart Beta indices, which are designed to reduce portfolio volatility. Here the results were even more compelling: whereas 72% of active funds in the Europe category outperformed a traditional benchmark in 2015, only 14% outperformed the Smart Beta index.
These findings demonstrate the increasing role played by Smart Beta strategies that are based on rules that do not rely on market capitalization, as an indispensable pillar of investor portfolio. Factor-investing is one of the various investment strategies referred to as Smart Beta. “In today’s markets characterized by very low interest rates, higher volatility and no market trend in risky asset markets, investors need to look at new forms of portfolio allocation in order to find diversification and generate performance,” Marlene Hassine, head of ETF research at Lyxor Asset Management; commented. “Smart Beta, which can be implemented, either with a more passive or a more active bias, is one of the new tools at the disposal of investors”, she added.
“Mid-cap stocks exposed to structural change, ‘picks and shovels stocks’ and undervalued frontier market businesses are three areas of investment that would likely slip below the radar of the more passive and large-cap focused emerging market investor”, says Ross Teverson, Jupiter’s head of strategy, emerging markets. “For active, fundamentals-driven investors like us, they represent a great opportunity,” he added.
Undervalued mid-caps exposed to structural change
Emerging market equities have enjoyed strong recovery since their low in January of this year. Despite this, the valuations of many emerging market stocks remain undemanding and we continue to find a number of compelling opportunities, particularly within the mid-cap universe, where strong growth prospects are not yet reflected in share prices. This is in direct contrast to certain EM large- cap stocks with well-recognised growth prospects, which in recent years, have become expensive relative to company earnings, as increasingly risk-averse investors crowded into a relatively small group of large cap stocks that are perceived to be of high quality.
Examples of these mid-cap opportunities are diverse by geography and sector. One stock that we hold in Jupiter Global Emerging Markets Equity Unconstrained is a Brazilian private university operator, Ser Educacional, which we believe is well positioned to benefit from structural growth in Brazilian education spending. Another is Indonesian property developer Bumi Serpong, a mid-cap stock that is exposed to structural growth in mortgage penetration in Indonesia, which is coming from very low levels. The company is a beneficiary of Indonesia’s very strong demographics: high rates of household formation are creating strong demand for the types of properties that Bumi Serpong are building.
‘Picks and shovels’ stocks
They say that in a gold rush, the ones that make the most money are the suppliers of the tools you need to find gold rather than the miners themselves. The modern equivalents of these businesses in EM are companies that give exposure to well-known and significant trends or structural changes like the growth of electric vehicles, the move towards industrial automation or the switch to renewable energy. Take BizLink in Taiwan. A key supplier of wiring harnesses to one of the most advanced manufacturers of electric cars, Tesla, it is held in Jupiter Global Emerging Markets Equity Unconstrained and Jupiter China Select. BizLink may be the less glamorous of the two businesses, but it is making high and consistent margins while Tesla itself, while ground-breaking, is some way from making a profit.
Or there is Chroma, another Taiwan-based company held in Jupiter Global Emerging Markets Equity Unconstrained. Chroma provides testing equipment to a number of different areas within clean technology and renewable energy, including solar power, electric vehicle batteries and LEDs. Because its management team has a culture of paying out free cash flow to shareholders, investors in the company typically receive a decent dividend. What’s more, because Chroma is a key supplier to manufacturers within its business areas, it can afford to make the pricing of the equipment it sells very stable.
Frontier-market banks
Large state-owned banks make up a big part of the Emerging Markets index, which means that these are the banks an investor in an EM ETF might own. Hanging over these largely government- controlled banks, however, is a great unknown. A history of undisciplined or politically incentivised lending has left many of these banks with a level of non-performing loans that is likely to be much higher than official numbers suggest. It is hard to quantify exactly how big the problem will be. A number of frontier market banks, in contrast, trade at similar valuations to their larger EM peers but with better asset quality, higher returns and superior long term growth prospects
Specifically, we like frontier markets banks which either have a strong deposit franchise or are building a strong deposit franchise. Depositors entrust these banks with their money because they provide a good branch network, easy access to money, and are considered a safe place for them to keep their cash. There are good examples in Georgia, where we own Bank of Georgia, in Pakistan, where we own Habib Bank, and in Nigeria, where we own Access Bank. By operating the traditional retail banking model, these banks make a high return by taking deposits on which they pay a low level of interest and then lending to blue chip corporates. It’s also less risky than an alternative model (which is to borrow money from the wholesale money markets and then lend to riskier borrowers). In frontier markets, this operating model has led to high returns and good growth prospects as a result of underpenetrated consumer credit.
New research from global analytics firm Cerulli Associates reports that asset managers have identified registered investment advisors (RIAs), broker/dealer (B/D) mega teams, and home-office due diligence relationships as the groups with the largest pockets of opportunity to generate revenue and increase marketshare. These channels are also leading the trend toward more sophisticated, investment- and data-focused interactions that have traditionally been reserved for firms operating within the institutional space.
“In our survey of national sales managers, 67% rank increasing the technical skills of existing wholesalers to address more sophisticated advisor teams as the top priority,” says Emily Sweet, senior analyst at Cerulli. “We believe this expanding institutional influence in the retail market, especially in the areas growing most quickly, will continue for the foreseeable future.”
Cerulli projects that within these areas of growth, the independent RIA and hybrid RIA channels combined will increase their asset marketshare from 23% in 2015 to 28% in 2020. “While wirehouses still hold a substantial share of assets, RIAs are the growth story,” explains Kenton Shirk, associate director at Cerulli. “To build a relationship within an independent practice, wholesalers need to truly understand a firm’s investment philosophy and decision-making process.”
Cerulli’s latest report, U.S. Intermediary Distribution 2016: Evolving Roles in Distribution, focuses on the convergence of the institutional and retail markets and its influence over distribution strategies. In addition, the report analyzes trends related to advisor product use, portfolio construction, and allocation changes across industry segments.
CC-BY-SA-2.0, FlickrMaurico Assael, Mildred Ottenwalder and Roberto Lizama. $100M Global Private Banking Team joins Investment Placement Group’s Miami Office
Investment Placement Group (IPG), an Independent Broker Dealer and IPG Investment Advisors, a Registered Investment Advisor, announced on Tuesday that former Wunderlich Securities advisors Maurico Assael, Roberto Lizama and registered sales assistant Mildred Ottenwalder have joined the firm’s newly established Miami, Florida office which is managed by Rocio Harb.
“We are very excited to become part of IPG. With our diverse client base in Latin America and the United States, IPG is the right platform and has the expertise to allow us to offer high quality service to our clients” said Lizama.
“The commitment of IPG to Latin American Investors was a key factor in our decision to join the firm. From the ownership, management team and support staff the knowledge of the international markets and needs of the investors are second to none” adds Assael.
“Maurico, Roberto and Mildred are highly capable and experienced team. They are the perfect fit for our firm and I am confident that they will have continued success at IPG”, said Gilbert Addeo, COO and Head of Business Development of IPG.
Michael Parsons, CEO at Wren Investment Office - Courtesy photo. WE Family Offices and MdF Family Partners Join Forces to Support the Launch of a London-Based Independent Family Office
American based WE Family Offices and MdF Family Partners, an independent multi-family office advisor in Spain joined forces last year to broaden resources and enhance client service abroad. The two firms formed a strategic alliance – remaining separate companies but creating ways to collaborate and share resources.
These collaborations include their support of the newly launched Wren Investment Office, a London-based, independent wealth advisory firm serving ultra-high net worth families. The association and collaboration of WE, MdF and Wren represents a global alliance of independent family offices and comes at a time when wealthy families are seeking advisors that combine local roots and a global outlook and capability to help them manage their increasingly globalized wealth enterprises. Though WE and Wren remain separate firms, our association strengthens our ability to serve families all over the world.
Mel Lagomasino, CEO of WE Family Offices, and Michael Zeuner, managing partner of WE, will serve as non-executive directors at Wren. “The launch of Wren Investment Office is an exciting development. The philosophy of sustaining family wealth by managing it like a well-run company has been highly successful here in the US and it is a philosophy our colleagues in Europe fully subscribe to,” Lagomasino comments. “The team at Wren shares our commitment to independence, a simple fee structure and adherence to always putting clients’ interests first. We look forward to working with Wren. Our alliance with Wren is a significant step toward building a truly independent, aligned and global wealth advisory service platform for ultra-wealthy families.”
Wren Investment Office will serve as an independent family advocate, helping families to view their wealth as an enterprise and manage it as they would a business. The three firms, Wren, WE and MdF, will remain separate companies and will continue to advise and serve clients independently, but through their developing alliance will collaborate to leverage the investment opportunities, relationships and services of each firm. This will provide wealthy families access to a global platform with servicing options in the UK, Europe and the United States. This comes as WE Family Offices surpasses $5 billion in assets under advisement, while serving 70 global client families. MdF has assets under management and advice of approximately €1.5billion serving over 30 clients from its offices in Madrid, Barcelona, Geneva and Mexico.
Wren will be operating from its new premises at 8 Wilfred Street, London SW1E 6PL and has Michael Parsons as its CEO.
According to the latest BofA Merrill Lynch Global Research report, cash levels rose from 5.4% in August to 5.5% in September – the two most popular reasons cited for high cash levels are a “bearish view on markets” (42%) and a “preference for cash over low-yielding equivalents” (20%).
Manish Kabra, European equity quantitative strategist, said that, “European investors have increased cash allocations to cover their sector underweights in Banks and Commodity sectors. Macro optimism is firmly at pre-Brexit levels, with economic growth expectations at their strongest since June.”
“Investors see an unambiguous vulnerability to ‘bond shock’ among risk assets, with the most crowded negative interest trades and EM equities susceptible should the Fed and especially the BoJ fail to reduce bond volatility in September,” said Michael Hartnett, chief investment strategist.
Other highlights include:
An all-time high, net 54%, of investors say equities and bonds are overvalued
Equity allocation relative to cash allocation is effectively the lowest it has been in 4 years, and is now at levels which have historically been a good entry point to stocks
83% of investors believe the BoJ and ECB will maintain negative rates over the next 12 months
Global growth expectations continued to rise, with a net 26% of investors expecting the global economy to improve over the next 12 months
Investors cite Long High Quality stocks as the most crowded trade, followed by Long US/EU IG corporate bonds and Long EM debt – all of which are dependent on everlasting negative interest rate policy (NIRP)
Hedge fund exposure to stocks at its highest level since the May 2013 “taper tantrum,” underscoring the market’s vulnerability to a bond shock
Allocation to US equities falls to net 7% underweight from net 11% overweight last month
Allocation to Eurozone equities improves modestly to net 5% overweight from net 1% overweight last month
Allocation to EM equities jumps to the highest overweight in 3.5 years – net 24% overweight from net 13% overweight last month
Allocation to Japanese equities falls to net 8% underweight, the biggest underweight since December 2012
Foto: Property in Europe. PIMCO lanza en Europa una estrategia de deuda estadounidense con gestión activa
PIMCO, a leading global investment management firm, has launched the PIMCO GIS US Investment Grade Corporate Bond Fund, which is a portfolio consisting of high quality USD-denominated corporate bonds. It is designed for investors seeking a high-quality fixed income alternative to government bonds or domestic corporate bonds, with the potential for higher yields and enhanced portfolio diversification. The fund is managed by a team led by Mark Kiesel, Managing Director and Chief Investment Officer Global Credit.
Mark Kiesel said: “With yields on European government and corporate bonds at historic lows, and in some cases negative, the U.S. corporate bond market continues to be one of the main areas offering much needed yield.”
PIMCO’s global investment process involves a three-step process including top-down considerations, bottom-up fundamentals, and valuations. The firm’s specific expertise in credit builds on a team of more than 50 credit analysts and more than 50 credit portfolio managers. In 2012, Mark Kiesel and PIMCO’s credit team were awarded Morningstar’s U.S Fixed Income Fund Manager of the Year.
PIMCO has been managing U.S. investment grade credit strategies since 2000, and has delivered over 1.75 percentage points of outperformance relative to the index, before fees, since inception.
The fund has been added to PIMCO’s UCITS compliant Global Investor Series (GIS) fund range. This Dublin-registered range now comprises 55 sub-funds with $98.5 billion under management as of 31st August 2016. With daily liquidity, investors can gain exposure to a broad range of asset classes, from the more traditional global and regional core fixed income funds, through credit portfolios, to enhanced equity, asset allocation and alternative solutions. The fund will be accessible in a variety of share classes in different currencies, depending on client requirements.
As of September 19, the PIMCO GIS US Investment Grade Corporate Bond Fund is registered in Austria, Denmark, France, Germany, Holland, Ireland, Italy (institutional share class only), Luxembourg, Norway, Spain, Sweden, and the UK.
Foto: Debs (ò‿ó)♪
. ¿Es el retainer el próximo método de compensación?
As the profession of financial planning has evolved from an industry focused on product sales to providing and implementing a client’s financial plan, compensation models have also shifted from a transaction-based model of compensation. Authors Ken Robinson and Jacob Kuebler through the Alliance of Comprehensive Planners explore how financial planning services and compensation continue to evolve in their White Paper “The Financial Planners’ Retainer: A Reflection of Real Value”, published in September.
The predominant method of compensation that has emerged has been the Assets Under Managements (AUM) model, says the document. While there are many advantages to this model, there is no reason to believe it is the ultimate evolutionary development in fee-only compensation. Limited markets, increasing competition, and regulatory concerns have contributed to some advisors’ interest in other fee-only compensation models.
Just as important, disconnects often exist between the value added for clients and the effort required by the advisor to deliver services. Service models have continued to evolve to include the emergence of new values added beyond maximizing economic value. These include attention to the client’s life values, behavior, and how those characteristics affect their financial well-being.
Therefore, the profession is in need of a fee model that represents these new value-added services. The authors present the retainer as a potential solution.
The retainer is a value-based system that increases compatibility with newer service models and aligns the advisor-client relationship, specifically with new fiduciary standards. Further advantages of the retainer model include resistance to commoditization, the ability to provide service profitably to a much broader market,
and adaptability to a wide variety of services the advisor may wish to make available. Not being tied exclusively to the value of assets managed, the retainer removes the implied (and erroneous) understanding that investment management is the sole service of value being provided in a planning relationship.
The work explains there are potential disadvantages to the retainer model. These include saliency of the fee payment, and limitation of the client’s ability to make apples-to-apples comparisons between different advisors’ fees and the benefits offered. Additionally, there is some risk that the advisor will perform less work than he should, or will spend more time than is profitable, when the fee is fixed at the outset. Each of these risks can be mitigated successfully so the retainer model of fee-only compensation can provide the advisor a competitive and financially successful professional practice.
Certified Financial Planner Board of Standards recently announced that there are more than 75,000 active Certified Financial Planner professionals – a historic milestone that marks the highest number of CFP professionals ever serving the public’s need for competent and ethical financial planning.
“Over the years, more and more financial professionals have recognized the tremendous value that the certification holds in advancing their careers and giving them the credibility and expertise needed to help consumers plan for the future,” said CFP Board Chief Executive Officer Kevin R. Keller, CAE. “We are especially proud that our relatively young profession has surpassed 75,000 active CFP professionals. Our efforts to increase access to CFP professionals will only continue as we carry out our mission to benefit the public through certifying individuals who deliver the highest standard of financial planning.”
The first group of financial planning professionals attained CFP certification in 1973 following completion of a Certified Financial Planners (CFP) course at the College for Financial Planning. In 1985, the College entered an agreement to establish an independent, non-profit certifying and standards-setting organization, and transferred ownership of the CFP® marks and responsibility for continuing the CFP® certification program to the new organization, which eventually became known as CFP Board. The total number of CFP® professionals has grown steadily since then. Since 2007, the number of CFP professionals has grown more than 35 percent. As of August 31st, there are 75,467 CFP professionals in the United States.
Gigi Guerra, recent CFP of Miami says: “Helping our profession by being part of a class that moved us past the 75,000th CFP professional is a true honor. This achievement has boosted my confidence as a young Millennial woman who is just entering the workforce,” said Guerra. “It’s an exciting time for CFP Board, and I’m thrilled to be a part of it and our profession, helping people achieve their dreams through financial planning.”
The need for recruiting CFP professionals to the profession has never been stronger as it continues to experience growth trends in hiring, retirement and succession planning.
“As we celebrate this significant milestone, we look forward to the next generation of CFP professionals with the hope that it will be even better positioned to serve the American public by being more representative of the population it serves,” said CFP Board Center for Financial Planning Executive Director Marilyn Mohrman-Gillis. “With the recent launch of the CFP Board Center for Financial Planning – which is working to advance a more diverse and sustainable profession.”
To learn more about CFP Board or becoming a CFP professional follow this link.
Foto: WerbeFabrik. Aberdeen fusiona 10 fondos dentro de su gama de renta fija global
Aberdeen Asset Management is to merge a series of offshore funds based within its global fixed income range.
A spokesperson for Aberdeen confirmed to International Investment that it is to merge together ten of its funds, eight based in Luxembourg and two based in Dublin and trim the global fixed income range down to five funds overall.
As a result of the mergers the company will now domicile all of the funds affected from its Luxembourg headquarters.
Of the Luxembourg-domiciled mergers; the US$14m Aberdeen Global II – Emerging Europe Bond fund is merging into the US$168m Aberdeen Global – Emerging Markets Local Currency Bond fund, the £40m Aberdeen Global – Select High Yield Bond fund into the €1bn Aberdeen Global – Select Euro High Yield Bond fund and the €38m Aberdeen Global II – Euro High Yield Bond fund is merging into €1bn Aberdeen Global – Select Euro High Yield Bond fund.
Luxembourg-domiciled
With the firms Dublin-domiciled range, the £116m Select International Bond fund will be merged into the Luxembourg-domiciled €1bn Aberdeen Global – Select Euro High Yield Bond. The Dublin-domiciled £35m Select Global Sovereign Bond fund will also be merged into the Luxembourg-domiciled $1.6bn Aberdeen Global – Select Emerging Markets Bond fund.
Confirming the move, Aberdeen Asset Management spokesperson said: “The mergers are part of a project to rationalise Aberdeen’s fixed income fund range”. Investors in the affected funds have been notified of the company’s plans.
