CC-BY-SA-2.0, FlickrPhoto: Nicolas Vollmer
. UBS AM Names New Asian Fixed Income Head
UBS Asset Management has appointed Hayden Briscoe as head of Fixed Income Asia Pacific.
Briscoe will be based in Hong Kong and will report to John Dugenske, global head of Fixed Income.
He will oversee all fixed income portfolio management and business activities in the region.
Briscoe joins from Alliance Bernstein where he worked eight years and held the role of director of Asia Pacific fixed income. He also worked at Schroders, Colonial First State and Bankers Trust.
Rene Buehlmann, head of Asset Management, UBS Asia Pacific, commented : “His experience in China complements our aim to be a global leader for China related investments, in both RMB fixed income and equity offerings.”
CC-BY-SA-2.0, FlickrFoto: Thomas Leuthardc. ¿Cómo evolucionan los mercados de bonos tras el Brexit?
At the half-way point of 2016, Investec‘s Multi-Asset team revisit their key investment themes for the year to see how they have fared over the past six months. Most played out as they expected, but in some cases the markets have moved in unexpected ways…
The need for portfolio resilience At the end of 2015, investors were confronted by a world that appeared to be full of potential pitfalls. To preserve and grow the value of their assets, they needed robust portfolios that could outperform the market in challenging environments and deliver resilient returns in the face of unforeseen events.
The investment environment in 2016 has been no easier. A slowing Chinese economy, the Bank of Japan’s surprise move to introduce negative interest rates, political and economic uncertainty in the US and the UK’s momentous decision to leave the European Union have all played their part in increasing global financial instability and volatility.
Investec’s approach to building portfolios that are resilient in the face of such tumultuous events requires a strong understanding of investment risks, beyond estimates of volatility. Portfolio construction should balance the trade-offs between potential returns and individual assets’ contribution to overall risk exposure. But they also believe that portfolios need to be diversified and to avoid those parts of the market that could be vulnerable to sudden liquidity squeezes. Investors should also have strategies to cope with periods of market stress.
Diverging monetary policies Six months ago, Investec believed the US dollar would reach new cyclical highs, as US monetary policy slowly normalised. Then, Europe had only just started to run down private-sector debt and seemed at least three years behind the US. Asia, and China in particular, were further behind Europe. These markets’ debt to gross domestic product ratio were still high, suggesting that monetary easing would need to continue for several years.
Since then, global economic headwinds and a weaker domestic backdrop has prompted a more dovish tone from the US Federal Reserve in the first quarter of 2016, which has slowed the pace of monetary policy normalisation. This means that the phenomenon of diverging monetary policy is less pronounced than it was at the beginning of the year.
Selectivity needed in emerging markets Their belief that the emerging market universe is disparate, and offers a wide range of investment opportunities still holds true. They continue to favour economies that are natural extensions of developed markets, such as Hungary or Romania are for the European Union. Nevertheless, Investec believes they need to continue to be selective in emerging markets, partly due to different sensitivities to demand for Chinese commodities and the US dollar.
Finding bottom-up opportunities Investec continues to believe that a bottom-up approach to choosing investments can help penetrate the short-term macroeconomic noise. Emerging market equities and resource stocks led global stock markets higher from mid-January, at a time when Chinese data remained negative and many analysts were forecasting a US recession. However, they still acknowledge that the environment has, even if temporarily, become marginally less supportive for stock picking.
ESG going mainstream As they predicted, 2016 is the year that many investors focused on taking account of environmental, social and governance (ESG) issues. Integrating ESG assessment into investment processes is increasingly being seen as a way of driving long-term value creation. German auto manufacturer Volkswagen could be seen as a game changer triggering increased attention on corporate behaviour and practices. The Paris Agreement on Climate Change in December 2015 has also focused investors’ minds on the environmental challenges surrounding global warming.
Photo: NicolaCorboy, Flickr, Creative Commons. Pioneer Investments and Santander Asset Management Will Not Merge
After 20 months in negotiations, UniCredit announced on Wednesday that it has agreed with Banco Santander and Sherbrooke Acquisition to terminate the agreements 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.
According to a press release by Unicredit, “The parties held detailed discussions to identify viable solutions to meet all regulatory requirements to complete the transaction, but in the absence of any workable solution within a reasonable time horizon, the parties have concluded that ending the talks was the most appropriate course of action.”
Further to UniCredit’s announcement on 11 July 2016 of a Group-wide strategic review, the results of which will be communicated to the market before the end of 2016, Pioneer will now be included in the scope of the strategic review to explore the best alternatives for all Pioneer stakeholders including a potential IPO. “This is to ensure the company has the adequate resources to accelerate growth and continue to further develop best-in-class solutions and products to offer its clients and partners.”
Meanwhile in Spain, and during Santander’s earnings release presentation, José Antonio Álvarez, Santander’s CEO commented that “we will cancel the transaction. We will develop Santander AM along with our partners and strive to build an asset management business that excels in serving our clients.”
Pioneer has presence in 28 countries and an experienced team of over 2,000 employees, including more than 350 investment professionals. It manages €225 billion in assets and is known internationally as one of the leading fixed income managers across all strategies. It also offers strong capabilities in European, US and global equities, as well as multi-asset and outcome-oriented, non-traditional products.. Meanwhile, Santander Asset Management has presence in 11 countries, and assets of €172 billion across all types of investment vehicles. Santander Asset Management has over 755 employees worldwide, of which around 220 are investment professionals.
Foto: id
. BMO Global Asset Management lanza el fondo Global Absolute Return Bond
BMO Global Asset Management has launched the BMO Global Absolute Return Bond fund further strengthening its absolute return offering for retail and institutional investors looking for attractive levels of potential return in today’s low-yield environment. The fund is a UCITS SICAV domiciled in Luxembourg and the Financial Conduct Authority recognizes it. It is a liquid investment strategy with daily dealing available.
BMO Global Absolute Return Bond fund’s investment approach is unconstrained by a benchmark or particular maturity, credit rating band, sector or geography, but has strict risk limits. A long bias, combined with the ability to goshort rates and credit, gives greater flexibility and downside protection.
Investment in global credit is combined with thematic overlays within the portfolio to provide diverse sources of return within a disciplined risk management framework. The core credit portfolio is a ‘buy and maintain’ strategy which focuses on exploiting persistent anomalies in investment grade and high yield securities and is well diversified with over 100 issuers to reduce risk. Thematic overlays contribute to return and aid diversification through active management of credit, interest rate and currency risk. Disciplined risk management is used across the portfolio to calibrate risk up or down as necessary.
BMO Global Asset Management’s Fixed Income team in London manages the fund. The lead managers are Keith Patton and Ian Robinson. Strategic decisions across each of the underlying strategies are delegated to experts in global credit, currency, rates and risk management.
“The fund aims to deliver stable returns whilst having a different profile to that of global bond markets,” said Keith Patton, co-manager of the BMO Global Absolute Return Bond fund. “The combination of multiple strategies, working together, provides investors with the opportunity for a smoother overall return profile over time relative to traditional investments. In addition, the unconstrained approach allows for greater diversification across strategies and for the investment teams to target areas where they have the greatest conviction.”
Ian Robinson, co-manager of the BMO Global Absolute Return Bond fund, added: “The focus on shorter dated credit securities reduces the cyclicality generally associated with longer maturity bonds.”
The launch is part of the continued drive to build BMO Global Asset Management’s offering to, and coverage of, wholesale and institutional clients across EMEA over the past year.
“We are seeing huge demand from our clients for absolute return strategies, as they look for solutions that can provide greater certainty of outcome and positive returns in a challenging market environment,” said Mandy Mannix, Head of Client Management, BMO Global Asset Management (EMEA).
Take-up of foreign investment funds has trumped the lackluster mutual fund industry growth in Southeast Asia in 2015, Cerulli Associates found in its recently released report Asset Management in Southeast Asia 2016.
While year-on-year growth of mutual fund assets under management declined from 21.2% in 2012 to 6.4% in 2015, foreign equity fund assets in Thailand surged from THB111.1 billion (US$3.1 billion) in 2014 to THB226.2 billion in 2015. In Malaysia, wholesale feeder assets nearly quadrupled from MYR812.5 million (US$188.8 million) in 2014 to MYR3.1 billion in 2015, and private unit trust foreign exposure increased from 14.9% to 16.8% over the same period.
“Despite these spectacular growth rates, assets of foreign-invested feeders in Thailand and Malaysia have largely been concentrated in the hands of the larger players or among the few biggest funds,” said Manuelita Contreras, an associate director at Cerulli in Singapore. The US$1.5 billion feeder fund assets managed by J.P. Morgan Asset Management in Thailand and Malaysia, for example, mainly came from four of its funds: JPMorgan Global Healthcare Fund, JPMorgan Global Income Fund, JPMorgan ASEAN Equity Fund, and JPMorgan Asia Pacific Income Fund.
Meanwhile, in the Philippines, no less than 13 foreign-invested feeder funds and two funds of funds were launched as of end-2015 since feeder fund unit investment trust funds were first introduced in late 2013, while at least four Indonesian managers have launched foreign-invested Shariah-compliant funds as of April 2016.
“For foreign managers looking to engage third-party fund distributors in Southeast Asia, a long-term track record and global brand recognition will come in handy, though we understand that Thai managers are also open to appointing less well-known managers,” said Contreras. Southeast Asian managers also generally prefer to work with fund managers with an Asian presence and a shorter turnaround time.
Negative interest rates– though unsettling for many – can actually be an economic boon, according to a new study by National Center for Policy Analysis(NCPA) Senior Fellow David Ranson.
“Low interest rates are not in themselves bad for the economy. Indeed, the same can be said of high interest rates; financial markets cannot operate efficiently unless rates are in line with expected inflation and, at times, deflation,” says Ranson.
The study points to Switzerland as an example of naturally negative interest rates. “To their own surprise, the Swiss accomplished it by maintaining an exceptionally strong currency, now roughly at par with the dollar. Life went on,” writes Ranson. “The Swiss currency has long been one of the strongest anywhere, and inflation has been low and sometimes negative for years. It is negative right now, but it is mostly market forces that drove Swiss nominal interest rates below zero. Indeed, in these hitherto rare cases where prices are consistently on the decline, it is natural for nominal rates to be negative.”
While there are mental, cultural and institutional barriers to negative interest rates, there are no economic barriers to negative interest rates, adds Ranson. “However inconsistent it may seem at first, there is no inherent conflict between opposing the Fed’s former zero interest-rate policy and cautiously welcoming negative interest rates, in the event that deflationary conditions last.”
CC-BY-SA-2.0, FlickrFoto: Investopedia. ¿Qué debe hacer un centro financiero para evitar ser percibido como un paraíso fiscal?
What should a financial centre in danger of being perceived as a ‘tax haven’ do to manage the outpouring of potentially damaging headlines? The Global Financial Centres Index (GFCI) indicates that the ratings of these centres tend to rely largely on the perceptions of people involved in financial services. These perceptions are affected by press coverage and the work of the Organization for Economic Co-operation and Development (OECD) and other international bodies.
In GFCI 19, published in March 2016, the Caribbean centres of the British Virgin Islands, the Cayman Islands, Bermuda and the Bahamas all suffered significant declines in their ratings with Panama showing a larger decline than any of them. The British Crown dependencies of the Isle of Man and the Bailiwicks of Jersey and Guernsey had a similar experience with Gibraltar, Malta, Monaco and Liechtenstein completing the picture with downgrades of their own. Looking back over the last three years, almost without exception, all of the Caribbean centres and the Crown dependencies have moved in the same direction in the GFCI – moving up together and down together clearly affected by the feelings and perceptions of the industry at the time of the survey.
If this were not unfortunate enough, the recent scandal has undoubtedly led to the deepening of these negative perceptions. In the light of the recent adverse publicity as a result of the ‘Panama paper’ leaks, what should a financial centre, which is likely to be drawn into the debacle do? For Trinidad and Tobago, there are three obvious options:
Lie Low and stay under the radar – it is likely that many centres will decide that in the face of such a media storm, it is best to lie low and stay out of the news as much as possible. This is perhaps understandable and may be a viable short term strategy.
Protest – several centres proclaim their innocence. In the current climate these protests of “it’s not us!” do not gain much sympathy. Several of the centres protesting the loudest do not deserve much sympathy!
Differentiate – a valid longer term strategy is to become a different type of financial centre. Encourage finance for good purposes and make it much harder for money launderers and tax evaders to operate in your territory so that when the next wave of bad publicity arrives (as it surely must), you can genuinely hold up your hand and claim that you are different.
The newly formed financial centre of Trinidad and Tobago is being developed using global standards and best practices and will have a modern, principle based regulatory framework which will be supported by enforcement action against firms that breach the legislation and regulations. This model has already been used to successfully establish the Dubai International Financial Centre. The legislation for the Trinidad and Tobago IFC has been drafted and is awaiting approval by legislators.
CC-BY-SA-2.0, FlickrFoto: PublicDomainPictures / Pixabay. 2016, el año del oro
Financial markets are vulnerable to unpredictable events that shake the international geopolitical stage. The most recent example was the outcome of the UK referendum on European Union membership. As noted by the International Monetary Fund (IMF) in its Global Economic Prospects report, “the negotiations on post exit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increacing financial market volatility.”
This and other political uncertainties in the developed world, such as the outcome of the US presidential elections or the fact that Spain has been unsuccesful in defining its government, result in the need for diversification of portfolios. That is, lay investor’s eggs in several baskets and favor safe-haven assets.
2016 is on track to be the year of gold. In the first three months of the year, gold increased in value by 22%, resulting in its best quarter in 30 years. During this period, deposits of listed products invested in this metal reached 22 billion. Just in the week following the UK’s referendum, investors allocated $2.5 billion to ETPs with Gold exposure. While European equities have had a negative year. The heightened noise we see in the markets is likely to continue so adding a hedge such as gold, could dampen volatility.
Beside the temporary circumstances, there are a number of structural factors ensuring gold’s long-term price stability, such as the proliferation of bonds with negative performance as well as the pace of the US interest rates.
One of the most relevant funds in this area is the BGF BlackRock World Gold Fund. In order to maximize the total profits of their investors, this fund invests more than 70% of its total assets in shares of companies around the world whose main activity is the extraction of gold. The fund may also invest in shares of companies whose predominant economic activity is the mining of other
CC-BY-SA-2.0, FlickrPhoto: Jorge Gobbi
. Will Erdogan Overplay his Hand in Turkey?
The dramatic events of the failed coup in Turkey and its aftermath has weighed heavily on all of the country’s asset sectors – equity, debt and currency. For the Eaton Vance Global Income Team this is not an unreasonable reaction, given many uncertainties of the political landscape. A member of the Global Income team is visiting Ankara now to assess the situation.
Turkish President Recep Erdogan announced a three-month extension of the state of emergency, following days of rounding up thousands of perceived political adversaries in the military, police and universities. As the situation evolves, Eaton Vance’s team will be focusing on two broad issues:
The U.S./Turkey relationship. It was strained before the coup, and is under even more stress now. Planes involved in the coup flew from the NATO airbase in which the U.S. military operates, and Turkey subsequently cut the power to the facility. Turkey is also seeking extradition from the U.S. of Fethullah Gulen, an Islamic cleric accused by Erdogan of being behind the coup.
Possible fissures in Turkish society. The relevant factions in Turkish society can be broadly divided into Erdogan and his ruling AKP party; the opposition, dominated by secular Turks; and Gulenists – followers of the exiled cleric. Erdogan’s opposition came out against the coup, despite the misgivings many have about his authoritarian style of rule.
“Most believe the purge is the right course of action for now, and believe the Gulenists are the problem – society is not fractured on this issue. On the other hand, we hear estimates that some 50,000 people are affected by the purges, so the impact is widespread – a scenario in which Erdogan goes too far would be worrisome.” The team explains.
For the team, the bottom line is: Turkey’s reputation as a democracy capable of reasonable growth and holding to tight budgets is obviously overshadowed by the latest developments. “We believe the U.S./Turkey relationship will survive this episode because it continues to serve the interests of both countries. We are watching very carefully to see if Erdogan overplays his hand and threatens the cohesiveness in Turkish society that currently works in his favor.”
CC-BY-SA-2.0, FlickrPhoto: Ennor, Flickr, Creative Commons. Allianz Global Investors: Institutional Risk Management Strategies Need Urgent Overhaul
Institutional risk management strategies are in need of urgent overhaul, according to a study of institutional investors conducted by Allianz Global Investors.
Conducted in the first quarter of 2016, AllianzGI’s 2016 RiskMonitor asked 755 institutional investors about their attitudes to risk, portfolio construction and asset allocation. The firms surveyed represent over $26 trillion USD of assets under management in 23 countries across North America, Europe and Asia-Pacific.
The Risk Monitor report found that since the 2008 global financial crisis, risk management practices have changed very little. Pre-crisis, investors’ top three strategies were diversification by asset class (57%), geographic diversification (53%) or duration management (44%). Despite the fact that 62% of respondents admit these strategies didn’t provide adequate downside protection, their use has actually increased post-crisis, with 58% of investors reliant on diversification by asset class, 56% using geographic diversification and 54% embracing duration management.
As a result, two-thirds of institutions are calling for innovative new strategies to help balance risk-return trade-offs, provide greater downside protection and replace traditional approaches to risk management. In fact, 48% say their organization is willing to pay more if it means access to better risk management strategies and 54% say their organization has set aside additional resources to improve risk management.
Commenting on the findings, Neil Dwane, Global Strategist AllianzGI, said:
“Investors are facing a world where average market returns continue to be lower and volatility is higher. In this environment, fulfilling investment objectives will require taking risk and applying truly active portfolio management,which needs to go hand in hand with an adequate strategy for managing that risk. Unfortunately, our RiskMonitor results show that a considerable number of investors do not show much confidence in their ability to manage risks effectively in both up- and down markets.”
“Encouragingly, institutional investors do seem to recognize the need for more effective risk management solutions. However, it is time for asset managers to innovate and offer solutions and products that will help clients to navigate the low yield environment without exposing them to inappropriate levels of volatility. This can take different forms, but the next few months and years will certainly be a litmus test for the growing offering in sophisticated multi asset solutions.”
Main investment concerns and allocation trends
There are countless risks lurking on the horizon, but a few are on the top of many investors’ minds as they navigate the markets in 2016 and try to meet their return objectives. Globally, 42% of those surveyed say market volatility is their main investment concern. Add to that the other big concerns this year – low yields (24%) and uncertain monetary policy (16%) and there is little doubt that investors may be in for an even bumpier ride compared to the last few years.
In light of the choppy markets at the start of this year, 77% of investors are apprehensive about equity-market risk, citing it as the top threat to portfolio performance this year. Also high on the list of threats that those surveyed believe could derail the performance of portfolios were interest rate risk (75%), event risk (75%) and foreign-exchange risk (74%).
Despite the concerns around market turbulence and equity market risk by institutional investors, many have not been persuaded to take a wide-spread defensive attitude. Institutional investors report their primary investment goal for 2016 is to maximize their risk-adjusted returns. Further, their inclination towards equities suggests their risk appetite has not been completely dampened by the market volatility. In particular, with 29% and 28% respectively, US equities and European equities garner the top spots among the investments earmarked for long exposure again this year.
