Foto: gags9999
. UBS Wealth Management Americas reduce la contratación de advisors en un 40%
UBS Wealth Management Americas (WMA) has announced it is introducing a new operating model designed to move decision-making and resources closer to clients and drive organic growth through an increased focus on advisor retention. Specifically, WMA is changing its field structure and its compensation plans for financial advisors and field management, as well as reducing advisor recruiting by 40 percent.
WMA initiated several changes as part of the new operating model, including:
Delayering the field structure:WMA will now be organized into four divisions, 43 markets and 208 branches. Previously, its structure included two divisions, eight regions, 63 complexes and 189 branches. By eliminating the regional layer and realigning into larger markets, WMA is giving field leaders broader spans of control and moving decision-making authority closer to clients.
Enhancing and simplifying FA compensation: As part of a shift in focus from recruiting to retaining and rewarding its best advisors, WMA has launched a simpler advisor compensation plan that is easier to understand and rewards productivity, growth and loyalty. The plan includes increased payouts for advisors with the largest books of business, incentives for advisors to form teams, which has been shown to benefit clients, and an enhanced program for advisors seeking to transition out of the business and transfer their practice to another UBS advisor.
Aligning Field Manager compensation: WMA is modifying its compensation plans for field leaders so that they are both rewarded and held accountable for the decisions they make.
Shifting home office resources to the field: WMA is streamlining management in its home office in order to reinvest in staff and resources that make a tangible difference for clients and advisors.
As part of the new field structure, Brian Hull will continue as Head of the Client Advisory Group, overseeing four divisions, led by: Jason Chandler (Northeast), Bill Carroll (Central), Brad Smithy (Southeast), and Lane Strumlauf (West). John Mathews will continue as Head of Private Wealth Management.
Generali Investments Deutschland Kapitalanlagegesellschaft mbH (GID) has been merged into Generali Investments Europe S.p.A. Società di gestione del risparmio (Generali Investments) effective from the beginning of June 2016. The transaction is part of the Generali Group’s strategic decision to streamline its global asset management operations and has been enabled by recent regulatory changes facilitating the passporting of funds across Europe.
Santo Borsellino, CEO of Generali Investments, has commented: “The merger of GID into Generali Investments is another step forward in the process aimed at creating the pan- European and borderless asset management hub of the Generali Group. We have now simplified our structures in Germany, aiming at achieving better coordination across the company and serving our internal and external German clients more efficiently.”
GID was an asset management company belonging to the Generali Group, operating in Germany and acting as the management company for third-party and Generali Group insurance portfolios. As of year-end 2015, GID counted on 47 professionals and approximately €33 bn of total AuM. For most of GID’s AuM Generali Investments acted as the delegated investment manager. Furthermore, most of GID’s AuM consisted of German Spezialfonds (AIF) and mandates set up for the benefit of the Generali Group insurance companies.
Generali Investments is one of the first players in the European asset management industry to apply, at the same time, the passporting procedures as per the recently introduced UCITS and AIFMD EU directives. As a result, Generali Investments will offer its German clients, and manage, a comprehensive range of investment solutions including UCITS and AIFMD- compliant Germany-domiciled investment funds, such as the Spezialfonds, previously administered by GID as a Germany-based asset management company.
CC-BY-SA-2.0, FlickrPhoto: Wajahat Mahmood. Frontier Markets: Kenya and Their Overcoming of the Infrastructure Deficit
Before the team lead by Stephen Bailey-Smith with Kenyan policy makers at the African Development Bank Annual meetings, Global Evolution was positioned long duration in the local bond curve, and overweight in the Eurobonds. However, after their meeting, they reinforced “our constructive sentiment towards the country’s longer-term prospects and happy with our investment positions.”
The key message from Kenya’s policy makers is that the high twin deficits are a necessary short-term evil in order to overcome the country’s infrastructure deficit. The strategy is being broadly practiced across the African continent. “But Kenya is one of the few countries where we believe it will proceed without jeopardizing macroeconomic stability.” Says Bailey-Smith.
“Our view is not uniformly held by the market and/or the rating agencies, who are concerned by the rate of debt accumulation, especially ahead of the elections in August 17.Certainly, the plan to spend KES45bn (USD450m) on elections discussed during our meetings does seem a tad excessive and reiterates for us one of the key negatives for the credit: the deeply ingrained ethnic fault lines in the political system, which raise governance costs and have arguably been exaggerated under the shift towards more local government.” He explains.
For the strategist, it is important to note that Cabinet Secretary Rotich will deliver the final budget to parliament In June and we suspect it will be more constrained than the April draft, which proposed a budget deficit of 9.3% of GDP. Moreover, the outcome for FY15/16 looks more like a deficit of 6.9% of GDP rather than the planned 7.9% of GDP reflecting the ongoing struggle to deliver on spending pledges. “We remain reasonably confident that the government will not allow their debt financing positon to become disorderly. Crucially, there appears to be a couple of prudent guidelines including recurrent spending being met by revenue and debt in NPV terms not exceeding 50.0% of GDP.”
Since the provisional budget was released there also appears to have been a change in the plans for deficit financing with more coming from concessional and less from commercial sources. Some 40.0% will come from domestic borrowing. Of the 60.0% external borrowing, some 46.0% will have a concessional element. “It is also important to take into account the huge investment spending going into the Single Gauge Railway which has a budget of around KES180bn or 2.6% of GDP. We remain reasonably constructive on the combination of the revamped rail and port facilities, plus the marked progress in energy generation and distribution to deliver significant productivity growth to the economy.”
Certainly this was the view of the relatively new CBK Governor Njoroge, who took up his position after nearly 20 years working at the IMF as a macroeconomist. Well known for his strict religious lifestyle and tough stance on corruption, “his appointment is positive not least because it demonstrates the President’s priorities” says Bailey-Smith.
Interestingly, the Governor feels the recent decline in the C/A deficit to 6.8% of GDP in 2015 from 9.8% of GDP in 2014 will continue despite the large fiscal deficit. He expects the C/A deficit to be around 5.5% in 2016 and 5.8% in 2017.
The improvement comes from a combination of lower imports (especially fuel), higher service and remittance inflows, albeit the improvement is partly due to better measurement. Interestingly, there have also been upward revisions to the FDI numbers suggesting the country now runs a much smaller basic balance deficit. He also suggested foreign holdings of local debt were a very minor 7.0% of total, suggesting limited currency vulnerability from global market risk.
“The reasonably contained BOP suggests continued currency stability, which should allow inflation to fall further and allow the CBK to continue easing monetary policy in coming months.” Bailey-Smith concludes.
Peru’s president-elect, Pedro Pablo Kuczynski, faces the delicate task of balancing fiscal stimulus with prudent maintenance of public finances, Fitch Ratings says. Moreover, he will be tasked with ensuring that infrastructure investments and proposed tax-regime changes yield sustainable growth beyond their short-term impact. In the medium term, the sovereign rating will depend in part on the government’s ability to adjust public finances to lower copper mining revenues.
Peru’s creditworthiness is based on its track record of macroeconomic policy credibility, consistency and flexibility, as well as strong fiscal and external balance sheets. These factors have enabled the country to navigate risks such as its high commodity dependence, low government revenue base and financial dollarization.
Kuczynski’s party indicated it will rely on fiscal stimulus to offset the negative impact of decreased copper prices through a ramp-up of public investment and adjustments to the tax regime to favor small-business formalization and private investment. Rising copper production and increased public investment aim to achieve growth of 3.5% in 2016 and 4.0% in 2017. While Peru’s growth averaged 5.8% from 2011 to 2015, Fitch Ratings expects the economy will continue to outperform the ‘BBB’ median, with 2.4% and 2.9% growth in 2016 and 2017, respectively.
Peru maintains low general government debt of 22.8% of GDP in 2015. Savings, including a 4%-of-GDP stabilization fund and a large cushion of local and regional government deposits, would allow Peru to implement a moderate, short-term, counter-cyclical fiscal policy. However, the interim pace of fiscal deterioration and the medium-term consolidation strategy of maintaining fiscal credibility and policy consistency should be key in assessing Peru’s credit profile.
The president-elect and new Congress will be inaugurated on July 28, and the executive must publish a five-year policy agenda within 90 days of that date.
Sustaining Peru’s growth trajectory will depend upon the success of initiatives that include improving the country’s transit, energy and logistics infrastructure while raising the productivity of alternative sectors such as tourism and agriculture. It will also depend on creating conditions that will move labor formalization forward and broaden the tax base. Moreover, an improvement in credibly managing and resolving social conflicts in mining investments would be critical to the recovery of the country’s competitive mining sector.
The Congress will play an important role in these major reforms. On April 10, Kuczynski’s party, Peruanos por el Kambio, received a 15% minority share of deputies in Peru’s unicameral Congress, while the center-right party, Fuerza Popular, led by Keiko Fujimori, won a simple majority. However, the left-leaning Frente Amplio, with strong support in the southern mining provinces obtained similar representation as Kuczynski’s party. Therefore, the passage of the president-elect’s agenda will depend on how well Kuczynski’s administration builds consensus on key legislative reforms.
Foto: Clarissa Blackburn
. Lazard Asset Management lanza un nuevo fondo global multiactivo
Lazard Asset Management (LAM) has announced the expansion of its multi asset offerings with the launch of the Lazard Global Dynamic Multi Asset Portfolio.
The Lazard Global Dynamic Multi Asset Portfolio (the “Fund”) is an addition to the Lazard Multi Asset platform of strategies that deploy capital based on the team’s forecast of expected global market risks, returns and opportunities. The firm’s multi asset team manages it.
“We are focused on constructing a portfolio with the objective of delivering a consistent level of volatility regardless of market environment,” said Jai Jacob, Managing Director and Portfolio Manager/Analyst. “We put risk management at the center of our approach by targeting volatility to an 8-12% band. We feel that this approach helps alleviate drawdown risk, which is one of the major concerns for global investors.”
“The Fund marries our macroeconomic insight to our bottom-upsecurity selection across the global capital markets opportunity set to seek strong risk-adjusted returns for our investors,” said Ronald Temple, Managing Director and Co-Head of Multi Asset Investing. “We achieve this by allocating capital across asset classes and securities based on our market forecast,” he added.
As of March 31, 2016, LAM and affiliated asset management companies in the Lazard Group managed $191 billion worth of client assets.
The secondary debt market Debitos is to cooperate with the DDC Financial Group from Prague, which focuses on markets in the CEE region. Among other activities, the service company organises Forums across Europe & USA on the subject of buying and selling distressed investments.
By working with this new strategic partner the Frankfurt-based fintech company intends to focus more closely on other European countries. “We are looking forward to doing business with the DDC Financial Group. This partnership helps us to bridge the gap between the capital needed in the CEE region and specialised investors from US/UK markets. We were particularly impressed by DDC’s innovative online and multimedia offering and its Forum format. This is an important step for us to establish our business model in other countries”, said Timur Peters, managing director of Debitos GmbH. Already around one in ten of the 390 investors registered on the online portal come from outside Germany – mostly of them from English-speaking countries.
In the USA there is already an established market for distressed investments and this alternative asset class now plays an important role there in corporate turnarounds. Distressed investments are also gaining traction in Europe: DDC Financial Group helps its customers to open up new markets in this area and also supports them with market research.
CC-BY-SA-2.0, FlickrPhoto: Rakib Hasan Sumon. Meeting the Challenge of Feeding the Planet
When you think about it, the expansion of agricultural output since the Second World War has been nothing short of miraculous. However, the system underlying that expansion is highly vulnerable to factors that are now staring us in the face. These include a dependence on relatively stable climatic conditions, the consequences of single-crop practices, excessive use of antibiotics, fertilisers and pesticides, and fast and efficient transport explains Alexandre Jeanblanc, SRI investment specialist in Paris at BNP Paribas Investment Partners.
The Food and Agriculture Organisation (FAO) now estimates that to feed humanity in 2050 agricultural output will have to expand by 70%. As this target will have to be achieved without placing additional burdens on the global environment, it will doubtless require many simultaneous initiatives such as:
supporting broader-based efforts to limit climate change, including better energy usage
restricting farmland expansion while increasing yields and reducing agricultural pollution to preserve ecosystems
reducing water usage to ease pressure on water tables
preserving topsoil quantity and health, in part by enhancing fertiliser efficiency
moderating the use of livestock antibiotics
halting the ecological impoverishment of the oceans and regulating fish-farming
“To meet these enormous challenges, agricultural production systems will have to evolve and adapt, not least by expanding research into “sustainable” farming. Some solutions already exist, as a number of successful developments have already demonstrated” writes Jeanblanc in his company blog. These include:
the domestication of water in Israel,
drip irrigation, which is increasingly common in California,
recycling containers in the Nordic countries,
the replacement of chemical fertilisers with organic ones,
permaculture (high yields but labour intensive),
the development of more efficient systems for food preservation,
precise systems for dosing inputs.
These solutions will have to be rolled out on a large scale to safeguard the environment against the impact of higher agricultural output. “New forms of decentralised and smaller-scale agriculture may equally be worth exploring. There is no single solution, but multiple strategies – from the way land is used, to new ways of thinking, making financing available and developing accessible technologies. Public education is also vital – both to reduce food wastage (one third of food currently produced is thrown away) and change dietary habits (eating less meat would help to optimise grain consumption). But none of these alone holds the key to meeting future challenges” says the expert.
“We are probably just at the start of a vast transformation in farming methods. Farming tomorrow will have to be efficient, economical and environmentally friendly. Technologies continue to improve and offer prospects for progress that would have been unimaginable just 10 years ago. But they will require heavy capital outlays. Will governments be able to rise to these challenges and thus support their farmers? Will they be able to choose unconventional environmental solutions (such as permaculture, for example)? Will consumers agree to pay more for food? The portion of GDP from agriculture has shrunk constantly over the past 50 years to less than 2% in 2014 in many developed countries. Has the time come to change our ways of thinking and our development models?” He wonders.
It is in companies that are firmly committed to meeting these challenges that BNP Paribas Investment Partners’ environmental funds invest.
Although most companies have perfected the art of managing analysts’ expectations, the corporate earnings season is producing fewer surprises although the general trend of a slowdown in profits seems to be continuing. This is the view of Guy Wagner, and his team, published in their monthly analysis, ‘Highlights’.
After the rebound in February and March, equity markets saw little change in April. The S&P 500 in the United States, the Stoxx 600 in Europe, and the MSCI Emerging Markets (in USD) gained respectively during the month, while the Topix in Japan gave up a bit. “Since most companies have perfected the art of managing analysts’ expectations, the corporate earnings season is producing fewer surprises although the general trend of a slowdown in profits seems to be continuing. The main support for the equity markets is the lack of alternatives, even though the deterioration of economic fundamentals is of increasing concern”, says Guy Wagner, Chief Investment Officer at Banque de Luxembourg and managing director of the asset management company BLI – Banque de Luxembourg Investments.
Stabilisation of China’s economy is due to the government’s stimulus measures Although the global economy is continuing to grow, there has been notable divergence in the different regions’ performance in recent weeks. While growth in US gross domestic product (GDP) slowed on the back of weak investment and exports, China’s GDP climbed. “However, the stabilisation of China’s economy is once again due to the government’s stimulus measures which are exacerbating the country’s excessive debt problem”, believes the Luxembourgish economist. In Europe, economic growth is stable despite a host of political crises. In Japan, the hoped-for economic recovery under the ‘Abenomics’ plan has not yet materialised.
Europe: no prospect of a change to the ECB’s accommodative monetary policy stance As expected, the US Federal Reserve kept its key interest rates unchanged at its April meeting. Fed Chairman Janet Yellen left the door open for a potential increase in interest rates during the year, although she remained very reticent about such a probability. In Europe, in response to a raft of criticism in recent weeks, European Central Bank’s (ECB) President Mario Draghi justified the rationale of the negative interest rate policy. Guy Wagner: “There is no prospect of a change to the ECB’s very accommodative monetary policy stance of recent years.”
European government bonds could despite weak or even negative yields gain Bond yields rose slightly in April. Over the month, the 10-year government bond yield inched up in Germany, in Italy, in Spain and in the United States. “In Europe, the main attraction of the bond markets, despite their weak yields, lies in the prospect of interest rates going deeper into negative territory and this being implemented on a greater scale by the ECB during 2016. In the United States, the higher yields on long bond issues give them some residual potential for appreciation without having to factor in negative yields to maturity”, concludes Guy Wagner.
CC-BY-SA-2.0, FlickrPhoto: Robert S. Donovan. Asia is Primed for Innovation
The massive buying power of Asian consumers has far-reaching significance, especially for aspiring entrepreneurs focused on ground-breaking new products. Innovators have existed in every market in Asia, most notably in South Korea, Japan and Taiwan. However, the overall value created has been constrained by their smaller market size since such homegrown inventions have been unique to their domestic markets. Today, this has completely changed, explained Michael J. Oh, CFA, portfolio manager at Matthews Asia. Key innovators in Asia now target their own regional market—and Asia’s middle class is quite homogeneous in many respects, meaning they may share similar cultural backgrounds, tastes and aspirations. Let’s look at South Korea’s cosmetics industry for example.
Human resources, another key source of competitiveness for innovators in Asia, is something that tends not to be in short supply in Asia. Each year, a highly educated workforce of millions hails from North Asian countries and India. South Korea’s young population, for example, has a notably high proportion of college graduates and the country has one of the highest ratios of higher education degrees earned among OECD (Organization for Economic Cooperation and Development) countries and the highest in Asia for those aged 25-35, according to the OECD and UNESCO.
According to the expert, asian companies are also increasing spending on research and development. In fact, many policymakers in Asia have made innovation a national, strategic priority. The global share of research and development spending by Asian companies surpassed that of U.S. companies in 2011, and the gap continued to widen in 2015. The effort has given rise to numerous research hubs equipped with good infrastructure and skilled workers. In this way, Asian companies are increasingly laying firm foundations for future innovation.
“An important trend we are seeing is innovation moving from East to West. This is most evident in the Internet services and consumer products space. For example, Amazon recently started a one to two-hour delivery service in some key cities in the U.S., and is investing in developing its own logistics as a key competitive advantage. This business strategy was started by leading Chinese entrepreneurs and companies early on. Initially, many investors had doubts over its potential for success, but the development of one’s own logistics has in fact become a global trend among many e-commerce companies. And most leading e-commerce companies in India and South Korea are making related investments in order to improve customer experience and satisfaction levels. It seems Amazon is also taking a page from this approach”, point out Matthews Asia portfolio manager.
In another area of prominence, China is leading the world in financial technology and, along with Indonesia, has among the highest levels of mobile banking penetration. In fact, Internet companies in China are penetrating deeper into the everyday lives of Chinese consumers in almost every respect. Internet companies have touched upon just about every major life purchase—from cars to homes to insurance products. Mobile Internet penetration in China is among the highest in the world, and China is often leading the innovation, creating new markets and services in the mobile Internet space.
“Asia can also claim to lead in some areas of traditional technology products, including next-generation display technology, known as organic light-emitting diodes (OLED), that will power future mobile devices and TVs, as well as lithium batteries—essential for many mobile devices and electronic vehicles. Almost all lithium batteries used in electronic vehicles today are made by companies based in Asia, and Asian companies are spearheading the development of next-generation batteries to power the global electronic vehicle industry”, explained Michael Oh.
Innovation is Key for Growth and Survival
Innovation can create value even during slower growth environments, which is important at this juncture since Asia in general is likely to transition more gradually, explained the strategist. For example, South Korea has long been a pioneer in the e-commerce industry and its market has become relatively mature with among the highest penetration rates in the world. It also has the highest e-commerce penetration rate in the Asia Pacific region with an online shopping reach of approximately 62%. But even in this relatively mature market, new companies with inventive marketing and distribution strategies have been able to grow exponentially—in one instance, one created a market value of approximately US$5 billion in just five years. This is particularly relevant to Asia today as many parts of the region adjust within a slower growth environment.
But for Oh, it is also important to note that innovation is not only limited to technology industries. Innovation can happen in any industry—old or new. Let’s look at transportation for example. Transportation is an old industry but a newcomer like the ride-sharing service Uber has completely changed the industry. Uber disrupted the century old industry with new ways of providing transportation services enabled by new mobile technology. Within the tourism industry, companies like Airbnb are doing the same, enabling people to capitalize on under-utilized assets by connecting the supply and demand of accommodation rentals via mobile technology. This is just the beginning for the ways in which technology is reshaping older industries.
Even in the automobile industry we are witnessing tremendous changes brought by electronic vehicles (EV). EV is likely to have far-reaching impacts beyond the automobile industries as it influences energy consumption patterns.
Oh highlights in a recent post in Matthews Asia blog that Japan and China, the region’s major auto powerhouses, have been ramping up the competition over the type of technology and power that may be adopted as the global standard for electric cars. China, which has famously been grappling with pollution issues, now has many locally funded EV start-ups that hope to usurp Tesla Motors. Beijing has been pushing for EV autos, offering buyer incentives, compelling global automakers to share their technology, and opening its market to tech firms. Japan, on the other hand, has invested heavily in fuel-cell technology and infrastructure as part of a national policy for the zero-emission fuel to power homes and vehicles.
Looking Ahead
The explosive growth of China’s emerging middle class brought sweeping economic changes to the global economy and these changes are still ongoing. Asia also has many emerging countries whose middle class has not yet entirely emerged. The ASEAN (Association of Southeast Asian Nations) region, which includes Indonesia, Malaysia, the Philippines, Thailand, Myanmar, Vietnam, is a compelling area of focus for future growth. With an overall population of about 625 million, this region holds exciting potential despite still being relatively poor with an overall middle class that is still relatively underdeveloped.
“We believe that Asia innovators can create value for Asian consumers and long-term shareholders on the back of a vast market that has been created in the Asian marketplace. Companies that can create unique products and services that are well-suited to meet the demand created by rising disposable incomes and improving lifestyles should be well rewarded by the market, and we believe this will continue to foster more innovation. This virtuous cycle will be one of the major trends in Asia going forward and be a sustainable value creator for long-term investors”, concluded.
CC-BY-SA-2.0, FlickrPhoto: Jennie O. How Lyxor’s Enhanced Architecture Program Can Boost European Pension Funds’ Performance
Europe’s pension funds face significant challenges as a result of low interest rates, volatile markets and regulatory constraints. Lyxor’s Enhanced Architecture Program (LEAP) helps institutional investors address these challenges.
The program offers its participants significant cost reduction, reporting, risk management, governance and return benefits. Amber Kizilbash, Global Head of Sales and Client Strategy at Lyxor Asset Management, explains how LEAP works and why operational effectiveness is such a hot topic.
“Pension funds face increasingly urgent demands to improve their overall performance. Lyxor’s Enhanced Architecture Program (LEAP) empowers them to achieve a step change in their infrastructure and investment effectiveness, via a collaborative, top- down approach. It is a modular, open architecture program from which investors can choose either a comprehensive duciary management solution or individual modules”, explains Kizilbash.
Lyxor experts offer clients a range of specialist skills, such as the design of the legal and infrastructure framework, the negotiation of service provider agreements, risk management, fund selection and management.
A successful LEAP implementation can result in significant eficiency gains, offering better value for money for the pension funds’ ultimate clients saving for retirement.
LEAP benefits pension funds in two ways.
The first is by enhancing funds’ infrastructure, thereby increasing operational effectiveness. Many pension funds suffer from a duplication of roles amongst service providers, both across schemes and across countries. This duplication of efforts leads to a sub-optimal cost structure and a challenge in ensuring effective governance.
The second way in which LEAP helps investors is by providing access to state-of-the-art investment solutions. Many large pension funds have access to sophisticated in-house investment resources as a matter of course. LEAP puts these capabilities at the disposal of small and medium-sized pension funds, which may lack the scale to run such investment programs on their own. Via LEAP, Lyxor accompanies clients in implementing advanced tailored solutions along the full investment value chain, from liability-driven investment (LDI) and strategic asset allocation up to fund selection and management.
