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Why Are Markets in Denial About Inflation?

Cómo ganar con activos ligados a la inflación — CC-BY-SA-2.0, FlickrPhoto: GIO IAB. Why Are Markets in Denial About Inflation?

As the US labor market continues to improve, investors are still waiting for signs that inflation will pick up. And with US consumer prices posting only a slight uptick in March, the Federal Reserve continues to assure markets that it will “proceed cautiously” in normalizing its policy rate.

Amit Agrawal, senior portfolio manager of developed markets investment grade credit at PineBridge Investments, discusses what’s going on with the Fed’s hawk-dove game and how investors can position portfolios for rising inflation.

Inflation has been benign for years in the US. Why are markets suddenly talking about it again?

Inflation has become a hot topic over the past two to three months because core inflation – which excludes the volatile food and energy components – has risen over 2% for the first time in four years. What many people haven’t noticed is that core inflation has been brewing for a while; 14 months ago it was at 1.6%. If you strip out goods, inflation has been trending over 3% over the past few months.

Why has the core trend flown under the radar?

Because low oil prices have dragged down the headline inflation rate, presenting a mixed picture.

The interesting thing is that despite these moves, the market is still sanguine about inflation. Investors are not convinced that it’s real, and neither is the Federal Reserve. In fact, the Fed is forecasting lower inflation for 2016 than we’re seeing right now. But if you look at past 50 years, US inflation has averaged around 4%; with core inflation at 2% currently, the risk of rising inflation is certainly there. For now, oil has stabilized, the Fed’s messaging is more dovish, and the dollar is trending sideways. These are all positive tailwinds for inflation in the near term.

Why are so many market participants unconvinced? And when do you think they’ll embrace the rising inflation trend?

The reason has to do with wages. The labor market has been improving for five or six years, while wages have been stuck around 2% over that time. Only over the past six months have we seen wages tick up around 2%-3% year over year. In past recoveries, wages have risen 3%-4%. Historically, when labor market slack disappears, inflation tends to show up in higher wages.

As far as when investors will come around, right now, we’re in what I call a “show-me” market. Inflation will have to run higher to convince people it has really arrived.

Several disinflationary trends have made people complacent about inflation: technological advances, demographics, the end of the commodity “supercycle,” and the China slowdown. These do seem like fair reasons for markets to expect inflation to remain low for a long time. (Although I’d argue that demographics may actually be inflationary as baby boomers enter retirement and require more in terms of health care and other services.) In fact, a recent survey by OppenheimerFunds found that, among the top 10 concerns among institutional investors for the next decade, inflation is nowhere to be found.

Unemployment is at 4.9% right now. As slack reduces further, wages will pick up on a broad-based measure. Indeed, the Fed recently reported an increase in wages in nearly all regions of the country in the “beige book,” its survey of economic conditions.

How does the US dollar fit in?

Fed research has shown some impact of the dollar on core inflation, but not a significant one. It’s more about sentiment; inflation expectations can be self-fulfilling.

The impact of the dollar is stronger on headline inflation through oil prices and lower import prices from China. This is why the Fed has been more dovish in recent commentary; the Fed is undermining the dollar because it doesn’t want the dollar to strengthen. (This “ultra-gradualism” is one of the Fed’s unspoken objectives.) By doing that, the Fed will have more conviction in its inflation and growth outlook – growth because of healthy exports, and inflation because it will help keep oil prices from deteriorating further.

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What is your inflation forecast?

We expect core inflation to remain in the 2%-2.5% range over the next couple of years. I don’t expect to see a major pickup, but if wage inflation continues to rise, we expect core inflation could grow as high as 3% over that period.

The important thing is that the market is pricing in an average of 1% core inflation over the next five years. That’s a low bar, and it means inflation assets are very attractive; mispricing means opportunity.

Can you describe the opportunity set in inflation assets?

The opportunity set runs the gamut: Treasury Inflation-Protected Securities (TIPS), overseas markets, European inflation-linked bonds, commodity bonds, gold, real estate, and real estate investment trusts (REITs).

In the US, 30-year Treasury bond yields are about 2.5%, while 30-year TIPS are trading around 0.8%. TIPS are a much better investment than nominal Treasuries from a risk/reward perspective. The 30-year TIPS breakeven rate, which is the inflation component in the TIPS market, currently is below 1.8%. In the last 17 years, we have seen only four instances where TIPS traded below 1.8%.

The opportunity is even more robust in Europe, where the market is pricing in only 0.5% inflation over the next five years – much lower than in the US. Europe is in the midst of a huge push from the European Central Bank to create inflation through quantitative easing (QE). We think they will be successful in raising inflation much more than in the US. The market is way too pessimistic in Europe.

An indirect way to get exposure to the inflation opportunity is commodity bonds associated with energy and metals and mining companies. Many investors are shying away from these due to the broad slide in commodities prices. What they may not realize is that a lot of bonds from strong companies are trading at yields between 5% and 9%. These are companies we believe will survive the industry downturn. So while many investors have given up on commodities because of high volatility, we think select commodities bonds offer lower volatility with attractive upside.

Gold is a particularly interesting investment because it’s not only a commodity but a currency. With the Fed and the G3 undermining their currencies, many investors are turning to gold because it’s the only currency that governments don’t control. Gold was the best performing asset class in first quarter of this year; we expect prices from here will be range-bound, possibly moving up if we see a stronger rise in inflation or if central banks continue to undermine their currencies.

Real estate is another way to gain exposure to inflation. We think there is still some value left in REITs if you believe the US housing market will continue to recover. A big component of inflation in the US is shelter, which includes buying and renting. Home prices are growing at an annual rate of 3%-3.5%, and we expect this momentum to continue. The US has also seen a shift toward more renting, especially in metro areas, with an annual growth rate of 3%-5%.

Finally, investors can also buy direct exposure to real estate, though it’s important to realize that, unlike the other opportunities I’ve discussed, real estate is an illiquid investment.

How do you recommend investors position their portfolios for rising inflation?

If you expect inflation to rear its ugly head in the next couple years, and you own a high-quality portfolio with nominal Treasury bonds, you may want to consider selling those Treasuries in exchange for TIPS. Reallocating this way would allow you to gain exposure to inflation while maintaining the same credit quality.

We think gold is a good asset to own as part of a larger portfolio, not only for inflation down the road but as a safe haven as global central banks cut rates to negative. Equities and REITs are also good hedges against rising inflation.

Overall, you don’t need to make wholesale changes to your portfolios; we would recommend allocating about 10%-15% of a portfolio to instruments that are linked directly or indirectly to inflation.

This information is for educational purposes only and is not intended to serve as investment advice. This is not an offer to sell or solicitation of an offer to purchase any investment product or security. Any opinions provided should not be relied upon for investment decisions. Any opinions, projections, forecasts and forward-looking statements are speculative in nature; valid only as of the date hereof and are subject to change. PineBridge Investments is not soliciting or recommending any action based on this information.

Christian Theulot, New Chief Retail and Digital Officer at Lyxor AM

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Lyxor AM nombra a Christian Theulot como nuevo responsable de mercado minorista y desarrollo digital — CC-BY-SA-2.0, FlickrPhoto: Christian Theulot . Christian Theulot, New Chief Retail and Digital Officer at Lyxor AM

Lyxor AM announces the appointment of Christian Theulot as Chief Retail and Digital Officer. The appointment took effect on 15 March 2016.

In this newly created position, Christian Theulot will be responsible for accelerating Lyxor’s digital transformation, supporting its commercial development and fostering excellence in its business processes. He is also tasked with strengthening Lyxor’s presence in distribution, where it is already well established, especially among private banks.

Lionel Paquin, Lyxor AM CEO, said: “The digital transformation presents many opportunities for asset management, whether for enhancing investor experience or for developing digital tools to optimise management processes. Christian Theulot’s appointment will allow us to fully seize them, while enhancing our ties to distribution and delivering Lyxor’s proven expertise and innovation capabilities to this segment.”

Based in Paris, Christian Theulot will report to Guilhem Tosi, Head of Products, Solutions and Legal and a member of Lyxor’s executive board.

Before joining Lyxor, Christian Theulot was Head of Marketing and Development for the Retail Partners & Investment Solutions business line at the Amundi Group for four years. Christian began his career at the Paribas Group, where he spent some ten years in various Marketing/Partnerships managerial roles (Cardif, Cortal-Consors, Compagnie Bancaire). At the beginning of the 2000s, Christian joined AXA’s holding as Senior Vice-President e-business. In 2004 Christian was recruited by the Société Générale group, where he spent seven years as Head of Savings Products for the French network.

Christian Theulot is a graduate of Kedge Business School and holds an MBA in Marketing from HEC.

Is the Turnaround of China’s Economy Real?

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¿Cómo sortear la volatilidad en China? — CC-BY-SA-2.0, FlickrPhoto: Carlos ZGZ. Surviving Chinese Volatility

Despite strong concerns at the start of the year, at Pioneer Investments, they believe that overall economic conditions are stabilizing, backed by a more aggressive policy stance, better fiscal supports, recovery of the real estate sector and credit growth, while consumers and the private sector have remained relatively resilient. Tail risks of a hard-landing in the near term are easing meaningfully.

Policy stance: 6.5% GDP Growth is the Floor

Following China’s annual National People’s Congress meeting (NPC) in March, policymakers sent relatively strong messages regarding their stance this year, which is likely biased towards the easing side.

The GDP growth target for the year was announced as the 6.5-7.0% range. According to Monica Defend, Head of Global Asset Allocation Research with Pioneer, the floor of 6.5% is probably a harder target than others. In other words, if growth risked breaching the 6.5% floor, policy support would turn stronger than planned, while support could ease if growth reached 7.0%.

Better Fiscal Support

“China’s overall fiscal and quasi-fiscal position is complicated, including the budget deficit, out-of-budget funds to local governments, net revenues from land sales, and changes of fiscal deposits in PBOC accounts,” says Defend.

The latest information allows us to have a more complete picture of the underlying fiscal & quasi-fiscal position, and suggests that fiscal policy is becoming more supportive and perhaps more effective.

The overall fiscal stance, including all budgetary and quasi-fiscal measures, became less supportive or even tightened beginning in late 2014 and through most of 2015, largely due to strengthening of regulations on local government out-of-budget financing and weak land sales. Defend believes that the increase of central government spending was not sufficient to offset such weakness. But this seems to have changed since late 2015. And so she estimates that the overall fiscal and quasi-fiscal deficit will rise by around 1.5% of GDP in 2016 vs 2015. This is mainly due to:

The fiscal deficit has increased since late 2015 and the plan is for it to continue to rise.
Land sales are likely to at least stop acting as a drag in 2016, with further positive signs in real estate markets.
The creation of Special Construction Funds (SCFs) in late 2015, which policy banks use to inject capital into specific projects, mainly infrastructure-related. This new quasi-fiscal channel appears, relative to traditional out-of-budget local government borrowing, easier to regulate and manage, and thus more flexible and efficient.

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Positive Signs in Real Estate

Easing of policy over the past year or so appears to have stabilized the real estate sector, with a visible rebound early this year. Relatively strong sales have been pushing acceleration of existing projects and new starts have finally picked up.

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Although property activity is still fairly weak for the country as a whole and price increases have been subdued, momentum in some large cities has been relatively strong. This has triggered a recent tightening of property purchase policy in a few large cities. But this is largely designed to prevent potential price bubbles in individual regions, rather than reflecting a reversal of a generally supportive policy stance.

“The latest data suggest that sales in Tier 1 cities have cooled somewhat, while overall sales have been relatively stable. While we expect only stabilization or a moderate recovery for the whole year, this scenario should be relatively sustainable.”

Conclusions

“Despite strong concerns about China’s economy at the start of the year, there is increasing evidence suggesting that the underlying situation has been stabilizing, with tail risks easing. This is buying more time for China to push structural reforms. We are conscious that the process is still long and not straightforward. A failure in reform implementation would add to medium-term risks. So far, we believe that the reforms are progressing nicely and that the transition of China toward a more balanced economic model is underway. For this reason, we are moderately positive on China, that is one of our favorite countries among emerging market universe,” she concludes.

To read Defend’s complete macroeconomic update, follow this link.

Columbia Threadneedle Investments to Acquire Emerging Global Advisors

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Columbia Threadneedle Investments adquiere una firma boutique centrada en smart beta — CC-BY-SA-2.0, FlickrPhoto: Glyn Lowe. Columbia Threadneedle Investments to Acquire Emerging Global Advisors

Columbia Threadneedle Investments announced on Wednesday an agreement for Columbia Management Investment Advisers, LLC to acquire Emerging Global Advisors, LLC (EGA), a New York-based registered investment adviser and a leading provider of smart beta portfolios focused on emerging markets. The acquisition will significantly expand the smart beta capabilities of Columbia Threadneedle Investments. Terms of the EGA acquisition were not disclosed. The transaction is expected to close later this year.

With $892 million in assets, EGA has an established presence in the smart beta marketplace. It is the investment adviser to the EGShares suite of nine emerging markets equity exchange-traded funds (ETFs) that track custom-designed indices:

Beyond BRICs (BBRC)
EM Core ex-China (XCEM)
EM Quality Dividend (HILO)
EM Strategic Opportunities (EMSO)
Emerging Markets Consumer (ECON)
Emerging Markets Core (EMCR)
India Consumer (INCO)
India Infrastructure (INXX)
India Small Cap (SCIN)

“The experience and knowledge of the EGA team and strong emerging markets ETF products will complement our existing actively managed product lineup,” said Ted Truscott, chief executive officer of Columbia Threadneedle Investments. “The EGA acquisition will allow us to reach even more investors and accelerates our efforts as we build our smart beta capabilities.”

Since launching its first ETF in 2009, EGA has had a dedicated focus on providing rules-based, smart beta strategies designed to provide investors with diversification and growth opportunities in emerging markets.

“The team is excited about joining Columbia Threadneedle Investments and building on our complementary strengths to deliver smart beta strategies across asset classes to investors,” said Marten Hoekstra, Chief Executive Officer of EGA. “Now our clients gain access to Columbia Threadneedle’s rich investment expertise, while continuing to benefit from EGA’s experience converting investment insights into rules-based, smart beta strategies.”

“Columbia Threadneedle Investment’s expansive footprint across global markets provides an opportunity to accelerate the growth of our smart beta platform,” said Robert Holderith, President and Founder of EGA.

As part of their efforts to enter the smart beta marketplace, in the first quarter of 2016 Columbia Threadneedle Investments filed with the SEC a preliminary registration statement relating to multiple equity smart beta ETFs, including Columbia Sustainable Global Equity Income ETF, Columbia Sustainable International Equity Income ETF and Columbia Sustainable U.S. Equity Income ETF (referred to as the Columbia Beta AdvantageSM ETFs).

Matthew Elderfield, to Become New Head of Group Compliance at Nordea

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50 year old Matthew Elderfield has been appointed Head of Group Compliance and a member of Group Executive Management at Nordea. He will join the company by November, 9th, 2016 at the latest.

“We have set an ambitious target to be best in class regarding regulatory compliance. Continuing to enforce a strong risk and compliance culture and making it an integral part of our business model is key to making these efforts succeed. I’m convinced that Matthew with his extensive international experience will bring Nordea closer to our ambition in leading our increased focus on compliance going forward, says Group CEO Casper von Koskull.

Matthew Elderfield is currently Global Head of Compliance at Lloyds Banking Group where his role covers all business areas, ie Retail, Wholesale and Wealth. The Financial Crime unit is also part of his responsibility.

Prior to Lloyds Banking Group Matthew Elderfield has held a number of senior international regulatory roles, most recently as Deputy Governor of the Central Bank of Ireland when he also served as Deputy Chairman of the European Banking Authority and as a member of the Managing Board of the European Insurance and Occupational Pensions Authority.

Johan Ekwall will stay on as acting Head of Group Compliance until Matthew Elderfield takes up his position.

Helen Driver Joins as Fund Manager, Global Equities, Aviva

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Aviva Investors, the global asset management business of Aviva, has appointed Helen Driver as fund manager in its Global Equities team. She is based in London and reports to Chris Murphy, Global Head of Equities.

In this new role, Helen is focused on identifying high-conviction large-cap global equity ideas for inclusion in both stand-alone global equity portfolios and as a key part of Aviva Investors’ Multi-Strategy proposition.

Helen has 16 years’ investment management experience and joins from Legal & General Investment Management, where she was fund manager on the UK Real Income Builder Fund. Prior to this, she held investment and client servicing roles with Standard Life Investments.

She is a member of the Asset & Liabilities Committee for the Social Investment Business, which provides grants and loans to voluntary sector organisations. In this voluntary role, she helps to review the investment portfolio for the Futurebuilders England & Modernisation Funds.

Chris Murphy, Global Head of Equities, said:

“I am very pleased to welcome Helen to Aviva Investors. She brings strong expertise in building and managing equity portfolios and a proven track record in successful stock selection. I am certain she will make a significant contribution to the team as we continue to develop our global equities proposition.”

Credit Markets: Confidence Returns, but is it Sustainable?

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La confianza ha vuelto a los mercados de crédito, pero ¿es sostenible? — CC-BY-SA-2.0, Flickr. Credit Markets: Confidence Returns, but is it Sustainable?

Stephen Thariyan, Global Head of Credit at Henderson, reviews the credit markets in Q1 highlighting the ‘two-thirds—one-third’ nature of the markets. Financials came under particular pressure over the quarter exemplified by Deutsche Bank’s ordeal. While investors are happy to be back in the markets for now, as central banks have acted effectively to bring confidence back, challenges lie ahead in 2016. Thus, Stephen believes investors should be prepared for volatility to resurface.

Can you give a brief summary of corporate bond markets in Q1 2016?

It was a tough start to the year. It seems that in the first two months, particularly in February, the markets were discounting all the possible bumps in the road for 2016: concerns about central bank policy, illiquidity, Brexit, the oil price, China and growth in general. This led to quite a major sell-off across all capital markets, both debt and equity.

The end of February and March then saw a strong recovery, essentially based on the oil price, rallying from a low of US$26 upwards. That resulted in good returns, especially in high yield and emerging markets; total returns being positive across most currencies, across most credit markets, and excess returns again being broadly flat across most credit markets. So, a quarter of two thirds/one third: a very poor start and a strong recovery that continued into Q2.

Can you explain why the financial sector underperformed, particularly Deutsche Bank and subordinated banks/insurers more broadly?

The financial sector came under particular pressure in the first quarter. This was based on a combination of issues. Deutsche Bank in a way personified this with a situation that led to a significant sell-off in its bond prices, CDS and equity price. In a negative interest rate world, the core way the banks make money is challenged (ie, use short-term borrowing to lend for longer periods). This means significantly reduced returns from investment banking, especially in trading, fixed income, commodity and currency.

Banks, such as Deutsche, reported their first major loss in around eight years and there is a huge degree of outstanding litigation surrounding these banks, totalling billions. The last point was, especially with respect to Deutsche, concerns about the AT1 securities, contingent capital notes, which are complex subordinated financial securities, in existence to increase the capital buffer. There was a rumour that Deutsche would not pay its coupon, and even though these securities are designed to protect the public, the potential triggering spooked investors. Deutsche did recover the situation, but for the first time it felt a bit like 2008.

So financials generally took an awkward situation largely on the chin, given that central banks, especially in Europe, are trying to make banks lend money. Banks, however, are deleveraging, carrying lots of liquidity and struggling to find borrowers to borrow that money.

What is the outlook for credit markets and what themes are likely to drive the markets?

We are at an interesting point. We have suffered from a difficult first few months in 2016. The central banks have come in and almost acted in unison, with the European Central Bank subtly talking about a movement in monetary policy, but more importantly, the purchase of corporate bonds in the next few months. They haven’t given any details but the sheer fact that they are prepared to do it has given the markets confidence that there is a bidder for bonds.

It is debatable how effective that would be but the markets have rallied as a result. That combined with the Fed being a little more dovish a week later gave the capital markets, debt and equity, a huge fillip. Equity markets strengthened, bond markets strengthened, new issuance has started and the oil price steadied. A combination of all those events and generally benign data means that the investor seems happy to be back in the market again.

There is a degree of suspicion about how long this will last, but I think as we have said ever since the back end of last year, given all the different events that could occur in 2016, we are in for a volatile time. Certainly central banks have acted effectively so far in giving investors the confidence that they should be back in the markets buying both debt and equity.

XP Investimentos: “We Strongly Believe We Can Break the BRL 100 Billion Mark in Five Years”

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The firm XP Investimentos has dedicated more than 10 years innovating and transforming the way Brazilians invest. They were the first firm that introduced the idea of “financial shopping” in the Brazilian market, aiming to provide more freedom of choice to their clients. The firm has already about BRL 35 billion in assets under management, and is expecting to grow up to BRL 100 billion in the next five years. In an exclusive interview with Funds Society, Beny Podlubny, Head of the Wealth Management division at XP Investimentos, talks about their main areas of development and growth, their international expansion plans, and the Brazilian investors’ preferences.

Since 2008, XP Investimentos has been the largest independent brokerage firm in Brazil, what factors would you say have shaped the success of the firm?

I believe several factors have contributed to our success, the first factor would be the partnership culture in the firm, our firm has attracted several outstanding professionals that act as owners. They are hardworking, committed and top performers. These same professionals will not stop working until reaching our main goal: the highest level of service. Secondly, our main focus are our clients. We do our homework daily and constantly compare ourselves to the best companies in Brazil known for this service. And thirdly, we invest on innovation, and when I say innovation I do not only mean technology, but also how we conduct businesses offering creative solutions and easy access to products and services.

XP Investimentos offers three type of services: Exclusive Advisory (Assesoria Exclusiva), Self-Service (Auto Atendimento), and the service offered through your Partner Network (Rede de Parceiros XP). Which line of business has shown greater growth in the last couple of years? And, which areas are a priority in terms of resource allocation for XP Group?

Since our Advisory Group is the newest line of business in the group and therefore the one with the smallest asset base, this is the one that is growing the most. We are having a tremendous growth in 2016, reaching more than BRL 3 billion on assets under management, up to April. On the retail side, we are also having huge growth, especially in the on line business. We have partnered with Red Ventures, and they are doing a fine job in helping us find new clients through our online platform. On March, we have opened 20,000 accounts and have raised more than BRL 2.1 billion.

What is the current size of the Wealth Management division unit? What are your goals for the next five years?

The XP wealth management platform can be accessed by our internal bankers and also by our partner network. Today we have around 15,000 clients with more than BRL 1million of investments, totaling BRL 15 billion.The wealth management market in Brazil is about BRL 1 trillion, and in five years we strongly believe we can break the BRL 100 billion mark.

When we consider the undeclared wealth held by Brazilians abroad, and the amount expected to bring the undergoing tax amnesty, we are even more confident about reaching this goal. At XP, we know that we are prepared to serve these clients in our Brazilian and US Platforms, as well as in our new European offices.

XP Investimentos has an open fund platform with more than 300 funds listed, are there any preferences on any particular asset management firm from investors?

Brazil has a long history of high interest rates. Therefore, clients are used to investing in bonds and fixed income funds. That is the biggest strategy for any portfolio in Brazil. Here at XP we have a strong due diligence process to select and approve the managers that are in our platform. We also offer market intelligence to our bankers and partners network in order to enable them to better serve their clients. Finally, clients can access our comparison tools to analyze the best risk adjusted returns.

XP Investimentos also distributes funds of XP Gestao de Recursos, being XP Long Short FIC FIM, XP Investor FI Renda Fixa Crédito Privado LP, and XP Referenciado FI Referenciado DI among the funds with larger assets under management, what do these strategies bring to investors?

Even though those funds are managed by XP, they compete in equal terms to any other fund in our platform. Those funds are managed so that they beat different benchmarks and are used by clients to have a diversified portfolio in a totally independent manner. Clients like and trust the XP brand, however, they only invest in those funds after comparing them to all the options they have in our platform.

Group XP has two office branches in the US, one in New York and another one in Miami, through its affiliated company, XP Securities. The firm currently serves institutional clients, are there any future plans of servicing wealth management clients (non-US resident offshore business)?

Actually, we are already serving Latin American clients through our US platform. We also just announced a new group of 10 bankers that are joining us to expand our European business. We aim to have USD 5 billion abroad in less than two years.

Brazilian equity and fixed income markets rallied since the beginning of the year on speculations on politic turmoil, but the Brazilian economy still faces serious challenges, and it is expected that the economy and corporate earnings will suffer from it. Are you increasing exposure to international assets? Which vehicles do you use for that purpose?

Brazil is living a very interesting moment. We are about to live an important political shift that will have major repercussions in society and economy. We can see asset prices move further and we are following the market closely in search for opportunities, constantly doing our homework. We also believe that Brazilian clients should have a diversified portfolio and that also means having US dollar denominated assets. Brazilians can access the offshore market through different vehicles. It all depends on how much money does the client have to invest and what are the client’s goals for that capital. In summary, nowadays there are several funds in Brazil that give exposure to the offshore market. Clients can also wire their money to an offshore platform and invest their money from there.

High inflation and depreciation of the Brazilian real had a great impact last year, how are you protecting portfolios from these events?

The political shift can dramatically change this dynamic. But there are several ways to protect a portfolio from an inflation peak, such as NTN-Bs, Brazilian treasury protected inflation notes. Regarding protecting a portfolio from currency depreciation, there are also many possibilities, one of them is through funds that hold USD based assets, such as equities and global fixed income. As aforementioned, our clients with bigger portfolios also have part of their wealth abroad.

Since the beginning, Grupo XP has put a lot of effort in developing an educational model with courses and conferences for its clients, how is this effort paying back to the firm?

XP’s culture is based on education. Since inception, XP collaborators have trained thousands of investors on how to build a portfolio and trade their money. The results are definitely a consequence of the company’s main beliefs. XP wants its clients to invest better. When clients are investing better, they bring more money and recommend our platform to their friends. I strongly believe that our education culture made us reach the BRL 35 billion mark and explains part of our growth.

Nikko Asset Management and Legal & General Investment Management Announce a Business Cooperation Agreement

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Japanese manager Nikko Asset Management (Nikko AM) and Legal & General Investment Management (LGIM) have signed a business cooperation agreement for the provision of investment management services.

Under the agreement, LGIM and Legal & General Investment Management America (LGIMA) will provide global fixed income products that Nikko Asset Management will distribute to Japanese investors, primarily Japanese insurance companies and banks. The first funds are expected to launch in mid-2016.

LGIM has also agreed to facilitate the marketing and sale of Nikko Asset Management’s products in the UK and other countries.

Takumi Shibata, President & CEO of Nikko Asset Management said: “We are delighted to announce our business cooperation with LGIM. We are sure that this collaboration will truly benefit our clients through the provision of differentiated fixed income investment solutions offered by LGIM.”

Mark Zinkula, Chief Executive of LGIM said: “I am delighted to be working with Nikko Asset Management on this new business agreement. Japan is a key part of our strategy as we continue to build out our global asset management business. We look forward to providing Nikko Asset Management’s clients with access to our high quality range of fixed income products and services”.

Eric Varvel Appointed Global Head of Asset Management at Credit Suisse

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Credit Suisse has announced that Eric Varvel will join the International Wealth Management (IWM) division as Global Head of Asset Management, effective June 1, 2016. From New York, he will succeed Bob Jain, reporting to Iqbal Khan, CEO International Wealth Management, and will be a member of IWM’s Management Committee.

Eric Varvel, who has more than 25 years of experience at Credit Suisse,will spend a significant portion of his time in Switzerland and in various emerging markets, including in the Asia Pacific region, to drive forward the further development of the global Asset Management franchise.

Iqbal Khan, CEO of International Wealth Management, commented: “We are delighted to have such an accomplished senior leader to head our Asset Management business and look forward to working with him in this capacity. We are confident that his global experience, track record and expertise will significantly contribute to the further development of our Asset Management franchise and to the achievement of our ambitious goals. Eric’s strong relationships with many strategic clients will be a great benefit not only to the Asset Management business, but also to the IWM division overall.”

Global Asset Management has a strong US-based Alternative Investments footprint, combined with a leading Swiss-based Core Investments business and a solid foundation in emerging markets. Eric Varvel will be instrumental in growing the firms Alternative Investments franchise, fostering the partnership with the Swiss Universal Bank to further strengthen the bank´s position in Switzerland and accelerating the business’ growth in emerging markets and Europe, he added.

Eric Varvel has more than 25 years of experience at Credit Suisse. He served as a member of the Executive Board from February 2008 to October 2014. During this period, he held senior roles including CEO of the Investment Bank, and CEO of the Asia Pacific and Europe, the Middle East and Africa. Prior to his appointment to the Executive Board, he was the Co-Head of the global Investment Banking division, where he was based in New York. Before that, Eric Varvel spent 15 years building Credit Suisse’s footprint in the Asia Pacific region in a variety of senior roles, including Head of Investment Banking, Head of Emerging Markets Coverage and Head of Fixed Income Sales and Corporate Derivative Sales. During that time, he was based in Tokyo, Jakarta and Singapore. Most recently, Eric Varvel served as Chairman of the Emerging Markets and Sovereign Wealth Funds and a senior advisor to the CEO.