According to Libby Cantrill, Executive Vice President in PIMCO’s Executive Office, now that Ted Cruz and John Kasich have dropped out of the race, Donald Trump is all but certain to receive the Republican nomination in July at the party’s convention. A Trump candidacy, however, doesn’t make it easier for investors to anticipate the possible economic and market implications of a Trump presidency if he were to win the U.S. general election in November. Here are two important reasons behind the uncertainty:
Trump does not necessarily subscribe to the conventional Republican orthodoxy of lower taxes, less spending and open markets made famous by President Ronald Reagan. Indeed, Trump’s economic agenda is more ideologically varied – with some tenets of Republican orthodoxy, such as lower taxes across the board, and with some Democratic principles, such as preserving Social Security and Medicare. Most famously, Trump’s extreme policy position on trade, which calls for a total overhaul of existing U.S. trade agreements and possible punitive action against U.S. trading partners, such as a 45% tariff on Chinese imports, does not belong to the platform of either party.
Trump’s stated economic policies are at times conflicting and often changing, which also makes it difficult for investors to interpret the possible consequences. For instance, several weeks ago in an interview with the Washington Post, Donald Trump called for a total elimination of the U.S. $19 trillion debt over the next eight years, which is effectively infeasible without abolishing most government spending and substantially increasing taxes. At the same time, Trump has called for a tax plan that would increase the debt by $9 trillion (according to the Tax Foundation). Trump has since walked away from the pledge to exhaust the U.S. debt but it still leaves observers wondering where he is focusing: on austerity or on fiscal expansion?
“What are investors supposed to do with a candidate whose economic ideology is divergent from that of his party’s, not to mention often inconsistent and fluid? At the very least, give it some time. Trump, who interestingly does not have much of a policy team to date, will have to hire experienced policy advisers who will help him solidify his economic agenda before heading into the convention – and certainly before he engages formally in debates with the other presumptive nominee, Hillary Clinton, a known policy wonk. At that point, we should have a better idea of what a Trump administration would mean for both the economy and the markets – for better or worse,” concludes Cantrill.
Martin Blessing will succeed Lukas Gaehwiler as President Personal & Corporate Banking and President UBS Switzerland in the Group Executive Board (GEB) of UBS, effective 1 September 2016. Blessing was CEO of Commerzbank AG until the end of April this year. During his 15 years on the Board of Managing Directors of Commerzbank, half of which as its Chairman, Blessing significantly shaped the firm. He managed the successful integration of Dresdner Bank and led the bank back to stability and a robust business model following the financial crisis. Today, Commerzbank is active in more than 50 countries, finances 30 percent of Germany’s foreign trade and is the undisputed leader in financing German SMEs. The firm serves around 15 million clients with over 50,000 employees. Prior to Commerzbank, Blessing was at Dresdner Bank and the consultancy McKinsey. He studied in St. Gallen, Switzerland, and Frankfurt am Main, Germany, following a bank apprenticeship.
Also effective 1 September 2016, Lukas Gaehwiler will take on a new strategic role as Chairman of the Region Switzerland, focusing on clients and other selected mandates. At the same time and at his own request, he will step down from his current operative roles as President UBS Switzerland and President Personal & Corporate Banking (P&C), as well as from the GEB. For more than six years, Gaehwiler has run the business of UBS in Switzerland very successfully. In that time, UBS regained its position as the unquestioned market-leading universal bank in its home market. He oversaw a sustained increase in profitability during challenging market conditions, with significant new client growth, as well as the successful digitalization of the business, continuous improvement in customer satisfaction, and the effective implementation of a new legal structure for UBS in Switzerland.
Group Chief Executive Officer Sergio P. Ermotti: “I thank Lukas Gaehwiler for his excellent work and am personally pleased that he will continue to remain close to UBS in his new role. With Martin Blessing we gain a professional with a proven track record and significant experience in all areas of the business for UBS. I am certain he will further advance our business in Switzerland and beyond.”
CC-BY-SA-2.0, FlickrFoto cedida. Julius Baer nombra a Yves Robert-Charrue responsable en funciones de Investment Solutions Group
Julius Baer has appointed Yves Robert-Charrue as Head Investment Solutions Group (ISG) ad interim with immediate effect, in addition to his duties as Head Intermediaries. In his additional function, Yves Robert-Charrue will also report directly to CEO Boris F.J. Collardi.
He succeeds Burkhard Varnholt who, following realignments within ISG at the beginning of this year, has decided to leave the Bank at the end of May. According to Citywire, Varnholt will join rival firm Credit Suisse as deputy global chief investment officer within its investment solutions and products team. He will formally join in November. Varnholt will be based in Zurich and report to Michael Strobaek, global CIO and head of investment solutions and products.
As a result of these changes, Yves Bonzon will become sole Chief Investment Officer (CIO) of Julius Baer. He will continue to lead the Bank’s Investment Management (IM) unit which is responsible for managing discretionary investment solutions.
Yves Robert-Charrue joined Julius Baer in 2009 and has been member of the Bank’s Executive Board since 2010. He already was Head ISG from 2010 to 2011 and can thus draw on this previous experience in leading the unit.
In the past two years, Burkhard Varnholt has been instrumental in shaping Julius Baer’s investment approach, enhancing its products and services offering and further developing the Next Generation platform. In particular, he has systematically integrated environmental, social and governance criteria into the selection of the assets.
Boris F.J. Collardi, CEO of Julius Baer, said: “I am pleased that Yves Robert-Charrue has agreed to assume the leadership of ISG ad interim. At the same time, I sincerely thank Burkhard Varnholt for his valuable contribution in the past years – thanks to his vision, Julius Baer has become a leading private bank with regard to responsible investing. We wish him the best of success for his future endeavours.”
CC-BY-SA-2.0, FlickrFoto: e_mole
. Jemstep, SigFig and Vanare Added to Pershing's Platform
Invesco recently announced that it will collaborate with Pershing to offer Jemstep Advisor Pro, the firm’s digital advisor-focused digital solution, to Pershing’s clients. Jemstep Advisor Pro will enable RIAs and broker-dealers on the Pershing platform to seamlessly onboard prospects and effectively service investors. It is expected to be available on Pershing’s NetX360 platform in the third quarter of 2016.
“Pershing serves a wide range of investment firms including RIAs and broker-dealers, and the Jemstep Advisor Pro platform offers the capabilities to satisfy the needs across our spectrum of clients,” said Jim Crowley, chief relationship officer at Pershing. “Jemstep Advisor Pro is distinct in that it combines Invesco’s leading world-class investment capabilities with best-in-class digital technology to enhance the financial experience for advisors and end investors.”
Jemstep Advisor Pro is open architecture which allows investors to access a variety of professionally selected investment options across mutual funds and ETFs. Unlike peer tools that focus on market-cap-weighted indexing, Jemstep Advisor Pro also gives home offices new and differentiated insights to help track advisor progress, view client data in aggregate, enhance portfolio management offerings and services, manage risk, and an opportunity to broaden their client reach to address intergenerational needs.
BNY Mellon appointed Richard Gill as head of its Markets business in Europe, the Middle East and Africa (EMEA). Gill will lead the regional business strategy and have overall responsibility for managing Markets within EMEA. He will report to Michelle Neal, president of BNY Mellon Markets.
“Richard’s appointment allows us to better balance global and regional considerations in managing our businesses,” said Neal. “Our senior regional executives in EMEA and Asia Pacific (APAC) now have dual reporting lines to the head of the region and to the global head of their business. These changes will empower these executives and give them significant input on issues that affect local employees, business partners and clients.”
Gill has worked at BNY Mellon for over 20 years and his previous roles include co-head of FX Trading and chief FX Dealer. In his new position, he will also serve as a member of the Markets Executive Management Team, the Markets Risk Committee and the EMEA Chairman’s Forum. Regionally, Gill will continue to be based in London and report to Michael Cole-Fontayn, chairman of EMEA at BNY Mellon.
Mark Militello will continue as head of Markets APAC and report directly to Neal. Militello will also serve as a member of the Markets Executive Management Team, the Markets Risk Committee and the APAC Executive Committee. Regionally, Militello will continue to report to Steve Lackey, chairman of APAC at BNY Mellon.
Standard Life Investments and Bosera Asset Management announced on Monday the launch of the Bosera-Standard Life Investments Emerging Opportunities Bond Fund. The Fund signals the establishment of a strategic relationship between the two companies, with an aim to collaborate in several areas including joint product innovation and investment management cooperation.
The Fund is a sub-fund of Bosera Investment Funds, an umbrella unit trust established under the laws of Hong Kong. The Fund aims to achieve income and capital appreciation through primarily investing in global emerging market (EM) debt securities and EM currencies.
The development of the Fund builds on the combined strengths of Standard Life Investments’ strong emerging market debt investment capability and Bosera’s China fixed income expertise.
The new Fund will be managed by Kai He, Head of Fixed Income at Bosera International, who is responsible for portfolio allocation in the mainland China and Hong Kong, and for the investment management of the Fund overall. The sub-manager of the Fund is Richard House, Head of Emerging Markets Fixed Income at Standard Life Investments, who will manage portfolio allocation in emerging markets globally except mainland China and Hong Kong.
David Peng, Head of Asia, Standard Life Investments, said, “The co-creation of the new Fund in Hong Kong signifies the first step in our strategic collaboration with Bosera International, one of the leading Chinese asset managers, which reinforces Standard Life Investments’ global business strategy and strong conviction in the China growth trajectory. Bosera International and Standard Life Investments have a proven record of picking successful investment opportunities from within the Chinese bond market and global EM debt respectively. Working together, with our combined international and local market insight, our clients are offered exposure to an expanded global universe of EM opportunities. This underpins our commitment to deliver innovative investment solutions designed to meet the evolving needs of investors.”
Kai Shao, Executive Vice President, Shenzhen headquarters of Bosera International, said, “Capitalizing on the collective strengths of Standard Life Investments’ global investment expertise and Bosera’s China fixed income capability, the partnership aims to strengthen both companies’ ability to deliver for investors. We are delighted to have this excellent opportunity to collaborate with Standard Life Investments on product development, investment management and knowledge exchange. The joint development of the new Fund marks the first initiative of our strategic relationship. This is great news for our clients as they are now provided a new investment choice to tap into the wider, exciting EM fixed income opportunities.”
Kai He, Head of Fixed Income, Bosera International, commented, “The Chinese bond markets, both onshore and offshore, have become a more and more important part of the world’s fixed income market, and have been delivering good returns over the past years. We believe it is worth giving China a more fair allocation in the EM space, by which investors will benefit from an enlarged opportunity set. This is what this Fund will bring about.”
Richard House, Head of Emerging Markets Fixed Income, Standard Life Investments, added, “The fundamentals of emerging markets are stronger than commonly believed. EM sovereign debt offers an attractive opportunity for both long term growth and income, and has produced better risk-adjusted return than developed markets bonds over the long term. Currently, EM sovereign debt offers one of the highest yields among liquid global fixed income asset classes. The Chinese bond market is the third largest in the world. The weight of China in current EM debt indexes does not reflect the global importance of the Chinese bond market and we believe it should form a more significant proportion of a global EM debt portfolio. ”
CC-BY-SA-2.0, FlickrPhoto: InvertmentEurope. Roderick Munsters Appointed Global CEO Asset Management of the Edmond de Rothschild Group
The Edmond de Rothschild Group has decided to entrust the management of all of its Asset Management business to Roderick Munsters from May 10, 2016. He replaces Laurent Tignard who leaves the Group to pursue new professional opportunities.
Edmond de Rothschild confirms its willingness to accelerate the development in France and abroad of one of the Group’s flagship business, representing over CHF 85 billion (€78 billion) in assets under management (at 31.12.2015).
Roderick Munsters (1963) has both a Dutch and a Canadian nationality. He was Chief Executive Officer of Robeco Group from 2009 to 2015 (EUR 273 billion AUM at end-2015). He also headed Robeco’s subsidiaries RobecoSAM (Sustainable Investing) in Zurich and Harbor Capital Advisors (US multi-manager) in Chicago. From 2005 to 2009 he was a member of the Executive Committee and Chief Investment Officer of ABP and APG All Pensions Group.
Roderick Munsters will report to Ariane de Rothschild and is part of the Group Executive Committee as Global CEO Asset Management.
“We are very pleased to welcome Roderick Munsters. He will bring a wealth of experience, strong knowledge of international financial markets, entrepreneurial spirit and recognised ability to generate long-term performance” said Ariane de Rothschild, Chairwoman of the Edmond de Rothschild Group Executive Committee.
“I am very pleased and proud to join the Edmond de Rothschild Group and its teams in France and abroad” said Roderick Munsters. “Edmond de Rothschild is a leading reference in Asset Management. The Group is a forerunner of alternative multi-management since 1969, high-yield bonds in the 70s and currency overlay more recently. It is an honour to have the opportunity to take part in the Group’s European and international development and to support the further growth of its reputation”, adds.
CC-BY-SA-2.0, FlickrPhoto: Ron Mader
. International Wealth Protection Launches LIFE, Portable Life Insurance
Celebrating 25 years of servicing the international insurance marketplace, Mary Oliva, Founder of International Wealth Protection launches LIFE – Life Insurance For Executives. LIFE is the result of the exponential growth the company has experienced over the last several years and will combine advanced technologies with dedicated protection advisors to empower and service professionals that are seeking affordable and portable life insurance solutions.
“After many years of working closely with the U.S. based trusted advisor of our International clients, we were constantly being approached with inquiries relating to insuring their own lives. Whether it be the client’s financial advisor, attorney or accountant, Executives today are looking for mobility and have expressed concern about limiting their life coverage to the group plans offered by their employer. We found that mostly are under insured and many don’t realize that if they leave their employer their life insurance is not transferrable. With this specific population in mind, I created LIFE tooffer both personalized and automated services. In other words access to experts when you need them and technology when you don’t.” said industry veteran, Mary Oliva.
“I am very proud and enthusiastic about this new offering. As a group, we are now in a position to cater to both our international clients and those professionals that we work so closely with. I know from personal experience that in today’s changing employment landscape, planning at an individual level is integral to meeting your financial goals. Just like we bring peace of mind to our clients, we are now in a position to do the same for our colleagues” said Patricia Carral, Senior Vice President.
This offerwas created exclusively for Senior Executives or those on the path to success. The busy lives of these individuals leave them little time to explore product alternatives that meet their personal financial needs. This launch simplifies this process by providing instant access to Protection Advisors and online services that can assist in implementing the life insurance solution that is appropriate and transferrable. These solutions are all supported by highly rated and globally recognized insurance companies.
CC-BY-SA-2.0, FlickrAntonio Díaz Bonnet. Antonio Díaz Bonnet to Join Compass in Mexico
After more than 20 years at Privest, Antonio Diaz Bonnet left the company he founded to join Compass.
The finance specialist who began his career in Inverméxico and was part of Probursa before and during the merger with BBVA -after which he was in charge of several divisions including private banking, national and international promotion, as well as institutional advisory, will start with its functions in Compass on Monday May 16th.
Diaz Bonnet’s departure includes his structure of private banking investors, which will also join Compass. There as Diaz Bonnet told Funds Society, his clients’ assets will join Compass’ nearly 31 billion dollars in assets under management. “With this, my clients are going to have a very important, and dynamic platform”. He also mentions that given that in Mexico Compass is also a fund operator, he remains “an independent consultant with no conflict of interests or restrictions, which allows for client’s assets to remain in the brokerages they choose.”
Diaz Bonnet is optimistic about the new challenge and his role in growing Compass’ market share in Mexico, as “the expansion of Mexico is one of Manuel Balbontín’s priorities” he said.
Kwok Chern-Yeh, Head of Investment Management at Aberdeen Asset Management in Japan.. "Do We Dare to Invest in Japan?" - Aberdeen
We interviewed Kwok Chern-Yeh, Head of Investment Management at Aberdeen Asset Management in Japan. Chern moved to Tokyo in 2011 from Singapore, where he had worked in management since 2005. Aberdeen currently has a team of 6 people dedicated exclusively to investing in Japanese equities, supported by an Asian equity team of 38 investment professionals located in 10 offices spread throughout Asia and teams around the world.
Why should investors look at a country with a challenging macro environment?
Japan is the second largest individual market worldwide, after the United States, by number of listed companies. This is a very large market with leading companies which are global leaders in their respective industries and very well managed. If we look at the Japanese market, we see it has great depth. It consists of 3,000 companies, of which 1,900 are listed on the first section. Among these, we selected a very small number of well-managed companies with strong and healthy balance sheets and with respect for shareholders. We manage very concentrated portfolios. Both the Large Cap and Small Cap strategies have fewer than 40 companies.
The investor must differentiate between Japan’s economic situation in general and the situation of individual companies. In regards to macro data, there are two facts which for the time being are not expected to change. First, we have the fastest aging population in the world, because life expectancy is rising, and the birth rate is still very low. And secondly, we face a high government debt and a persistent deflation problem. In regards to this second issue, there are certain sections of the market where there is obviously no pressure on prices, but in others, where there are players with considerable market share, a rise in prices is possible.
But if we analyze the micro data, things are much more interesting and different. Unlike the government, companies have large cash flows, and also currently, their growth is not dependent on the Japanese economy. They are multinational companies in which less than 20% of their business is concentrated in Japan. These companies have been increasing their incomes from abroad for some time, and this circumstance enables companies to benefit from growth in other parts of the world, especially in Asian emerging markets with rapid growth, in which the middle class is driving the demand. In addition, many of the best companies have begun to outsource their production to countries with lower-costs. Aberdeen’s objective is to select those companies that are the best performers in a struggling economy.
How does the currency effect affect the results of the export-oriented companies?
The stocks in our portfolios have international exposure, but need not necessarily be exporting companies per se. Many of our companies outsource production and sales outside Japan, this is important from the currency point of view, since this part of the business is not affected by the strength of Japanese currency since production costs are not in yen. The only currency-effect we could find in this case would be at the time of transferring benefits to yen. However, high-end production is usually located in Japan and this section of business itself is affected by the currency effect. Japanese companies are comfortable with an exchange rate of 100-115 yen vs the dollar. With an exchange rate below 100 yen per dollar, it is more difficult for these companies to make money. Regarding the RMB its devaluation does not have to be a problem either for companies that produce in China, which are many nowadays.
Regarding portfolio composition, do you seek the same sectors for Small Cap strategies than for Large Cap strategies?
No, in reality, the opportunities that can be found in both strategies are different, for example, in the Large Cap strategies, there are some good options in automotive companies, while in Small Cap strategies, the most interesting companies are those that produce automotive parts. Another example would be pharmaceutical companies, which are attractive to Large Cap strategies, while for Small Cap strategies we focus more on companies which produce medical devices and equipment.
Is there any improvement taking place within the corporate governance of Japanese companies?
In general, we are feeling encouraged because new measures and improvements in corporate governance are being implemented, but they are still insufficient and the process is very slow. The main problems facing foreign investors have been, and still are, the shortage and low efficiency of the information provided by companies, not looking after shareholders, and not taking into account their profitability, as well as maintaining very high cash levels.
The new corporate governance code based on the OECD’s Principles of Corporate Governance, which came into force in June, aims to address these problems. Regarding the quality of the information provided by the companies, it is still inadequate, and should be expanded. Something similar is happening with the relationship between companies and shareholders. Some companies are taking steps to support this good interaction, even exceeding regulatory standards, and on occasions, legislation itself is later responsible for adjusting these measures. Finally, the problem of excessive levels of cash in companies should be addressed. This is a long-standing problem, motivated by economic events of recent decades. After the banking crisis in the eighties, banks endeavourednot to grant credit to businesses, which led companies to adjust to growing without debt, and to have high amounts of cash on their balance sheets. Companies believe they need this cash because for a long time they were denied credit and now don’t know how to work otherwise. It is clear that these reserves should be returned to shareholders, but this practice will take a long time to become effective.
What are the difficulties that an analyst or investor may encounter when investing in the Japanese market as compared to other markets? Why is it good idea to invest in Japanese companies?
I believe that there is no substantial difference between investing in the Japanese market or any other market such as American or British. Perhaps the greatest difficulty we encountered in the Japanese market is, as I said earlier, that the information offered by companies is not very efficient. The Japanese economy is the second largest by market capitalization; however, the Japanese stock market has not been sufficiently covered by analysts: only 14% of assets invested in Japan correspond to companies with analyst coverage, compared to 71% in Asia-Pacific ex-Japan. This situation favors us because Aberdeen has been analyzing Japanese companies first hand over the past 30 years, and we have been able to find very good opportunities.
An example of these good opportunities in which we have invested and are still investing, are companies with great market capitalization in which dividends have grown substantially in recent years. Companies with stable ROE and EBITDA, strong balance sheets, and good fundamentals, and which do not depend on the evolution of the domestic economy. These are the type of companies in which Aberdeen invests for their Japanese strategies: quality companies, even if it involves having to pay more for them in some cases, because in the medium term, returns exceed the benchmark. If we compare the average P/E of our strategies with the benchmark, we will see that ours is higher. But this should not lead to confusion, because the benchmark is weighted down with very low PERs from banking companies and the automotive sector, and may seem cheap, but it really isn’t, as structurally, these sectors are trading at very low ratios.
What are the technical factors that will affect the Japanese market during the coming months?
In July, we have elections in Japan for the Upper House. Shinzo Abe is trying to reform the economy but has another intention for the long term, which is to reform the Constitution, and for that he needs votes, time, and to gain in popularity by presenting a package of measures to stimulate the economy before the elections, since the Abenomics plan has not worked as it was initially intended to, and the economy remains weak.
And, in regards to the restructuring of the pension funds, is it stimulating investment in Japanese equities?
The GIPF, the world’s largest pension fund, (the Japanese government’s pension fund) has already adjusted its allocation in Japanese equities raising it from 12% to 25%. If small pension funds did the same, it would lead to an increase in investment in Japanese companies in the short term. This remains to be seen, but normally these pension funds often operate by following the steps of GIPF.
How have Japanese investors been acting in recent years?
The Japanese domestic investor mentality is changing very gradually. When markets rise, they feel encouraged to invest in Japanese equities, but the proportion of their wealth in these assets is still very low.
And Latin American and US Offshore market investors?
Japan has been ignored by foreign investors for many years, it is an educational issue. The Latin American investor currently has around a 5% exposure in the Japanese market, the US Offshore investor, however, has been more receptive during the last two years, but despite this, Japanese exposure is not higher than 10%.
Is it possible for the international investor to cover yen fluctuations in the strategy’s net asset value?
Although these strategies are denominated in yen, there is a class denominated in dollars (hedged) which covers the currency effect, and which is the most popular for Latin American and US Offshore market investors.
