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. Basel III Fundamentally Changes How Asset Managers Are Connected To The Financial System
Basel III reforms have fundamentally changed how asset managers are connected to the financial system, with hedge funds challenged to understand expense, usage and access to the financing power grid, according to a joint survey and report by the Alternative Investment Management Association (AIMA), the global representative body for alternative asset managers, and S3 Partners, a leading financial data, analytics and services firm.
Jack Inglis, CEO of AIMA, commented: “There is no doubt that the Basel III banking standards are having a significant impact on hedge funds and other alternative asset managers. Financing costs are rising and the fund manager / prime broker relationship is changing fundamentally. It is our hope that this timely and important report will provide clarity and direction to those who have felt the impact of the recent regulations, and to give context to issues that are being felt across the industry.”
Bob Sloan, CEO of S3 Partners, commented: “New bank capital regulations are creating downstream financing challenges and opportunities for asset managers and hedge funds. The survey clearly shows how plugging into the financial power grid is getting more expensive.”
Mr Sloan continued: “Managers of all shapes, sizes and strategies now seek to answer the question: How can we maintain access to the grid, while optimizing for the right amount of efficiency? As the survey results show, access to unbiased data, comprehensive Return on Assets/Return on Equity analytics, and a common language are critically important towards determining fairness – as rates, margin, spreads and contracts will be a key determinant for an asset managers’ success.”
Rising financing costs. The survey of fund managers worldwide found that:
Financing costs have risen for 50% of firms, with an even split between those who quantify the level of cost increase as being greater than 10% and below 10%.
75% of firms expect further cost increases over the next two years.
The impact is consistent regardless of a fund manager’s size, investment strategy or location.
Rethinking prime brokerage relationships:
Fund managers responding to the survey said they are having to rethink their prime brokerage relationships due to Basel III.
75% have been asked to change how they do business with their prime brokers, while more than 67% have had to cut the amount of cash they keep on their brokers’ balance sheets.
Importantly, the survey found that:
Most alternative asset managers over the last two years have either maintained or increased the number of prime brokers they use, with the average number of financing relationships found to be four.
Only 20% of fund managers have a clear understanding of how their prime brokers calculate their worth in terms of the revenue they provide relative to balance sheet impact, known as “return on assets” or RoA. Fewer still have the data necessary to calculate this themselves.
Photo: Youtube. BNY Mellon Names Mitchell Harris CEO of Investment Management Business
BNY Mellon recently announced that Mitchell Harris has been named chief executive officer of the company’s Investment Management business, effective immediately. Harris, who already had responsibility for the day-to-day oversight of the company’s investment boutiques globally and wealth management business, will report to Gerald L. Hassell, BNY Mellon’s chairman and CEO. BNY Mellon Investment Management amounts $1.6 trillion in assets under management.
Harris succeeds Curtis Arledge, who led the company’s Investment Management business and Markets Group and has decided to pursue other opportunities outside of the company.
Harris, most recently president of BNY Mellon Investment Management, joined BNY Mellon in 2004 and has had a distinguished career in investment management and private banking spanning more than 30 years. Harris was CEO of Standish, a BNY Mellon investment boutique, from 2004 to 2009. He joined Standish from Pareto Partners, where he served as chief executive officer from 2000 to 2004 and as chairman from 2001.
“Mitchell has an impressive track record in the investment management industry, having led several successful firms during his career and most recently in overseeing our industry leading line-up of investment boutiques globally. He is well regarded across our client base, and I am confident he will lead our investment management business with great insight and success,” said Hassell. “I want to thank Curtis for his many contributions and helping to position our Investment Management and Markets businesses for growth and success moving forward.”
Michelle Neal,president of the Markets Group, who reported to Arledge, will report to Hassell, effective immediately. In her role, Neal leads the company’s foreign exchange, securities finance, collateral management, and capital markets businesses.
Foto: AedoPulltrone. BNP Paribas Investment Partners nombra nuevo responsable de renta fija de los mercados emergentes
BNP Paribas Investment Partners announces the appointment of L. Bryan Carter as Head of Emerging Market Fixed Income. He will be based in London and will report to Dominick DeAlto, Chief Investment Officer of Institutional Fixed Income.
Bryan has 12 years’ experience of emerging market fixed income investment and joins from Acadian Asset Management in Boston, where he was lead portfolio manager for benchmark relative and absolute return fixed income strategies and was a member of the Macro Strategy and Investment Policy committees. He joined Acadian in 2007 to launch the company’s emerging market fixed income strategy. Prior to Acadian, he spent four years as an international economist, first at the United States Treasury Department and then at T Rowe Price Associates. Bryan has a BA in Economics & Spanish from Georgetown University and an MPAdm in International Development from Harvard University.
In this role Bryan will have oversight of the management of all emerging market fixed income portfolios and will be responsible for overall investment strategy, performance and the allocation of the risk budget across multiple sources of alpha within emerging markets. BNP Paribas Investment Partners’ emerging market fixed income team currently consists of eight investment professionals and manages client assets totalling $1.3 billion across a range of mutual funds and segregated client accounts.
Dominick DeAlto, Chief Investment Officer of Institutional Fixed Income at BNP Paribas Investment Partners, comments: “Bryan Carter has considerable experience of evaluating emerging market risks and opportunities, gained within both asset management and central government planning, and we are pleased to welcome him as Head of Emerging Market Fixed Income. BNP Paribas Investment Partners has an extensive network of analytical resources based across the broad emerging markets universe, providing us with access to real-time local information. Bryan will be instrumental in further harnessing these capabilities in order to ensure that we continue to deliver optimum investment performance for our clients.”
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. Are Markets Right to Worry?
Lower oil prices would normally be expected to benefit the global economy through aiding both consumers and corporates in oil-importing economies, says Stefan Kreuzkamp, Chief Investment Officer, Deutsche Asset Management. He remains constructive on global growth, but thinks there is still some risk of the benefits of lower oil prices being overshadowed by continuing financial- market turbulence. “Perhaps most importantly, lower oil prices have reopened the Pandora’s box of concerns about the longer-term negative side effects of looser monetary policy. In the ancient Greek fable, of course, Hope lies at the bottom of the box – but many more problems fly out first.”
His message is that the changing structure of the oil market and uncertainty about what this means will continue to have market implications. Oil can no longer be seen as a “known problem” that can be assessed in terms of known fundamentals, he adds. Therefore the firm has reduced its forecasts for major equity indices and increased its end-2016 spread forecasts for U.S. high yield. Although they have slightly adjusted the euro high-yield spread forecast as well, they see much lower risks of defaults in this segment.
“We caution that it is still too early to invest in oil-related equities. But this, in a sense, is the easy part.” Declares Kreuzkamp. What is more difficult is to assess the timing to re-enter or to build up positions. For U.S. high yield, for example, implied default rates look excessive, in his view. But the tag-war between markets and fundamentals might well continue, in high yield as in other areas, and impair fundamentals in the process.
CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn
. Henderson Global Investors Hires Stephen Deane to Join Emerging Markets Equities Team
Stephen Deane has joined Henderson Global Investors from Stewart Investors (previously known as First State Stewart) as a senior portfolio manager. He will work alongside the head of emerging markets equities, Glen Finegan, and the wider emerging markets equities team. Stephen will be based in Henderson’s Edinburgh office.
Most recently Stephen spent over five years at Stewart Investors where he worked as an analyst and co-manager of the worldwide Equity funds. In this role, Stephen was responsible for generating ideas for global, emerging markets and Asian portfolios.
Previous to this, Stephen spent 13 years at Accenture and during this time he completed an Executive Masters in Business Administration (MBA) at INSEAD, Fontainebleau in France, with distinction.
Glen Finegan, head of emerging markets equities at Henderson, said: “Stephen and I worked closely together at First State and, given our shared experience, I feel the hire is a very good fit for the team. We share a similar investment philosophy and Stephen’s disciplined approach will be of great benefit to our clients.
“Stephen’s hire evidences Henderson’s continued commitment to the emerging markets equities asset class and signals the further strengthening of Henderson’s franchise working out of Edinburgh. We are certain Stephen’s global insights will be invaluable going forward.”
Stephen Deane adds: “I believe that there is a significant opportunity to help build Henderson’s emerging markets franchise based on its philosophy of long-term quality oriented investing, something Glen and I both share. This combined with Henderson’s reputation for excellent client service, global distribution and a client-led culture made joining the company a straightforward decision”.
As part of the team build-out in Edinburgh, Michael Cahoon has been promoted from analyst to portfolio manager, effective immediately, having contributed significantly to overall performance during the past year. Additionally he has been named co-manager on the US mutual fund, the Emerging Markets Fund. Nicholas Cowley will also be named as co-manager on the Henderson Gartmore Emerging Markets Fund.
EFG Asset Management (EFGAM) – an international provider of actively-managed investment solutions – announced it has brought the management of its top-performing, award-winning New Capital US Growth Fund in-house.
The strategy underpinning the New Capital US Growth Fund was launched for EFGAM in July 2010; based on the firm’s convictions of multi-year growth across the Atlantic, and has since successfully delivered long-term outperformance for clients.
Core members of the existing investment team have officially joined EFGAM as part of the transition. Citywire A rated, Joel Rubenstein, who has been co-lead on the fund since inception will continue as lead manager, working alongside senior portfolio managers Tim Butler and Mike Clulow, as well as research analyst Chelsea Wilson and client portfolio manager Don Klotter, all of whom have been running the fund since inception. There will be no change to the investment process. The US team will continue to be based in Portland, Oregon, and will remain focused on managing the fund. In addition, they will now have the benefit of working alongside other New Capital portfolio managers and analysts with access to the broader global team of investment professionals.
The New Capital US Growth Fund has proven to be a successful component of the wider New Capital fund range, which comprises seven equity funds, three fixed income funds and one multi-asset fund. The Fund has a 5-star rating by Morningstar and a 5 crown rating from FE Trustnet. Compared to the universe of US large cap growth equity funds (approximately 330 funds), it has consistently performed in the top quartile over 1, 3, 5 year periods and since inception. – Moz Afzal, CIO, EFG Asset Management: “This move reflects the successful growth of our New Capital funds franchise. At the time of the fund’s launch we wanted to ensure we had the best managers to implement our strategic views. The strategy has been very fruitful for us, and we are now in the position to provide clients with the best service possible by incorporating all aspects of the fund’s management under the New Capital umbrella.” – Joel Rubenstein, lead portfolio manager: “We have always worked extremely closely with the EFGAM team. Given the success of the fund we are looking forward to taking the relationship to the next stage. We are confident that by joining a much bigger organization with a larger analyst platform, cross-collaboration will enhance the investment process and ultimately performance for clients.”
Foto: Abel Pardo López
. Bill Gross: En renta fija, hay que buscar vencimientos cortos y apalancarse para ganar en un entorno de tasas negativas
In his latest monthly outlook, Bill Gross compares the sun’s lifespan and that of capitalism and inmediate needs, “our finance based economic system which like the Sun has provided life and productive growth for a long, long time – is running out of fuel and that its remaining time span is something less than 5 billion years,” he writes on his letter, adding that “our global, credit based economic system appears to be in the process of devolving from a production oriented model to one which recycles finance for the benefit of financiers. Making money on money seems to be the system’s flickering objective. Our global financed-based economy is becoming increasingly dormant, not because people don’t want to work or technology isn’t producing better things, but because finance itself is burning out like our future Sun.”
He mentions that what people should know is that the global economy has been powered by credit. And that with negative interest rates dominating 40% of the Euroland bond market and now migrating to Japan, it is less likely that someone will loan money knowing they will receive less in the future. “Negative investment rates and the expansion of central bank balance sheets via quantitative easing are creating negative effects that I have warned about for several years now.” He adds that governments, pension funds and corporations are suffering because they cannot earn enough on their investment portfolios to cover the promises, and that “the damage extends to all savers; households worldwide that saved/invested money for college, retirement or for medical bills. They have been damaged, and only now are becoming aware of it. Negative interest rates do that”.
In his opinion, “the secret in a negative interest rate world that poses extraordinary duration risk for AAA sovereign bonds is to keep bond maturities short and borrow at those attractive yields in a mildly levered form that provides a yield (and expected return) of 5-6%.”
Standish Mellon Asset Management Company LLC, the fixed income specialist for BNY Mellon Investment Management, announced that Vincent Reinhart will join the firm as Chief Economist.
Reinhart, who will report to David Leduc, Standish’s Chief Executive Officer and Chief Investment Officer, is a recognized leader in economics and the investment management industry. He will serve as a key resource for Standish’s investment team and support developing the firm’s macro framework which is a key part of Standish’s investment process across all strategies.
“We are delighted to have someone of Vincent’s caliber and expertise to further strengthen our global macroeconomic research platform. He will provide additional scope to our team based investment process and will support our focus on developing innovative fixed income solutions,” said David Leduc.
Reinhart succeeds Tom Higgins who passed away late last year. “2015 was difficult as we said goodbye to a dear friend and remarkable colleague, but we find ourselves fortunate to add Vincent to the team,” continued Leduc.
Prior to joining Standish, Mr. Reinhart held the roles of Chief U.S. Economist and Managing Director at Morgan Stanley and is a visiting scholar at the American Enterprise Institute (AEI). In addition, Reinhart worked at the Federal Reserve for twenty-four years where he was responsible for directing research and analysis of monetary policy strategies and the conduct of policy through open market operations, discount window lending, and reserve requirements. Reinhart received his undergraduate training at Fordham University and has graduate degrees in economics at Columbia University.
“I am excited to be able to join Standish, a firm with an impressive history, strong team and excellent investment capabilities,” stated Reinhart. “I look forward to working with my new colleagues to meet the needs of our clients and to help them navigate ever changing market conditions.”
CC-BY-SA-2.0, FlickrFoto: EvelynGiggles, Flickr, Creative Commons. La consolidación de la industria europea de fondos no parará aunque el mercado acompañe
The Thomson Reuters Lipper ‘Launches, Liquidations & Mergers in the European Mutual Fund Industry: Q4 2015’ report, available here, highlights the following trends int he industry:
Over the course of the year 2015 the European fund industry launched 2,162 new products, while 1,573 funds were liquidated and 1,127 products were merged into other funds. This meant the number of products available to European investors decreased by 538 funds during the year 2015.
At of the end of December 2015 there were 31,931 mutual funds registered for sale in Europe.
Luxembourg continued to dominate the fund market in Europe, hosting 9,174 funds, followed by France, where 4,572 funds were domiciled.
For Q4 2015, a total of 704 funds (444 liquidations and 260 mergers) were withdrawn from the market, while only 563 new products were launched.
“Since the European fund industry enjoyed high net inflows for 2015, it is surprising the industry was still cautious with regard to fund launches. There were a number of mergers between asset managers over the last few years, which led to a number of duplications in the respective product ranges that need to be cleared to achieve economies of scale. In addition, there was still a lot of pressure on asset managers with regard to profitability, which also drove the cleanup of the product ranges. This pressure might even increase, once the new regulatory frameworks are fully applied, since not all the costs related to regulation can be passed on to investors and will therefore become a burden on the asset management industry”, explain Detlef Glow, Head of EMEA Research, Thomson Reuters Lipper, and Christoph Karg, Content Specialist Germany & Austria, the authors of the report.
“In this regard the consolidation of the European fund industry might continue over the foreseeable future, and even a supportive market environment —with rising equity and bond markets—might not stop the trend. But, the consolidation should at least slow, since increasing assets under management can lead to higher income for fund promoters”.
“We might also see an even higher pace of consolidation in the number of funds available to investors in Europe, if the volatility investors experienced in the markets during December 2015 and January 2016 continues over the course of 2016”.
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. Cambian las necesidades tecnológicas del family office
New research “Technology in the Family Office: Navigating New Solutions,” from Family Office Exchange (FOX), has identified a shift in recommended best practices for family office technology. The report details the ways that technology’s rapid development and the emergence of the cloud have disrupted the traditional approach to family office technology, and why it should lead to a change in the way offices think about that technology in the first place.
In the past, family offices typically had to custom build their technology infrastructure in order to meet their specific needs. It was an expensive, cumbersome process—and one that could leave an office unable to agilely adapt to a family’s evolving needs.
In recent years, however, two significant developments in wealth management technology have proven to have a positive impact on family office technology product selection and investment: Internet/Cloud delivery of wealth management applications, and functionality. Thanks to the cloud, family offices can now maintain their own “holistic” platforms, taking advantage of the wide variety of existing wealth management and financial service applications to design a services model that fits their unique needs.
“The sheer speed of technology development,coupled with the dramatic increase in technology adoption rates for family clients in their day-to-day lives, has created a sense of urgency for today’s family office,” said Steven Draper, senior technology consultant at FOX and author of the whitepaper. “Cloud-based solutions have the potential to change the way family office staff interacts with its client base. This shift requires a new mindset when it comes to an office’s investment in technology—family offices must act to remove outdated systems and processes in order to keep pace with modern business practices in office efficiency, security, service levels and execution.”
To design and implement this new cloud-based infrastructure, family offices need to make sure they have access to an expert who understands the unique needs of their office and the services it provides, concludes the document.
