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UBS Global AM: “Now is A Great Time for US Growth Companies”

The markets may be nervous at the moment, plagued by issues like uncertainty in commodities and the structural changes faced by China, but there is no cause for concern around some assets, such as US equities, because the situation is a far cry from 2008. “There are weak spots in the market – the energy and industrials sectors, for example – but we are optimistic and we expect the situation to improve,” says Grant M. Bughman, manager of the US growth equity strategy at UBS Global AM.

At an investor presentation held last week in Madrid, he recognized that the S&P 500 companies have not seen earnings acceleration but highlighted areas where earnings growth has been remarkable.“Now is a great time for US growth companies because they have proven that they can grow in any environment.” Bughman especially likes growth stocks in the IT and healthcare sectors, which are currently overweight in the UBS USA Growth portfolio.

These are quality companies that can gain market share, have pricing power and are able to grow and generate revenues in any environment, even a tough one like the present time. Bughman hails the benefits of growth versus value companies, which include banking sector names and more cyclical stocks. “When it comes to investing in US equities in a lower-growth environment, growth companies work best,” he says. Growth companies are also inexpensive, with valuations currently below their historical 14-year average.

Fundamental strategy

The fund’s portfolio comprises 45 stocks selected through a fundamental research process, midway between concentration and diversification. Stocks are divided into three groups: classic growth companies (such as Nike or Home Depot, which the managers buy when the valuations are compelling); “elite growth” companies, that is, companies in a period of high growth (such as Facebook, a “secular winner” which will benefit from the shift from traditional to online and mobile advertising and which has featured in the fund’s portfolio since its IPO), and cyclical stocks which enjoy more opportunistic growth (such as Delta Airlines). The latter tend to make up around 10% of the portfolio but currently account for less, given the complex backdrop. Fast-growing companies, which have outperformed in recent years, also have a smaller slice of the portfolio at the moment, making room for increased exposure to classic growth stocks.

“The three groups of stocks complement each other in the portfolio, which is designed to perform well in any environment.” It does not include energy sector stocks, “not because we have an outlook on where crude prices are headed, but because the risk-return trade-off is not attractive at this point.” The fund manager, who points out that the collapse in energy prices has not led to increased consumer spending in the US – the fund is underweight the consumer sector – explains that the drop in oil prices stems from the excess supply, adding that some players will be forced out of the business and into bankruptcy, especially if current prices mean they can’t repay their debt. “No-one knows where commodities prices will go but we don’t see them trending upwards over the long term.”

Volatility creates opportunities

Despite the many challenges that lie ahead, Bughman believes that the best strategy in the current environment is to take advantage of volatility, which he says “creates opportunities to use our tools and rebalance portfolios, adding good names at more compelling prices,” especially if you take a long-term view. He believes the selloffs we are seeing in 2016 are indiscriminate and that there are opportunities to be found in stocks that are falling for no reason but fear alone.

When it comes to challenges like China, which will no longer be enjoying double-digit growth, Bughman points out that whilst the US is not an island its exposure through exports is smaller than countries like Japan and Germany. He refers to two US sectors: industrials, which is more closely linked to the emerging markets and will therefore underperform, and the services sector, which is more exposed to the domestic economy and is performing better as employment climbs, salaries improve and support aimed at boosting consumer spending gains momentum. He does add, however, that the upturn in consumer spending has only been observed among part of the US population and is not widespread. He is not worried, though, because household deleveraging and saving means healthier balance sheets, which may not lead to steep spending growth in the short term but will underpin a more robust improvement in the future.

Limited Fed action in 2016

With regard to the Fed, Bughman believes interest rates will stay low for longer and does not expect to see 4 rate hikes this year, as Fed previosly announced. “The Fed took the first step in December and unleashed volatility in equity and credit markets, driving up financing costs. The Fed has continually repeated the mantra that they will be data-dependent and given our generally positive view we see support for further future hikes, but not at the pace the Fed had anticipated to start the year,” he says, completely ruling out another hike in March. He believes rates could be raised as of June if the situation is more stable but expects Yellen to take a cautious stance in a deflationist environment. “The market is still underestimating how long interest rates will remain low. The path of rate hikes will be modest,” he adds.

After The FATCA Exchange, Investment Returns Will not Be The Same!

| For Gabriela Huerta | 0 Comentarios

From this moment forward, a U.S. taxpayer ought to recognize that IRS will have knowledge of a taxpayer’s financial assets outside of the U.S. that it did not previously have. Before passage of Internal Revenue Code Chapter 4 (FATCA), a U.S. taxpayer faced little risk of discovery, income tax liabilities and sanctions, or a penalty from I.R.S. for not reporting his foreign financial assets or income. So, a U.S. taxpayer making a 10% return on an investment was actually keeping the 10% return.

The United States has always taxed its U.S. taxpayers’ taxable income on a worldwide basis. Thus, absent a treaty or Internal Revenue Code benefit, there is no tax advantage for compliant U.S. taxpayers to investing offshore if the same pretax internal rates of return are obtainable in an onshore U.S. investment. Now that FATCA reporting by Foreign Financial Institutions is occurring, the previously untaxed internal rate of return from an unreported passive investment in an offshore structure will no longer be the actual rate of return. U.S. tax and reporting requirements applied to foreign financial assets and offshore passive investment will reduce an offshore structure’s return on investment. To explain further, given that the current highest effective U.S. tax rate on ordinary income is 39.6%, the long term capital gains or qualified dividend income rate is 20%, and the estate & gift tax rate is 40%, when they are factored into an investment decision, it can dramatically change the tax landscape for a U.S. taxpayer.

Part of the rationale behind the activity of investing overseas has been asset protection; and in some cases – U.S. income tax non-compliance to maximize investment returns. Certain offshore jurisdictional confidentiality laws and rules have historically helped protect assets and increase effective rates of return in those jurisdictions.

FATCA significantly increases the risk of IRS becoming cognizant of assets and reportable income amounts that have not been compliantly reported. Furthermore, U.S. taxpayers should be aware of some of the potentially punitive nightmare scenarios involving offshore investments including but not limited to:

Passive Foreign Investment Companies (PFIC),
Unreported Foreign Financial Accounts,
Unreported Foreign Trusts, and
Non-US Businesses.

It is a reality that tax transparency will have a negative impact on actual returns from offshore investments. A U.S. taxpayer with offshore investments ought to consider whether asset protection structures with the potential for causing punitive taxpayer treatment in the absence of compliance merits increased costs associated with compliance, as well as the latent penalties associated with non-compliance. Finally, FATCA is here to stay, and the era of secrecy has ended.

Neuberger Berman Appoints David Rowe as Head of Marketing, EMEA

| For Alicia Miguel | 0 Comentarios

Neuberger Berman, one of the world’s leading employee-owned investment managers, announces the appointment of David Rowe to the role of Head of Marketing – EMEA, effective immediately.

David is responsible for developing and implementing marketing strategy to support Neuberger Berman’s growing EMEA business across all client channels, based in London.

Dik van Lomwel, Head of EMEA and Latin America, commented: “We are excited about David’s addition to the firm at a time when communication with our clients is more important than ever. His deep understanding and experience of marketing across EMEA will play a key role in tailoring our capabilities to each diverse market and supporting our dedicated client teams.”

David has over 17 years’ experience in the asset management industry. He joins from PIMCO where he was Head of MarComms EMEA since 2012 and additionally responsible for APAC since 2014. Previously, he held several senior marketing roles at Threadneedle (now Columbia Threadneedle) including Head of Wholesale & Institutional Marketing and latterly Head of Marketing. Prior to this he was Marketing Director – Funds at GAM.

David commented, “I am delighted to be joining one of the few privately owned investment firms of true scale. With the breadth of product range across asset classes the firm is well positioned to partner with clients in the short and long-term.”

Choppy Markets Spur Interest in Multi-Factor Smart Beta Strategies

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Pixabay CC0 Public DomainFoto: Andrew. Sube la marea, llegan nuevas noticias, ¿debería cambiar mi visión de mercado?

While market volatility will continue to fuel the growing popularity of multi-factor smart beta strategies in 2016, there will be greater focus on diversification than trying to predict which factor will dominate, according to the latest issue of The Cerulli Edge – Europe Edition.

“For delivering alpha, multi-factor strategies that tip-toe the line of active investing will gain favor,” says Barbara Wall, Europe managing director at Cerulli Associates, a global analytics firm.

In a Cerulli survey conducted in mid-2015, when asset managers were asked which smart beta products would see the strongest institutional sales over the next 12-24 months, 50% of UK managers said multi-factor, with 30% of Nordic managers answering the same.

“Over the past year as market uncertainty has reigned, multi-factor smart beta strategies have garnered greater interest. We expect total assets under management (AUM) to continue to increase not only in Europe but in the US and Asia as well,” says Justina Deveikyte, a senior analyst at Cerulli.

Big data platforms and improved off-the-shelf analytics that better understand how different factors work is also growing the market by broadening the investor base beyond sophisticated institutional clients, says Cerulli.

It estimates that total AUM for smart beta portfolios in Europe has grown from EUR 9.5 billion (US$ 10.6 billion) in 2011 to EUR 32 billion by the close of 2015. Return-oriented AUM increased from EUR 5.7 billion to EUR 23.5 billion over the same period.

“Investors sitting in more cap-weighted passive implementations or classic active management strategies will be looking at the multi-factor smart beta strategies as suitable alternatives because they are cost effective, transparent, and are more likely to live up to potential,” says Deveikyte.

Natixis GAM Appoints New SVP of Global Public Relations and Communications

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Natixis Global Asset Management has recently hired Ted Meyer for the role of Senior Vice President of Global Public Relations and Communications. Meyer joins Natixis from Reality Shares, where he was the director of communications.

Meyer will assume a key role in the development of the global public relations and communications strategy and will be responsible for overseeing activities in the U.S. and Canada. He will work closely with international counterpart Wesley Eberle and his UK-based team to provide support at the corporate, distribution and affiliate levels of Natixis.

The Boston-based public relations team will report to Meyer who will report to Caren Leedom, Executive Vice President of Global Communications and Public Relations. “With more than 20 years of experience Ted’s background makes him a great addition to the global public relations and communications team,” said Leedom.

Meyer joined Reality Shares, Inc., an innovative start-up asset management company, in February of 2015 and led their communications and marketing efforts. Among other accomplishments, he helped the firm develop and launch a new series of exchange-traded funds (ETFs) based on proprietary market strength and dividend health indicators, and he structured and implemented a content marketing and thought leadership program.

Along with Reality Shares, Inc., Meyer progressively expanded his experience in media relations and communications through positions at leading corporations. Meyer built the communications program at First Solar Inc., providing key support to executive management from 2010 – 2013. Prior to that role, he was the head of communications in the Americas for Deutsche Bank AG, where he worked for 10 years, and was responsible for internal communications, media relations and brand communications for Deutsche Bank’s operations throughout the region. Before his time at Deutsche Bank, Meyer worked in media relations at UBS and served as media relations and internal communications manager at General Electric Co.

There is a Clear Mismatch between Product Development Trends and Real Demand from Large Fund Selectors in Europe

| For Alicia Miguel | 0 Comentarios

The European fund distribution consultant accelerando associates conducts regular surveys capturing the latest insights from both the buy as well as the sales side. In January 2016 accelerando reached out to 60 Global, European and Country Sales Heads across Europe in order to shed light into experienced and forthcoming opportunities and challenges in European fund distribution from the source.

The 2016 survey kicked off with questions on the fund selector’s takes on current product waves. Smart beta dominates headlines. Is the asset management industry smart enough without smart beta? While 53% of the interviewed fund sales people stated that fund selectors consider smart beta concepts to be potentially interesting, 33% said that selectors have a rather skeptical view on smart beta. Only 13% of the survey respondents believe that European gatekeepers consider smart beta funds as a clear value adding proposition.

Responses on multi strategy funds, which seem to be the product developer’s current darling, provided a very similar picture. 60% of the survey respondents said that fund selectors address multi strategy funds very selectively, while 20% believe the gatekeepers look at these funds rather skeptically. “With that, we witness a clear mismatch between product development trends and real demand from large fund selectors“ states Philip Kalus, managing partner of accelerando associates.

Passive and Active

The experienced and also expected growth of the ETF and passive fund space also provides regular industry headlines. However, how do European investors play out these funds? Cheap core exposure, tactical plays or cheap replacement for active funds? The survey outcome provides a mixed picture with leading scores for cheap core exposure (45%) and tactical plays (41%). Only 14% see ETFs as a threat to active funds based on replacements. “This demonstrates well again, that the question is not active versus passive, it is both. High alpha active funds will be always in demand. However, the picture is different for so called closet-tracker funds“ says Charles Velie, researcher at accelerando.

Covering the demand or doing the best?

Many asset managers roll out new products on a regular basis to ensure further asset gathering, while most fund selectors want asset managers to focus on what they are best in. So, is this creating a conflict of interest for fund sales staff? Interestingly, not for the majority of senior sales people interviewed. However, individual comments suggest that some sales people can afford to ignore product campaigns to a certain extent and that they only focus their activities on the very best offering. Nevertheless, for 38% it is a clear conflict.

Equity year?

2016 should be the year for equity funds – at least when it comes to the majority of early year asset manager statements. In stark contrast, 63% of the survey respondents believe that this is rather wishful thinking and that fund selectors will keep their powders dry.

There has also been a lot of talk about increased price pressure from European fund buyers recently. However, the accelerando survey suggests that price pressure in Europe has only increased moderately with a score of 53%, while 31% state that price dynamics have more or less stayed the same in recent years. “It is about adequate fee levels. Investors are willing to pay fees for quality“, concludes accelerando.

Fund selectors requirements

Most fund selectors have high minimum requirements in terms of assets under management in a target fund, which makes initial asset gathering outside captive channels hard for new fund launches and small boutiques.

Within the alternative world, in particular in private equity, club deals – investors joining forces to invest at early stage – are common. Within traditional fund distribution / fund selection this seems far from reality yet. 70% of the survey respondents have never witnessed it, while 27% have experienced fund selector club deals in a very limited amount only. “This is certainly something asset managers should promote more. It is a win-win. Selectors can access new funds and emerging talents at an early stage and promoters gain sufficient size“ states Philip Kalus.

Overcrowded?

Europe is overcrowded in terms of the number of fund promoters and funds available, says the study. Fund selectors have plenty of choice in any given asset class. At the same time operational and due diligence efforts have increased. A widespread move away from open towards guided / limited architecture has already been witnessed by the majority of accelerando’s survey respondents in the 2014 and 2015 surveys. 2016 does not come along differently. Only 7% stated that fund selectors do not intend to work with less funds / less fund providers.

The state of the industry

The asset management industry has increasingly come under pressure by troubling headlines. How about the perception of the state of the industry by European fund selectors? 63% of the senior sales people interviewed believe the perception is good, but not good enough, while 27% stated the perception is poor. The asset management industry has over-promised and under-delivered too often. Only 10% believe the perception is very good.

Digitalization

accelerando associates are firm believers that fund selectors want to access everything they need anytime from anywhere. Digitalization matters. 50% of the survey respondents believe that digitalization has nowadays a very high importance in marketing and communication to fund selectors, while 47% give it high, but early stage importance. Interestingly, 50% state that their employers do not encourage them to apply more digital contacts versus face to face meetings. “We expect this to change dramatically in the forthcoming years. Old-school sales models run high costs and a lot of unproductive time traveling to and in between investor meetings“ states Charles Velie from accelerando.

How about fund sales expectations for 2016? 67% of the survey respondents expect a good, but challenging year ahead, while 27% expect a challenging year indeed. Only 7% expect 2016 to be a good year indeed in terms of fund sales. Optimism looks different.

La Française to Take Majority Ownership of Forum Securities

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Two years after the announcement of their strategic partnership and the successful launch of the La Française Lux – Forum Global Real Estate Securities Fund, Forum Partners, subject to regulatory approval, will transfer an 80% interest in its wholly owned subsidiary, Forum Securities Limited, to La Française. The transfer is expected to close in the first quarter of 2016.

Forum Securities is an SEC registered investment advisor managing private investment accounts for institutions and family offices, with an investment focus on long-only and hedged global real estate public securities strategies. The business was established in 2009 and has seven full-time employees, six of whom perform investment, advisory and research functions. Employees represent seven nationalities and speak ten languages. Forum Securities has offices in Greenwich, CT (USA), Singapore and London. The team is recognized for its “out of the box” approach.

The new integrated platform will be re-branded La Française Forum Securities and will allow Forum Securities enhanced back office and reporting capabilities as well as stronger business development and client relations support. La Française will continue to expand its international footprint with a presence in the US and Asian markets. Together the firms will look to broaden their product offering to include: infrastructure/commodities, a Sharia compliant listed real estate investment fund, listed Green real estate funds, sector specific listed real estate funds and other customized strategies that meet investor demands.

The existing product line will continue to be managed by the Forum Securities team which will be reinforced to support the expected growth in offerings. Jana Sehnalova, Portfolio Manager within the Forum Securities Limited team, will be the Global Head and Managing Director of La Française Forum Securities and will report to Pascale Auclair, Global Head of Investments of La Française Global Asset Management.

Old Mutual Global Investors to Launch Gold and Silver Fund

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Old Mutual Global Investors has announced that it intends to launch the Old Mutual Gold & Silver Fund in March 2016, subject to regulatory approval.

The Fund, which will be a sub-fund of the Dublin domiciled Old Mutual Global Investors Series, will be managed by Ned Naylor-Leyland, who joined OMGI from Quilter Cheviot in September 2015. Ned will be supported by Analyst Joe Lunn and Investment Administrator, Amelia Bowyer, who previously worked with Ned at Quilter Cheviot.

The Fund will aim to deliver a total return by combining indirect exposure to gold and silver bullion, with selected precious metals mining equities, in order to target maximum diversification and potential for upside for investors. The management team will use a bottom-up stock selection process in order to identify companies that, they believe, will produce a good long-term return to shareholders.

Using a dynamic investment process the team will adjust the weighting of gold- and silver- related equity and equity-related securities, at various points throughout the market cycle, to create the optimal balance in the portfolio.

OMGI believes that the Fund will be suitable for clients looking to diversify their portfolio and benefit from the prospect of attractive long term growth in the gold and silver market.

Ned Naylor- Leyland comments:

“I’m delighted to be at Old Mutual Global Investors working on the launch of a new gold and silver fund. In times of market turmoil, monetary metals have consistently been turned to as a safe haven for investors. Gold and silver prices have fallen to levels from which they have rebounded strongly in previous bear market cycles and look set to rise again in popularity as an asset class over the course of 2016.”

Warren Tonkinson, Managing Director, Old Mutual Global Investors, comments:

“As investors increasingly look for alternatives to diversify their portfolios, now is the perfect time to launch the Old Mutual Gold & Silver Fund. Ned brings with him a wealth of experience and his appointment is another great example of how we are working with our colleagues at Quilter Cheviot to identify opportunities to utilise existing skills within the business to enhance our proposition and add value for investors.”

Ned Naylor Leyland joined OMGI from Quilter Cheviot in September 2015. Ned started at Quilter Cheviot in July 2008 and continues to run their Malta-domiciled precious metals fund. Ned joined Quilter Cheviot from Smith and Williamson. He started his investment career at Neilson Management in 2001 and has over 15 years’ experience working in the precious metals sector.

Monaco to Examine Draft Law on Multi Family Offices

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Mónaco prepara un ley para regular la actividad de los multi family offices en el Principado — CC-BY-SA-2.0, FlickrPhoto: Paul Wilkinson . Monaco to Examine Draft Law on Multi Family Offices

The national council of Monaco, the Principality’s parliament, is to examine a draft law on multi family offices’ activity in Monaco.

It points out that if single family offices have been run for years in Monaco, multi family offices which have started to flourish in recent years in the Principality remain unregulated so far in the country.

The further law will then provide a regulatory framework to the business.

Moreover, it seeks to promote Monaco as a centre of excellence for family offices, pursuing therefore Monaco’s government plan that aims to make the country more attractive to ultra-high-net-worth individuals and entrepreneurs.

Among compliance obligations enshrined in the draft law, multi family offices conducting financial transactions will have to be granted a license by Monaco’s state minister and will be subject to regulatory approval by Monaco’s financial authority, the Commission de contrôle des activités financières (CCAF).

Also multi family offices in Monaco will have to be structured in Monegasque public limited companies (Société anonyme monégasque).

Michael Roberge, MFS’ co-CEO: “We Do Not Believe The United States Will Fall into Recession in 2016”

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Michael Roberge, MFS’ CIO and co-CEO, was recently in Miami where he met with more than 120 investors in two events organized by Jose Corena, Managing Director for the aforementioned management company, together with Paul Britto, Regional Director, and Natalia Rodriguez, Internal Wholesaler.

Roberge, who has been working with the company for the past 20 years, began his review of the global macroeconomic and business landscape by emphasizing the huge disconnect between what markets are discounting and the realities of the economy. The current environment is much more favorable than a year ago, because, according to MFS’ co-CEO, market downturns have led to more attractive entry prices. “It is undeniable that there are risks. A year ago the markets were calm and everyone was buying, even though all asset classes were overvalued,” he pointed out.

But the fear factor currently extending through the market is not so much a concern over valuations, but is more focused on the possibility of a recession on the horizon. For Roberge, even if the market discount rate reflects a scenario of great pessimism, the United States will not fall into recession in 2016.

“Consumption accounts for seventy percent of US GDP, and its health is enviable. The unemployment rate is declining and heading towards 4%; real wages are rising by about 2-2.5%; and the price of energy has fallen considerably in the last 18 months — which for the consumer’s disposable income is comparable to a tax cut” he claimed.

“US manufacturing, which accounts for about 10% of the overall economy, is underperforming the consumer-oriented sectors of the US economy,” he said. “This is due to both a stronger dollar, which hurts exports, as well as a clean-up of accumulated inventories during the past year. Once these inventories have been depleted, it is likely that the manufacturing sector will not continue to be a drag on GDP growth.”

Finally, Roberge said that the public sector, which in recent years has either been neutral or has had a negative contribution, will contribute between 0.6% and 0.7% to GDP growth in 2016 through a combination of tax cuts and increased spending. “In short, the US economy is in good shape. Doing the math, it seems highly unlikely that the US goes into recession unless an exogenous factor which significantly affects consumer confidence takes place,” he explained to attendees. The factors which could affect consumption are gasoline prices and interest rates, neither of which appears to be going up this year.

Global Growth

With respect to global growth, a stronger US dollar helps Europe, as it favors exporters, and ultimately its manufacturing sector. The MFS executive believes this will last throughout 2016. He also believes the Old Continent is benefiting greatly from low energy prices. For its part, Japan is not likely to contribute in any great measure to global growth this year. Finally, emerging markets are expected to be the part of the world that will continue to deteriorate in 2016. “Continued pressure from China means they will grow, but less than last year. If we look at the world as a whole, I think there is a very low probability of falling into recession. It is the market which is mistaken and not the fundamentals of the economy,” he said.

With all of this on the table, MFS’ advice for investors is to consider equities over high quality bonds. The reason, he said, is very simple. The average dividend yield currently stands at 2.4%, while the yield on the benchmark 10-year Treasury is 2%. So unless the economy falls into recession, “which is something we do not believe will happen, it is better to have an emphasis on equities, given the current lack of profitability in the bond market.”

Limited Opportunities in Fixed Income

Among the few opportunities currently offered by fixed income securities, Roberge mentioned the high yield bond market, where the average yield is around 9%. “It will probably beat equities this year,” therefore, he believes it’s a good idea to include this asset in a portfolio. “We believe that the market is being a lot more pessimistic about high yield market conditions than our own vision of what will really happen. The key factors here are volatility and liquidity, two factors which are of great concern, but the market has already discounted both of those risks. This year, high yield should perform much better than US Treasuries and, in our opinion, also much better than stocks.”

MFS’ co-CEO also opts for dollar-denominated emerging market debt, and explains that “during the last five or six years, we have seen a flattening in the debt curve of developed countries, due to the slowdown in growth and the monetary policies of central banks, and we believe that the next debt cycle will favor emerging markets. We prefer debt issued in dollars because local currencies are still exposed to risk from China, to the price risk of raw materials, and to what the Fed does throughout the year,” he added.

The market is expecting the Fed to raise interest rates again in March, but MFS does not believe that will be the case. Roberge ventures that the board headed by Janet Yellen will go easy. “It is likely that this time it may be the Fed which moves the market and not vice versa. It will be difficult for the board to raise interest rates since the major central banks in the developed world continue easing monetary policy due to global deflationary pressures. Therefore, we do not see the Fed raising rates four times this year, and have positioned our portfolios accordingly,” he said.

In his analysis of Latin American countries, MFS’ co-CEO explained that there is dollar-denominated Mexican debt in their portfolios, and Argentine debt has recently been added as a result of the political changes brought about by recent elections. With respect to Venezuela, given political circumstances and the price of oil, the Boston-based firm believes that at some point it will have to restructure its debt because its current levels are unsustainable.

“Brazil has a lot of challenges,” he said. “The economy is stagnant, inflation is high, and the central bank has little room for maneuver; added to all this is the political turmoil as a result of corruption exposed during the last year. These factors make it almost impossible to implement the reforms which the country needs.”