Allianz GlobalInvestors (AllianzGI) announced the appointment of Irshaad Ahmad as head of institutional Europe. Based in London, he will assume business development and client servicing responsibility for all AllianzGI’s institutional clients in Europe and spearhead the company’s strategy to further develop its institutional business in key regional markets.
Ahmad, who will report to Tobias C. Pross, head of EMEA, will also chair the European Institutional Executive Committee and become a member of the European Executive Committee.
Commenting on the appointment, Tobias C. Pross said: “I am delighted that, in Irshaad, we have found a senior executive who combines extensive experience with a strong entrepreneurial mindset. I am certain that Irshaad will help further strengthen our institutional business across our key markets, driving best practice in client-centric advisory and service delivery throughout Europe.”
He joins AllianzGI from AXA Investment Managers, where he was head of UK & Nordics and CEO UK since 2011, leading retail and institutional sales as well as client service teams.
Foto: Steve Jurvetson. Barclays vende una unidad de índices a Bloomberg
Last Wednesday British bank Barclays agreed to sell its indexing business built around former Lehman Brothers benchmarks to US based Bloomberg for close to 781 million US dollars (520 million pounds).
The move comes as Chief Executive Officer Jes Staley speeds up non-core disposals and will give Barclays a 480 million-pound gain.
Barclays Risk Analytics and Index Solutions Ltd. (BRAIS) incorporates Barclays’ benchmark indices, including the Barclays Aggregate family of indices. The transaction includes the sale of relevant intellectual property in relation to the POINT portfolio analytics tool. Barclays has agreed to continue to operate POINT for 18 months post completion in order to help clients transition to other providers, including Bloomberg’s PORT product. Barclays will retain its quantitative investment strategy index business, with calculation and maintenance of its strategy indices outsourced to Bloomberg.
Completion is subject to various conditions, including anti-trust approval, and is expected to occur by mid-2016.
Jes Staley, Barclays Group CEO, said: “We are pleased to partner closely with Bloomberg upon completion of the transaction, including maintaining a co-branding arrangement on the benchmark indices for an initial term of five years. This transaction is further evidence of the good work we are doing in managing down our Non-Core assets so that shareholders can feel the full benefit of ownership of Barclays’ well-performing Core businesses.”
Back in 2008 Barclays combined their indices offering with those of Lehman Brothers Holdings Inc.’s North American unit to create BRAIS.
Foto: Katie Mollon
. Las pymes estadounidenses presentan una oportunidad en renta variable
In today’s landscape, where the economies and markets are more linked together, and the “new normal is going to hit investment” with “very modest returns,” investing in smaller companies can give an added edge.
According to Chris D. Wallis, CEO, CIO and Senior Portfolio Manager – Equity Investments at Vaughan Nelson Investment Management (part of Natixis Global Asset Management), when looking to invest in small and mid sized companies, “you get better information than from large caps, since the structure of larger ones is so vast that it is hard to realize exactly how they are making money” The investment professional also mentions that in the “small and mid cap space it is easier to pick up the phone and have access to the CEO or CFO.”
Another point Wallis makes is that large cap companies can be over diversified, so many times you are gaining exposure to different areas you don’t necessarily are interested in. The same comes to avoiding the pitfall of a strong dollar affecting the company’s balance sheet. Today’s large caps often have sales abroad and thus the higher dollar hurts their numbers.
According to Wallis, sectors are not going to work; “We don’t see anything that stands out in asset classes or sectors, it is no longer about buying energy or healthcare, but on a specific company.” In order to do that, the expert recommends screening for minimum levels of profitability and maximum levels of valuation but then “you need to turn to your database and understand subtle changes and how they are going to impact companies,” which requires specialized industry and market knowledge.
In general terms, and given that companies are highly exposed to tightening credit, he recommends checking “what does the balance sheet look like and when do they have to refinance debt; do they have the sufficient cash flow to refinance the debt? and, are their customers able to get funds to keep up the sales?”
One thing to note, is that Wallis believes that globally, the next five years will look completely different than any period we have seen in the last 50 -100 years. For the very first time, we have seen liquidity tighten; high yield spreads have increased, and access to credit has declined without the economy or personal income accelerating or inflation picking up. “The economies and markets are more linked together, the US was the first to fall and come out of the crisis then Europe followed, and now China. The policy choices that we made have exhausted the limits, we have gone to zero interest rates and I wouldn’t be surprised if we needed negative interest rates.” So, with mid single-digit returns in equity, low single-digit returns in fixed income and zero returns from cash, which translate into very modest returns, saving rates need to go up and as an investor, you need to differentiate yourself from the market.
The Erste WWF Stock Environment Fund invests globally in companies in the environmental sector. It was first launched in 2001 as Stock Umwelt. Clemens Klein is fund manager with Erste Asset Management.
Mr. Klein, what was the goal in setting up Erste WWF Stock Environment Fund?
The basic idea is to invest in companies that contribute to environmental protection with their products or services. Our goal was to take into account the effects of global mega-trends such as population growth, urbanisation, and the growing middle class in growing regions such as Asia and Africa.
What are the effects of these trends?
These trends lead to an increase in energy demand and demand for scarce resources, higher emissions of greenhouse gases, and an increase in the volume of waste. With our topics “renewable energy”, “energy efficiency”, “water”, “mobility”, and “recycling”, we focus on those areas where solutions for these developments are available.
What strategy do you pursue in these funds?
We are strongly focused on small and medium-sized companies with interesting products or technologies. We hold them over extended periods of time in order to benefit from long-term trends. One example is Shimano, a producer of bicycle components, which we first bought for our fund in 2003. To date the company has recorded a price increase of the factor of ten.
Can you invest in any sector?
No, the fund invests only in companies whose products and services come with a benefit for the environment. Companies involved in nuclear power, the oil, coal, gas, or mining industry, or the automotive and aviation industry are not investable.
Are there certain topics in your investable universe that are promising?
We can see potential especially in renewable energies. Although clean forms of energy are crucial for climate protection, wind and solar power currently make up less than 2% of global power generation. This share will be growing to 30%-50% by 2050. We also regard companies as attractive that operate in energy storage and energy efficiency. Energy that you don’t consume doesn’t have to be produced at a high financial and environmental cost. The relevance of alternative propulsion systems such as electric or hydrogen-powered cars will drastically increase as well.
Foto de Juan Agapito. ¿Es momento de favorecer los TIPS?
A sluggish economy, strong dollar and falling energy prices have pushed inflation down to historically low levels. However, as Russ Koesterich, CFA, BlackRock Global Chief Investment Strategist, explains, expectations for future inflation may be too complacent.
Over the past several years, investor perceptions of the U.S. economy have changed dramatically. Following several years of consistently disappointing economic growth, few now expect a return to the post-World War II growth norm.
Amid the sluggish economic recovery, investor expectations for future inflation have also moderated, but perhaps by too much. Indeed, current expectations for future inflation may be too complacent, creating a potential opportunity in long-dated Treasury Inflation-Protected Securities (TIPS).
Shifting the Focus to TIPS
Three years ago, according to data accessible via Bloomberg, investors were expecting inflation of roughly 2.5 percent over the course of the next decade. Even as recently as last summer, expectations for long-term inflation were around 2.25 percent. However, since the summer, inflation expectations have collapsed. As of December 1, 10-year TIPS breakevens, a measure of investor expectations for future inflation, were below 1.6 percent. While this is nominally above the multi-year low reached in late September, it’s well below the long-term 10-year breakeven average of around 2 percent.
The collapse in investor inflation expectations coincides with a similar recalibration among consumers. In addition to measuring consumer confidence, the University of Michigan publishes several surveys measuring consumer expectations for inflation. The most recent survey suggests that 1-year inflation expectations are at 2.7 percent, down from 3 percent in March. The longer-term 5-year survey has inflation expectations at 2.6 percent, just above a multi-year low.
Why have both investors and consumers lowered their expectations for inflation so dramatically? While the sluggish recovery has certainly contributed, there’s some evidence that the precipitous drop in oil has played an outsized factor. Since peaking last summer, U.S. crude benchmark WTI has fallen by approximately 55 percent, according to Bloomberg.
As consumers and investors are constantly exposed to the price of a gallon of gasoline, itself a function of crude prices, the drop in oil may have disproportionately impacted perceptions of inflation. There’s some empirical evidence to support this. Since the third quarter of 2015, the drop in oil prices explains roughly 80 percent of the variation in 10-year inflation expectations, according to a BlackRock analysis using Bloomberg data.
Should oil prices continue to collapse, inflation may remain at today’s low levels or sink even further. However, there are a number of signs that that the recent drop in inflation expectations may be overdone.
Inflation Expectations Underrated?
First, U.S. inflation stripped of food and energy prices, which are inherently volatile, has been much more stable than the headline number. The core consumer price index (CPI), which excludes both food and energy prices, is currently running at 1.9 percent year over year, the highest level since June of 2014, according to data via Bloomberg.
Looking at this from an economic perspective also seems to indicate that today’s inflation expectations may be unrealistically low. “My preferred leading economic indicator—the Chicago Fed National Activity Index (CFNAI)—suggests that current estimates for U.S. inflation appear roughly 40 basis points too low,” says Koesterich.
“While I don’t envision a significant surge in inflation anytime soon, I do expect to see some stabilization in inflation and inflation expectations given factors including declining slack in the labor market. In addition, U.S. inflation should firm as the one-off impact of a stronger dollar and lower energy prices start to fade from CPI calculations. In the meantime, today’s TIPS prices tell me that investors’ inflation expectations may be too sanguine. As such, in bond portfolios, I prefer TIPS to plain-vanilla Treasuries. An allocation to TIPS could help hedge the risk that inflation may be on the rise,” he concludes.
This material is for educational purposes only and does not constitute investment advice nor an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator in any Latin American and Iberian country and thus might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein.
After more than nine years, on Wednesday, the Federal Reserve of the United Stated made true to its promise of raising interest rates in 25 basis points moving from near zero to the range of between 0.25-0.5%. It also stated it would not shrink its balance sheet until rate normalisation was ‘well under way’. Though policy remains extraordinarily accommodative, this is the first small step toward interest rate normalization since the financial crisis.
Markets took the Fed’s hike very much in their stride. 2-year yields rose by 2 basis points to 1.00%, but 10-year yields were a touch softer at 2.29% at the time of writing. The dollar inched higher against the euro, yen and on the Bloomberg DXY basket. While stocks reacted to the message of the Fed’s confidence in the economy the S&P 500 index rose 1% to 2074.
What will happen next? The Fed continues to project an expectation of four rate hikes next year, describing these as gradual, with no fundamental shift in its other economic projections to signify a more dovish outlook than in September. But, according to David Page, Senior Economist at AXA Investment Managers (AXA IM), this means that “the Fed failed to deliver a ‘dovish hike’. We continue to expect a tightening in financial conditions to lead the Fed to deliver just three hikes next year. Yet financial markets took today’s move in its stride, with little today deviating from broad expectatios…we consider the likelihood that the Fed has seen insufficient evidence of inflation pressures to justify a move in March and we forecast the next move in June.”
Goldman Sachs Asset Management said that they think the Fed’s action amounts to a cautious hike, and that “based on current forecasts, we believe the trajectory of interest rates will be shallow. Given the positive trends in the US labor market, we expect the Fed’s main focus in the coming months will be on inflation, financial conditions—particularly dollar strength—and economic growth.” They also expect three hikes in 2016 but “We believe the Fed could raise interest rates again in March if inflation rises and financial conditions stabilize. Our current expectation is for an additional three increases in 2016, but the path remains uncertain.” They cited that the dollar’s strength was among the key factors—along with broader financial conditions and weak external demand—in the Fed’s decision to postpone tightening in both June and September this year.
In regards to the Fed’s announcement of a modification of its balance sheet policy -suggesting that it would not stop or taper reinvestment of maturing Quantitative Easing (QE) assets until normalisation was ‘well under way’ (previously it had simply said this would start after lift-off), Page commented that ” this was a clarification that we had long anticipated and echoed a similar recent statement by the Bank of England.”
Fed Chair Yellen’s press conference did little to overtly suggest a more dovish assessment. She was questioned on the inflation outlook and repeated that actual progress was required, but refused to be pinned down on any metric or timeframe of such an assessment. She highlighted the FOMC’s assessment that risks were balanced. The Fed Chair provided the Fed’s justification for a hike, which having fulfilled the conditions posed by the Fed was broadly to avoid the risk of the need for a future abrupt tightening, which she said might increase the chances of prompting recession. She also emphasised that the Fed’s policy outlook was for an expectation of gradual tightening and one that would likely not be even-paced.
Economic forecasts saw little change:
the median estimate of Q4 year on year GDP was nudged higher to 2.4% from 2.3% in 2016, but were otherwise unchanged;
unemployment was forecast marginally lower at 4.7% from 2016 onwards (from 4.8%);
and headline and ‘core’ personal consumption expenditure (PCE) inflation was forecast marginally lower to 1.6% (from 1.7%) in 2016, but was otherwise unchanged.
Longer run estimates of the these factors were unchanged.
Moreover, the Fed saw little adjustment in the median estimate of future rates, although some of the higher forecasts were lowered.
GSAM agrees saying that they “do not believe this modest policy adjustment is likely to derail a US recovery that has momentum. As a result, we remain pro-cyclical in our investment outlook, with equities remaining our favored asset class at this stage of the cycle.” Although their growth expectations are slightly lower, moderating from 2.4% this year to 2.2% in 2016.”
“In emerging markets, we think commodity prices, Chinese growth and local fundamentals are more important than Fed policy. Markets have had a long time to adjust to the prospect of higher US rates and we believe emerging market assets have largely priced in a modest course of Fed tightening. As a result, we continue to believe emerging market assets will be driven primarily by local fundamentals,” concluded GSAM.
Robert C. Serenbetz, analyst on the CIO Americas Team in Private Banking Americas at Credit Suisse, shares his outlook for Latin America, which continues to be negative as industrial production momentum falls.
Industrial production continues its declining trend likely leading to lower output and growth.
CDS spreads on Brazilian debt have risen considerably this year; however, the cost of protection has fallen recently as some steps have been taken to address economic reforms.
Rising inflation along with increasing unemployment and some painful tax hikes are placing a large portion of the Brazilian population in an increasingly disparate position. Simultaneously, these same factors are hurting corporate expectations.
According to the BofA Merrill Lynch Fund Manager Survey for December, a majority (58 percent) of global investors expect the U.S. Federal Reserve (Fed) to raise rates three times or more in the coming 12 months.
The survey where an overall total of 215 panelists with US$620 billion of assets under management participated in from December 4 to December 10, 2015 noted that:
More than half of the panel (53 percent) says long U.S. dollar is the “most crowded trade,” up from 32 percent in November.
Thirty-five percent say the end of the Fed hiking cycle is the event most likely to end the U.S. dollar bull market.
Risk-taking fell. Cash rose to 5.2 percent of portfolios from 4.9 percent last month.
A net 43 percent of regional fund managers expect China’s economy to weaken in 2016, up from a net 4 percent last month.
Weighted average GDP growth projections for China in 2018 have fallen to 5.5 percent from November’s 5.9 percent.
A net 29 percent of asset allocators are underweight commodities, up from a net 23 percent in November.
As investors increase U.S. equities underweights, Europe and Japan are most favored regions for overweights in 2016.
Investors emphasized a focus on quality, with a net 65 percent saying that high-quality earnings stocks will outperform low-quality earnings stocks in 2016.
“The strong dollar view is writ large across all asset, regional and sector allocations. It will take a very dovish Fed and weak U.S. earnings to reverse the strong dollar view in 2016,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“European equities remain in favor despite disappointment over the ECB decision,” said James Barty, head of European equity strategy.
A total of 175 managers, managing US$517 billion, participated in the global survey. A total of 106 managers, managing US$241 billion, participated in the regional surveys.
You can read the full results in the following link.
Following ECB regulatory approval, Franco-German financial services group Oddo&Cie is set to take over private banking and asset management group BHF Kleinwort Benson Group.
The ECB’s approval is conditional to the implementation by the Oddo Group of a capital increase of €100m and to the fact that the Group joins the German guarantee funds deposit.
The capital increase has already been approved by Oddo&Cie shareholders, the group is now awaiting the final confirmation from the German guarantee funds deposit (Prüfungsverband Deutscher Banken) is under process, as well as the approval of the prospectus by the Belgian Financial Services and Markets Authority (FSMA).
Philippe Oddo, managing-partner of Oddo & Cie, said: “The green light from the European Central Bank is an important milestone in our project of acquiring the BHF Kleinwort Benson Group and thus of giving rise to a unique Franco-German group.”
2015 has been a year of acquisitions for Oddo, starting with the takeover of Seydler in Janaury followed up by the acquisition of fomer BNY Mellon boutique Meriten.
The acquisition of BHF Kleinwort Benson, which currently manages about €58.5 billion in assets would provide a significant boost to the group’s assets under management.
Foto: Dennisilekeller, Flickr, Creative Commons. Julius Baer compra la entidad de banca privada de Commerzbank en Luxemburgo
Julius Baer has announced that it has agreed to acquire Commerzbank International SA Luxembourg, a well-established and fully-licensed private banking franchise with close to EUR 3 billion assets under management, from Commerzbank AG. This transaction will significantly strengthen Julius Baer’s position in the Luxembourg financial centre.
CISAL’s client assets are booked on a Temenos T24 banking platform. CISAL’s staff includes a highly experienced IT team with relevant expertise of the Temenos T24 technology. As announced earlier this year, Julius Baer has selected Temenos as its partner for the planning of its core banking platform renewal project. The total consideration is approximately EUR 68 million, assuming EUR 25 million of regulatory capital is transferred as part of the transaction. Total restructuring and integration costs are expected to amount to approximately EUR 20 million.
Closing of the transaction is expected to take place in the summer of 2016, subject to regulatory approvals and following the unbundling of the local IT platform. After closing, Julius Baer’s Luxembourg-based business will manage total assets of around CHF 5 billion on a pro forma basis. The transaction will be accretive to adjusted earnings immediately following closing.
Boris F.J. Collardi, CEO of Julius Baer, commented: “The acquisition of a fully-licensed bank in Luxembourg as well as the Temenos-based booking centre and the related IT expertise provide us with important strategic flexibility for our European businesses. Furthermore, it strengthens the implementation of our global banking platform project by aligning Europe with our Swiss and Asian platform strategy, thus reducing the execution risk.”
Gian A. Rossi, Region Head Northern, Central and Eastern Europe, added: “The acquired entity is a pure private banking business with a stable base of European clients and hence fits very well with Julius Baer’s business approach and strategy. We are pleased to add significant scale to our local franchise in the important international financial centre of Luxembourg and look forward to leveraging the business opportunities provided by the full bank licence.”
