Foto: CGIAR Climate, Flickr, Creative Commons. Los inversores vuelven al riesgo: apuestan por bolsa y alternativos, convencidos de una subida de tipos en diciembre
Investors have regained some appetite for risk with a strong consensus over a U.S. rate rise next month, according to the BofA Merrill Lynch Fund Manager Survey for November. With growth and inflation expectations notably higher after new U.S. payroll data, they have cut cash holdings and increased exposure to equities, real estate and alternative investments.
The percentage of asset allocators overweight equities rose significantly by 17 points to a net 43 percent, while lowering cash overweights to their lowest level since July.
Four-fifths of panelists now expect the U.S. Federal Reserve to raise rates during the current quarter.
Confidence in the global economy rebounds, with net expectations of it strengthening in the next 12 months up 22 percentage points from October.
Concerns over a slowdown in China abate: local fund managers turn neutral on the country’s growth outlook–their most positive reading in more than a year.
Eurozone and Japan strengthen as the most favored equity markets globally, reflecting deeper consensus on the U.S. dollar. A net 67 percent now expect the currency to appreciate in the next year.
Real estate and alternative investment overweights rise to their second-highest readings in the survey’s history. In contrast, aggressive underweights on commodities and Global Emerging Markets are maintained.
“With consensus very clustered in QE and strong dollar trades, asset price upside appears limited until an ‘event’ curtails the Fed hiking cycle, as in 1994,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“While European equities are loved by global investors and the ECB has created some excitement about growth, sector positioning shows local asset managers are lacking conviction and hugging their benchmarks,” said Manish Kabra, head of European quantitative strategy.
An overall total of 201 panelists with US$576 billion of assets under management participated in the survey from 6 November to 12 November 2015. A total of 164 managers, managing US$465 billion, participated in the global survey. A total of 92 managers, managing US$213 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.
China’s Fifth Plenum in October reemphasize the need to support economic growth while also pushing forward measures aimed at increasing the country’s competitive landscape. Among the surprised announcements was Beijing’s decision to loosen its three decade-old single child program and allow all couples to have a second. Children-focused consumer goods, such as milk and paper companies, rallied after the announcement, but have seen gains quickly returned; suggesting that the best direct investment strategy for the two-child policy is limited. “Instead, we believe investors should focus indirectly, and consider investments that reflect the need to loosen the single child restriction instead of the pending result.” Says Christopher Chu, Union Bancaire Privée.
“Though it may sound counter intuitive, a better thematic for the two-child policy would be healthcare and insurance sectors -continues the analyst-. Allowing families to now have two children reflects changing demographic profiles in China, where according to official data, the percentage of those over the age of 60 rises to 39% in 2050, compared with 15% currently. Beijing’s push to increase the nation’s fertility rate is to offset a decreasing labor force and proliferating aging population. As incomes rise, demand for higher quality life moves in tandem. This should lead to a greater ability to spend on healthcare and medical services, where penetration rates are low and only compete with inadequate public coverage and quality.”
UBP thinks the financial sector would also be a beneficiary, as the key towards promoting reform and efficiency would be to further liberalize the renminbi and channel credit to more productive sectors. Before the Plenum, the firm explains, Beijing removed a ceiling on deposit rates, allowing greater competition among the banks while also improving incomes for household savings. If loans were to further channel into less productive sectors, overcapacity issues would ensure China’s vulnerabilities to external price shocks. “These steps to internationalize the renminbi also act as a prelude to the International Monetary Fund’s decision to include the yuan into its Special Drawing Rights consideration.” He adds.
Direct child investments such as baby formula, education, and paper companies are beneficiaries of general population growth and improving household incomes. “But with a current estimate of 20 million births per year in China, this number is still below that of the 1980s when the country experienced an estimated 26 million births annually. With fewer joining the current generation, the median age of 35 in 2010 will rise to 49 in 2050, and also lift the dependency ratio (the ratio of those over the age of 65 by those aged 15 to 64) from a current level of 11 to 42 by 2050.”
In the oppinion of UBP, the removal of the single child restriction is an important social advancement but does little to lift productivity in China, which is the economy’s main concern. The caveat to the firm´s analysis is if China’s experience a slight increase in population growth in tandem with waning cultural preference for sons. With sex ratio near 120 boys to 100 girls, this creates another social strain for aging China, and thus, a generation of daughters would be welcomed. Otherwise, China’s population profile will continue to age quickly and not quietly, giving policy makers something to cry about, he concludes.
Andrew Feltus, Director of High Yield and Bank Loans, is Portfolio Manager of Pioneer Funds – Global High Yield, Pioneer Funds - U.S. High Yield, and Pioneer Funds – Strategic Income. Courtesy Photo. Andrew Feltus, Pioneer Investments: The Fed Wants to Increase Rates, but is Afraid to Kill the Cycle
Despite having very limited public spending, the United States is the fastest growing developed economy. What has changed during the past year in the U.S. economy? Andrew Feltus, Director of High Yield and Bank Loans, is Portfolio Manager of Pioneer Funds – Global High Yield, Pioneer Funds – U.S. High Yield, and Pioneer Funds – Strategic Income. With extensive experience managing a wide range of debt securities globally, including emerging markets and foreign exchange, Feltus narrows in his focus to review the situation for the U.S. credit markets at the InvestmentSeminar “Embrace New Sources of Return” which was recently held in Miami by the fund management company.
“In the past year, the fall in energy prices has led to a change in consumer behavior. The ordinary citizen has used the money from gas savings to pay down their debts and increase their savings” says Feltus. Right now, the U.S. consumer has much more flexibility and a bigger cushion than in 2008. “Banks are also much more robust.”
On the other hand, employment and wage inflation are doing relatively well, positively influencing consumption and services, “which make up the bulk of the U.S. economy.”
Energy and Liquidity the Black-Spots of the Credit Market
The companies which have suffered are almost exclusively in the energy sector. “In this industry, there are defaults, job losses, and reduced earnings per share. This doesn’t only affect the companies directly related to the energy industry, but all of those which service it indirectly, especially those related to shale gas.” The plight of this sector has infected the whole high yield credit market in the U.S., which with its 600 bp spreads are discounting a default rate of 7.5%, when in fact the default rate is at 2.5% (ex-energy data, end of September).
“This really seems too much,” says Feltus. Although he also adds that, until it is clear where the oil price points to, they are not looking to increase their exposure to the energy sector, because “the valuation is very attractive, but the fundamentals are very uncertain.”
An additional problem, which affects the whole credit market, is liquidity. “Liquidity is trash these days,” points out Feltus. “The lack of liquidity is what is causing credit spreads outside the energy sector, but if the problem is solved, there is now an opportunity to enter.”
Is this Enough to Curb the Fed?
Feltus explains how, historically, the worst time for the credit markets is from 3 to 6 months before the Fed begins to raise rates, “but the trouble this time is that we have been postponing the expectations of the first rate rise for almost a year. The Fed wants to raise interest rates, but does not want to kill the cycle, which is pretty nice.” Feltus, like many other voices in the industry, believes that probably at this point the market would react well to the first hike as long as the message continues to be one of gentle rises.
He also points out that the QE program ended a year ago, and the Fed’s balance sheet has been contracting since, “so, on that side, there has been some ‘tightening’ of monetary policy.” Meanwhile, general inflation is under control, but it is true that as you break down the index, energy prices have a big effect. In fact, inflation in the service sector is slightly above 2% -the Fed’s target-. In any case, “the reality is that rarely in the Fed’s history -only twice- it has raised rates with the GDP growing below 4%, which is the current situation.”
Barbell Strategy to Extend Duration
Due to the economic slowdown seen outside of the United States, and inflation expectations falling to lows since 2008, the Strategic Income Fund team has decided to be less short in duration than previously, but through the purchase of TIPS –long-term bonds linked to inflation-, which should benefit from a normalization in inflation expectations. “There is no value in buying Treasuries right now, unless you’re considering a scenario of recession, something we do not see at this time,” says Feltus.
An effect that is repeated in the history of the Fed’s upward cycles is the flattening of the curve, with a much greater effect on the shorter half of the curve. Faced with these prospects, the team is using a Barbell strategy in the portfolio, with very short-term bonds on one side, and TIPS on the other, to lengthen the portfolio’s duration and neutralize this effect.
Finally, Feltus declares himself to be a great fan of the dollar. “We have less exposure to currencies other than the dollar than what we have had in our history.”
The growing number of resource-rich countries establishing sovereign wealth funds present an ideal opportunity for asset managers not sufficiently specialized or alternative to win mandates from established sovereign wealth funds (SWFs), according to the latest issue of The Cerulli Edge – Global Edition.
Cerulli says that new SWFs are likely to need help in the early stages, even in mainstream asset classes and geographies. It cites, as an example, oil-rich Nigeria, which is in the early stages of a complex three-fund approach to sovereign wealth. The structure comprises: a stabilization fund, an infrastructure fund, and a future generation fund. The latter, which Cerulli likens to a classic sovereign fund, is to receive 40% of oil surpluses, with a target allocation of 80% for growth assets. “It is likely that much of that will need the assistance of external managers,” says Barbara Wall, Europe research director at Cerulli.
The firm notes that while some SWFs are only interested in managers that either provide a specialist alternative that cannot be replicated internally, or a partnership model that opens the door to new investment possibilities, others appear committed to outsourcing the majority of their funds to external managers.
Funds from as far afield as Angola to Kazakhstan, Mongolia to East Timor or Papua New Guinea are potential opportunities. “An increasing number of countries feel they need a sovereign fund in order to diversify assets for the long term. These funds–some of which may grow to have tens of billions of dollars under management–will be lucrative sources of outsourcing mandates in their early years,” adds Wall.
In its review of the changes taking place within the SWF arena, Cerulli notes that established heavyweight Abu Dhabi Investment Authority (ADIA) is bringing more of its assets in-house. “What’s unusual about this move is that instead of bringing passive assets under its own supervision, the management that is being brought back in-house appears to be quite technical and specialist,” says David Walker, who leads Cerulli’s European institutional research practice. “For example, last year, ADIA created two new mandates within its internal equities department: U.S. equities and high conviction. The latter in particular is not normally the sort of mandate that a fund like this would take in-house, not when two-thirds of the fund is still outsourced.”
Walker adds that two of ADIA’s three most significant hires over the past two years have been for internal rather than external asset management: Christof Ruhl as global head of research and John Pandtle as head of the United States in the internal equities department. Other areas of increasing internal expertise include real estate and infrastructure.
Photo: Ana Patricia Botín.. UBS (Italia) S.p.A. to Acquire a Business Concern from Santander Private Banking Italia, which Includes €2.7bn AUM
UBS Group AG announced today that its Italian Wealth Management entity UBS (Italia) S.p.A. has entered into an agreement to acquire a business concern from Santander Private Banking S.p.A. (SPB Italia), which includes €2.7bn assets under management, all of its private bankers and branch support staff. The transaction is expected to close in the first quarter of 2016, subject to regulatory approvals and other customary closing conditions.
Based in Milan, SPB Italia provides financial advice and investment solutions to high net worth individuals and family groups. In addition to its wealth management services, SPB Italia’s offering includes banking products and services, loan products, and mortgages. As of 30 September 2015, SPB Italia operates through 6 branch offices located in Milan, Varese, Brescia, Roma Napoli and Salerno.
SPB Italia’s business will be integrated into UBS Italia and will enhance UBS Wealth Management’s presence in the country.
“SPB Italia has a distinguished positioning in our country as a provider of world-class Private Banking services. This transaction is a natural fit with our current wealth management offering in Italy in terms of both business and culture,” said Fabio Innocenzi, CEO UBS Italia. “It also represents a perfect opportunity to grow UBS’s business and to further expand our market share in Italy. SPB Italia’s clients and Private Bankers will gain access to one of the world’s leading wealth management platforms with an excellent reputation in the marketplace. UBS’s clients will benefit from a wider range of banking products and financial solutions.”
UBS is one of the largest wealth managers in the world, giving access to a global banking platform while providing excellent local advice. UBS offers a global scale, world-class investment capabilities and a compelling value proposition for its clients.
UBS (Italia) S.p.A. is an Italian registered bank, subsidiary of UBS AG, running wealth management activities for private investors in Italy. UBS (Italia) S.p.A. is the parent company of Gruppo UBS Italia, comprising also UBS Fiduciaria S.p.A, operating in the country since 1996 and employing about 480 staff serving from nine branches located in Bologna, Brescia, Florence, Milan, Modena, Padua, Rome, Treviso and Turin. UBS (Italia) S.p.A. is ranked 6th and has a market share of 4% in the Italian Wealth Management market (source: Magstat).
Global investors have regained appetite for risk against the backdrop of strong liquidity and a fairly positive economic outlook, according to the BofA Merrill Lynch Fund Manager Survey for June.
A net 66 percent of respondents expect the global economy to strengthen over the next year. This bullish reading is unchanged from last month’s survey. However, concern at the pace of expansion is rising. A net 78 percent now anticipate below-trend growth over the next 12 months. In response, more investors than ever before (63 percent) are calling on companies to increase their capital spending.
Equities are in greater favor than at any time since the start of the year. A net 48 percent of asset allocators report overweights, up 11 percentage points month-on-month, even though a net 15 percent now regard the asset class as over-valued – this measure’s strongest response since 2000. Appetite for real estate has also risen. The net 6 percent overweight reported ranks as the highest in eight years.
In contrast, underweight positions in bonds (now regarded as over-valued by a net 75 percent) have reached their highest level since the end of 2013.
The prospect of debt defaults in China has strengthened as the most significant risk on investors’ horizon. It is now cited by 36 percent of respondents. 20 percent worry most over potential ‘asset mania’ – a new category introduced in the survey this month.
Even so, investors have reduced their cash buffers. Although still somewhat high, average holdings of 4.5 percent are at their lowest since January.
“Although fund inflows and oil prices argue for near-term consolidation, the case for a summer ‘melt-up’ remains stronger than for a meltdown as high liquidity and low growth force investor cash levels down,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“Europe has been a cheap way to get equity exposure, but investors no longer see Europe as cheap. This together with some uncertainty on the level of growth may be why optimism is starting to wane,” said Obe Ejikeme, European equity and quantitative strategist.
European QE postponed
Investors no longer see quantitative easing by the European Central Bank as imminent. 42 percent of respondents anticipate any ECB program coming in Q4 or even 2015, up from 19 percent last month. A further 22 percent expect no action. Against this background, longer-term conviction towards European equities has started to decline. A net 21 percent now see Europe as the equity market they are most likely to overweight over the next year, down seven percentage points month-on-month.
However, current allocations suggest global investors are not yet ready to give up on the region. Net overweights have risen for the second consecutive month, to a net 43 percent.
Elsewhere, regional fund managers are already showing signs of caution. A net 6 percent of now regard European equities as over-valued – the highest proportion since 2000. As recently as April a net 16 percent viewed the market as under-valued.
Japan picks up
Japanese equities have declined 7 percent this year, underperforming other global markets. The survey shows global investors treating this as a buying opportunity. A net 21 percent are now overweight, up from a net 7 percent in May.
Moreover, a net 10 percent favor overweighting Japan in preference to all other equity markets in the next year.
These changes come as regional fund managers turn significantly more positive on Japan’s outlook than recently. A net 73 percent expect the country’s economy to strengthen over the next 12 months. This represents a 20 percentage point rise in the space of two months.
Dollar dominates
Bullishness on the U.S. dollar has re-emerged strongly. A net 79 percent of respondents now expect the currency to appreciate over the next year. This stands out as one of the strongest readings on this measure in the past 15 years.
In contrast, a net 28 and 48 percent expect the Euro and Japanese yen, respectively, to weaken over the same period. The European currency’s reading has declined seven percentage points month-on-month. This appears to reflect a combination of the ECB’s dovish stance and some weaker European macro data.
An overall total of 223 panelists with US$581 billion of assets under management participated in the survey from 6 June to 12 June 2014. A total of 167 managers, managing US$422 billion, participated in the global survey. A total of 120 managers, managing US$270 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.
Foto: NicolaCorboy, Flickr, Creative Commons. BNY Mellon IM firma un acuerdo con Banca Mediolanum para distribuir sus fondos en Italia
BNY Mellon Investment Management has announced a new agreement with Banca Mediolanum to distribute funds to their network of retail clients.
The agreement is for Banca Mediolanum’s 4500 financial advisors to distribute UCITS funds and investment solutions available through the BNY Mellon Global Funds, plc SICAV. The range of solutions includes fixed income, equity, dynamic, flexible and absolute return funds, as well as other strategies designed to seek consistent returns in volatile market conditions.
Additionally, four BNY Mellon funds and strategies join the range of collective investments undertakings (CIUs) that can be sold within the Mediolanum MyLife insurance policy, a unit-linked product by Mediolanum Vita that offers investors a selection of high quality investment solutions:
· BNY Mellon Global Real Return Fund, a flexible multi-asset fund which combines capital protection with the search for returns
· BNY Mellon Absolute Return Equity Fund, an absolute return equity fund aiming to achieve positive returns independently from the underlying market direction
· BNY Mellon Global Equity Income Fund, an equity fund that actively selects stocks able to generate high, sustainable dividends over the long-term
· The Newton Asian Income strategy, that aims to capture the growth potential of Asian companies
“The agreement with Banca Mediolanum is part of our ongoing growth strategy in Italy”, states Marco Palacino, Managing Director of BNY Mellon Investment Management in Italy. “We are fully committed to strengthening and extending our relationship with the most important distribution networks in Italy and as a result, become closer to retail investors. Our product range is well suited to the current financial environment, due to advanced, flexible and dynamic strategies capable of providing stable returns while containing market volatility. This is the main goal of our equity and bond absolute return funds, such as the BNY Mellon Absolute Return Equity Fund and BNY Mellon Absolute Return Bond Fund, now available to retail investors also through Banca Mediolanum’s network of financial advisors”.
Standish Mellon Asset Management Company LLC (“Standish”), a BNY Mellon investment boutique with a focus on fixed income, announced that Standish’s dedicated mortgage team have become employees of its subsidiary, Amherst Capital Management LLC (“Amherst Capital”), in order to unite Amherst Capital’s deep real estate expertise and industry-leading technology with Standish’s investment processes for mortgage-related assets.
As dual officers of Standish, the mortgage team will remain in Boston and continue to utilize the same investment processes for Standish clients, while gaining access toAmherst Capital’s real estate data set and analytical tools to provide an information advantage for specialized solutions in the U.S. real estate credit space. The mortgage team will provide investment advice with respect to approximately US$ 6.5bn of real estate-related assets.
“Amherst Capital’s loan-level data analysis of the real estate capital markets provides the mortgage team with a unique perspective on the fundamental elements driving asset performance, and a specialized set of tools for managing risk,” said Dave Leduc, CEO of Standish. “This collaboration reinforces Standish’s long history of innovation, client service and working with the best talent in the industry to enhance the investing process for our clients.”
Under the leadership of Sean Dobson, a well-known real estate finance executive with a history of managing U.S. real estate investment strategies, Amherst Capital is tapping the expertise of senior mortgage analysts, including Laurie Goodman, who provides leadership and guidance in research and investment strategy on an exclusive advisory basis as Non-Executive Director.
“This is an important milestone for Amherst Capital as we position ourselves to offer a comprehensive set of real estate credit investment capabilities, including direct lending strategies,” said Sean Dobson, Amherst Capital CEO. “The U.S. real estate credit markets are still in disrepair from the financial crisis and asset managers will play a bigger role to facilitate recovery. Inefficiencies within the sector tend to reward a high level of investment in research and analytics, and as such, Amherst Capital is poised to play a significant role in this transformation.”
Amherst Capital was established by BNY Mellon in collaboration with Amherst Holdings in 2015 to support Standish’s capabilities in real estate investing and to also offer standalone real estate investment solutions to meet the growing demand of an underserved real estate credit market as a consequence of the changing U.S. regulatory landscape.
Kairos Investment Management SpA, the leading independent Italian wealth and asset management firm, has delivered impressive, profitable growth since the start of its partnership with Julius Baer in 2013: assets under management have nearly doubled from EUR 4.5 billion to EUR 8 billion. On the back of this successful partnership, Julius Baer has decided to increase its participation to 80% for an undisclosed amount, following its initial purchase of 19.9%. The transaction is expected to close in the course of 2016. Julius Baer and Kairos have agreed to list Kairos in a subsequent step through an offering of a minority percentage of Kairos’ share capital. Both steps are subject to regulatory approval.
Kairos was established in 1999 as a partnership and today employs a total staff of over 150. The company is specialized in wealth and asset management, including best-in-class investment solutions and advice. Paolo Basilico, founding partner, president and CEO of Kairos, and his partners will continue to run the business with the same team and pursue the same client-centric strategy.
Boris F.J. Collardi, CEO of Julius Baer, commented: “The partnership between Julius Baer and Kairos has proven to be a powerful force in the Italian wealth management sector, surpassing our expectations when we started this journey in 2013. We are confident that the future close cooperation combined with the intended listing will bring additional growth momentum and will further strengthen our position in the Italian wealth management market.”
Paolo Basilico added: “We are very pleased with our development over the last years, which confirms our positioning to provide independent investment excellence to our clients. I am very much looking forward to deepening our partnership with Julius Baer and being able to spearhead Kairos into the next phase of growth.”
As of October 30th, 2015, European ETP assets stood at $514 billion (€465 billion) according to Deutsche Bank’s European Monthly ETF Market Review. During the month, European ETP had net inflows of +€6.4 billion, considerably more than the +€1.8 billion from September. Fixed Income ETFs led the charge with notable inflows of +€3.5 billion followed by Equity ETFs which received +€2.5 billion over the last month. Commodity ETPs listed in Europe recorded inflows of +€400 million during the same period.
US-listed ETFs providing exposure to European equities registered monthly inflows of +$2.3 billion bringing YTD total to over +$32.4 billion.
According to Deutsche Bank, Investors remained bullish on the Energy sector while Short and Leverage Long focused ETFs lost momentum.
Within fixed income, investment grade led the flows, attracting +€2.9 billion over the last month, bringing YTD numbers to +€20.4 billion. High yield bonds reversed previous month’s trend and recorded inflows of +€700 million.
