New board of directors at ALFI. The Association of the Luxembourg Fund Industry Appoints Denise Voss as Chairman
The Association of the Luxembourg Fund Industry (ALFI) today announced the appointment of Denise Voss as chairman of ALFI. Ms Voss takes up the position, which will initially run for two years, with immediate effect.
“I am very excited about this appointment,” said Ms Voss. “The asset management industry in Europe has gone through dramatic change over the past few years, with extensive regulation that has been put in place following the crisis, and ALFI has played a key role in working through the implementation of this regulation.”
”Going forward, we face different challenges, for instance, from the greying of the population and more and more individuals being responsible for funding their own retirement, to the growth of digital technology, which means that buying habits are changing dramatically. My role is to inspire the industry to focus on these issues and to ensure that the Luxembourg Fund Industry continues to play a key role in driving the development of the industry worldwide, encouraging economic growth and providing long-term financial security for individuals.”
Denise Voss has played a key role in ALFI for many years. She has been Vice Chairman for International Affairs of ALFI since 2011 and has been a member of the ALFI board of directors since 2007. She is also Chairman of the European Fund and Asset Management Association (EFAMA) Investor Education working group.
Denise is Conducting Officer of Franklin Templeton Investments and has worked in the financial industry in Luxembourg since 1990.
A new Fitch Ratings study of corporate bond liquidity takes a different approach to the topic by focusing on the characteristics of corporate bonds pledged as collateral in the tri-party repo market. The analysis identifies key features of a sample of bond collateral that could contribute to the risk of fire sales, or forced selling of collateral in a repo funding squeeze.
Corporate bond collateral characteristics such as long-dated maturities, low trading frequency and industry concentration (‘wrong way’ risk) could raise risks of a forced unwinding of repo-funded trades in a scenario where risk aversion increases sharply. Such risk aversion could limit the ability of dealers to finance securities in the repo market. Cash investors such as MMFs could also be forced to sell collateral in the event of a dealer default.
Maturity mismatches between short-term repos and the long-term corporate bond collateral they finance could exacerbate fire sale risk if repo trades are unwound quickly. Over 90% of the bonds in Fitch Rating’s collateral sample have maturities of one year or more. These bonds carry greater interest rate risk, and could be more difficult to sell in a period of market dislocation.
Fed officials have highlighted the risk that fire sales of securities could amplify price dislocation in a period of market turmoil. New York Fed researchers have estimated that up to $250 million per day in corporate bonds can be liquidated without negatively affecting bond prices. Total corporate bond tri-party repo collateral averaged approximately $75 billion in 2014. Forced selling of even a small fraction of that amount could accelerate price pressure during periods of market stress.
The Fitch study is based on a broad survey of corporate bonds pledged as collateral by dealers in the tri-party repo market as of Dec. 31, 2014. Data was reported by prime money market funds in their monthly N-MFP filings made with the SEC.
CC-BY-SA-2.0, FlickrPhoto: Dave Kellam. Euroland Dividends: a Cornerstone of Returns
The real return that investors see ultimately depends on the starting price paid. In other words, buying equities when they are out of favour improves the prospects for better returns, said Henderson. Timing is always difficult, so it is important to have a reliable set of screening tools to identify stocks that are incorrectly priced, and which offer value in the market. There are many metrics investors can use to assess this: earnings; net asset value; value of growth and dividends to name just a few.
The firm place a high level of importance on dividends as a measure of a company’s health. Any increase in sales and revenues increase should be reflected in a rise in the common share dividend. A good dividend strategy can indicate a strong, cash-generative business, as well as a management team that understands the importance of prioritising shareholders’ needs. From a performance perspective, an attractive well-covered yield also increases the certainty of an investor’s return.
Higher dividends or a new factory?
While yield is an important source of performance for investors, it is important to avoid companies that chase yield at the expense of long-term capital return, affirm Henderson´s experts. Management teams need to properly allocate capital in a way that balances the needs of shareholders, while providing sufficient capital for reinvestment to help generate future growth.
Outlook for dividends
There currently seems little reason to suggest that dividends cannot move forward from existing levels, with the opportunity to see some special dividends in isolated cases. Eurozone companies have spent the past few years rebuilding their balance sheets and dividends are growing nicely, reflecting confidence in future revenue streams.
Significant levels of cash have been redirected towards share buybacks, supported by the European Central Bank (ECB)’s accommodative monetary policy. While these can provide a strong signal about a firm’s future profitability, not all buybacks are equal. The fund’s investment process factors in the need to be careful that a company, when it is doing a share buyback, is doing so at the right valuation level, without funding through additional debt, and for the right reasons.
“As always, stock selection is driven by the identification of value – even the best dividend stock is not worth holding at any price. Among the stocks we like at present, although this is no recommendation to buy, are Anglo-Dutch publisher Reed Elsevier, and France-listed global automobile company Renault and luxury goods firm Christian Dior”, point out Henderson.
Reed Elsevier generates healthy profits and sees a good return on its spending, and holds a leading position in an industry where it is difficult for new companies to thrive. The company has demonstrated long-term commitment to returning cash to shareholders via dividends and buybacks, reflecting the company’s strong underlying revenues.
Renault has a stable market share and has taken steps to rein in spending. The car-maker is entering a strong phase for model updates, suggesting that consensus estimates for future earnings may be too low. The company now has a five-year track record of providing dividends for investors.
Christian Dior looks priced at a significant discount, given the value of its stake in LVMH. The company is run by an experienced management team that has delivered consistent revenue growth in Christian Dior Couture operations over the past five years, which has been reflected in annualised dividend increases.
Nothing in this article should be construed as investment advice, or a recommendation. Past performance is not a guide to future performance. The value of your investment can go down as well and you may not get back the amount originally invested. The information in this article is not intended to be a forecast of future events or a guarantee of future results and does not qualify as an investment recommendation of any individual security.
CC-BY-SA-2.0, FlickrPhoto: George Laoutaris. Down to the Wire in Greece
Until this month, the base case for Grecce of many analysts and strategists was for an eventual agreement, even though no one had offered a clear road map on how to get there. In MFS´ view, such optimism suggested that these observers were overlooking the facts on the ground.
Virtually no progress toward an agreement has been made since the Syriza government took office in January. Pilar Gomez-Bravo, Fixed Income Portfolio Manager, Lior Jassur, Fixed Income Research Analyst, and Erik Weisman, Chief Economist & Fixed Income Portfolio Manager at MFS would argue that by rejecting existing agreements, sending conflicting messages and failing to provide detailed alternative proposals, Syriza has damaged Greece’s relationships with creditors. Now the country has little money left and has made no reforms or even commitments to reforms — and nearly all eurozone goodwill and solidarity has evaporated in the process.
Higher risk of default
June promised to be a milestone in the Greek debt saga, with the month’s first debt service installment payable to the IMF on 5 June and the second bailout program expiring at the end of the month. On 4 June, however, Greece took advantage of a rarely used IMF procedure to bundle together its 5, 12, 16 and 19 June installments totaling 1.5 billion euros and delay payment until 30 June.
Running out of cash and credit, Greece may be facing a political crisis, as the Syriza government’s adherence to its anti-austerity election platform could be putting the country’s economic future at risk. The three experts at MFS suspect that holding a referendum on extending austerity measures or launching a snap election now would be unlikely to solve much at this stage. “Even if another party could win an overall majority, it would take weeks to organize a budget and put forward an actionable plan for further reforms that would be acceptable to the creditor countries. Regaining the confidence and goodwill of its creditors could take Greece years”, said.
“We thought Greece might miss a payment, though without that leading to a declaration of default by the IMF. After last events, we are raising the probability we assign to default. And with large debt repayments due to the ECB by 20 July, political uncertainty further increases the chances that the default process could become disorderly”, point out from MFS.
Terms of agreement
From the perspective of creditors such as Germany, said the experts, the main point is that a framework for the second bailout package had been agreed upon with the government of a sovereign country. By the terms of this 2012 bailout, tangible reforms were supposed to be implemented in exchange for funding. Then another government under Prime Minister Tsipras came into power by promising to renegotiate the terms of this bailout — especially its onerous conditions for reform.
“Now creditors wonder whether this or any successor government will honor any existing agreements. That is why the creditors have been so inflexible. Politicians in the creditor countries need to see far more compromises on structural reforms before extending additional funding to Greece”, argued.
The firm thinks that there is an increasing acceptance that Greece could default on its sovereign debt or other state obligations and still remain within the eurozone. After all, a country cannot be expelled from the common currency zone; it has to choose to leave. If Greece chooses to leave the eurozone, it would also need to leave the European Union under current treaties, and the Greek population clearly does not want that to happen.
Nonetheless, the markets are facing a significant amount of market uncertainty and potential dislocation “if we enter the uncharted territory of a default within the eurozone or a country leaving the European Union. Based on the relative stability of periphery bond spreads and equity markets, it seems that investors may be underestimating such risks”.
Admittedly, the likely intervention of the ECB — as well as the implementation of the relatively new EFSF, Outright Monetary Transactions and banking union reforms — should help to provide financial stability and support asset prices in the near term. At the very least, however, we would likely see increased volatility — particularly on the currency side — and a migration toward “safer haven” assets. “Given the uncertainty that surrounds such a default or “Grexit,” we would warn against assigning too low a probability on a negative market event”, conclude.
Foto: Dan Taylr
. Cuatro de cada cinco Limited Partners han participado en la reestructuración de fondos de private equity desde la crisis
Eighty percent of private equity investors have been approached with fund restructuring proposals since the onset of the financial crisis, according to Coller Capital’s latest Global Equity Private Barometer. One fifth of LPs having received more than five such proposals. Approximately the same proportion of LPs have actually participated in fund restructurings over the same period.
Three quarter of North American LPs, and almost half (45%) of European LPs, have committed to debut funds from new GPs since the financial crisis. This trend has been encouraged by strong results: 91% of LPs say these debut funds have equalled or outperformed the rest of their private equity portfolios.
Private equity has continued to deliver strong returns for LPs, with four fifths of all private equity portfolios having delivered annual net returns of over 11% across their lifetimes. Nearly half of LPs have achieved net annual returns from North American buyouts of greater than 16%.
“Creative destruction is the name of the game in private equity today,” said Jeremy Coller, CIO of Coller Capital. “Investors are accelerating the natural pace of change in private equity through hyperactive buying and selling in the secondaries market, a demonstrable willingness to support newly-formed GP franchises, and decisions to exit or stay invested in restructured funds.”
Areas of investor focus
Limited Partners have a more positive view of private equity in the Asia-Pacific region than they did three years ago. They see an improved risk/reward profile in India, Taiwan, Japan, Korea and Australia; and fewer of them now harbour doubts about Indonesia’s and Malaysia’s private equity prospects. However, investors are less positive about the risk-reward profile for China than they were three years ago – one third of LPs believe it has deteriorated in the intervening period.
Almost half of North American LPs intend to commit to oil and gas-focused private equity funds in the next three years, following the recent fall in in oil prices.
Co-investments are viewed as an established part of the private equity landscape – most LPs think co-investment opportunities will stay plentiful, despite the growing size of private equity funds.
Investors are split over the attractiveness of ‘longer life’ funds (i.e. private equity funds with lives intended to be significantly longer than ten years). Around half of them see longer life funds as a potentially valuable option for investors, whereas the other half think private equity’s model is not suited to funds with much longer lives.
Fundraising environment
Both the medium-term and short-term prospects for private equity fundraising look healthy. Over half of LPs believe private equity’s share in balanced investment portfolios will increase over the next 3-5 years. And for the shorter term, half of European investors and one third of North American investors have commitments below their target allocations to the asset class.
Investor demand for ‘in favour’ GPs is very strong. Two out of three LPs say they have failed to receive their full requested commitment to new funds in the last 12 months, with two in five LPs reporting that this has happened to them a few times in the last year.
‘Early bird’ discounts remain a common feature of the fundraising market. Over four fifths of LPs have been offered ‘early birds’ in the last two years – and two thirds of LPs have taken advantage of them.
Investor views of private equity fees are interestingly divided by geography. Over half of LPs in North America and the Asia-Pacific say that current fee levels are acceptable as long as fees are transparent and fund performance is strong. However, only 30% of European LPs take this view – with most saying fees are too high even if there is transparency and returns are good. Fewer than half of LP (45%) are under significant pressure to reduce fees from senior levels within their organisations.
Credit markets
LP appetite for private debt remains high,with 53% of LPs either having recently committed to private debt funds or expecting to do so soon.
Interestingly, over half (56%) of private equity investors believe credit markets are now in danger of being over-regulated (although one fifth of LPs believe more still needs to be done by regulators). However, only one in five LPs believe the SEC’s recent guidelines limiting debt multiples in buyouts will adversely affect private equity’s risk/return profile in the medium to long-term.
In recent months, the IRS has opened its information reporting portal and non-U.S. jurisdictions heavily affected by FATCA (e.g., Cayman Islands and British Virgin Islands) have issued official guidance to implement FATCA compliance for financial institutions in their respective jurisdictions.
The following list outlines upcoming FATCA compliance deadlines in 2015, as outlined by Kate Forde, Compliance Officer at Apex Fund Services :
*Deadlines for Cayman and BVI Financial Institutions
May 29, 2015: Cayman Islands Local Registration Deadline Each Reporting Cayman Islands Financial Institution must register electronically with, and provide certain information to, the Cayman Islands Department for International Tax Cooperation (the “DITC”).
June 26, 2015: Cayman Islands 2014 FATCA Reporting Deadline Each Reporting Cayman Islands Financial Institution must file a 2014 information return with the DITC.
Before June 30, 2015: BVI Local Registration Deadline Each Reporting BVI Financial Institution that is required to file a 2014 FATCA report must register with the BVI Financial Account Reporting System, and such registration must be approved by the BVI International Tax Authority, before such Reporting BVI Financial Institution can submit its 2014 report (which must be done by June 30, 2015, see below).
July 31, 2015: BVI 2014 FATCA Reporting Deadline
*Deadlines for Reporting Financial Institutions in Model 1 Jurisdictions (other than Cayman/BVI)
May 31/June 30, 2015: 2014 FATCA Reporting Deadline
Generally Reporting Financial Institutions in other Model 1 jurisdictions must file any required 2014 FATCA reports with the relevant Tax Authorities by one of these dates.
July/August 2015: 2014 FATCA Reporting Deadline
Financial Institutions in Australia and Mauritius must file any required 2014 FATCA reports by 31 July 2015 and Bahamian Financial Institutions must file by 17 August 2015.
CC-BY-SA-2.0, Flickr. BlackRock Appoints Dr. Andrew Ang to Lead Factor Investing Platform
BlackRock announces the appointment of Andrew Ang, PhD, as a Managing Director and Head of the Factor-Based Strategies Group. In this role, Dr. Ang will lead BlackRock’s expansion in the emerging field of active investing via exposure to different risk premiums. BlackRock currently manages over $125 billion in client assets across a variety of factor-based products and strategies.
Dr. Ang joins BlackRock from Columbia Business School, where he has focused on understanding the nature of risk and return in asset prices, in particular the behavior of factor risk premiums within and across asset classes, over the past 15 years. His research spans bond markets, equities, asset management and portfolio allocation, and alternative investments. Most recently, Dr. Ang was Chair of the Finance and Economics Division and the Ann F. Kaplan Professor of Business at Columbia. Dr. Ang’s recent book “Asset Management: A Systematic Approach to Factor Investing” published by Oxford University Press in 2014 has been lauded by the investment community.
In addition to his academic work, Dr. Ang has consulted for Canada Pension Plan Investment Board, Norges Bank and the Norwegian Ministry of Finance, the UAW Retiree Medical Benefits Trust and other large institutional managers on factor investing strategies.
“Markets are constantly evolving. Historic sources of outperformance are so widely understood and incorporated by investors that their impact has diminished. To generate sustainable investment results, investors will need to use data and technology in factor-aware investment processes,” said Ken Kroner, Global Head of Multi-Asset Strategies for BlackRock. “Andrew Ang is a leading light in this arena, having applied his knowledge to some of the largest portfolios in the world. His combination of knowledge and experience make him ideal person to drive BlackRock’s development in factor-based strategies.”
“With BlackRock’s established systematic investment platform, along with its data analytics capabilities and superior talent, this is the perfect opportunity for factor investing to truly transform asset management,” said Dr. Ang. “BlackRock is a trusted advisor to some of the most sophisticated asset owners in the world. Having that credibility supporting the next generation of factor-based strategies will be critical in educating investors and clients about these important developments in portfolio construction and active asset management.”
BNY Mellon announced that Alan Flanagan has been appointed to the new role of Global Head of Private Equity and Real Estate (PE&RE) Fund Services. Flanagan will continue to be based in Dublin and report to Frank La Salla, CEO of BNY Mellon’s Alternative Investment Services (AIS) business, in New York.
As a new unit within AIS, PE&RE Fund Services will comprise more than $100 billion in assets under administration and over 150 employees worldwide. Flanagan will be responsible for overseeing global business and driving growth in an area that has seen large recent deals. In February, BNY Mellon and Deutsche Asset & Wealth Management (AWM) announced an agreement where Deutsche will outsource its real estate and infrastructure fund accounting and parts of its reporting functions to BNY Mellon covering more than $45 billion in AUA.
Most recently, Flanagan was global head of product management for Alternative Investment Services. He will be succeeded in that role by Robert Chambers, who joins BNY Mellon from Balestra Capital, where he was managing director, portfolio manager, and member of the operating committee.
“We’re seeing vibrant growth opportunities in this space as investors pursue new strategies and increase allocations to private equity and real estate,” said La Salla. “Alan was instrumental in orchestrating our signature agreement with Deutsche AWM. During his tenure as head of product he led many projects to better serve our hedge fund and PE clients, and I have every confidence he’ll do an outstanding job in this new role.
“Rob Chambers brings a multi-faceted skillset in finance, investment strategy and the alternatives market. I look forward to working closely with him in building out the global capabilities for our alternative manager client base,” La Salla added.
Flanagan serves on a number of executive committees at BNY Mellon, including its European operating committee, Asset Servicing global business risk committee, and is a director of BNY Mellon Trust Company (Ireland). He joined BNY Mellon in 2007 from UBS Fund Services (Cayman) Ltd., where he was head of business development-Americas. Flanagan is a Fellow of the Institute of Chartered Accountants in Ireland.
Swiss Life AM has named Mathieu Caillier as head of International Business Development, a division that has been recently created.
Caillier joined Swiss Life AM as a senior relationship manager in 2007. He was hitherto working as head of Wholesale distribution and Swiss Life France network.
Formerly, he worked at HSBC GAM where he has been responsible for the development of wholesale and institutional distribution for France and Switzerland.
Caillier started his career as a broker at Tullett & Tokyo (Futures & traded Options) in Paris.
Swiss Life AM has CHF160bn (€152bn) of assets under management as at the end of 2014.
Photo: Hartwig HKD
. ¿Por qué son soleadas las perspectivas para España?
Spain is in recovery mode, but has not been rewarded for this by equity investors so far in 2015. “The Spanish economy is doing fine and there is a strong cyclical recovery underway.” That is how Robeco’s Chief Economist Léon Cornelissen sums up the current state of the fourth-largest economy in the Eurozone. The country is emerging from a difficult period as a result of the global financial crisis. Economic growth was 1.4% in 2014, but this year it is expected to be more than 3%.
Despite the positive growth figure for 2015, the Spanish stock market is lagging: The IBEX 35 Index has risen 7% this year, while the Euro Stoxx 50 Index is up 11% (as of 5 June 2015). “Economic difficulties in Latin America are a problem for Spanish equities,” explains Cornelissen. “And investors, who already expected a strong economic recovery last year, have now become more cautious.”
Opportunities in equities Despite the investor pessimism, Cornelissen sees opportunities in Spanish equities. “I am moderately optimistic about the rest of the year for two reasons. First, the worst is over for the economies in Latin America. Interest rates in Brazil will fall in 2016, which will stimulate the economy.” Latin America is an important destination for exports and many Spanish companies are active in this region.
“Second, the outlook for corporate earnings will strengthen as the economy improves further,” he continues. “Financials, which represent the biggest component in the IBEX 35 Index, are geared to see an earnings improvement. And the banks have successfully recapitalized by issuing new shares. Moreover, Spanish house prices have risen again, which is very important for mortgage loans.”
Debt levels improve The recovery will lead to improved public finance figures, says Cornelissen. “The figures are not great; a 4.5% government deficit is still too high, as is the current debt-to-GDP ratio of just under 100%. But the direction is positive and the government expects these figures to come down. I agree with the government, given the strong economic recovery. The deficit is expected to go down to the 3% threshold set by the Stability and Growth Pact of the EU.”
Another important factor behind this Spanish renaissance is the country’s increased competitiveness, says Cornelissen. “Spanish exports are doing well. Unit labor costs have come down, which enables companies to lower their costs. This has been helped by labor market reforms, especially a decentralization of wage negotiations. Currently Spain has the strongest growth within the Eurozone.”
Outlook on bonds more subdued He is less optimistic about bonds, because a lot of the good news has already been priced into the market. Government bond yields have gone down over the last two years and are now around 2.2%. “The ECB’s bond buying is set to support Spanish government bonds,” says Cornelissen.
“And ECB President Mario Draghi will continue the program until September 2016, which will keep the lid on any strong rise in interest rates. In addition, Spanish credit worthiness will improve as a result of economic growth. That said, I expect the impact on credit spreads versus German government bonds to be small. These spreads are already low and I do not expect them to tighten much further.”
Elections not a concern Another major theme for the financial markets in 2015 is the national elections. These have to be held before 20 December and are expected to take place at the end of October or in November. Regional elections were held in May and saw the rise of two new political parties: Podemos and Ciudadanos. Podemos (which means ‘We can’) is often compared with Syriza in Greece, while Ciudadanos (which means ‘Citizens’) is liberal and moderate.
Another looming question is Catalan demands for independence. Because of the size of its economy, this region is vital for Spain. Therefore, any talk of secession is a risk to the financial markets. However, Cornelissen is not really worried, and even sees bright spots ahead, once the traditional two-party system has come to an end. “In theory, a Podemos victory is a risk to Spain’s membership of the Eurozone, and any steps towards a Catalan secession could also spook the markets. But it is not going to happen soon. Podemos has peaked in the opinion polls, so I do not fear a situation similar to that of Greece occurring in Spain.”
“The rise of Ciudadanos can be seen as a boon to investors because the party opposes Catalan independence – it forms a useful counterweight to regional nationalism,“ he adds. “All in all, investors should not be too worried by the occasional political storm, but should focus on the country’s sunny fundamentals. Spain can do it,” concludes Cornelissen.
