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UK-Based Investment House Plants Emerging Market Team In Florida

RWC Partners contrata un equipo entero para ofrecer desde Miami estrategias centradas en Asia, los mercados emergentes y en los mercados frontera — CC-BY-SA-2.0, FlickrPhoto: Diana Robinson. UK-Based Investment House Plants Emerging Market Team In Florida

RWC Partners confirms that it has hired a 15 person investment team previously at Everest Capital to establish a new Emerging, Frontier and Asia equity business. To support the team, RWC Partners has established a new office in Miami and is in the process of establishing an office in Singapore, subject to regulatory approvals.

The Emerging and Frontier market team is jointly headed up by John Malloy and James Johnstone. Malloy is primarily responsible for the Emerging Market portfolios and will be backed up by his co-portfolio manager, Thomas Allraum. Johnstone is responsible for the Frontier Market portfolios and backed up by his co-portfolio manager, Luis Laboy. Cem Akyurek has joined as the team’s Emerging Market economist, while in Singapore, Garret Mallal will serve as portfolio manager and Min Chen will be focused on Asian equity research. Additionally, RWC Partners has recruited Simon Onabowale to head up trading in Miami.

RWC Partners has established new funds replicating those previously managed by the team, covering long-only Emerging and Frontier markets and long-short Frontier and Asian strategies. The Frontier market strategies at Everest Capital were previously closed to new investors. Additionally, Tord Stallvik joins as a member of the RWC Management Committee and Head of US, with Frances Selby heading up US Institutional business development.

Dan Mannix, CEO of RWC Partners, commented: “An extremely unusual set of circumstances allowed us to recruit a fully formed institutional quality Emerging and Frontier markets investment team. It is incredibly hard to build a team of the depth and breadth that John and James have over the last few years and we are all very pleased to have been able to create the environment for the team to stay together. The support we have seen from John and James’ clients is a real endorsement of the quality of the investment capability and we have in the region of $1.3bn of committed capital and expect to exceed $1.5bn across the strategies in the near future.

“We have also taken the opportunity to strengthen our business development framework with the addition of Tord and Frances. Tord brings 25 years of experience from previous leadership roles in alternative and traditional asset managers, while Frances has been working in a senior capacity with US institutional investors for over 30 years.

“For RWC Partners this comes at an exciting time where our business has seen its assets double in the last two years on the back of strong performance and good inflows. We have developed our systems and infrastructure to support our rapidly growing business over the last two years and it is a great opportunity for us to launch an Emerging Market capability that is highly credible, fully formed, and at a point in the cycle where clients are starting to consider who they use in the Emerging Market space.”

Soaring US Dollar Masks Strong Start to the Year for Global Dividends

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La depreciación del euro anuncia un gran año para los dividendos — Foto cedidaRichard Pease is manager of the Henderson European Special Situations Fund, the Henderson European Growth Fund and the Henderson Horizon European Growth Fund. Henderson: Identifying value in Europe

Global dividends fell to $218bn in the first quarter, down 6.3% year on year, the second consecutive quarterly decline and the sharpest since the first quarter of 2010, according to the latest Global Dividend Index from Henderson. However, this disappointing headline picture masks a more encouraging underlying one. Underlying growth, which strips out special dividends, currency movements, and other factors, was in fact up 10.9% year on year.

The severity of the drop in the first quarter is mainly because Vodafone’s $26bn special dividend paid last year was not repeated, but the sharp rise in the US dollar also made a significant impact. This means the value of dividends paid in a variety of currencies is translated back into US dollars at a lower exchange rate, costing dollar based investors $15.9bn in the quarter. For individual regions, especially Japan, Europe, and Emerging Markets, the effect is very pronounced. The impact on the headline growth rate in Q1 was to deduct seven percentage points, the largest exchange rate effect in any quarter since Q2 2011.

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The US dominates the first quarter, accounting for more than half the global total, so the rapid growth in dividend payments from US companies had a very positive impact on the quarter. US companies paid out a record $99.4bn in Q1, up 14.8% at the headline level, (+11.2% underlying).

This is the fifth consecutive quarter of double digit increases, cementing the US as the engine of global dividend growth. All sectors in the US raised their dividend payouts growth, except for insurance and US dividends have outstripped the global average significantly since 2009. In Canada, headline dividends fell 4.5% to $8.8bn, with the fall due almost entirely to the weakness of the Canadian dollar. Underlying payouts rose a very positive 9.8%.

Europe and Asia Pacific

The first quarter is a very small one for Europe, accounting for just one seventh of the annual total payout. European dividends fell 2.0% (headline) to $34.3bn, with a $6.1bn currency loss deducting 18 percentage points from the dollar growth rate. By contrast, underlying growth in Q1 was impressive, at 15.2%, though this will be hard to sustain all year. Very few companies made payments, but the fastest underlying growth came from Germany, Spain, and France, while other countries had a more mixed performance. Swiss companies Roche and Novartis were the two largest payers in the world in Q1, together distributing $13bn. Japan, also a small payer in Q1, followed a similar trend of good underlying growth pulled down by currency weakness.

In Asia Pacific, dividends of $12.7bn were 11.7% higher than a year ago on a headline basis, but were up 18.3% underlying. Currency was the biggest adjustment factor, as a result of the sharply weaker Australian dollar, though Australia had the fastest growth in the region on an underlying basis, comfortably outstripping Hong Kong and Singapore.

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Emerging Market dividends were boosted strongly by Russia. They rose 13.7% on a headline basis to $15.6bn, but were up 30% on an underlying basis, after currency declines and other adjustments were taken into account. Russia, unpredictable as ever, more than doubled its payout in dollar terms (trebled in rouble terms), after a poor 2014. Brazil, down in headline terms, showed growth after adjusting for the low Brazilian real, while total Indian dividends declined.

Industry perspective

From an industry perspective, financials and consumer industries grew rapidly, with the US leading the way. Healthcare, the second largest payer in the first quarter, has seen relatively subdued dividend growth of late and this was pulled down further by lower exchange rates in Q1. Utilities continued their poor performance, falling 13.6% year on year (headline). They remain the worst performing industry in recent years, from a dividend growth perspective.

As the US dollar extended its gains into the second quarter, offsetting a slightly stronger than expected underlying performance from a number of regions, Henderson has reduced its forecast for the year from +0.8% to -3.0% (headline), taking total dividends to $1.134 trillion, $42bn less than the forecast we made in January. Henderson expects underlying growth to be +7.5%, slightly stronger than Henderson’s initial forecast of 6.9%.

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Alex Crooke, Head of Global Equity Income at Henderson Global Investors said:

“The effect of the strong dollar is set to be even greater in the second quarter when Europe and Japan pay a large share of their annual dividends. In fact, if the current exchange rates persist, the impact could be as much as $40bn. In any given period, exchange rates can have a very large effect on dividend payments, but our research shows that over time they even out almost entirely, so investors can largely disregard them if they take a longer term approach.

“Despite our lower forecast, there are many reasons for optimism. Japan, the second largest stock market in the world, is undergoing a cultural shift towards higher dividend payments, unlocking large cash piles from what has traditionally been a low yielding part of the world, while in Europe, though dividend growth is modest, it is tracking somewhat higher than we expected. Meanwhile the US goes from strength to strength, and is likely to break new records this year.

“With interest rates and bond yields likely to remain at relatively low historic levels, equity income investing has a significant role to play in meeting investors’ income needs. Over time, the risks to dividend growth are significantly smaller if you look beyond the confines of your own domestic stock market.”

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From a Valuation Perspectives Bunds Remain Unattractive at Current Yield Levels

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Pese al rebote de abril, la deuda alemana sigue sin ser atractiva — CC-BY-SA-2.0, FlickrPhoto: FdeComite . From a Valuation Perspectives Bunds Remain Unattractive at Current Yield Levels

German 10 year Bund yields reached a low of 0.07% on the 20th of April. A rise followed in the remaining of the month. The 10 year yield reached a level of 0.58% on the 6th of May, up 51bp from the low. 30 year Bund yields rose 68bp over the same period. Pieter Jansen, senior Multi-Asset Strategist at NN Investment Partners analizes if this is a overshoot or trend reversal in german fix income.

Also the US 10 year yield rose (+33bp since 20th of April). However, it is clear from the graph below that given the significantly lower level of Bund yields in a relative sense the Bund yield correction is very significant indeed, said Jansen. Measured as 20 day yield volatility as a ratio of the yield level the move is beyond any correction in Bunds seen in the past decades.

Along with Bunds also other European government bond yields rose. Periphery spreads were under pressure earlier in April due to Greek related stress, but during the Bund yield correction Periphery spreads declined once again.

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What drove this correction?

The increase in yields does not seem to be driven by fundamental data flow. Global macro data surprises were at best mixed during the past month (US data surprises were negative and the positive growth surprise trend in Euro Area data seems to be stabilizing somewhat). Indications of an early QE exit by the ECB could have the potential to trigger a correction like this, but also this was not the case and the ECB remains dovish. “It is possible that fading Greek related stress and a disappointing Bund auction may have contributed to a rise in yields, but in isolation it seems that it is hard to justify the significant move we have seen”, point out Jansen. Therefore, it is most likely that technical and/or positioning factors played an important role. Surveys had indicated that on average investors were significantly overweight in Bund for instance. This can be seen in the graph below:

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Most of the rise we have seen in German Bund yields was a result of the rise of the real yield, believes NN Investment Partners´expert. It is no surprise that it is this component that is showing the strongest correction. Of the 51bp rise of German Bund yields since the 20th of April, 42 stem from a pickup in the real component. The inflation expectations component has been trending up for longer, which coincided with a rise of the oil price. Probably part of the rise is also a result of currency weakening and ECB policy.

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Overshoot or trend reversal?

After such a sizeable correction that is not obviously the result of macro data flow and/or a significant directional change in the monetary policy outlook “it seems that part of the move is an overshoot, although at this stage there are no signs yet of a stabilization after this significant move. Even though the overshoot may be relevant for the very short‐term, from a valuation perspectives Bunds (and other core government bonds) remain unattractive at current yield levels. The real yield remains significantly negative”, concluded Jansen.

Venezuelan Banks Resilient but Facing Growing Challenges

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Private Venezuelan banks continue to report resilient loan quality ratios and earnings, even when adjusted for inflation. However, growing macroeconomic imbalances, high unseasoned loan growth and government policies that favor state banks pose additional challenges, according to a Fitch Ratings report.

‘The banking system’s significant exposure to the public sector, as well as a marked shift in portfolio composition toward more vulnerable economic segments and consumer loans, could lead to a sudden deterioration in asset quality in the event of a forced economic adjustment,’ said Mark Narron, Director. ‘Further government regulations and intervention could create additional challenges.’

In December 2014, Fitch downgraded the long-term Issuer Default Ratings (IDRs) of the seven largest private banks to ‘CCC’ from ‘B,’ in line with a downgrade of the sovereign. All these banks’ ratings are limited by the sovereign given their vulnerability to the country’s weak economic performance, high inflation and policy choices.

In addition to long-standing interest rate caps and floors and compulsory loan requirements, beginning in 2014, the government enacted policies favoring state banks. These included the migration of public sector deposits to state banks, and restrictions on private banks’ ability to provide customers with access to hard currency.These actions led to one-off liquidity events, evidenced by spikes in inter-bank rates. However, in the absence of further government intervention, Fitch does not expect these policies to lead to a sustained divergence in deposit growth relative to state banks.

Venezuelan banks continue to rely on demand deposits for the vast majority of their funding, maintaining a large, negative mismatch between short-term assets and liabilities. However, this position remains manageable under Venezuela’s current scheme of foreign exchange controls which acts as a barrier to capital flight.

The effects of inflation on operating expenses, plus an uptick in funding costs, led to weaker profitability and internal capital generation in 2014. In addition, the government’s elimination of the inflation adjustment for the calculation of income tax will further pressure profitability in 2015. Weaker profits and high nominal asset growth in turn continue to pressure capital ratios. While capital levels vary across banks, Fitch expects that capitalization will deteriorate further if the rate of deposit growth does not decline.

Loan quality ratios have been stable but belie potential risks as they are distorted by inflation. The banking system’s significant exposure to the public sector, as well as a marked shift toward more vulnerable economic segments and consumer loans, could lead to a sudden deterioration.

Many banks have continued to proactively increase reserves for impaired loans in order to better confront macroeconomic imbalances. Although reserve levels compare favorably with those of international peers, Fitch views them as potentially insufficient given the volatility in asset quality exhibited during past crises.

India: Balancing Fiscal Discipline and Growth

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La India continuará superando al resto de emergentes a medio plazo — Photo: Denis Jarvis. India: Balancing Fiscal Discipline and Growth

It is nearly a year since Narendra Modi and his Bharatiya Janata Party’s landslide election victory in India. At the time Investec wrote about its cautious optimism that the new prime minister and his team could implement much needed reforms to unlock the country’s economic potential. A year later, the Modi administration has broadly met expectations with a number of pro-market reforms and most recently a pragmatic budget, balancing the needs for fiscal consolidation with that of spurring growth.

On the fiscal consolidation front the biggest step so far has been the cut in fuel subsidies. Mr Modi was dealt a fortuitous hand after oil prices collapsed in the latter half of 2014. The Indian government was the first of many to see the opportunity to cut inefficient oil subsidies – and the 2015-16 budget estimates a 50% cut from 2014-15 fuel subsidies. However, point out Investec´s experts, rather than take a dogmatic approach to fiscal consolidation, the government have taken a more balanced view and modestly relaxed the pace of the adjustment (the 2015-16 target fiscal deficit has been revised up to 3.9% from 3.6%). Hence it has used some of the savings from subsidy cuts to commit to a 25% year-on-year rise in capital spending, with a large chunk due to be spent on the country’s dilapidated road and rail networks. A number of steps have also been made to reform the tax code. Corporate taxation is set to be brought down, over a staggered period, to 25%. Meanwhile, the first steps to introducing a goods and services tax (GST) were introduced with a rise in services tax and a commitment to implement the GST next year. This is a long overdue move: tax rates will go down, while tax revenue should increase due to higher tax buoyancy.

Other important pieces of legislation were approved by parliament in March. Firstly, the insurance bill (delayed over a number of years) was finally passed which will allow increased involvement by foreign firms in developing the country’s underdeveloped insurance market. Secondly, two pieces of legislation designed to liberalise the coal mining industry also passed through congress. The pending land reform bill, which would make it easier to acquire land for industrial development (and deemed to be the most contentious), will be a big test of the government’s ability to pass legislation through the parliament. That said, overall Modi’s reform agenda since taking office has been impressive and deft political manoeuvrings in the upper house should be enough to secure the passage of key bills without support from the opposition.

These much-needed fiscal and structural reforms have been supported by a government commitment to officially adopt inflation targeting as the new monetary policy framework. This will help to secure the credibility of monetary policy that has been won in the two years since Raghuram Rajan was appointed as central bank governor in 2013. He ensured India was among the first emerging market economies to hike interest rates in the wake of the ‘taper tantrum’, helping to ease the current account deficit and building up the monetary authority’s credibility. The move to formalise the inflation targeting regime is particularly welcome as it should help to underpin transparency and consistency in monetary policy, as well as hopefully ensure that excessive inflation – long a problem in India – becomes a thing of the past. The central bank’s foreign exchange reserves have also shot up to an all-time high of US$340 billion. So overall, we have seen a pertinent shift in both fiscal and monetary credibility. This has underpinned investor sentiment and the once imperilled investment grade credit rating is now no longer at risk; indeed Moody’s have recently upgraded India’s outlook to positive.

There is of course still much progress to be made. Not least, India’s underdeveloped manufacturing sector is not going to mushroom overnight. Yes, government policies such as ramping up capital expenditure on infrastructure will help, but much more will be required in the coming months and years to improve transport links, energy infrastructure and perhaps most importantly, cutting through the country’s infamous swathes of red tape to make it easier for businesses to invest. We feel that the significant progress Mr Modi has already made indicates that India has never had a better chance of attaining the strong growth rates the country needs to catch up with its peers.

“We remain overweight in the rupee and have recently added more exposure. The current account deficit has narrowed sharply since 2013. It now stands at 1.6% of GDP and should continue to improve this year assuming oil prices remain contained around these levels. Meanwhile, foreign inflows have picked up, with around US$13 billion inflows since the start of the year. With a much improved FX reserve position, the central bank has both the willingness and capability to underpin the rupee through FX intervention. As such it should remain relatively stable, making it an attractive currency while headwinds to emerging market currencies remain prevalent while the implied yields on the rupee are a very alluring 6-7%. We expect India to continue to outperform its peers over the medium term as investors become more discerning as we approach the start of Fed rate hikes; India with its credible fiscal and monetary policy is well placed to negotiate the headwinds”, conclude Investec.

Funds Society’s Fund Selector Summit in Miami – Photos Day 2

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Fotos del segundo y último día del Fund Selector Summit de Funds Society en Miami — Funds Society’s Fund Selector Summit in Miami – Photos Day 2i. Funds Society’s Fund Selector Summit in Miami – Photos Day 2

The second and last day of the Fund Selector Summit celebrated in Key Biscayne on the 7^th and 8^th of May began with a conference by Javier Santiso, Professor and Vice President of the Centre for Global Economy & Geopolitics at ESADE, who spoke about emerging markets and technology.

Right after that, six asset managers had the opportunity to meet in small groups with 50 fund selectors from the US Offshore wealth management industry. The asset managers who presented their investment strategies on the second day were Henderson, Lord Abbett, Schroders, Carmignac Gestion, Robeco and Old Mutual Global Investors. The previous day five additional asset managers had presented their strategies to the same group of fund selectors.

At the end of the day, a farewell cocktail was offered by the ocean, providing the portfolio managers, sales representatives from the asset management companies and fund selectors the opportunity to network and comment over the different investment ideas which had been presented over the Summit.

You may see the photos of the second day of the Summit, organized by Funds Society and Open Door Media, in the slide presentation.

Mirabaud Boosts Spanish Equity Team

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Emilio Barberá se incorpora a Mirabaud Asset Management para reforzar el equipo de renta variable española — . Mirabaud Boosts Spanish Equity Team

Mirabaud Asset Management has announced the appointment of Emilio Barberá, who joins the firm as senior portfolio manager and analyst for Spanish equities.

Barberá joins Mirabaud Asset Management from Inverseguros in Madrid where he was responsible, for a Spanish equity fund, and actively involved in the management of various European funds. Both firms employ a bottom-up approach to stock picking.

Within Mirabaud Asset Management, Emilio Barberá will act as the deputy portfolio manager for the Equities Spain fund and analyst on Spanish equities while Gemma Hurtado San Leandro will remain the lead portfolio manager and team leader.

Lionel Aeschlimann, CEO of Mirabaud Asset Management, said: “We are delighted to welcome such a talented stock picker as Emilio whose experience and professionalism will allow us to reach new heights for our Spanish equities franchise. We firmly believe that we have one of the best teams operating in this asset class and we are geared for growth.”

EFAMA Underlines its support for European Capital Markets Union

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EFAMA has reiterated its strong support for the European Commission’s aim to build a Capital Markets Union.

In its formal response – published today – to the EC Green Paper on Capital Markets Union, EFAMA has welcomed the European Commission’s initiative, saying that an integrated capital markets union that succeeds in unlocking capital and shifting it towards long-term investments will be to the benefit of investors, the cornerstone of the asset management industry.

Peter de Proft, Director General of EFAMA, commented: “Europe is facing an important challenge, which is also a unique opportunity. We very much welcome the fact that EU policymakers are embracing the opportunities that the asset management industry offers in terms of supporting sustainable economic growth and long-term financing.”

These opportunities are outlined in EFAMA’s recent Asset Management Report, which illustrates how the asset management industry plays a vital role in the general financing of the economy and contributes to an efficient and well-functioning Capital Markets Union.

In its response, EFAMA also aims to underline what it considers to be the necessary conditions to make a Capital Markets Union successful – particularly highlighting the crucial role of promoting long-term savings and creating a single market for personal pensions. EFAMA thinks necessary to encourage European citizens to save more for retirement, and it is convinced that developing private pensions in Europe is crucial. The creation of a European personal pension product would offer the potential to increase the volume of retirement savings while channelling those savings to long-term investments across the EU. EFAMA’s recent report on this topic provides further details and recommendations.

European asset managers have long supported the ELTIF regulation as a concrete step towards unlocking capital and encouraging a shift towards investments in long-term projects. EFAMA believes that to make this a success story, important refinements, a right framework and appropriate incentives are necessary.

In the context of building a capital markets union, ensuring appropriate calibrations in Level 2 must be a priority: appropriate and well calibrated level 2 measures in both MIFID II and Solvency II can encourage and promote, as they should, long-term investment.

EFAMA reiterates that it is crucial to ensure a regulatory level playing field and consistent regulation across sectors in the distribution of similar retail investment products. Retail investors must receive the same level of protection, whether these products are governed by MIFID II or IMD II.

Finally, EFAMA seeks to remind EU policymakers that the Financial Transactions Tax (FTT) represents a potential significant obstacle to the successful implementation of a Capital Markets Union. This proposal carries a significant risk which would cause distortions to the creation of an EU single market as it would relocate financial activities outside of the 11 participating Member States, or if applied in the 28 Member States, outside of the EU altogether. FTT would increase the costs for investors as it will render EU investment funds more expensive. It would also jeopardise long-term savings, growth and investment as it would channel investments to products not subject to FTT.

Peter de Proft, Director General of EFAMA, concluded: “Asset managers have an important role to play in the changing landscape of a more capital market based economy, and we stand ready to constructively engage with EU policymakers in the road towards financing growth in Europe.”

M&A Activity Among RIA Firms Remains Steady but Aligning Strategic Objectives More Important Than Ever

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Registered investment advisor firms (RIAs) continue to initiate the bulk of mergers and acquisitions (M&A) of RIAs, but the success of these transactions increasingly rests on the alignment of the strategic objectives of the firms involved, according to a report recently released by Pershing LLC, a BNY Mellon company. The report, Real Deals: Achieving Purposeful Growth with Purposeful Transactions, analyzes RIA deals and offers guidance to firms for determining if or when a transaction is the optimal course of action.

According to the report, one in four advisory firms was involved in a transaction within the past five years. During this period, nearly half (48 percent) of all deals involved RIAs transacting with each other. RIA-RIA deals now account for twice the proportion of industry transactions compared with 10 years ago, when banks and other institutional buyers tended to dominate transactions. Although the total of 42 real deal transactions in 2014 is slightly less than the 48 recorded in 2013, the numbers represent a largely consistent level of M&A activity over recent years. Real deal transactions are defined as those mergers involving an RIA or acquisition of an RIA that is retail-focused, and manages $50mor more in assets or earns $500,000 or more in annual revenues.

“RIA deal-making will invariably continue and grow in frequency,” said Gabriel Garcia, director of relationship management at Pershing Advisor Solutions. “Firm owners are increasingly aware of the potential benefits of a transaction and are more confident in initiating one.”

A transaction can result in a host of strategic advantages, the principal of which include: greater economies of scale, accessing new markets, accessing new expertise and facilitating an ownership or management succession solution. But in order to gain any one of these advantages, Garcia urges firms to consider both organic and inorganic growth approaches. Organic growth is achieved from maximizing existing business capabilities such as growing the firm’s existing client base, improving efficiency to increase profitability and reinvesting profits to increase service capacity. Inorganic growth is achieved as a result of a merger with, or acquisition of, another firm.

“While M&A activity is highly regarded as a means of expansion, it is important to recognize that a transaction is not necessarily the only way to achieve growth,” said Garcia. “RIAs must first understand the strategic context of a potential transaction.”

To evaluate whether a transaction is appropriate, the report provides a four-step course of action:

Define objectives: The personal objectives of shareholders, the strategic objectives of the firm, and other clearly defined objectives serve as valuable guideposts. Without them, it is impossible to adequately determine whether a transaction is in the best interest of the firm and its shareholders.
Identify the problem: Firms are often tempted to pursue any deal opportunity that presents itself. However, a purposeful transaction should help firms address a specific problem such as the need to scale, access new markets, or acquire new capabilities, etc.
List all options: While a transaction may take the firm in the direction it wants to go, another initiative might do the same but more effectively. Identify all practical options, inorganic as well as organic, for achieving the objectives of the firm.
Analyze and discuss: Conduct a thorough analysis of each option to determine which solution will be most effective for driving the firm’s growth strategy. Review and evaluate the best options for achieving the firm’s objectives from the perspectives of cost, risk, timing, business continuity and associated distractions.

BM&FBOVESPA and S&P Dow Jones Indices Sign Index Agreement

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BM&FBOVESPA y S&P Dow Jones Indices firman un acuerdo para crear una familia de índices smart beta — . BM&FBOVESPA and S&P Dow Jones Indices Sign Index Agreement

BM&FBOVESPA, the largest equity and futures exchange in Latin America, and S&P Dow Jones Indices, one of the world’s leading providers of financial market indices, announced today the signing of a strategic agreement to create and launch new, co-branded equity Brazilian indices. The signing, as well as a bell ringing commemorating the event, took place at BVMF.

Yesterday also marks the launch of the S&P/BOVESPA family of smart beta indices, the inaugural series of indices developed and launched as a result of this agreement. The five indices – S&P/BOVESPA Low Volatility Index, S&P/BOVESPA Inverse Risk Weighted Index, S&P/BOVESPA Quality Index, S&P/BOVESPA Momentum Index, and S&P/BOVESPA Enhanced Value Index –measure the performance of stocks within the Brazilian equity markets based on exposure they provide to respective risk factors and are the first suite of smart beta indices in Brazil. Market participants can use these indices, and combinations thereof, in various ways depending on their investment objectives.

“As the Brazilian financial market develops, BM&FBOVESPA continues to play an integral role for both local and international investors,” says Alex Matturri, CEO of S&P Dow Jones Indices. “Through this agreement, S&P Dow Jones Indices expands its mission of bringing greater index-based solutions, research, ideas, and analysis to the markets of Latin America. By launching this family of smart beta indices in Brazil, we are meeting the evolving needs of investors throughout the world for benchmarks that tilt towards certain styles, sectors, and factors.”

According to Edemir Pinto, CEO of BM&FBOVESPA: “The agreement between BM&FBOVESPA and S&P DJI is a very important step toward increasing index based opportunities for investors and further educating them on the merits of the Brazilian capital markets. The association of our brand to S&P DJI’s on new co-branded indices will reinforce BM&FBOVESPA’s position overseas through S&P DJI’s global index distribution.”

S&P/BOVESPA Smart Beta Index Offering:

S&P/BOVESPA Low Volatility Index tracks the performance of the top quintile of stocks in the Brazilian equity market, defined by the S&P Brazil Broad Market Index (BMI), that have the lowest volatility, as measured by standard deviation.
S&P/BOVESPA Inverse-Risk Weighted Index calculates the performance of the Brazilian equity market with stocks weighted based on the inverse of their volatility. It provides the exposure to the low volatility factor using a tilted approach.
S&P/BOVESPA Quality Index measures the performance of the top quintile of high-quality stocks in the Brazilian equity market as determined by their quality score. This score is calculated based on return on equity, accruals ratio, and financial leverage ratio.
S&P/BOVESPA Momentum Index computes the performance of the top quintile of securities in the Brazilian equity market that exhibit persistence in their relative performance, measured by their risk adjusted price momentum.
S&P/BOVESPA Enhanced Value Index tracks the performance of the top quintile of stocks in the Brazilian equity market with attractive valuations based on “value scores” calculated using three fundamental measures: book value-to-price, earnings-to-price, and sales-to-price.