After Tough 2022, Financial Markets Remain Challenged by Multiple Threats

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T. Rowe Price released its outlook for global financial markets for the balance of 2023 and the message is reluctantly bearish for the short term, with more room for optimism over the longer term.

Contributing factors making the near term uncertain include stubborn inflation, despite some recent slowing, tightening financial conditions and higher interest rates, a risk of recessions in many developed markets and reduced lending after the failure of several U.S. regional banks.

The resilience of many world economies is being tested as the effects of a steep U.S. Federal Reserve interest rate hiking cycle and a shift from quantitative easing to quantitative tightening are still being felt.

Labor markets remain strong and are an important signal for investors to watch as any softening could increase the risk of a recession.

As always, company earnings are an important focus. Although equity markets have delivered gains in the first half of 2023, earnings estimates may be too high for a weakening economy, putting further pressure on equity valuations.

Bonds, which suffered badly in 2022 alongside stocks, present potentially attractive opportunities in high yield, bank loans, and sovereign and local currency debt in certain emerging markets.

“The market is trying to reconcile two very different scenarios – one where the U.S. economy remains fairly strong and the Fed doesn’t cut rates, and one where the Fed has to cut by several percentage points.  In Europe, I expect both the European Central Bank and the Bank of England to raise rates despite the associated economic risks.  The Fed and other central banks in developed markets will lower rates eventually, but the timing is tricky.  Rates are likely to remain higher for longer.  Some emerging markets may be on the verge of rate cuts, but they are only attractive on a very selective basis,” said Arif Husain, Head of International Fixed Income and Chief Investment Officer.

In addition, Sébastien Page, Head of Global Multi-Asset and Chief Investment Officer commented: “Whenever the Fed has slammed on the brakes, someone’s head has gone through the windshield.  This time it was some U.S. regional banks.  Stock valuations aren’t broadly attractive right now, but small- and mid-cap stocks are trading at significant discounts to their historical averages, with small-caps priced like it’s 2008.  In an uncertain environment, market dislocations are inevitable.  With both stocks and bonds, skilled active management can help navigate market volatility by taking advantage of opportunities and avoiding riskier exposures. My takeaway fits in a fortune cookie: stay invested, stay diversified.”

 

 

Sandro Pierri, CEO of BNP Paribas Asset Management, Elected New President of EFAMA

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Sandro Pierri, Efama

Sandro Pierri, CEO of BNP Paribas Asset Management, was elected as EFAMA’s President for a two-year term, running until June 2025.

Sandro Pierri has been the CEO of BNP Paribas Asset Management since 2021. He has over 30 years of experience in various leadership roles within the asset management industry, including as former CEO of Pioneer Investments.

Massimo Greco, Vice-Chair Asset Management EMEA at JP Morgan Asset Management, was also elected as EFAMA’s Vice-President. Mr Greco has been Vice-Chair Asset Management EMEA since earlier this year, after heading EMEA Funds for J.P. Morgan Asset Management since 2012. He has 25 years of senior leadership experience at JP Morgan Asset Management and has previously served two terms as an EFAMA Board member.

President of EFAMA, Sandro Pierri, commented: “It is an honor to serve as EFAMA President for the next two years. In a challenging financial environment, regulation has become a key competitive component for our industry while navigating through major strategic transitions such as the retail investment strategy, sustainable finance and tech. I am deeply convinced that EFAMA has an essential role to play, to help build a true European Capital Markets Union to serve our clients and European savers but also finance the net zero transition. Our industry needs clear rules that allow fund and asset management companies to operate efficiently throughout the Union and beyond and I am truly committed to ensure the voice of our industry is heard at European and international levels.”

Pierri takes over from Naïm Abou-Jaoudé, CEO of New York Life Investment Management and EFAMA President since 2021.

Mr. Abou-Jaoudé commented: “I would like to congratulate and wish the best of luck to my successor and friend, Sandro Pierri. I have full confidence that he will lead EFAMA with excellence, ensuring our industry’s continued growth and success. I would also like to welcome EFAMA’s new Vice-President, Massimo Greco, and wish the very best to both of you in your mandate.”

Fidelity International Publishes its Sustainable Investing Report 2023

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Fidelity International released its annual Sustainable Investing Report 2023, entitled Nature Positive. The report details Fidelity’s approach to sustainable investing and the progress made in 2022 in several key areas of the ESG dimension.

“As an asset manager, Fidelity remains committed to climate change mitigation and, through this report, recognizes the weight of nature in achieving emissions neutrality and the power of effective governance in driving systemic change,” the firm said.

Jenn-Hui Tan, Fidelity International’s Global Head of Sustainable Investment and Oversight, commented: “Despite the enormous challenges of geopolitics and inflation that plagued economies in 2022, sustainable investing continues to evolve apace and our focus is shifting as systemic issues, such as nature, become more relevant. As around half of the world’s GDP is heavily or largely dependent on nature, we realize that reversing the loss of nature is vital to ensure the long-term prosperity of the global economy.”

Some of the highlights of the report include updating the Sustainable Investment Principles to reflect the evolving approach to active ownership, and introducing an Influence Framework to identify opportunities for dialogue with stakeholders around issues of systemic importance over several years.

On the other hand, the development of Fidelity’s ESG tools to drive dimension integration. In this regard, with the deployment of climate ratings, the ODS tool and ESG ratings currently cover around 4,000 companies.

In addition, the report highlights that the thermal coal thematic dialogue program was launched, designed to accelerate the phase-out of thermal coal by 2030 in OECD markets and by 2040 globally, in line with the IEA’s 2050 net zero emissions scenario.

Finally, Fidelity highlights the development of a Deforestation Framework that “will help deliver on our commitment to do everything in our power to address the risks of deforestation caused by commodity sourcing in our investment portfolios by 2025 and, on neutrality.”

Home-buying Competition Pushes Prices Higher

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Competition among buyers over few available houses has made this home shopping season unusually hot, according to the latest market report from Zillow®. Meanwhile, high mortgage rates are continuing to deter homeowners from listing, pushing inventory to record lows.

“Many homeowners are still opting not to sell and give up historically low mortgage rates. But those who do have been rewarded with bidding wars as buyers compete for limited options,” said Zillow senior economist Jeff Tucker. “Spring is traditionally the hottest time of year in the housing market, and 2023 has been no exception. Time will tell if seasonal price slowdowns arrive on time this year, later in summer.”

Typical U.S. home values grew by 1.4% from April to May, the strongest monthly appreciation since last June. That’s a few degrees cooler than the previous two springs, but hotter than in 2018 or 2019. The typical home value is $346,856 — up 0.9% over last May and up 3.4% from a recent low in January.

A new loan on a home priced at the typical value in the U.S. would feature monthly mortgage payments just shy of $1,800. That monthly payment is 22% higher than last year, double that of May 2019, and the second highest on record after October 2022.

Regional appreciation trends
Affordability is still the key driver of demand, and that’s reflected in the markets that are appreciating fastest. The largest monthly home value gains are in the Midwest — home to six of the seven metros with the biggest gains in May. Columbus, Ohio, led the way (2.2% monthly gain), followed closely by Cincinnati, Detroit, Richmond and Milwaukee.

Price growth also sprang back in West Coast tech hubs after prices fell significantly there late in 2022. Home values rose faster than the national average for the second straight month in San Jose (1.9%), Seattle (1.7%) and San Francisco (1.4%).

Inventory shortage drags on, driven by high rates
A shortage of new listings has dogged the housing market for almost a year. The flow of new listings was down 23% year over year in May — a milder drop than in April, but nearly equal to that of March.

The chief driver is still higher mortgage rates, which make a new loan unattractive when the majority of mortgaged homes are financed for less than 4%. Even without intentions to buy again, anyone with a mortgage at a rate under 4% might be loath to sell when there’s a possibility to rent out the home for more than their carrying costs.

The lack of new listings, paired with resolute demand from buyers, has driven prices up and total inventory down to record lows for this time of year. The number of homes for sale on Zillow in May was 3.1% lower than last year — the former low-water mark — and a massive 46% below that of May 2019.

Buyers still motivated, despite challenging conditions
Sales measured by newly pending listings climbed 9.5% from April, shrinking the year-over-year decline to 18% in May and marking steady improvement since March. While this looks low in comparison to the hot pandemic era, sales figures are close to pre-pandemic standards.

Pending sales peaked in May in 2018, 2019 and 2022; the weeks ahead will reveal if that seasonal pattern repeats itself, or if the buying season stretches into summer, as it did in 2020 and 2021.

The Zillow Real Estate Market Report is a monthly overview of the national and local real estate markets. For more information, visit the following link.

 

Blackstone Announces Majority Investment in New Tradition

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Blackstone announced that funds managed by Blackstone Tactical Opportunities have acquired a majority stake in New Tradition Media, a leading out-of-home media operator with assets across the nation’s largest markets.

Founded in 2010, New Tradition develops, owns and operates premium digital and static signage for leading national brands and advertising agencies. It manages some of the most iconic, large-format, spectacular out-of-home advertising assets nationwide, including One Times Square in New York City and The Reef in Los Angeles, the press release said.

This partnership with Blackstone, the largest owner of commercial real estate globally, will help fuel New Tradition’s continued growth and meaningfully enhance its network of real estate and advertising relationships. The company’s management team, Evan Richheimer, Bret Richheimer, Vince Mastria and Lu Cerda, will continue to run day-to-day operations of the business and remain significant equity holders after closing.

Evan Richheimer, Co-Founder and CEO of New Tradition said: “We’re thrilled to partner with Blackstone, whose track record of scaling founder-led businesses and significant real estate expertise, will enable New Tradition to accelerate the expansion of our footprint and continue to provide cutting edge out-of-home advertising solutions to new and existing clients.”

John Watson, Managing Director, and Kern Vohra, Senior Associate, at Blackstone, said: “Technological advancements in digital signage are transforming the way consumers engage with the physical advertising industry. Evan, Bret, Vince and Lu are respected leaders in this evolving market and have created iconic advertising activations across the country on behalf of their customers. We’re excited to leverage Blackstone’s scale, resources and relationships to support New Tradition’s continued expansion and innovation.”

Terms of the transaction were not disclosed. Moelis & Company LLC served as a financial advisor to Blackstone, and Weil, Gotshal & Manges LLP served as a legal advisor to Blackstone. Solomon Partners served as a financial advisor to New Tradition, and Lowenstein Sandler LLP served as a legal advisor to New Tradition.

UBS Completes Acquisition of Credit Suisse, Creating the World’s 11th-largest Asset Management Company

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UBS has completed the acquisition of Credit Suisse, passing a major milestone. According to a statement released today, the combined entity will operate as a consolidated banking group and will create the 11th largest asset manager in the world and the third largest in Europe.

“We are excited about bringing together our highly complementary businesses and product offerings to scale our capabilities and enhance our client offering. With a combined USD 1.6 trillion in invested assets, we are creating the third largest Europe-based asset manager and the number 11 firm globally,” UBS Asset Management said in a press release.

In the asset management business, the acquisition also creates the number one Europe-based Index player with leading capabilities in customized and sustainability-focused solutions; an expanded Alternatives offering, across real estate, hedge funds and commodities, as well as the leading collateralized loan obligation (CLO) franchise globally; leading active investment capabilities, including a strong thematic equities offering; a continued commitment to sustainability and innovation, with an expanded offering; our increased asset base will provide a more influential ‘seat at the table’ for our stewardship and engagement activities; reinforce our strengths as the asset management leader in Switzerland; and an increased presence in the US and APAC, with an expanded footprint in China including Credit Suisse’s joint venture with ICBC, the firm said.

UBS Asset Management leadership team

UBS will build on UBS Asset Management’s existing target operating model, growth strategy and organizational set-up. Through the course of the next 90 days, they will work swiftly to determine the best options to create most value in the interest of our clients, employees and shareholders, the statement added.

The entity has now shaped the organizational structure of its business and announced the management team appointed for the Asset Management business, which will report to Suni Harford. Michael J. Rongetti will be CEO at Credit Suisse Asset Management; Barry Gill, Investment Director; Joe Azelby, Real Estate & Private Markets (REPM) Director; Aleksandar Ivanovic, Head of Client Coverage and EMEA & Suiza Head; Michael Kehl, Product Director; Nasreen Kasenally, Operations Director; James Poucher, América Regional Director and Raymond Yin, APAC & China Onshore Regional Director.

In the beginning, the UBS and Credit Suisse businesses will be required to run as separate affiliates. For its Asset Management clients, however, “we understand the importance of moving swiftly to provide clarity on how your assets are managed while we work to bring together our teams, capabilities and product offering,” the firm said.

As previously announced, UBS will operate the following governance model pending further integration: UBS Group AG will manage two separate parent banks – UBS AG and Credit Suisse AG. Each institution  will continue to have its own subsidiaries and branches, serve its clients and deal with counterparties. The Board of Directors and Group Executive Board of UBS Group AG will hold overall responsibility for the  consolidated group. 

As it completes the acquisition, UBS announces Board of Director nominations for certain Credit Suisse  entities. Subject to regulatory approval, the Credit Suisse AG Board will consist of Lukas Gähwiler (Chair), Jeremy Anderson (Vice-Chair), Christian Gellerstad (Vice-Chair), Michelle Bereaux, Mirko Bianchi (until 30 June  2023), Clare Brady, Mark Hughes, Amanda Norton and Stefan Seiler.  

Colm Kelleher, UBS Group AG Chairman, said: “I‘m pleased that we’ve successfully closed this crucial  transaction in less than three months, bringing together two global systemically important banks for the first  time. We are now one Swiss global firm and, together, we are stronger. As we start to operate the  consolidated banking group, we’ll continue to be guided by the best interests of all our stakeholders,  including investors. Our top priority remains the same: to serve our clients with excellence.” 

Sergio P. Ermotti, CEO of UBS Group AG, added: “Today we welcome our new colleagues from Credit Suisse  to UBS. Instead of competing, we’ll now unite as we embark on the next chapter of our joint journey.  Together, we’ll present our clients an enhanced global offering, broader geographic reach and access to even  greater expertise. We’ll create a bank that our clients, employees, investors and Switzerland can be proud of.”

UBS expects its CET1 capital ratio to be around 14% in the second quarter of 2023 and to remain around  that level throughout 2023. It anticipates that Credit Suisse’s operating losses and significant restructuring  charges will be offset by reductions in RWA. 

In the future, UBS will report consolidated financial results for the combined group under IFRS in USD. The  second-quarter 2023 earnings will be communicated on 31 August 2023. 

Douglas Gill Joins Snowden Lane Partners with $420 Million in Client Assets

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Snowden Lane Partners announced that Douglas J. Gill has joined the firm with $420 million in assets under management.

As the latest addition to the firm’s Riverstone Capital Wealth Group, Gill will be based in Snowden Lane’s Bethesda office and serve as a Partner and Managing Director. With a focus on generational wealth planning, investment management and philanthropy, he joins Snowden Lane with over 30 years of experience in financial services. His arrival takes Snowden Lane’s total client assets above $10 billion.

“We’re thrilled to welcome Doug to the firm, as his experience in the independent wealth management space makes him a natural fit for our team,” said Rob Mooney, Managing Partner & CEO of Snowden Lane Partners. “We’re also humbled by the milestone our firm has achieved today, as it illustrates that personalized client service and our core values continue to resonate across our industry.”

“I’m looking forward to working alongside Doug to continue offering our clients cutting-edge solutions,” said Alex Bryer, Senior Partner and Managing Director with Snowden Lane’s Riverstone Capital Wealth Group. “The depth and breadth of his investment experience, in addition to his expertise in working with entrepreneurs, will be a natural complement to our team’s existing capabilities. More than anything, though, I know his values align perfectly with Snowden Lane’s and we’re all excited to collaborate on our clients’ behalf.”

Prior to joining Snowden Lane, Gill founded FullArc Wealth Management at CreativeOne Wealth, where he offered entrepreneurs, families and foundations comprehensive investment advice, financial planning, trust and estate recommendations, and risk management strategies.

Gill also previously spent 17 years as a Private Wealth Advisor at Goldman Sachs and Morgan Stanley, and before entering the wealth management space, served as an institutional trader, managing risk capital in bonds and currencies in London, Paris, Tokyo, and New York. In addition to his financial services experience, Gill mentors entrepreneurs at the Halcyon Incubator in Washington D.C. 

“I’m excited to join Snowden Lane for the next step of my career and to continue offering my clients the individual attention and creative solutions they have come to expect,” Gill said. “I’ve been fortunate to work for a range of firms across the wealth management industry, each of which applied their own approaches, but the emphasis Snowden Lane places on personalized client service made the firm a clear choice as I continue my career in the independent advisory space.”

Added Greg Franks, Managing Partner, President & COO: “We’re excited that Doug chose to continue his career at Snowden Lane, especially amid an increasingly competitive recruiting landscape. His experience and expertise make him an asset to any organization, and I’m confident his customized approach will continue helping clients achieve their unique financial goals.”

Since its founding in 2011, Snowden Lane has built a national brand, attracting top industry talent from Morgan Stanley, Merrill Lynch, UBS, JP Morgan, Raymond James, Wells Fargo, and Fieldpoint Private, among others, the press release added.

Caroline Portel is Appointed Global Chief Operating Officer of AXA IM

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AXA Investment Managers (AXA IM) announces the appointment of Caroline Portel as Global Chief Operating Officer  effective 1 July 2023. She will take over from Laurent Caillot who will pursue a new professional endeavour outside of the AXA Group.

Based in Paris, Portel will be a member of the AXA IM Management Board, reporting to Marco Morelli, Executive Chairman of AXA IM.

In this role, she will oversee Technology, Operations, Data Management, Project Management, Security Procurement, Facilities and Innovation.

“I am delighted to welcome Caroline to the Management Board as GCOO and I look forward to working with her in these key strategic areas. Caroline has over 20 years of experience in finance and knows AXA very well, having held several roles in different entities. She will bring invaluable insights to her teams and the Management Board,” said Marco Morelli.

“I would also like to thank Laurent for his contribution to AXA IM over the past 4 years and notably for his leadership to transform our operating model to make AXA IM one of the most technologically-driven asset managers. I sincerely wish him the best in his new professional adventures,” added Marco Morelli.

Portel has been Programme Director at AXA IM since 2022 and is responsible for the integration of the AXA IM Prime and AXA IM Architas business units.

Having initially joined AXA in 1999, Caroline held senior roles in multiple functions ranging from investor relations to consolidation and reporting in various AXA entities and countries.

Most recently, she was CFO at AXA Global Life, the life reinsurance subsidiary of AXA from 2014 to 2018, and then became CFO of Architas Group and CEO of Architas France until 2019. She was then appointed CFO and deputy CEO at AXA Global Re, the Group’s internal reinsurer, until 2022.

Portel graduated from the Ecole Nationale Supérieure d’Electronique in Grenoble (ENSERG) with a Bachelor of Science in Electrical Engineering and holds an MBA in Corporate Finance and Accounting from the University of Rochester in the US.

 

Pershing X Unveils Its New Wove Wealth Management Platform

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BNY Mellon’s Pershing X, a technology provider within BNY Mellon | Pershing (NYSE: BK), debuted Wove, a groundbreaking wealth management platform that integrates the technology tools advisors use into a single, data-driven platform.

“When building Wove, we went beyond just having integrations and created interconnected experiences for advisors so they can go from planning and portfolio building to account management without having to re-enter data,” said Pershing X President Ainslie Simmonds. “The goal is to help them be more productive and efficient with their time so they have the ability to help serve even more clients.”

Wove will feature the core applications advisors need, such as advanced data reporting and analytics, financial plan building, flexible billing, cross-custodian trading and rebalancing. Additionally, advisors will have access to direct indexing investment strategies, including the new BNY Mellon Precision Direct Indexing S&P 500®, managed by Mellon, BNY Mellon Investment Management’s indexing specialist. The strategy seeks to match the performance of the S&P 500® Index and enables advisors to offer clients customized solutions.

As part of its Wove debut, Pershing X also announced that BNY Mellon Advisors, Inc. will deliver investment solutions through the new platform by using an in-house team of senior investment professionals from across BNY Mellon.

“The Wove platform is unique because it has the power, scale and security of BNY Mellon behind it,” said Jim Crowley, CEO of BNY Mellon | Pershing. “By leveraging the breadth of innovation from across the firm to create Wove, we are able to provide advisors with seamless technology and best-in-class investment tools to help revolutionize how they serve their clients.”

SEC Files 13 Charges Against Binance Entities and Founder Changpeng Zhao

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The Securities and Exchange Commission charged Binance Holdings Ltd. (“Binance”), which operates the largest crypto asset trading platform in the world, Binance.com; U.S.-based affiliate, BAM Trading Services Inc. (“BAM Trading”), which, together with Binance, operates the crypto asset trading platform, Binance.US; and their founder, Changpeng Zhao, with a variety of securities law violations.

Among other things, the SEC alleges that, while Zhao and Binance publicly claimed that U.S. customers were restricted from transacting on Binance.com, Zhao and Binance in reality subverted their own controls to secretly allow high-value U.S. customers to continue trading on the Binance.com platform. Further, the SEC alleges that, while Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes.

The SEC also alleges that Zhao and Binance exercise control of the platforms’ customers’ assets, permitting them to commingle customer assets or divert customer assets as they please, including to an entity Zhao owned and controlled called Sigma Chain.

The SEC’s complaint further alleges that BAM Trading and BAM Management US Holdings, Inc. (“BAM Management”) misled investors about non-existent trading controls over the Binance.US platform, while Sigma Chain engaged in manipulative trading that artificially inflated the platform’s trading volume.

Further, the Complaint alleges that the defendants concealed the fact that it was commingling billions of dollars of investor assets and sending them to a third party, Merit Peak Limited, that is also owned by Zhao.

The Complaint also charges violations of critical registration-related provisions of the federal securities laws:

  • Binance and BAM Trading with operating unregistered national securities exchanges, broker-dealers, and clearing agencies;
  • Binance and BAM Trading with the unregistered offer and sale of Binance’s own crypto assets, including a so-called exchange token, BNB, a so-called stablecoin, Binance USD (BUSD), certain crypto-lending products, and a staking-as-a-service program; and
  • Zhao as a control person for Binance’s and BAM Trading’s operation of unregistered national securities exchanges, broker-dealers, and clearing agencies.

“Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” said SEC Chair Gary Gensler.

To access the press release, please click on the following link.