BNP Paribas AM Appoints Pieter Oyens as Global Marketing Director and Guillaume Wehry as Co-Head of Global Product Strategy

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BNP Paribas AM has strengthened its Marketing and Global Strategy teams with the appointment of Pieter Oyens as Global Marketing Director (CMO) and Guillaume Wehry as Co-Head of Global Product Strategy.

According to the asset manager, since July, Pieter Oyens has been reporting hierarchically to Steven Billiet, Head of the Global Client Group. In his new role, he will lead the marketing organization to ensure greater coordination with the priorities of the product, investment, and sales teams on an international, regional, and national scale, in order to best meet client needs.

“Thanks to his extensive experience, Pieter has developed a deep understanding of BNP Paribas Asset Management’s product range and strategic opportunities. I am convinced that this knowledge will enable him to develop and execute the comprehensive marketing strategy we need to advance our business development. His experience in Asia will be particularly useful in reinforcing our objectives in this key region for the asset manager,” highlighted Steven Billiet, Head of the Global Client Group.

With over 20 years of experience in investment banking and the asset management industry, Pieter has held various regional and international executive positions in sales, product development, and derivatives. He previously served as Co-Head of Global Product Strategy at BNP Paribas AM and, before moving to Paris, was Head of the Investment Specialists team in Asia-Pacific, based in Hong Kong, where he was a member of the regional Executive Committee. In this regard, he has extensive experience in Asia, having spent 14 years in Hong Kong working for BNP Paribas Group and ABN AMRO Bank, among other entities. He holds a law degree from Leiden University in the Netherlands and is a CFA (Chartered Financial Analyst) charterholder.

On the other hand, Guillaume Wehry will lead the product strategy team alongside François Roux. As Co-Head of Global Product Strategy, Guillaume will report hierarchically to Pierre Moulin, Global Head of Product and Strategic Marketing. “I am confident that Guillaume will help BNP Paribas Asset Management in developing our product priorities, allowing us to execute our current and future strategic plans. He is well-equipped to manage, optimize, and develop our strategic and innovative product offerings in line with our strategic pillars in private assets, ETFs, and thematic investments, within the framework of the new interest rate environment. Additionally, he will assist us in achieving our ambitious sustainability goals, which are a key element of BNP Paribas Asset Management’s corporate philosophy,” added Pierre Moulin, Global Head of Product and Strategic Marketing.

Guillaume brings over 25 years of experience in the asset management industry, of which more than 10 years were spent in Asia. He has held various senior positions within BNP Paribas Group, SGAM, and Amundi in Europe and Asia. In 2018, he joined BNP Paribas Asset Management as Head of Marketing for Asia-Pacific in Hong Kong, where he drove commercial efforts in the region, particularly in the distribution segment. Guillaume holds a degree in Management from Université Paris IX Dauphine.

Neal Brooks (M&G): “We See Luxembourg as an International Gateway, and Not Just to Europe”

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Over the past two years, M&G has focused its objectives on asset management and a greater focus on Europe as growth drivers. Among these goals were strengthening the firm’s areas of investment expertise, consolidating the M&G Investments brand internationally, and improving distribution networks in continental Europe to reach more institutional investors.

Neal Brooks, Global Head of Product & Distribution at M&G, notes that they have largely achieved these goals, as the growth of the manager is solid, especially in Europe, where they have made new hires and strengthened relationships with their clients, particularly banks, pension plans, and insurers.

“Europe is where we have experienced the most and fastest business growth. We are very focused on active management, and our goal is to be recognized as a leading active manager across pan-European markets. We want to do this by focusing on areas where we believe active management makes a difference, such as fixed income and private markets,” says the Head of Product and Distribution at M&G, who acknowledges that in Europe, one of their main objectives for years has been to internationalize the business and go beyond their established presence in the UK.

Aware that they are in a highly competitive market with other managers excelling in certain areas, they have strengthened their distribution and client relations teams, especially with global banks and insurance companies. This is evidenced by the good results achieved in Europe in the institutional segment, where they have seen a greater influx of institutional flows and pension plans from European markets in recent years, traditionally known for their wholesale business.

“I think it’s part of what we wanted to achieve, which was to invest in a way that worked for a broad set of clients across Europe.” He adds, “Our company’s approach is to set up M&G PLC in three distinct businesses: international asset management, M&G Investments, and in the UK, our Wealth division and our insurance division, Life. The experience in the latter in the UK gives us great capacity to understand the end institutional client and, in turn, allows us to scale the asset management business. We are not an insurance company with an asset management arm, but rather our approach is of two parallel businesses.”

This advantage is deployed by the company from Luxembourg, a destination chosen by the firm after Brexit to internationalize its business. “We see Luxembourg as an international gateway, and not just to Europe. Right now, we have €114 billion under management, making us the fifteenth largest manager in Luxembourg, with a team of 70 people. In recent years, we have strengthened our investment staff in Europe, but we maintain the criterion that all our offices are well balanced between distribution, investment, and other functions. Without a doubt, Europe is where we have experienced the most and fastest business growth,” Brooks acknowledges.

In these years, he recognizes that the industry has evolved. “We are in a context where banks and intermediaries are moving towards portfolio construction models. Therefore, what we are looking for is to identify what we can provide to those portfolios.” According to him, when Joseph Pinto joined the manager as the new CEO, they evaluated what they were doing and concluded that many clients knew them for their Optimal Income strategy but were unaware of their capabilities in private markets, especially on the institutional investor side. Focusing on portfolio construction and offering a wide range of specialized strategies is, in his opinion, the right path for continued growth.

A growth opportunity that he also believes will come with ELTIFs, as he considers that “they will be the real change that will open much more access to retail investors,” although he acknowledges that some challenges remain to be resolved, such as liquidity and fund size. “With ELTIFs 2.0, these vehicles can be distributed in any European country at the retail level, not just among professionals, which I honestly think will change the rules of the game and the market. However, none of this will make a difference if investors do not understand the product well; people need to understand it correctly to buy it,” he adds.

When talking about private assets and the potential of the ELTIF structure, Brooks takes a moment to highlight that they are firm believers in private credit and its role in portfolios, but only if the investor understands the asset. “We have encountered a very varied knowledge and understanding of the asset. The conversation usually centers on liquidity or the level of leverage, but it is necessary for the investor to understand the level of risk. The first investors in our ELTIF were family offices, who are sophisticated investors. We are working with banks and insurance companies, but our starting point is to ask ourselves how we can help train private banking networks so that they can then help and train clients in this asset class,” he highlights.

Credit, Thematic Investment, and Private Assets

In this vision of portfolio construction, he believes that successful investment strategies like Optimal Income will have a place, but Brooks goes a step further: “It is in the areas where we have the most experience and where we do best that we can offer the most to the investor, such as being an active credit manager. What I mean is that we have made an effort to highlight the areas where we have outstanding capabilities, and this has driven much of our flow and growth over the past two years. I think it has been very valuable because we are now more relevant to our clients because we have different strategies and assets that we can offer.”

This evolution of the company has made them a reference point when it comes to credit management, which has become “at the core” of what they do. According to Brooks, beyond credit, they have also found a way to differentiate themselves in an area like thematic equity investment. “I think it is an investment segment where an active approach can really make a difference,” he says. In this regard, he highlights the work of his colleague Fabiana Fedeli, who joined M&G about three years ago as CIO of Equities, Multi-Assets, and Sustainability. “I think we are doing well, finding where the gaps were and making sure we are set up correctly to manage strategies for all clients, whether institutional, retail, or wholesale clients. Again, we have had good results and are delivering good returns, aligning with clients’ interests. I would say we are even more focused on equities than on other areas, because we firmly believe there are some areas where active management can make a difference.”

The third area where Brooks believes M&G makes a difference is in the universe of private assets and markets, where they currently have €84 billion under management. “We are focusing our private asset offering in six areas: private credit, structured credit, real estate, infrastructure, responsibility, which specializes in impact strategies in emerging markets, and the private equity and impact team, leading the Catalyst strategy. Catalyst is an internal mandate of €6 billion focused on investing in sustainable companies in private markets. We don’t want this to be seen as a boutique model but rather to show that there is a very clear investment culture,” explains Brooks.

In this regard, he acknowledges that they are focused on topics related to healthcare, climate change, and fighting inequality. “We are looking at this purely from a private markets angle, specifically venture capital. We have a responsibility, the Swiss boutique firm we bought two years ago. Obviously, their expertise is focused on emerging and frontier markets. Much of what they do is incredibly interesting and is helping us a lot in providing new perspectives on how to approach similar ideas in developed markets. Emmanuel De Blanc has just joined us as CIO of private markets and now oversees and leads these six areas that are so crucial to us,” he adds.

Looking Towards the Americas

Regarding the manager’s business in the Americas, Brooks explains that they are focusing on two areas: Latin America and the US offshore market. “In Latin America, we are in markets like Chile, Peru, Uruguay, and Colombia, and we are also looking at Mexico and Brazil from an institutional side. These are regions where our strategies work well. In the offshore market, we are making good progress with large global banks like Morgan Stanley, UBS, and Citi,” he says.

One of the reflections that Brooks highlights about the American market is that in addition to the strong presence of Latin American money, there is a significant flow of Asian money. According to him, “Chinese money enters through San Francisco, Latin American money through Miami and Texas.” To respond to this opportunity, he acknowledges that they have had to collaborate with more advisors than they initially thought.

He also notes, in terms of investment preferences, the strong bias towards the dollar and the US and how comfortable investors are with emerging market credit. “In many Latin American countries, investors are very used to buying individual corporate bonds in their local market. They include significant allocations to their sovereign debt within their assets and are well aware of the market dynamics and risks. Their portfolios tend to have larger allocations to emerging markets and look for specialized partners for their purely European asset allocations, with smaller allocations,” he adds.

In his experience, the difference on both sides of the Atlantic is not only noticeable in portfolio allocations but also in the way of approaching the business: “Europe and the UK remain large fund markets, while large American firms and brokers have had great success with Separately Managed Accounts (SMAs), offering greater customization and a broader selection.” Brooks is sure that their presence on both continents is a two-way journey. “What happens in America ends up reaching the UK and Europe. Some of the things that happen there we will learn and they will help us with European clients,” he concludes.

AZTLAN Equity Management Lists an ETF on the Lima Stock Exchange

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AZTLAN Equity Management, a boutique investment fund management firm specializing in strategy development and global stock selection, has announced a strategic alliance with the Peruvian firm Belo Partners. This partnership enabled the registration of the ETF Aztlan Global Stock Selection DM SMID on the Lima Stock Exchange, Peru.

With an initial price of 21.50 dollars per share, it can now be purchased by local investors through any Brokerage Firm (SAB).

“The AZTD ETF from AZTLAN is a unique rule-based strategy that selects the 27 highest-ranked companies based on fundamental factors. It uses a proprietary quantitative model with six factors, including cash flow generation, valuations, earnings growth, quality of capital structure, earnings revisions, and stock price momentum,” the firm explained in a statement.

The fund’s stock selections represent companies in developed markets in North America, Western Europe, and Asia, with stock market capitalizations ranging from 500 million to 10 billion dollars.

In 2022, the Aztlan Global Stock Selection DM SMID (AZTD) ETF was first listed in the U.S. market through the New York Stock Exchange and subsequently in the SIC through the Mexican Stock Exchange (BMV). Its portfolio comprises small and mid-cap companies with high market liquidity and superior business fundamentals, including free cash flow, profitability, and attractive valuations. Currently, the AUMs (Assets Under Management) of this ETF exceed 30 million dollars.

“We are very proud to enter the Peruvian stock market with our funds, thanks to the efforts of our commercial partner Belo Partners. Listing our AZTD ETF demonstrates our commitment to creating value alliances that benefit the broad investing public,” highlighted Alejandro H. Garza Salazar, Founder and Chief Investment Officer of AZTLAN Equity Management, LLC.

AZTLAN Equity Management, LLC is a boutique portfolio and investment fund management firm specializing in strategy development and global stock selection. Over seven years, AZTLAN has established its presence in the United States, Mexico, Argentina, and Hong Kong.

Belo Partners is a Peruvian firm with experience in banking and financial institutions, providing advisory services in wholesale sales, capital raising, mergers and acquisitions, and corporate advisory with the goal of utilizing all available resources and reinforcing alliances with partners and clients.

These Are the Most Expensive Cities in the World for “Living Well,” According to Julius Baer

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Living well is not cheap. Living well in major cities comes with costs that not everyone can afford, creating a distinction between large metropolises and other cities.

The Global Wealth and Lifestyle Report 2024, prepared by investment bank Julius Baer, details the lifestyles and consumption trends of high-net-worth individuals (HNWI) in 15 countries across Europe, APAC, the Middle East, Latin America, and North America.

According to the data provided, the impact of the global pandemic has stabilized into a “new normal.” However, inflation, rising living costs, and geopolitical tensions continue to affect prices and priorities globally.

In 2024, price increases slowed to an average of 4%, measured in dollars, compared to 6% in 2023. This year, the prices of goods grew more rapidly than those of services: 5% versus 4%, also measured in dollars. Although cities continue to become more expensive, inflation rates have normalized over the past 12 months.

The city’s ranking is based on the Julius Baer Lifestyle Index, which analyzes the cost of a basket of goods and services representative of “living well” in 25 cities worldwide.

Regions and Their Cities

This year saw significant shifts in the rankings of major cities and, consequently, the regions for “living well,” based on the index’s performance.

Singapore once again ranked as the most expensive city in the world, while Hong Kong moved to second place from the third position it held in the previous report. However, this was not enough for the Asia Pacific region (APAC) to retain the top spot, and it fell to second place for the first time in the regional ranking. This was due to the decline observed in cities like Tokyo and the significant advance of the European region.

Thus, the Europe, Middle East, and Africa region, defined by Julius Baer as EMEA, displaced APAC from the top spot. This is a significant advance considering that in last year’s report, it was the cheapest region for “living well,” now becoming the most expensive.

The performance of London, which moved from fourth to third place, and the rise in all European cities, without exception, explain the region’s increase in the index. This year, Zurich climbed eight places, while Milan and Paris rose six and five places, respectively.

The appreciation of the region’s most representative currencies (euro and Swiss franc, except for the British pound) also explains this positioning.

In the Americas, both New York and São Paulo remain among the top ten most expensive cities for “living well.”

In city measurements, New York dropped from fifth to seventh place, while São Paulo remained in ninth place. However, Miami fell from 10th to 15th place, and the big surprise was Ciudad de México, which made a significant leap to 16th place from 21st the previous year.

Currency Fluctuations Are Determinants

Overall, currency fluctuations play an important role in determining changes in the index, says Julius Baer in its report, impacting both upward and downward movements.

“Although costs barely changed in local currency, conversion to U.S. dollars made the difference. The index prices are converted to dollars to allow for international comparison. Therefore, the strength of currencies like the Swiss franc and the relative weakness of currencies like the Japanese yen are clearly reflected in the results of these cities,” the company stated in its report.

Christian Gattiker, Head of Research at Julius Baer, commented: “This year’s report demonstrates that currencies are very important. For example, in the 1990s, Tokyo was the epitome of an ultra-expensive city. However, the gradual decline of the yen has shown that this can change. Although it may seem trivial, we tend to forget that the cost of living can look completely different for a foreigner thinking in U.S. dollars or Swiss francs instead of the local currency. Currency and context make the difference.”

Retail Financial Advisors and Their Model Portfolios Drive ETF Assets

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The adoption of ETFs by end investors and financial advisors in the retail client channel is one of the main drivers of the growing market share of this vehicle, according to the latest Cerulli Edge-The Americas Asset and Wealth Management Edition report.

Retail financial advisor channels collectively held $4.3 trillion by the end of 2022, which is 66% of the total ETF assets. In this context, the wirehouse channels ($1.2 trillion) and independent RIAs ($1.1 trillion) are the two largest segments of retail financial advisor intermediaries in terms of ETF assets, collectively representing more than $2.2 trillion in total ETF assets, adds Cerulli.

Financial advisors report an increasing use of ETFs in the future, regardless of the channel.

Independent RIAs are expected to continue leading the trend, with a forecasted allocation of 39% to ETFs, while hybrid RIAs estimate an allocation of 32.7%.

Independent intermediaries foresee allocations close to 22%, while wirehouses expect to remain near 20%.

Another catalyst for ETF flows is asset allocation model portfolios, in which ETFs have become a significant component.

According to Cerulli, asset managers and external strategist model providers have an asset-weighted average allocation of approximately 54% to ETFs.

12% of financial advisors’ assets are held within practices that primarily use model portfolios as their portfolio construction process. However, Cerulli estimates that 24% of assets are within practices considered targets for model portfolios.

“The sector will continue to see the adoption of models as wealth management home offices push advisors towards them and they realize the resulting benefits,” says Matt Apkarian, associate director.

Given the industry’s move towards model portfolios, ETF providers should seek placement opportunities within both proprietary and third-party model portfolios.

“We expect the ETF to have more weight in model portfolio construction as newer products start to reach their three- and five-year track records, which are typically needed for consideration,” concludes the report.

Guilherme Benchimol (XP) and Zest Want to Change the “Dress Code” of Private Banking in the Americas

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With the presence of Guilherme Benchimol, founder of XP, the top executives of the Peruvian company Zest formalized an alliance in Montevideo to expand into the onshore and offshore markets of Latin American clients, with one of their bases being the Uruguayan capital.

The giant XP, a technology platform that provides investment products to retail clients in Brazil, is now targeting various segments of Spanish-speaking Latin American clients, both locally and offshore. To this end, alongside its partner Zest and its new office in Montevideo, led by María Noel Hernández, XP will undertake a particularly challenging technological and cultural shift.

Entrepreneurial and Technological Culture

Wearing casual clothes and white sneakers, Benchimol, accompanied by Arthur Silva, founder of Zest, showcased a youthful maturity in Montevideo and began his analysis before a small group of bankers gathered at the Radisson Hotel. “In Latin America, the banking sector is very concentrated and does not provide access to good investment products for people. Our goal is to help people invest better,” said the founder of XP.

Created by Benchimol and his partner Marcelo Maisonnave in 2001, XP now has five million clients and manages 1 trillion reais. But that’s not all: the firm is currently the main vehicle for international fund managers, has offshore operations (with offices in Miami and the Cayman Islands), and in Brazil, works with a network of 20,000 independent financial advisors.

Through its fintech platform Rico, XP offers investment funds from firms like Baillie Gifford, BlackRock, Fidelity, Fundsmith, J.P. Morgan, and Vanguard. It thus makes available over 500 equity funds, 2,000 fixed income funds, 730 multi-asset funds, and 160 alternative funds.

Benchimol speaks to millennials, both end clients and private bankers, with a new “dress code” and language: “We are entrepreneurs, not account managers,” he says. “We offer infrastructure so that our network can serve their clients internationally.”

The 21st century begins with the dominance of technology companies over financial ones, a paradigm shift. It was only a matter of time before financiers like Benchimol joined the prevailing entrepreneurial and technological culture.

The word “trust,” central to traditional private banking, slips into the discourse, but XP’s competitive bet is on technology: “U.S. banks have heavy structures. Our dream is to serve American residents and bring them our culture, which consists of offering the best customer experience. We will do the same as we have done in Brazil, where we have been recognized as the best company for six consecutive years, ahead of Itaú and Santander,” says Benchimol.

“We Are Not a Bank, We Have a Bank”

XP’s innovative and technological identity is summarized in one phrase: “We are not a bank, we have a bank.”

But with its offshore structures in the Cayman Islands, Miami, and now in Latin America (Peru and Uruguay), we are talking about a true financial entity that particularly targets clients with international investments who want to move from onshore to offshore with a single click.

For its Brazilian clients, XP has managed to overcome regulatory and tax difficulties through technology, but as Benchimol says, “no client can resist a financial advisor who is empathetic and persistent.”

During the event in Montevideo, taking advantage of the B2B Summit for entrepreneurs, XP’s technicians and onboarding specialists demonstrated their mobile app, capable of “breaking down barriers and providing access to both Brazilian fixed income and U.S. Treasury bonds.”

With small print not suitable for presbyopia but adapted to millennials, the XP app is specially designed for retail clients starting from very low amounts and aims to reach financial advisors with equal efficiency. The promise of three clicks to be online and invest must translate into ease of gaining clients, overcoming regulatory barriers, and switching from the local market to offshore in seconds.

Zest, founded in 2016 by Arthur Silva, a Brazilian resident in Peru, is a young and small company now partnering with a giant to conquer, no less, the Latam market. The firm has an expansion plan with the opening of branches in Uruguay, Chile, and Colombia. With the support of XP Wealth Services US, it aims to reach 5 billion dollars in assets in the next three years and double its team. The adventure has just begun in this southern winter of 2024, perhaps marking the start of a new success story in Wealth Management.

M&G Appoints Andrew Chorlton as CIO of Fixed Income

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M&G Investments has announced the appointment of Andrew Chorlton as CIO of its €160 billion Fixed Income division. Andrew Chorlton will succeed Jim Leaviss, who has decided to leave M&G to pursue his personal interests in the academic field after 27 years with the company. Chorlton, currently the head of fixed income at Schroders and a member of the company’s Group Management Committee, will join M&G this year and report to Joseph Pinto, CEO of M&G Investments.

According to the management company, Chorlton has over 25 years of experience in fixed income markets and leading teams of highly experienced and high-performing fund managers, as well as direct experience in global fixed income portfolio management, US multisector strategies, and credit strategies in both Europe and the US. In his role since 2020, Andrew has been responsible for a global division of investment, analysis, risk, and product professionals.

Additionally, he has led the development of multiple innovative strategies and client solutions in various fixed income areas, including sustainability, quantitative credit, semi-liquid credit, emerging markets debt, and opportunistic strategies across global markets, including the launch of ETFs in the US.

At M&G, Leaviss has spearheaded the company’s growth in fixed income with a management team widely recognized in the industry as a leader in this asset class, managing €160 billion for global investors. Under his leadership, M&G has built a global fixed income platform and developed one of the largest credit analysis teams in the sector; launched innovative investment products to reflect the evolving fixed income markets; and developed a new generation of investment talent within the team. In 2006, Leaviss launched the award-winning blog Bond Vigilantes to share the management team’s firsthand views on issues relevant to fixed income investors—such as inflation, interest rates, and the global economy—as well as insights on the bond markets themselves.

“I would like to take this opportunity to pay tribute to Jim, whose influence in the fixed income world has been remarkable; he should be very proud of his career at M&G and the dynamism and talent of the team he has built. Leaviss has delivered excellent returns for our clients, who have always greatly valued his unique way of communicating, sharing the team’s insights directly from his desk. When Jim leaves the company in a few months, he will do so with our gratitude for his contribution and our best wishes for his academic interests,” said Joseph Pinto, CEO of M&G Investments.

Regarding the appointment of Andrew Chorlton, he commented: “With his extensive experience as a fund manager and team leader, we will have a fixed income heavyweight to lead a team as experienced as M&G’s, at a time when we anticipate numerous opportunities in the bond markets as the rate cycle begins to move. We are excited about the opportunity to capitalize on the growth of our global fixed income platform by making traditionally internally managed strategies available to our clients internationally, including global banks, family offices, pension funds, and insurance companies in the UK, Europe, and Asia-Pacific.”

For his part, Jim Leaviss stated: “It has been a great privilege to work at M&G for almost three decades and to lead the team through the growth and evolution of bond markets over the years. I am very proud of our fixed income team, the talent we have developed, and what we have achieved for clients. Innovation is part of our culture—M&G launched the UK’s first corporate bond and high yield bond funds—and how we have communicated with clients since launching the Bond Vigilantes blog in 2006. Our range of investment strategies has grown enormously, including the launch of the M&G Optimal Income Fund, which has become one of Europe’s largest funds, and our leading European credit strategies that have an excellent reputation among our international clients. I would like to thank everyone for their support over the years and have no doubt that this culture will continue. I wish the team all the best.”

Finally, Andrew Chorlton, the new CIO of Fixed Income at M&G, also commented, acknowledging that after more than a decade at Schroders, both in New York and London, he is proud of the solid fixed income platform that has been built. “I have long considered M&G one of the leading fixed income managers and a strong competitor throughout my career due to its history in this asset class. The team’s presence has been amplified by its ability to bring the bond market to life and make fixed income interesting through its innovative way of communicating with clients and a broader audience. It is an honor to take on this role at a time when investors are increasingly seeking active managers with a global perspective based on proprietary analysis to seize opportunities in the fixed income market, as clients’ need for income continues to grow.”

“Jim will remain in his position until the fall to ensure a planned and smooth transition and handover of responsibilities,” the management company notes.

 

AXA IM Repositions its Metaverse Fund to Cover a Broader Spectrum and Include Artificial Intelligence

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AXA Investment Managers (AXA IM) has announced the renaming of its AXA WF Metaverse fund to AXA WF AI & Metaverse, effective July 2, 2024. According to the company, this decision reflects the expansion of the fund’s investment universe to include the broader realm of artificial intelligence (AI) and the growth opportunities it offers as the AI revolution extends beyond the boundaries of the metaverse.

Commenting on the fund’s name change, Tom Riley, Head of Global Thematic Strategies at AXA IM Equity, explained that the management company “firmly” believes that the synergies between AI and the metaverse offer unprecedented opportunities, while also noting that the AI revolution extends beyond the metaverse. “While the existing companies in our portfolio have been at the forefront of AI innovations, by expanding our investment universe to include the broader AI environment, we believe we could capture even more exciting opportunities. By selecting one of the most significant themes of our generation, the fund can appeal to investors seeking exposure to this fast-moving sector and its growing set of credible long-term growth opportunities. The rise of AI and its possibilities have increasingly made it clear that its evolution is not just a trend or a parallel development, but a powerful accelerator of the metaverse,” Riley commented.

The management company highlights its established expertise in technology and disruptive technology, managing around 6 billion dollars in assets within these themes. The Metaverse strategy was launched in 2022 as part of AXA IM’s commitment to identifying and capturing the growth potential of disruptive technologies for its clients. The AXA WF AI & Metaverse fund will continue to be co-managed by Pauline Llandric, a technology portfolio manager, and Brad Reynolds, a technology portfolio manager, both based in London.

Asset Allocation for the Second Half of the Year: What Do International Asset Managers Prefer?

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After analyzing the perspectives that asset managers have for the second half of the year, it’s time to ask them about the asset allocation they prefer. We start from a market context that is still anticipating central banks to cut interest rates, especially the Fed. The fact that they have lowered market and investor expectations in this regard has created quite a bit of dispersion in identifying which assets should not be missed from now until December.

According to Dan Scott, head of multi-assets at Vontobel, the second half of the year presents some positive aspects: the resilience of the US consumer, China’s fiscal stimulus, and the incipient recovery of the eurozone contribute to a moderate but steady economic expansion that is likely to continue until the end of 2024.

“However, these positive prospects are not without risks. One of our main concerns is whether interest rates will remain too high for too long, ultimately causing some disruption. In the US, an increase in delinquencies on credit cards and auto loans is already being observed. The continued increase in provisions for bad loans related to the US commercial real estate sector is also a clear indicator that cracks are gradually appearing and will require a policy response,” warns Scott.

Fixed Income

This period of waiting concerning central banks makes one of the most complex allocations to make in fixed income, where durations and maturities have become key tools for investors. In this regard, Kevin Thozet, a member of Carmignac’s Investment Committee, highlights that in public debt, maturities up to two years are favored. “Longer-term rates could yield less, given the optimistic trajectory of disinflation and the increase in public debt at a time when monetary authorities are trying to make safe cuts and reduce their balance sheets. In credit markets, premiums are not far from previous or historical lows,” says Thozet.

According to the Carmignac expert, historically, the combination of low bond yields and low credit spreads has been disadvantageous for the asset class, but the current higher-yield environment means that credit spreads act as a boost to investor returns and a cushion for volatility.

“Fixed income investors were too exuberant about rate cuts earlier this year, but now that markets are not aggressively predicting cuts, fixed income yields are more attractive,” says Vince Gonzales, portfolio manager of the Short-Term Bond Fund of America® at Capital Group. In his view, bonds remain fundamental as economic growth slows and can provide a strong counterbalance to stock market volatility.

Additionally, Gonzales adds that “given the recent tightening of corporate bond spreads, we are seeing better opportunities in higher-quality sectors with attractive yields, such as securitized credit and agency mortgage-backed securities (MBS).” According to his view, mortgage bonds with higher coupons are especially attractive. “These bonds are unlikely to be refinanced before maturity, given current mortgage rates of around 7%,” he notes.

On the other hand, Jim Cielinski, Global Head of Fixed Income at Janus Henderson, acknowledges that the fixed income market is currently very different from a few years ago: “Yields are at levels that typically pay well above inflation and offer the prospect of capital gains if rates fall. Those seeking attractive yields can start here. We see solid prospects for both healthy income and some additional capital appreciation in the next six months.”

According to his stance, they prefer European markets to US ones, as they believe the relatively weaker European economy offers more visibility of a lower rate trajectory. “With an economic backdrop of resilient but moderate growth in the US, a revival of the European economy, and less pessimism about China’s economic outlook, there is a chance that credit spreads will narrow. Among corporate sectors, we continue to prefer companies with good interest coverage ratios and strong cash flow, and we see value opportunities in some areas that have been disadvantaged, such as real estate equities,” says Cielinski.

Additionally, the expert acknowledges that credit spreads as a whole are close to their historical levels, which he believes leaves little room if corporate prospects worsen. “With this in mind, we see value in diversification, especially towards securitized debt, such as mortgage-backed securities, asset-backed securities, and collateralized loan obligations. In this case, misconceptions about these asset classes, combined with the aftermath of rate volatility, have made spreads and yields offered appear attractive. Yields in the securitized sectors are more attractive in historical terms, and they are more likely not to be affected by a more severe slowdown,” he concludes.

Don’t Forget Equities

Wellington Management argues that their position is to continue overweighting equities. “The global economy is growing steadily, and the risk of recession has faded, with strong and continuous US economic growth and an increasing momentum of global growth. Although disinflationary pressures have stalled in recent months, especially in the US, we still believe that rates have peaked in this cycle and expect a relaxation of monetary policy in the next 12 months,” explains Wellington Management’s multi-asset strategy team.

Consequently, they add, this makes them prefer the US and Japan over Europe and emerging markets. “We consider the former as our main developed market due to the macroeconomic context and our confidence in the potential of AI to continue underpinning earnings growth. We have a moderately overweight view on Japan and remain skeptical of a material improvement in China, given the real estate and consumer confidence issues,” they add.

“Conditions appear favorable for US and Japanese equities to extend their good streak. The solid growth and healthy earnings of the former, coupled with the structural drivers and corporate reforms of the latter, partly justify the increased valuations in these regions, but not entirely; thus, especially in the US, we are going beyond the hottest areas of the market to uncover opportunities. Mid-cap stocks offer solid long-term growth potential at reasonable prices and should also withstand higher rates,” adds Henk-Jan Rikkerink, global head of Solutions and Multi-Assets at Fidelity International.

For its part, abrdn has also increased its conviction in developed market equities, which will benefit from interest rate cuts and solid corporate fundamentals. “The Japanese equity market remains particularly interesting, as its companies are increasingly focusing on shareholder profitability thanks to a cultural shift in buybacks and corporate governance in general. The Japanese market has exposure to a variety of companies well-positioned to benefit from demand for both artificial intelligence and the green transition. We also find European and British equities interesting, given the recovery in activity, valuations, and (at least in the case of the UK) the potential return to a more stable political environment,” says Peter Branner, Chief Investments Officer at abrdn.

On the other hand, Branner believes that Chinese equity valuations seem attractive but face the country’s real estate market problems. “The Indian market should benefit from strong growth and structural reforms, but Narendra Modi’s reduced government majority may limit the scope of the country’s reform agenda, and valuations already discount a lot of good news,” adds the CIO of abrdn.

Alternatives and Currencies

Finally, Branner acknowledges that they have improved their view of the alternatives segment after two years of underweighting. “Rate cuts, limited supply, and strong rental growth mean that the valuation adjustment is largely complete. Structural factors favor the residential sector, data centers, and logistics,” he highlights.

Fidelity International Updates Its Sustainable Investment Framework and Creates Three Major Categories

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Fidelity International has revised its sustainable investment framework to adapt to changes in this field, in line with client needs and environmental, social, and governance (ESG) regulations. As the management company reminds us, sustainability is an essential element of Fidelity’s active investment approach.

The company has a robust investment analysis methodology that incorporates sustainability into its fundamental analyses and integrates its proprietary sustainability ratings with insights generated by its equity, corporate debt, macroeconomic, and quantitative analysts to obtain a comprehensive view of the companies and markets it studies.

They explain that this framework has been designed to complement the company’s overall investment approach and provide clients with greater clarity and transparency. Within this revised framework, which will be applied starting from July 30, 2024, Fidelity has created three major categories: ESG Unconstrained, ESG Tilt, and ESG Target.

Regarding these categories, they explain that ESG Unconstrained comprises products that seek to achieve financial returns and may or may not integrate ESG risks and opportunities into the investment process. “The products in this category apply the exclusions that Fidelity has adopted for the entire company,” they clarify.

In the case of the ESG Tilt category, it comprises products that seek to generate financial returns and promote environmental and social characteristics by favoring issuers with better ESG performance than the benchmark index or the product’s investment universe. Additionally, products in this category adopt the exclusions from the ESG Unconstrained group and apply others, such as tobacco production, thermal coal mining, thermal coal power generation, and certain public sector issuer exclusions.

Thirdly, in the ESG Target category are “products that seek to generate financial returns and prioritize ESG or sustainability as a key investment objective, such as investing in ESG leaders (issuers with superior ESG ratings), sustainable investments, sustainable themes (such as climate change or transition), or complying with impact investment standards. Products in this category are subject to the reinforced exclusions mentioned earlier and may apply others.”

On the occasion of this announcement, Jenn-Hui Tan, Director of Sustainability at Fidelity International, stated: “We have long been committed to sustainable investing and have continued to evolve our approach and capabilities in line with client needs and ESG regulations. Integrating sustainability into investment analysis and portfolio construction is part of our core process of identifying the drivers of long-term value creation. The objective of our revised framework is to facilitate the creation and maintenance of a consistent, transparent, and practical range of investment capabilities that cover changes in client needs and regulation. We believe this framework appropriately combines a robust approach to sustainability with a flexible approach that can accommodate different investment styles, asset classes, and client preferences.”