CC-BY-SA-2.0, FlickrPhoto: Roberto Trombetta. Multi-Asset Funds Fail to Keep Volatility-Busting Promise: Should They Consider Cutting Fees?
Multi-asset funds in Europe have not lived up to the sales pitch of providing a buffer against unsettled markets, according to the latest The Cerulli Edge – Global Edition, which advises managers of poorly performing funds within the asset class to consider cutting fees.
While Cerulli Associates, a global analytics firm, acknowledges that some multi-asset sectors are faring better than others, its evaluation of the overall performance of the asset class over the 12 months prior to July 2016 shows that, on average, returns have been negative.
In terms of asset-weighted average returns, none of the multi-asset sectors, as defined by Morningstar, were in positive territory during the review period. Cerulli notes that a number of the funds are highly correlated to the stock market, some by up to 90%, which, given market conditions, defeats the funds’ key objective of providing stability.
“The past 12 months have been tough for multi-asset managers. Overall, the asset class has failed its first real test–and investors are beginning to take note. While a single year is not enough to truly judge performance, it does serve as an indicator,” says Barbara Wall, Europe managing director at Cerulli.
Average multi-asset fund fees (ongoing charges) in the UK have dropped 16 basis points in the past two years. Cerulli believes that charges will continue to fall in both the UK and mainland Europe. “More managers may be forced to sacrifice part of their fees,” says Angelos Gousios, an associate director at Cerulli Associates.
He says the case for liquid alternative multi-asset funds sticking with existing charges on the basis that special skills are required no longer holds water. “Fund buyers will not hesitate to switch to less expensive alternatives if performance and risk targets are not met,” says Gousios.
Noting that cheaper, more innovative strategies such as smart beta multi-asset funds are on the increase, Gousios warns that managers “charging unjustifiable performance fees in both rising and falling markets are at risk of being marginalized.”
Despite Cerulli’s damning assessment, the firm is optimistic with regard to the longer term prospects for multiasset funds. “Tailwinds that will increase their exposure include defined contribution pension schemes in the UK. However, inflows are likely to be more concentrated from now on, with managers that fail to deliver falling by the wayside,” says Gousios.
CC-BY-SA-2.0, FlickrJames Ross . James Ross gets Promoted to Co-Manager of the Henderson Horizon Pan European Equity Fund
Henderson Global Investors has strengthened the European equities team by promoting James Ross to co-manager of the €3.9bn Henderson Horizon Pan European Equity Fund. The fund has been managed by Tim Stevenson since its inception in 2001 and over this period Tim has delivered top-decile performance returning 162.0% against an index return of 88.3%.
The Fund’s investment objective is to seek long term capital appreciation by investing at least 75% of its total assets in equity securities. The fund may invest in shares of European (including UK) companies in any industry.
James has been with Henderson since joining the graduate scheme in 2007 and has been co-manager on the Henderson UK Alpha Fund since January 2013. Since taking over management of the fund, alongside his co-manager Neil Hermon, James has delivered top-quartile performance with the fund delivering 48.0% against an index return of 28.2%.
Commenting on the appointment, Stevenson said, “Having worked with James for the past 10 years, I am very pleased to bring him on to the fund to work alongside me. James and I share a common investment philosophy and with his help I feel confident we can continue our successful track record of finding good quality growth companies in an increasingly tough market.”
Neil Hermon will assume lead management of the Henderson UK Alpha Fund with immediate effect and has appointed Indriatti van Hien as deputy fund manager on the fund. Indriatti has worked alongside Neil and James for the last four years and has played an increasingly important role on the fund.
CC-BY-SA-2.0, FlickrEGA´s team in the NYSE. Columbia Threadneedle Investments Completes Acquisition of Emerging Global Advisors
Columbia Threadneedle Investments announced that Columbia Management Investment Advisers, LLC has completed its acquisition of Emerging Global Advisors, LLC (EGA), a New York-based registered investment adviser and a leading provider of strategic beta emerging market portfolios. Terms of the acquisition were not disclosed.
The acquisition adds over $900 million in assets across a suite of nine emerging markets equity exchange- traded funds (ETFs) and significantly expands the firm’s capabilities in the development, management and deployment of innovative strategic beta products. The product line includes strategic and thematic index-based investment strategies, highlighted by the $671 million EGShares Emerging Markets Consumer ETF (ECON).
“We believe that our combined strategic beta offerings enhance and complement our actively managed investment capabilities and bring our expertise to a broader set of investors,” said Ted Truscott, chief executive officer of Columbia Threadneedle Investments. “We are pleased to welcome our new EGA colleagues to Columbia Threadneedle and to offer our clients and partners a strong platform of strategic beta portfolios.”
Marc Zeitoun, formerly EGA chief product and marketing officer, now leads Columbia Threadneedle’s strategic beta platform as head of strategic beta, reporting to Mr. Truscott. Edward Kerschner now serves as chief portfolio strategist for strategic beta, reporting to Colin Moore, global chief investment officer, and Mr. Zeitoun.
EGA’s website (www.emergingglobaladvisors.com) has been rebranded to Columbia Threadneedle Investments. Product information and market commentary related to the EGShares suite of ETFs can be found by visiting www.columbiathreadneedleetf.com and accessing the emerging market ETF section.
CC-BY-SA-2.0, FlickrCourtesy photo. UBS AM to Appoint Pedro Coelho as Head of UBS ETFs Spain
UBS Asset Management has appointed Pedro Coelho as Head of UBS ETFs Spain. Pedro will be based in Madrid and report to Simone Rosti, Head of UBS ETFs Southern Europe.
In his role, Pedro will be responsible for business development for ETFsand will aim to grow and strengthen the professionals clients relationships in all key market segments (asset managers, pension funds, insurance companies, private banks, family offices and independent financial advisors), together with the UBS AM Spain business led by Juan Infante.
Pedro started his career in the financial sector in 2000 in Lisbon and before joining the UBS ETF’s team he worked for 10 years in NN Investment Partners, in Madrid and Lisbon, where he was a Senior Clients Director for Iberia, Latin America and US Offshore. He has a Bachelor’s degree in Economics by ISEG Lisbon School of Economics and Management and an M.B.A. by NOVA School of Business & Economics.
UBS ETFs have a long-term track record of providing index-based investment solutions to clients. In 2001, UBS launched its first ETF. It was the beginning of a success story and today UBS is the fourth European ETF provider and one of the fastest growing in Europe, with around 29 bn USD in AUM (source: ETFGI, July 2016).
In Europe, UBS offers a wide range of ETFs, replicating more than 170 fund and currency share classes, covering equities, fixed income, commodities and alternatives.
UBS ETFs are managed by UBS Asset Management, a large scale investment manager with a presence in 22 countries. UBS AM offer investment capabilities and investment styles across all major traditional and alternative asset classes to institutions, wholesale intermediaries and wealth management clients with about 660 bn USD of AUM and a long-term commitment to passive management (215bn USD in indexed products and managing passive assets for 30 years).
CC-BY-SA-2.0, FlickrCourtesy photo of Huw van Steenis . Huw van Steenis, Appointed Global Head of Strategy at Schroders
Huw van Steenis has been appointed as Global Head of Strategy and member of the Group Management Committee at Schroders. Based in London, and reporting into Group Chief Executive, Peter Harrison, Huw will be responsible for business strategy and corporate development.
This newly created role within Schroders will focus on medium and longer-term strategy development, reflecting the firm’s commitment to growth. He joins in the fourth quarter of 2016.
Huw comes to Schroders with more than 20 years’ experience in the investment industry, including 14 years as Managing Director and Global Coordinator Banks and Diversified Financials Research at Morgan Stanley. During his tenure at Morgan Stanley he drove award winning research on the investment management and securities industry. Prior to this, he worked at JPMorgan and Boston Consulting Group.
Harrison, said:“Huw joins Schroders at a pivotal time for the industry. As a creative thinker and influential collaborator, his deep knowledge and experience of the investment industry is a valuable asset in these times of rapid change. Our highly-diversified business model and strong financial position gives us a firm foundation on which to grow. We see many interesting long-term opportunities and will be taking advantage of our position to invest behind them.”
Huw van Steenis, said: “It is a huge honour to join Schroders, a firm which stands for the very best in investment management: with world-class investment strategies, outstanding client service and a deep bench of talent which has delivered for clients over many years. I look forward to working with Schroders’ pre-eminent teams to meet the challenges and opportunities for investors. The company has a bold strategy and a culture of ambitious continuous improvement, both of which will be critical in meeting the competitive challenges ahead.
CC-BY-SA-2.0, FlickrPhoto: SpaceRitual, Flickr, Creative Commons. Mega Funds Continue to Dominate the Global Mutual Fund Landscape - 45% of Assets go to <1% of Players
Less than 1% of the approximately 65,000 mutual funds sold around the world controlled 45% of the global fund industry’s $23.0 trillion in assets as of 30 June 2016. New research from Propinquity, a specialist consultancy to investment management companies worldwide, offers insight into these giants. What’s more, the small subset of 634 ‘mega funds’, defined as those with total net assets of $5 billion or more, have been responsible for nearly half (48.1%) of the industry’s global growth since 2007.
446 of the 634 worldwide mega funds are sold in the U.S. This represents 82.9% of global mega fund assets ($8.5 out of $10.2 trillion). 68.7% of total U.S. mutual fund assets are in mega funds – the U.S. has never been this hyper-concentrated. This concentration is in sharp contrast with European domiciled funds, which have 16.9% of assets in mega funds.
In 2007, 11.6% of mega fund assets were passively managed. As of Q2 2016, passive funds make up 25.8% of global mega fund assets ($2.6 out of $10.2 trillion). By contrast, passive funds make up only 15.1% ($3.5 out of $23.0 trillion) of the broader worldwide mutual fund universe.
As of Q2 2016, the average passive mega fund has $40.1 billion in assets while its active counterpart has $13.4 billion – a third as large. The greatest economics of scale are found in passive strategies, while fees are slim, barriers to entry are high link.
CC-BY-SA-2.0, Flickr. Investors Should Take A More Thematic Approach In The Emerging Markets
For investors struggling to find growth opportunities in a low growth world, Colin Moore, Global Chief Investment Officer at Columbia Threadneedle Investment, offers two insights. Don’t write off Brazil, and don’t treat emerging markets as a homogeneous asset class.
Brazil is in the spotlight this year, both as host of the summer Olympics and as a country with a long list of problems. But after a recent visit to Brazil, Moore thinks investors should look much more positively at the country. “Brazil is a country rich in resources, especially its people. Improving health care and education will be critical to building a strong foundation for long-term growth. With proper stewardship and better fiscal control, Brazil’s future looks much brighter than it did just one or two years ago”, point out.
But the Global Chief Investment Officer considers that Brazil is not the only emerging markets country with opportunity for investors. “In today’s low and slow growth world, you have to identify where there are pockets of growth. One way to do that is to look at themes where there is growth around the world, such as the development of health care or the development of infrastructure. Emerging markets are going to be at the center of both these developments”, explains.
For Moore, it’s a mistake just to think about emerging markets geographically. “We all got obsessed about BRICs (Brazil, Russia, India and China). When you create these acronyms or names like “emerging markets,” you’re assuming a level of homogeneity about how they will act, and that’s clearly not the case. The trick will be to move beyond the country definition of emerging markets and take a more thematic approach”, concludes.
CC-BY-SA-2.0, FlickrPhoto: K-ryu . BlackRock Launches the Sustainable Euro Bond Fund
BlackRock has launched the BSF Sustainable Euro Bond Fund. With the launch, BlackRock is responding to the growing demand for investments incorporating environmental, social and governance (ESG) factors.
The BSF Sustainable Euro Bond Fund builds on the European Fixed Income’s team tried and tested investment process. The issuers we include in the fund are positively screened for environmental, social and governance (ESG) considerations using the MSCI’s ESG Ratings for corporate, sovereign and government-related issuers that assess how well the issuer manages ESG risks relative to its industry, or peer group. Investors benefit from the award-winning investment approach of Michael Krautzberger and his team, who manage the BGF Euro Bond Fund, the existing sister strategy on the basis of which Michael and the team won Morningstar European Fixed Income Manager of the Year 2016 award, the only fixed income team to ever win the award twice.
The BSF Sustainable Euro Bond Fund invests in a broad range of sources to add alpha and maximize total return, primarily focusing on euro denominated investment-grade bonds. There is a strong emphasis on diversification and active risk is spread through selection of country, sector, security, duration and yield curve positioning, as well as through flexibly-managed currency exposure.
According to Krautzberger, “sustainable investing is becoming mainstream as investors globally are placing greater emphasis on transparency and seek an ESG approach to their investments. Considering ESG factors is seen as a sign of operational strength, efficiency, and management of long-term financial risks of the companies they invest in. We are looking to incorporate MSCI’s ESG insights in our active positioning, for example underweighting issuers with deteriorating ESG profiles that we expect to be downgraded by MSCI. We also expect to hold a higher proportion of green bonds in this fund than we do in non-ESG strategies.”
Besides the ability to achieve specific ESG investment goals, companies with high ESG scores and in particular those scoring highly on governance, tend to be less prone to negative surprises. “This is an important consideration given the asymmetric impact of unexpected news on bond prices”, says Krautzberger. The fund is managed by Michael Krautzberger and Ronald van Loon who have a combined investment experience of over 37 years. Michael and Ronald are supported by the European Fixed Income team. BlackRock manages over $1.4 trillion in fixed income assets on behalf of global clients, including both active and index strategies.
BlackRock Impact
In February 2015, BlackRock appointed Deborah Winshel to help unify its approach to impact investing through the launch of BlackRock Impact, the Firm’s global platform catering to investors with social or environmental objectives. The development of the BlackRock BSF Sustainable Euro Bond Fund further highlights BlackRock’s commitment within this space and enables investors to access the platform which currently manages $200 billion of assets across impact investing, environmental, social and governance (ESG) portfolios, and screened portfolios.
CC-BY-SA-2.0, FlickrPhoto: Kevin Dooley. Risk-On Sentiment Trumps Brexit Fallout Fears
The feedback loop between financial markets and the real economy has been positive this summer, relegating the status of the June 23 Brexit vote from a global scare to a domestic UK political matter. The current environment remains supportive for risky assets.
The positive feedback loop that has developed between markets and economies may be the best evidence yet that the fallout from the Brexit vote is far less dire than many feared in June. With market and sentiment channels transmitting little or no Brexit-shock into the real economy in the rest of the world, the UK political drama has swiftly morphed into a local problem rather than a global scare. Recent economic data also suggest that mainland Europe, the region most at risk of contagion, has been remarkably resilient post-Brexit.
Economic and earnings data have been a support factor globally. Positive macro data surprises in developed markets reached a 2.5-year high this month. Second-quarter corporate earnings in the US and Europe came in better than expected. The global policy mix is shifting to an easier stance again, with the Bank of England and the Bank of Japan both easing further and remaining biased to do more. The fiscal gears are also starting to turn. Japan’s government announced a large stimulus package and the US and UK governments are hinting at fiscal stimulus measures in the 2017-18 period.
With investor sentiment turning positive for the first time this year and cash levels reaching 15-year highs, the right conditions for some of that money coming into the market are emerging. The flow momentum seems likely to remain a support factor for risky asset classes like equities, real estate and fixed income spread products, at least until technically overbought levels are reached, or until new macro or political shocks occur. With neither of those on the radar at this stage, we keep our risk-on stance tilted to these asset classes.
Jacco de Winter is Senior Financial Editor at NN Investments Partners.
CC-BY-SA-2.0, FlickrCourtesy photo. Paul de Leusse Appointed as CEO of Indosuez Wealth Management
Paul de Leusse has been appointed Chief Executive Officer of Indosuez Wealth Management. Paul has also joined Crédit Agricole S.A.’s Extended Executive Committee.
Paul de Leusse, aged 44, started his career in management consulting, first as a consultant (1997-2004) then as Managing Partner of Mercer Oliver Wyman (2004-2006). He subsequently joined the consultancy firm Bain & Company as Partner (2006-2009).
In 2009, he joined Crédit Agricole Group as Director of Group Strategy. In 2011, he was appointed Chief Financial Officer of Crédit Agricole CIB. He became Deputy Chief Executive Officer of Crédit Agricole CIB in August 2013. His knowledge of the Corporate and Investment Banking businesses, combined with his strategic vision, for the Major Clients business line in particular, will be a key asset for Crédit Agricole Group’s Wealth Management business.
Paul de Leusse is a graduate of École Polytechnique and a civil engineer trained at École Nationale des Ponts et Chaussées.
