Photo: Tristan Hanson . M&G Investments Appoints Tristan Hanson To Its Multi-Asset Team
M&G Investments, a leading international asset manager, today announces the appointment of Tristan Hanson as Fund Manager to its Multi-Asset team, starting on 21st March. Tristan will be responsible for developing the team’s absolute return proposition and will report to Dave Fishwick, Head of Multi-Asset.
Tristan has 15 years’ experience in asset management and joins M&G from Ashburton Investments, where he was Head of Asset Allocation with responsibility for global multi-asset funds. Prior to this, Tristan worked as a Strategist at JP Morgan Cazenove covering equities, fixed income and currencies.
Graham Mason, Chief Investment Officer at M&G Investments, says: “We are very pleased to welcome Tristan to our team. He has extensive experience across multi-asset strategies and will play a key role in broadening our capabilities around absolute return products. This will strengthen our Multi-Asset team and meet increasing demand from our clients.”
Over the past 15 years, M&G’s 16-strong Multi-Asset team has successfully developed a robust investment approach by combining valuation analysis and behavioural finance.
CC-BY-SA-2.0, FlickrPhoto: Matthieu Duncan, new CEO of Natixis Asset Management. Matthieu Duncan Becomes Natixis Asset Management CEO
The Natixis Asset Management Board of Directors met today, chaired by Pierre Servant, to appoint Matthieu Duncan as Chief Executive Officer (CEO) of Natixis Asset Management following the resignation of Pascal Voisin. This new appointment will take effect on April 4, 2016. Until that date, Jean François Baralon, Natixis Asset Management’s Deputy CEO, will serve as interim CEO of Natixis Asset Management.
Matthieu Duncan will be looking to accelerate the international growth of Natixis Asset Management and to continue to integrate Natixis Asset Management within Natixis Global Asset Management’s global multi-affiliate business model.
The Board of Directors would like to thank Pascal Voisin for his role over the past eleven years leading Natixis Asset Management’s operational management. He brought new life to the company internationally and successfully contributed to the development of Natixis Global Asset Management’s multi-affiliate model by taking majority equity interests in H2O Asset Management and Dorval Asset Management and by using Natixis Asset Management’s expertise to create Seeyond and Mirova.
A dual French and US citizen, Matthieu Duncan completed his studies at the University of Texas (Austin) and the University of California (Santa Barbara). He began his career in the financial industry at Goldman Sachs, where he held various positions in the capital markets sector in Paris and London between 1990 and 2003. Since 2004, he has held various positions in the asset management area in London: Chief Investment Officer (CIO) Equities at Cambridge Place IM, Head of Business Strategy and member of the Board of Directors of Newton IM (a Bank of New York Mellon company), and Chief Operating Officer (COO) and member of the Board of Directors of Quilter Cheviot IM.
CC-BY-SA-2.0, FlickrFoto: Thomas Leth-Olsen. Claves para entender el ciclo de crédito
Consistent dividend growth is generally a sign that a business is doing well and should provide investors with a degree of confidence. If dividends are rising steadily over time, said Alex Crooke, Head of Global Equity Income at Henderson, then a firm’s earnings, cashflow and capital should also be growing.
An indicator of sustainability
Payout ratios identify the percentage of corporate earnings that are paid as dividends and can be an indicator as to whether a company has the scope to maintain or increase dividends. The payout ratio, explains Crooke, can be influenced by a number of factors, such as the sector the company operates in and where the company is within its growth cycle. As the chart below shows, the level of current payout ratios varies considerably between countries and regions both at an absolute level and when compared to historical averages.
“Although the payout ratio chart shows that opportunities exist for dividend increases in the emerging markets, the outlook for earnings and dividends remains uncertain and at present we are finding the most attractive stock opportunities for both capital and income growth in developed markets. Within the developed world, Japan and the US have the greatest potential to increase payout ratios, although from a relatively low base with both markets currently yielding just over 2%” points out the Head of Global Equity Income at Henderson.
An active approach is important
Conversely, payout ratios from certain markets, such as Australia and the UK, are above their long-term median. “Companies from these countries are distributing a greater percentage of corporate earnings to shareholders in the form of dividends than they have done historically. This leaves the potential for dividend cuts if a company is struggling to grow its earnings. One area of concern for income investors with exposure to UK and Australia is the number of large resource-related companies listed within these market indices”, said Crooke. Henderson believes that earnings, cashflow and ultimately dividends from these types of firms are likely to be impacted by recent commodity price falls.
Nevertheless, explains Crooke, the UK in particular has a deep-rooted dividend culture and outside of the challenging environment for the energy and resources sectors is home to a number of businesses that are delivering sustainable dividend growth. Our approach is to invest on a company-by-company basis using an actively-managed process that considers risks to both capital and income.
Seeking dividend growth
Recent market volatility has affected share prices globally. Despite this, Henderson believes attractive businesses with strong fundamentals and the potential for capital and dividend growth over the long term can be found across nearly all regions and countries.
“Within our 12-strong Global Equity Income Team we continue to seek companies with good dividend growth, and payout ratios that are moderate or low, which provides the potential for dividend increases. Typically, we avoid the highest-yielding stocks and focus on a diversified list of global companies that offer a sustainable dividend policy with yields between 2% and 6%”, concludes.
CC-BY-SA-2.0, FlickrPhoto: Investment Europe. Invesco Hires Deutsche AM Head of EMEA Marketing
Invesco announce the appointment of Henning Stein as Head of Institutional Marketing for the EMEA region. Based in Zurich, Stein will report to will report to David Bower, head of Marketing at Invesco and will be part of the distribution leadership team led by Colin Fitzgerald, head of Invesco’s EMEA Institutional Business.
Henning joins from Deutsche Asset Management where he led EMEA Institutional and Retail Marketing. One of his core focus areas has been the development of research-based marketing programmes for institutional investors. As Chair of the firm’s academic foundation, he established and developed a thought leadership programme to provide clients with a wide range of perspectives and research. This helped clients develop ideas and solutions to address wider financial requirements beyond their immediate manager selection activities. In so doing, he has established a broad academic network of finance professors from institutions such as the University of Cambridge, the University of Zurich and MIT; a network that we believe will complement our ongoing activities in the institutional market. Henning holds a PhD from the University of Cambridge (Darwin College) in Business and Economics.
“I would also like to take this opportunity to thank Carsten Majer who since 2013 has been responsible for EMEA Institutional Marketing. Under his leadership we have consolidated our institutional marketing efforts in the region and progressed our marketing activities particularly in the UK, CH, DE, AT and the Middle East. With the near doubling in size of the Cross Border retail channel over the period and corresponding growth in complexity and depth of marketing activities, I’m delighted that Carsten will have more time to focus on this critical activity”, points out Bower.
CC-BY-SA-2.0, FlickrPhoto: Arturo Sánchez
. Investors Want Transparency, Ethics, and Performance, CFA Institute Survey Reveals
Investors are expecting higher levels of transparency than ever before, holding their investment managers to the highest ethical standards, and are laser-focused on returns, according to a newly released study “From Trust to Loyalty: A Global Survey of What Investors Want,” by CFA Institute, the global association of investment professionals, that measures the opinions of both retail and institutional investors globally.
The findings reveal that investors want regular, clear communications about fees and upfront conversations about conflicts of interest. The biggest gaps between investor expectations and what they receive relate to fees and performance. Clients want fees that are structured to align their interests, are well disclosed and fairly reflect the value they are getting from their investment firms.
“The bar for investment management professionals has never been higher. Retail and institutional investors, as always, crave strong performance, however both groups also demand enhanced communication and guidance from their money managers. Building trust requires truly demonstrating your commitment to clients’ well-being, not empty performance promises or tick-the-box compliance exercises. Effectively doing so will help advance the investment management profession at a time when the public questions its worth and relevance.” said Paul Smith, president and CEO of CFA Institute.
“While an increase in overall trust in the financial services industry is a net positive for financial professionals,” continued Smith, “performance is no longer the only ‘deal breaker’ for investors. They are continuing to demand more clarity and service from financial professionals and, with the rise of robo-advisors, they have more alternatives than ever before. Further, if investment professionals don’t provide this clarity, then regulators may force them to, for better or worse.”
The study also shows that investors are anxious about global markets, and do not believe their investment firms are prepared. Investors revealed a growing anxiety about the state of global finance. Almost one-third of investors feel that another financial crisis is likely within the next three years (33 percent of retail investors/29 percent of institutional investors), with significantly more in India (59 percent) and France (46 percent). In addition, only half of all investors believe their investment firms are “very well prepared” or “well prepared” (52 percent retail investors/49 percent institutional investors) to manage their portfolio through a crisis.
CC-BY-SA-2.0, FlickrPhoto: Leticia Machado
. The Majority of New Assets in European Equities Have Landed in The Most Active Funds
Average active share for European large-cap funds was 69.6% in the three-year period through March 2015, with a median of 72.4% when measured against the funds’ appropriate style indexes. That is the finding of a new study from Morningstar.
“Our results show that between 2005 and 2015 “closet indexing” has become rarer among European large-cap funds, and those funds with higher active shares have received the lion’s share of new assets. We find that funds with higher active share have delivered better investment results than the least active funds in most of our research period, but not unambiguously. Because dispersions in returns and risk characteristics become much wider as a portfolio’s active share rises towards 100%, investors should not rely solely on active share when selecting funds”.
Among other findings of the report, the percentage of funds with a three-year average active share below 60% (so-called closet indexers) was 20.2%. The portion of funds that can be characterized as closet indexers has been falling in the researched categories in recent years. The majority of new assets in European equities have landed in the most active funds.
Although funds in the most active quartile charge 33 basis points more on average than those in the least active quartile for their retail share classes, we find that when price is measured per unit of active share, European investors are overpaying for low active share funds. Investors should compare fees carefully as dispersion in fees among funds with similar active shares is high.
Morningstar finds a strong inverse correlation between active share and market risk. Active share numbers dropped considerably during the financial crisis of 2008-09 but have been rising at a steady pace since then.
Funds across the board lowered the share of mid- and small-cap stocks in their portfolios in 2008-09, but this was especially the case for the most active funds.
The funds with the highest active shares have done better, on average, than those in the least active quartile in all of the five-year periods tested between 1 July 2006 and June-end 2015. However, the difference in excess returns between the most and the least active quartile has decreased recently, which implies that the strength of active share as a selection tool is time-period dependent. Invariably, however, the funds with the lowest active shares have been the worst performers.
The study finds that funds in the highest active share quartile have displayed much stronger style biases than the average fund. This may not always be desirable from a fund investor’s point of view, and complicates the use of active share in fund selection. The style effects have been especially strong in the small group of funds with an above 90% active share. After controlling for style effects in a four- factor regression model, we find their alpha to be lower than for any other group in the most recent five-year period researched.
Investors who use active share as a fund selection tool should exercise caution. As active share increases, dispersion in returns and risk levels rises sharply; the best and worst performing funds are to be found among the more active ones. Therefore, we advise using active share only in combination with other quantitative and qualitative tools.
Combining active share with tracking error adds a useful dimension to the analysis, and we find this to be an adequate analytical framework in the European large-cap space. Confirming results in US markets, we find that funds that exhibit a large tracking error but a low or moderate active share (so- called factor bet funds) have underperformed.
“We find that funds with Positive Morningstar Analyst Ratings tend to have above-average active shares and tracking errors”, says the study.
“In less than a decade, “active share” has become a widely used concept in fund analysis. However, much of the available active share research references only US-domiciled funds. In this paper we study a subset of European funds investing in European equities to see how their active share has developed over time, and evaluate how the active share measure might be used as a tool to aid fund selection within the European fund universe. The study encompasses the period 1 January 2005 through June-end 2015. By including only large-cap funds, we reduce the difficulties arising from benchmark selection and the impact of the small-cap effect”.
CC-BY-SA-2.0, FlickrPhoto: Ben W.
. Basel III Fundamentally Changes How Asset Managers Are Connected To The Financial System
Basel III reforms have fundamentally changed how asset managers are connected to the financial system, with hedge funds challenged to understand expense, usage and access to the financing power grid, according to a joint survey and report by the Alternative Investment Management Association (AIMA), the global representative body for alternative asset managers, and S3 Partners, a leading financial data, analytics and services firm.
Jack Inglis, CEO of AIMA, commented: “There is no doubt that the Basel III banking standards are having a significant impact on hedge funds and other alternative asset managers. Financing costs are rising and the fund manager / prime broker relationship is changing fundamentally. It is our hope that this timely and important report will provide clarity and direction to those who have felt the impact of the recent regulations, and to give context to issues that are being felt across the industry.”
Bob Sloan, CEO of S3 Partners, commented: “New bank capital regulations are creating downstream financing challenges and opportunities for asset managers and hedge funds. The survey clearly shows how plugging into the financial power grid is getting more expensive.”
Mr Sloan continued: “Managers of all shapes, sizes and strategies now seek to answer the question: How can we maintain access to the grid, while optimizing for the right amount of efficiency? As the survey results show, access to unbiased data, comprehensive Return on Assets/Return on Equity analytics, and a common language are critically important towards determining fairness – as rates, margin, spreads and contracts will be a key determinant for an asset managers’ success.”
Rising financing costs. The survey of fund managers worldwide found that:
Financing costs have risen for 50% of firms, with an even split between those who quantify the level of cost increase as being greater than 10% and below 10%.
75% of firms expect further cost increases over the next two years.
The impact is consistent regardless of a fund manager’s size, investment strategy or location.
Rethinking prime brokerage relationships:
Fund managers responding to the survey said they are having to rethink their prime brokerage relationships due to Basel III.
75% have been asked to change how they do business with their prime brokers, while more than 67% have had to cut the amount of cash they keep on their brokers’ balance sheets.
Importantly, the survey found that:
Most alternative asset managers over the last two years have either maintained or increased the number of prime brokers they use, with the average number of financing relationships found to be four.
Only 20% of fund managers have a clear understanding of how their prime brokers calculate their worth in terms of the revenue they provide relative to balance sheet impact, known as “return on assets” or RoA. Fewer still have the data necessary to calculate this themselves.
Photo: Youtube. BNY Mellon Names Mitchell Harris CEO of Investment Management Business
BNY Mellon recently announced that Mitchell Harris has been named chief executive officer of the company’s Investment Management business, effective immediately. Harris, who already had responsibility for the day-to-day oversight of the company’s investment boutiques globally and wealth management business, will report to Gerald L. Hassell, BNY Mellon’s chairman and CEO. BNY Mellon Investment Management amounts $1.6 trillion in assets under management.
Harris succeeds Curtis Arledge, who led the company’s Investment Management business and Markets Group and has decided to pursue other opportunities outside of the company.
Harris, most recently president of BNY Mellon Investment Management, joined BNY Mellon in 2004 and has had a distinguished career in investment management and private banking spanning more than 30 years. Harris was CEO of Standish, a BNY Mellon investment boutique, from 2004 to 2009. He joined Standish from Pareto Partners, where he served as chief executive officer from 2000 to 2004 and as chairman from 2001.
“Mitchell has an impressive track record in the investment management industry, having led several successful firms during his career and most recently in overseeing our industry leading line-up of investment boutiques globally. He is well regarded across our client base, and I am confident he will lead our investment management business with great insight and success,” said Hassell. “I want to thank Curtis for his many contributions and helping to position our Investment Management and Markets businesses for growth and success moving forward.”
Michelle Neal,president of the Markets Group, who reported to Arledge, will report to Hassell, effective immediately. In her role, Neal leads the company’s foreign exchange, securities finance, collateral management, and capital markets businesses.
CC-BY-SA-2.0, FlickrPhoto: C2C Balloon
. Are Markets Right to Worry?
Lower oil prices would normally be expected to benefit the global economy through aiding both consumers and corporates in oil-importing economies, says Stefan Kreuzkamp, Chief Investment Officer, Deutsche Asset Management. He remains constructive on global growth, but thinks there is still some risk of the benefits of lower oil prices being overshadowed by continuing financial- market turbulence. “Perhaps most importantly, lower oil prices have reopened the Pandora’s box of concerns about the longer-term negative side effects of looser monetary policy. In the ancient Greek fable, of course, Hope lies at the bottom of the box – but many more problems fly out first.”
His message is that the changing structure of the oil market and uncertainty about what this means will continue to have market implications. Oil can no longer be seen as a “known problem” that can be assessed in terms of known fundamentals, he adds. Therefore the firm has reduced its forecasts for major equity indices and increased its end-2016 spread forecasts for U.S. high yield. Although they have slightly adjusted the euro high-yield spread forecast as well, they see much lower risks of defaults in this segment.
“We caution that it is still too early to invest in oil-related equities. But this, in a sense, is the easy part.” Declares Kreuzkamp. What is more difficult is to assess the timing to re-enter or to build up positions. For U.S. high yield, for example, implied default rates look excessive, in his view. But the tag-war between markets and fundamentals might well continue, in high yield as in other areas, and impair fundamentals in the process.
CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn
. Henderson Global Investors Hires Stephen Deane to Join Emerging Markets Equities Team
Stephen Deane has joined Henderson Global Investors from Stewart Investors (previously known as First State Stewart) as a senior portfolio manager. He will work alongside the head of emerging markets equities, Glen Finegan, and the wider emerging markets equities team. Stephen will be based in Henderson’s Edinburgh office.
Most recently Stephen spent over five years at Stewart Investors where he worked as an analyst and co-manager of the worldwide Equity funds. In this role, Stephen was responsible for generating ideas for global, emerging markets and Asian portfolios.
Previous to this, Stephen spent 13 years at Accenture and during this time he completed an Executive Masters in Business Administration (MBA) at INSEAD, Fontainebleau in France, with distinction.
Glen Finegan, head of emerging markets equities at Henderson, said: “Stephen and I worked closely together at First State and, given our shared experience, I feel the hire is a very good fit for the team. We share a similar investment philosophy and Stephen’s disciplined approach will be of great benefit to our clients.
“Stephen’s hire evidences Henderson’s continued commitment to the emerging markets equities asset class and signals the further strengthening of Henderson’s franchise working out of Edinburgh. We are certain Stephen’s global insights will be invaluable going forward.”
Stephen Deane adds: “I believe that there is a significant opportunity to help build Henderson’s emerging markets franchise based on its philosophy of long-term quality oriented investing, something Glen and I both share. This combined with Henderson’s reputation for excellent client service, global distribution and a client-led culture made joining the company a straightforward decision”.
As part of the team build-out in Edinburgh, Michael Cahoon has been promoted from analyst to portfolio manager, effective immediately, having contributed significantly to overall performance during the past year. Additionally he has been named co-manager on the US mutual fund, the Emerging Markets Fund. Nicholas Cowley will also be named as co-manager on the Henderson Gartmore Emerging Markets Fund.
