CC-BY-SA-2.0, FlickrFoto: Donkey Hotey
. Día Mundial de la Tierra: hay que abastecer alimentos mundialmente a precio razonable
BNP Paribas Investment Partners is adding a new fundamental active world equity fund, Parvest Equity Best Selection World, to its flagship Parvest umbrella fund. The fund is managed by its highly experienced Global Equity team that joined in February and is led by Simon Roberts.
Parvest Equity Best Selection World is a high conviction stock picking fund managed using an unconstrained long-only strategy with an absolute return philosophy. The portfolio consists of the fund managers’ top stock picks and is highly concentrated, with a maximum of 40 names. It is not benchmark-constrained and has a high active share of close to 90%, and is expected to have a tracking error in the range of 4-8%1.
The investment team seeks to identify companies based in Europe, the USA, Japan and Emerging Markets, which have strong compounding growth potential that has been underestimated by the market, or where companies are undergoing significant restructuring by reducing their asset base and therefore leading to increased and sustainable profitability.
Parvest Equity Best Selection World combines a proprietary quantitative screening process that identifies a universe of stocks with attractive financial characteristics with fundamental analysis to identify and invest in stocks with an expected risk-adjusted absolute annualised Internal Rate of Return (IRR) of at least 20%. Position sizes will be consistent with the expected IRR at any time and this approach is also a major part of the sell discipline. The fund follows a long-term investment approach, resulting in low turnover. It is expected that much of the alpha will be sourced from stock selection across sectors and that there will be no intentional style bias through time, which should enable it to perform in different market conditions.
Guy Davies, Director of Equities at BNP Paribas Investment Partners, comments: “We are pleased to announce the launch of Parvest Equity Best Selection World, managed by our recently-appointed global equity team. The team members average more than 20 years’ industry experience and have worked together for many years. They have a strong and demonstrable investment record, and being able to offer our clients this capability is a further step in our strategy of developing a world class equity proposition.”
CC-BY-SA-2.0, FlickrPhoto: James. Aberdeen to Acquire Flag Capital Management to Boost Global Alternatives Capability
Aberdeen Asset Management announce today it has entered into an agreement to acquire FLAG Capital Management, LLC (FLAG), a manager of private equity and real asset solutions with offices in Stamford CT, Boston, MA, and Hong Kong.
This acquisition is in line with Aberdeen’s strategy to strengthen and grow its global alternatives platform and solutions provision via multi-manager coverage of hedge funds, property and private market allocations, infrastructure investments and pan-alternative capabilities. FLAG’s well-established private equity teams in the U.S. and Asia will help broaden Aberdeen’s private markets solutions activity within the alternatives arena.
As of December 31, 2014 , FLAG managed assets of approximately $6.3 billion of invested and committed capital on behalf of its broad client base. FLAG is a diversified private markets solutions business focused on venture capital, small- to mid-cap private equity, and real assets in the U.S. , as well as private equity in the Asia-Pacific region. The business will be fully integrated into Aberdeen’s current private markets capability. This will position Aberdeen as a leading global private equity investor with over 50 investment professionals and roughly $15 billion of assets under management.
Aberdeen’s alternatives platform, overseen by Andrew McCaffery, Global Head of Alternatives, will have total assets under management of $21.3 billion following completion of the transaction.
The transaction provides key benefits to Aberdeen:
The addition of FLAG’s U.S.- and Asia-focused investment capability, combined with Aberdeen’s strength in Europe, will offer clients a compelling global private markets solutions proposition;
FLAG’s long-established presence across the institutional and high-net-worth client segments in the U.S. increases Aberdeen’s exposure to the region and enhances the footprint among family offices, endowments and public and corporate pension plans;
Aberdeen believe FLAG’s expertise in successfully launching private equity and real asset-linked products will permit Aberdeen to accelerate organic growth in this business segment;
FLAG’s funds bring highly stable revenues that are at low risk of outflows; once launched, each fund’s revenue stream is defined, based on committed capital and a fixed fee schedule over the multiple-year life of the fund, which typically is set at 12 years;
The integration of FLAG’s investment platform boosts Aberdeen’s pan-alternatives capability, allowing Aberdeen to provide to its client base a full range of private markets solutions.
Commenting on the transaction, Martin Gilbert, Chief Executive of Aberdeen, said: “Institutional investors are increasingly looking towards alternative asset classes, including private market allocations, to diversify their portfolios and enhance returns. This transaction is in line with Aberdeen’s strategy of undertaking clear value-added acquisitions that will assist with accelerating business growth in this area. FLAG meets this objective in two ways. Initially, it strengthens further our private market capability by bringing additional Asian expertise and new U.S. resource. This will also benefit our overall pan-alternatives platform. Secondly, FLAG deepens and expands our U.S. client base, which is a key growth market for Aberdeen.”
Commenting on the transaction, Peter Lawrence, Chief Executive of FLAG, said: “We at FLAG are thrilled to be joining Aberdeen, not only because of its reputation and position as one of the leading global asset management firms, but also because of the clear cultural fit of our two organizations. We believe the combination serves the interests of all of our constituents, particularly our limited partners and the talented team of professionals that have built FLAG into the high-achieving, high integrity firm that attracted Aberdeen in the first place. Simply put, we can think of no better or more appropriate future for all involved. As integral members of Aberdeen’s private markets solutions team, we’re excited to deliver a truly global array of private capital solutions for our investors.”
CC-BY-SA-2.0, FlickrPhoto: Paul Downey. Amundi Launches Floating Rate Notes ETF
Amundi has launched the first ETF in Europe exposed to USD denominated floating rate notes. This fund aims to protect portfolios from interest rate moves.
The firm says that the ETF has a low degree of price sensitivity to interest rates and a yield moving in line with interest rates.
The fund has been listed on Euronext Paris and has already been recongnised by the Financial Conduct Authority. It will be soon cross-listed on the main European markets, including the London Stock Exchange.
Valerie Baudson, global head of ETF, Indexing and Smart Beta at Amundi, said: “Our innovative Floating Rate Notes range is of particular interest in today’s market for investors seeking a source of yield in a low rate environment and a hedge in the event of a rise in EUR and US short term rates. Our building blocks are innovation, cost-efficiency and quality of replication.”
CC-BY-SA-2.0, FlickrPhoto: ankakay
. Moneda Asset Management Announces US$100 Million Investment from CPPIB Credit Investments Inc.
Moneda Asset Management announced today that CPPIB Credit Investments Inc., a wholly owned subsidiary of Canada Pension Plan Investment Board (CPPIB) and Canada’s largest pension fund manager with C$264.6 billion in assets, has made a US$100 million investment into the Moneda Deuda Latinoamericana fund, which is managed by Moneda S.A. Administradora General de Fondos.
The Moneda Deuda Latinoamericana fund is a high-yield bond fund which invests in US dollar- denominated corporate credit of companies throughout Latin America.
Fernando Tisné, senior partner and portfolio manager of the fund, explained: “We have been able to take advantage of credit opportunities in Latin America over the last 15 years by building a highly diversified portfolio, not only by issuer, but also by country through a deep fundamental analysis process. We believe that it is of utmost importance to be methodical in the investment process, build a highly diversified portfolio and invest with patience.”
“Through our investment in the Moneda Deuda Latinoamericana fund, we are able to gain a presence in the attractive Latin American high-yield credit market, said Mark Jenkins, Senior Managing Director & Global Head of Private Investments, CPPIB. “Moneda is a well-established, successful fund manager run by a strong management team with a proven track record. We look forward to building our relationship with the Moneda team as we seek to expand our presence in the region in this sector.”
“We are happy to partner with such a sophisticated Canadian institutional investor. This investment is an important part of Moneda ́s Canadian business which was first initiated in 2011. Very few foreign investors have dedicated Latam high yield credit exposure, but when evaluating the asset class, there is clear value on its own and when added to a global fixed income portfolio. This education process is part of our long term business model globally,” said Tisné.
With this investment, Moneda Asset Management continues its growth among high-level, reputed foreign institutional clients, such as pension and sovereign wealth funds and family offices globally, which together with their strong base of Chilean clients, enables it to manage over US$ 4,500 billion. Founded in 1993, Moneda is a Latin America focused asset manager that invests across the corporate capital structure. Our investment philosophy is based on fundamental, long term and bottom-up analysis of companies across the region.
Moneda Deuda Latinoamericana manages USD 979 million (abr-2015).
CC-BY-SA-2.0, Flickr. Eight Factors That Will Change Global Consumers Behaviours
Today’s consumers are different than yesterday’s. This is the consequence of three major mutually interacting factors: Demographics, markets and economics. Alongside historically unprecedented demographic changes, people’s behaviours have also changed: They are getting married later, having fewer children, both parents are both working and young adults are entering the job market much later than they used to. Understanding these demographics changes is essential to understanding consumer behaviors.
The report “Demographic Focus – Changing Global Consumers” of Credit Suisse provides insights into changing global consumer behavior and expenditure patterns.
The market place has also changed mainly due to new technologies and new marketing techniques. The way people consume today is very different to how they used to consume in the past. Indeed with ongoing global technological changes people are becoming more and more reliant on technology to consume. This creates pressure for certain age groups that may not adapt as quickly as they should to cope with these new ways of consuming. Moreover marketing techniques are becoming more prominent and are creating difficulties for consumers to assess the cost-benefit characteristics of a product. This has huge implications as it means people will need to spend a lot more time trying to decipher the huge amount of information available on goods and services that can be quite complex.
Moreover freer international trade, more efficient international transportation services and new information and communications technology have created more open international markets for goods and services. Increased trade has promoted competition thereby boosting consumer welfare worldwide. Once again this has both an upside and downside impact on consumers, as they have access to more products and information but they also need to sort out the amount of information available to make optimal consumption choices.
In the first section of our report we talk about changing consumers analyzing how consumers have changed. In the second section we look at how they consume, what affects their consumption and how their consumption has changed. “The power of individual choice has never been greater, and the reasons and patterns for those choices never harder to understand and analyze.” Mark J. Penn (Chief Strategy Officer, Microsoft & former advisor to Bill Clinton).
According with Credit Suisse those are the eight factors that will change global consumers behaviours:
Demographics is about consumers and workers. Individuals consume from birth to death and there are nearly 7.3bn global consumers today. With dramatic life cycle changes, individuals’ consumption behavior and patterns have been undergoing major rapid changes – later marriage, and parenthood, multiple workers in a family and delayed job market entry.
The G6 (France, Germany, Italy, Japan, UK and US) countries’ consumers account for 50.3% of world consumption, thus have the world’s largest consumer markets. The EMG6 (Brazil, China, India, Mexico, Russia and Turkey) countries’ consumers account for 19.6% of world consumption, their consumption share is growing.
Contrary to popular perception, old people are the largest consumer group as they are the richest age group. Consumption shares for the 50+ age group accounts for 58.1%, 54.2% and 59.7% of the total consumption in Japan, US and Germany respectively.
Today’s young adults consume relatively less than their corresponding cohorts born a generation or two earlier. They start accumulating assets later due to longer years in education. High youth unemployment and high student debt levels put additional pressure on these young adults.
Working women are a group of new consumers with increasing numbers of them getting educated, working and becoming richer..
Consumer behaviors have been impacted by changing technologies. Consumers are more sophisticated and more impatient in terms of purchase experiences. An information intensive and complex market place forces them to access and process information quickly
The state of the economy and their own economic status also influences the way people consume. Job uncertainty leads to increased precautionary saving amongst workers. Economic confidence and fads/fashions also affect consumer expenditure patterns.
Those who miss out on these consumer trends and changes are unlikely to capitalize on opportunities and are unlikely to be winners.
CC-BY-SA-2.0, FlickrPhoto: Paul Falardeau. Sustaining the Dollar’s Rise: Three Additional Factors
The US dollar has seen a substantial rise over the last nine months. In its last analysis, Henderson looks at why thinks it will remain at elevated levels and examine what this means for investors. James McAlevey, portfolio manager of Henderson Horizon Total Return Bond Fund named three additional factors:
1. Slower global currency reserve growth
In the ‘taper tantrum’ risk asset sell-off, the ability of some EM countries to pay their now more expensive dollar-denominated debts came into question. This resulted in assets flowing into US dollars; however, a considerable proportion remained in EM with a clear differentiation between fragile economies and their stronger peers; the Brazilian real weakened by c.16%, while Asian currencies, such as the Korean won, actually appreciated by 5.3%.
While the ‘tantrum’ passed, Henderson has subsequently seen the growth of foreign currency reserves slowing and in fact shrinking in the second half of 2014, as some EM central banks in particular were forced to sell reserves to defend their currencies against outflows. As these central banks sell reserves, they are required to sell non-US dollar foreign currencies and buy dollars before they sell dollars against their own currency. This trend further supports the dollar.
Aggressive rate cuts and a subdued US dollar in the years following the financial crisis have made it a major funding currency for carry trades (borrowing at low interest rates in one currency to fund purchases of higher yielding assets elsewhere) particularly into China/Asia. Now, however, as the dollar strengthens, investors could look to reduce exposure (ie, buying dollars to repay their debt), a move which would make the dollar appreciate even more.
3. Not enough dollars
A falling current account deficit (the difference between import costs and export receipts) is normally a positive driver for a currency. This is especially true for the US dollar given it is a reserve currency, and the principal currency of global trade. As chart 3 shows, the US current account deficit has been shrinking since 2012 as a percentage of global trade and this trend is expected to continue. This means a reduction in global liquidity as fewer dollars are available for foreigners to conduct trade. If the current account deficit continues to narrow, or we see a pick-up in global trade, then the dollar should continue to rise.
CC-BY-SA-2.0, FlickrPhoto: Day Donaldson. Are Asian Equities in a “Sweet Spot”?
With the Standard & Poor’s 500 and Nasdaq indices breaching all-time high levels pushing P/E multiples for the MSCI United States index to above the 5-year historic average, some investors are likely to re-think their portfolio in search of more attractively valued investments. Given the low growth expectations and concern over unresolved debt issues in some eurozone states, nor may Europe be considered a screaming “buy” by all investors at this juncture. Especially after the strong rally since the start of 2015. Meanwhile, the Latam, middle-east, Eastern Europe, and Africa regions — the darlings in the eyes of many investors in the not-so- distant past – are now plagued by a myriad of obstacles weighing on investors’ appetites.
While economies in Asia also confront a number of challenges, we believe relatively attractive valuations for the region coupled with internal domestic drivers put a floor under the market and position the region in a “sweet spot”. Additionally, a number of external factors provide a strong tailwind for Asian equities including: weak energy/commodity prices, an accommodative European Central Bank (ECB) ready to inject abundant liquidity into the financial system, and an expected sustained, albeit moderate US recovery propping up exports for Asia.
“It is undeniable that many Asian economies also face a growth soft patch as they undergo rebalancing to the “new normal” slower global growth trend. However, we believe much progress has been made in recent years, with key notable positive developments in 2014. What is most encouraging is the determination demonstrated by many Asian governments to drive reform across all facets of the economy, including what were once highly sensitive government-dominated areas. We see this trend as being especially evident in China, India, and Indonesia where new “reform-minded” political leaders have taken office. The leaders in Japan and Korea can also be commended for championing much-needed reform agendas”, point out Hue Lu, senior investment specialist covering Asia Pacific and Greater China equities at BNP Paribas Investment Partners.
“We should be mindful of the fact that despite the growth soft patch across many Asian economies, Asia ex-Japan countries continue to top the charts for global GDP growth”, said Lu. The International Monetary Fund (IMF) and consensus real GDP growth forecast for the Asia ex-Japan region averages around 5 to 6% — much stronger than the 2 to 3% growth estimate for the US, and the 1% for the Eurozone.
Also worth mentioning is the fact that Asian corporates are cash rich. Cash on the balance sheets of Asian companies is approaching US$1 trillion, leaving the door open to possible dividend increases, share buy-backs, and opportunities to increase shareholder value through accretive acquisitions – all positives for shareholders.
External Catalysts
A sustained cycle in the US economic recovery should help boost exports for many Asian economies, especially for Japan, Korea, Taiwan, China, Hong Kong and Singapore. Additionally, quantitative easing by the ECB should inject abundant liquidity into the financial system. This, in our view, bodes well for global equities. “We believe Emerging Asian markets will be key beneficiaries of the new flood of liquidity given the region’s inherent higher-beta market structure”, believe the senior investment specialist at BNP Paribas Investment Partners .
As a net importer of commodities and energy products, Asia significantly benefits positively from the recent weakness in commodity prices. Given the structural demand-supply forces in the global commodity market coupled with the “new normal” softer global growth trend, we expect commodity prices to remain suppressed for some time. Weak commodity price has been a significant positive for Asia in a number of ways. For one thing, lower input costs for Asian corporates has recently and will continue to boost margins.
The steep decline in commodity prices has been a powerful disinflationary force globally. The low inflation environment has paved the way for many economies (e.g. Indonesia, India, China) to push through price reforms for energy and resource-based utilities. As a result of recent energy price reform implemented in India and Indonesia, both economies are now benefiting from a much-improved fiscal position, making them less vulnerable to a future normalisation of US interest rates.
Furthermore, disinflationary pressure has enabled many Asian central banks to trim benchmark rates to support growth. In fact, with inflation easing significantly across the region, many Asian economies now have an easing-bias (Japan, China, India, Korea, Thailand, Indonesia, Singapore, and Australia). And while the central banks in Taiwan, Malaysia, and the Philippines have not yet moved to an easing stance, their monetary policies are not positioned to hike anytime soon. On the contrary, if disinflationary pressures persist (and BNP Paribas IP expect they will), these economies could very likely adopt a more dovish policy.
The opportunities
BNP Paribas IP outlook on Asian equities remains very constructive. In fact, there may be a high probability, in our opinion, that Asia equities will outperform many global equity markets in 2015. Within Asia, we highlight the following opportunities:
Japan remains one of our preferred markets. Given the Bank of Japan’s easing monetary policy, the weak yen should continue to benefit Japanese exporters. We see many technology-related opportunities, especially in the healthcare equipment and industrial automation and robotics area. We are also encouraged by the early signs of corporate restructuring plans. It will be a slow process to change decades of ingrained cultural behavior and norms, but the early signposts are encouraging with Prime Minister Shinzo Abe at the helm.
India is also a preferred market and we expect a re-rating over the medium-term. The two recent rate cuts by the Reserve Bank of India are a huge positive to help boost growth. The long-term consumption growth story remains very much intact, and we believe increased household wealth will drive consumption for many low-penetrated areas across the economy. Meanwhile, the Modi government continues to accelerate structural reforms and improve the policy environment.
China offers the benefit of being one of the cheapest markets in Asia-Pacific. The urbanisation and increasing wealth trend in this country provide good support for consumption over the medium term. With the People’s Bank of China clearly signaling an easing posture, equities should be supported despite the weak growth trend. Excessive government debt and a weak property market, however, continue to be areas of concern.
Australia continues to face headwinds from weak commodity prices, but the economy is healthier than some may expect. We favor the consumption-related areas such as transportation (airport/toll road), healthcare, telecommunications and utilities. Risk remains high in energy and materials except for large diversified miners who continue to generate strong cash flows despite weak commodity prices. We also like a number of the banks as they offer very attractive yields, and operate in an oligopoly structure, which allows them to command strong pricing power.
“Valuations remain attractive for the region. Despite the recent multi-year strong market performance for many of the Asian countries, with a number of markets breaching all-time high levels, valuations remain reasonable with both the MSCI Asia ex-Japan index and the MSCI Asia Pacific index still trading near its 5-year historic average P/E multiple (based on 12-months forward consensus estimates). Not to mention, Asian corporates offer one of the more attractive yields. Investors seem to be agreeing that Asia may be in a “sweet spot” if recent market performance is any indication”, conclude Hue Lu, senior investment specialist
CC-BY-SA-2.0, FlickrPhoto: Seier+Seier. Negative Interest Rates: New Strategies for a New World
Maurits Escher was the champion of enigma. This 20th century Dutch artist was a master of portraying strange or paradoxical situations. In Escher’s world, white birds transform into daytime landscapes while black birds become night-time landscapes, ribbons only have one side, motion is perpetual and so on.
Until recently, negative nominal interest rates would have never been considered a serious hypothesis. Outside of the imaginings of an “Escheresque” form of finance, financial theory and practice seemed to be based on the solid foundations of the time preference and making money “work”. As a result, the widespread and lasting establishment of negative interest rates in Europe directs us toward a new world where our thought patterns have been turned upside down, explained Nicolas Gaussel, Chief Investment Officer at Lyxor Asset Management.
A widespread reality that looks set to last
How do we explain why banks are still lending to one another while interbank rates are negative?, asked Gaussel. As of mid- April 2015, five-year sovereign yields were negative in nine European countries: Austria, Belgium, Denmark, Germany, Finland, the Netherlands, Sweden, Switzerland, and Slovakia. For shorter maturities (two-year), twelve countries are trading at negative yield (the above countries plus Czech Republic, France, and Portugal, see graph 1.
Lyxor AM estimate that 25% of bonds contained in the iBoxx euro sovereign all maturities index currently deliver negative yields (see graph 2). At the beginning of February 2015, certain corporate bonds also had negative yields. Since records began at the turn of the 19th century, interest rates have never been so low.
Despite this, the flow of investment into European bonds is at record levels. According to Morningstar, European bond UCITS (sovereign and corporate) saw inflows of EUR 6 billion in February 2015, the highest monthly inflow in five years.
The bond rush is accelerating in Europe, while yields do not appear to offset the credit and duration risks taken by investors.
Falling yields are certainly not a new phenomenon. Since the mid 1980s, there has been a marked decline in real interest rates. There are many reasons for this fall: an abundance of savings in emerging market countries, especially China, a widespread decline in investment in developed countries and increased demand for risk-free assets from emerging markets in the wake of the financial crises in the late 90s, said the Chief Investment Officer at Lyxor Asset Management.
This fall in interest rates, which has accelerated since the financial crisis of 2007-2008, has now reached its peak. In 2015, leading central banks around the world have adopted a zero interest rate policy. In order to tackle deflation risks in several European countries, some of these have even introduced negative interest rates (ECB, Swiss National Bank, Danish National Bank and Bank of Sweden).
This negative interest rate phenomenon looks set to last, believe Gaussel. Indeed, it is acting as a catalyst for the decline of the eurozone’s growth potential. The latest forecasts by the European Commission signal that the growth potential of the euro area has fallen from 2% at the start of the last decade to 0.7% today. The eurozone has been experiencing deflation for several months, and while this phenomenon should be temporary, long-term inflation expectations have fallen. The ECB survey among professional forecasters at the beginning of 2015 also points to long-term inflation expectations largely below the ECB target: we will have to learn to live with negative interest rates.
Financial players will have to adapt to this new environment
It is too soon to size up the implications of such a situation, should it last. In an environment of negative interest rates, the future value of financial assets is less than their current value. This favours debtors and penalises creditors, who now have to pay the equivalent of an insurance premium to put their money in a safe place.
Not only individual investors, but also major financial institutions including banks, insurance companies and pension funds are experiencing far-reaching implications. For banks, for example, imposing negative interest rates on deposits would have political consequences that are difficult to assess. Life insurers and pension funds will have to totally rethink how they operate: what is the point of investing in the markets if they perform less well than a safe deposit box?
However, we are still left with some very tangible issues facing investors: how do you generate a minimum return without taking too much risk?
Are negative yields inevitable if you do not want to reduce a portfolio’s credit quality, or take on too much duration risk for fear of being caught out by an unexpected rise in interest rates? Innovative and dedicated investment solutions offer a response to new constraints on investment. Designed and operated by Lyxor, two new, actively managed funds address the matter of negative yields and the control of market risks.
New solutions
The Lyxor EuroGovies Risk Balanced strategy offers a solution for investors wishing to maintain their exposure to European sovereign bonds, said Nicolas Gaussel. Originally designed for banks seeking to invest their HQLA(2) portfolio linked to the Basel III liquidity coverage ratio, this solution is also of interest to investors who have to manage bond portfolios in order to comply with the regulations, manage liabilities or synchronise durations.
This strategy offers a response to a major challenge for investors: how to maintain optimum exposure to European sovereign bonds when yields are so low, while keeping a close eye on risks? Treasurers are facing a similar challenge in the light of historically low money market rates. Once again, a turnkey solution involving short-term secured investments can offer real investment opportunities.
In this way, Lyxor Smart Cash invests in short-term bank securities, collateralised by shares. Actually, new regulatory constraints encourage banks to offload shares from their balance sheets, with a commitment to take them back in the future, via repo transactions(4). This new paradigm is putting pressure on equity repo rates, which are turning negative across the board. Combined with a negative Eonia, this gives rise to a situation in which short-term bank debt securities collateralised by shares offer a higher return than non-collateralised securities, even though objectively speaking they are less risky.
Lyxor Smart Cash strategy offers the possibility to achieve a return higher than the yield generated by traditional unsecured short-term money market investments, while minimising counterparty, liquidity and interest-rate risk.
In addition to its advantages in terms of yield and risk management, the Lyxor Smart Cash fund also allows investors to gain this exposure without having to deal with the administrative and financial complexities associated with investing directly in the repo market.
Lyxor’s two active management strategies can be seen as a new source of performance in a universe hampered by low returns. An effective response to the current situation.
CC-BY-SA-2.0, FlickrFernando Bonardi heads the Latin American business of BNY Mellon IM. Courtesy Photo. BNY Mellon IM: "Insofar as the Market and Regulations Allow, Our Aim is to Triple Assets in Latin America"
The conservative and prudent character which defines BNY Mellon Investment Management (IM) also applies to the asset management company’s business development in Latin America, a region in which the company has about 3.5 billion dollars under management in cross-border international business (excluding on-shore business in Brazil through its subsidiary ARX). Its Managing Director, Fernando Bonardi, is cautious, but also aware of the huge growth potential that exists in the coming years. Therefore, he explains in this interview with Funds Society that his aim, “insofar as the market and regulations allow,” and working with the team he now has, is to triple these assets over the medium term.
In order to achieve this, Bonardi heads a team of five professionals from Chile (himself included), with which he covers mainly Chile, Peru, Colombia, and Mexico. This team is supported by its parent company, BNY Mellon Investment Management International, based in the UK, as well as by independent management companies which make up the multi-boutique structure which characterizes BNY Mellon IM. For now, Bonardi rules out that his office will grow this year, while acknowledging that if growth allows, their efforts in Mexico and Brazil could increase in the coming years, with teams specifically focused on international investment segments. This would be a boost to the representative offices with which the Latin American team at BNY Mellon IM currently interacts.
Future Objectives
BNY Mellon IM, which focuses mainly in the institutional profile business, adopts a prudent and patient, although active, vision in regard of the relevant regulatory developments for the different markets covered.
In Mexico, for example, pension funds are beginning to gradually diversify international portfolios through so-called “segregated portfolios.” However, from a regulatory standpoint, the development has been slow and complex. This is creating obstacles in the activity of the major players within the Afores segment when it’s time to summon or to nourish their portfolios with funds. As one of the active agents in the sector, BNY Mellon IM, has adapted to the circumstances offering diversified portfolios and applying current regulations, but being aware that there is still much to be covered. In any case, it is true that regulatory developments in Mexico have been very positive and on path toward a more permissive practice as the different players gain experience.
In Brazil, however, the wait could be longer: “It’s the big question in the region, although it is a matter of time until its regulated offshore diversification is real and efficient. The key is, rather, when it will occur, and how it will adapt its format,” Bonardi explains, “without necessarily mixing international investment with local format vehicles, which complicate and increase the cost of the ultimate goal, even more so for institutional segments and pensions, as is still happening in this market,” he adds.
BNY Mellon IM has been working in the country for several years through its subsidiary ARX, offering regional asset management services for local and international investors interested in gaining exposure in Brazil and Latin America. Likewise, BNY Mellon, the company’s corporate branch, has a strong local presence with its Asset Servicing business unit. BNY Mellon Investment Management works closely with this other division, supporting each other to gradually approach the offshore diversification project with local regulated investors; an incipient, yet already visible, plan.
The Andean Region
Historically, efforts by Bonardi and his team have focused on institutional investors in the Andean region, i.e. pension funds in Chile, Peru, and Colombia. The main reason is that regulatory evolution in these countries has been the most dynamic and efficient on their international opening. Other regulated segments in these countries, such as local mutual funds or life insurance portfolios, have also followed a similar process.
“Chile is a large market with 170 billion in assets in their AFPs, 50 billion in mutual funds, and another 50 billion in insurance firms,” explains Bonardi. In the country, the need to diversify outside the local market is clear, due to limitations in terms of volume and liquidity of the local market and what legislation allows, which clears the way for the AFPs to allocate up to 80% of their assets outside Chile, while also within a regulated framework as regards various sub-limits and eligible assets.
“That said, we also know that it’s an ultra competitive market when it comes to participating. Firstly, it’s not much use to have good products if they currently don’t match the asset allocation requirements of the AFPs or their own regulatory and internal requirements.” Secondly, the part that they allocate to active management (as opposed to passive funds or ETFs) is concentrated in about 20 or 30 funds which are often the best in their class. “Getting into the AFPs portfolios is somewhat complicated since you must have winning products, whose size is above 300/400 million dollars, they must be inexpensive in their costs and have a good support structure,” says Bonardi.
Thirdly, time and resources should be dedicated to the dynamics of the regulatory framework and its preferences in order to plan for the development of future proposals. Examples of such dynamics could occur in the gradual incorporation into such private equity type portfolios, which until now have required complex and inefficient local structures, but which will surely follow a renewed evolution which is more in line with international standards. The same could happen with the regulation on use of derivatives within the UCITS portfolios, explains Bonardi, “giving greater accessibility to some absolute return type of portfolios, which have shown such evolution and international growth in recent years (Liquid Alternatives), or even an incursion into segregated portfolios, insofar that the operational and administrative requirements on them could be eased “.
Peru and Colombia are also two centers of attention: greater flexibility and openness is expected from the first of those markets, along with a revitalization of eligible portfolios, on which they have already been working on for several months and on several fronts, and good news is definitely expected, says the expert. Colombia maintains its international commitments, predominantly on indexed portfolios and “at times its an uphill struggle to provide products that can meet the AFP preferences as well as regulatory requirements, even more so for fixed income, where the issues of underlying credit limits are particularly difficult to overcome.”
Other Important Segments
In addition to its usual dedication to the Andean institutional market, BNY Mellon IM, also works actively with sovereign type funds in Latin America, traditionally focused on fixed income, but which are gradually diversifying positions and also incorporating equity in some cases. This dedication is mostly concentrated in the central banks, sovereign reserve funds, and quasi-sovereign companies operating throughout the region, and with which a relationship from the corporation’s other business units is also maintained.
Reaching the Retail Client
With offshore wealth management segments (private banks) there is a “private placement” type of regime, which indirectly reaches more retail investors with access to diversifying their savings internationally via international brokers, depending on the relevant regulatory conditions in their region. At this point, the management company is also supported by the Pershing platform, which is bank owned and the best-known in Latin America, while maintaining total independence from it given its open structure regarding any possible recommendations.
CC-BY-SA-2.0, Flickr. László Krasznahorkai Wins the Man Booker International Prize 2015
Innovative Hungarian writer László Krasznahorkai is announced as the winner of the sixthMan Booker International Prize at an award ceremony at the Victoria and Albert Museum in London. Krasznahorkai was chosen from a list of ten eminent contenders from around the world.
The Man Booker International Prize, worth £60,000, is awarded for an achievement in fiction on the world stage. It is presented once every two years to a living author for a body of work published either originally in English or available in translation in the English language. It has previously been awarded to Ismail Kadaré in 2005, Chinua Achebe in 2007, Alice Munro in 2009, Philip Roth in 2011, and Lydia Davis in 2013.
Born in 1954, László Krasznahorkai gained considerable recognition in 1985 when he published Satantango, which he later adapted for the cinema in collaboration with the filmmaker Bela Tarr. In 1993, he received the German Bestenliste Prize for the best literary work of the year for The Melancholy of Resistance and has since been honoured with numerous literary prizes, amongst them the highest award of the Hungarian state, the Kossuth Prize.
The judging panel for the 2015 Man Booker International Prize was chaired by celebrated writer and academic Marina Warner. The panel also comprised Wen-chin Ouyang, Professor of Arabic and Comparative Literature at SOAS, University of London; acclaimed author Nadeem Aslam; novelist and critic Elleke Boehmer, who is currently Professor of World Literature in English at Oxford University; and Edwin Frank, editorial director of the New York Review Books Classics.
The judges said of Krasznahorkai’s work:
‘In László Krasznahorkai’s The Melancholy of Resistance, a sinister circus has put a massive taxidermic specimen, a whole whale, Leviathan itself, on display in a country town. Violence soon erupts, and the book as a whole could be described as a vision, satirical and prophetic, of the dark historical province that goes by the name of Western Civilisation. Here, however, as throughout Krasznahorkai’s work, what strikes the reader above all are the extraordinary sentences, sentences of incredible length that go to incredible lengths, their tone switching from solemn to madcap to quizzical to desolate as they go their wayward way; epic sentences that, like a lint roll, pick up all sorts of odd and unexpected things as they accumulate inexorably into paragraphs that are as monumental as they are scabrous and musical.’
The Man Booker International Prize is sponsored by Man Group plc, which also sponsors the Man Booker Prize for Fiction. The prize is significantly different from the annual Man Booker Prize in that it highlights one writer’s continued creativity, development and overall contribution to fiction on the world stage. Both prizes strive to recognise and reward the finest modern literature.
Manny Roman, CEO of Man Group, comments: ‘I would like to congratulate László Krasznahorkai and all the finalists from ten countries around the world. We are very proud to sponsor the Man Booker International Prize, recognising the hard work and creativity of these talented authors and translators. The prize also underscores Man Group’s charitable focus on literacy and education, as well as our commitment to excellence and entrepreneurship.
