Today, the People’s Bank of China has announced the granting of a 50 bn RMB RQFII quota to Luxembourg.
The RQFII (RMB Qualified Foreign Institutional Investor) scheme was launched in Hong Kong in 2011 and has been expanded to other jurisdictions since 2013 enabling offshore RMB to be reinvested into the Mainland securities market.
Luxembourg Minister of Finance, Pierre Gramegna, said: “The granting of the RQFII quota again demonstrates China¹s recognition of the Luxembourg financial centre as one of Europe¹s main hubs for international renminbi business. We are proud to play such a significant role in the process of the internationalisation of the renminbi.
Luxembourg has made the UCITS a globally recognized brand and more than 67% of UCITS funds distributed internationally are based in Luxembourg. Luxembourg is the largest investment fund centre in the world after the US.
The RQFII scheme is particularly useful for fund managers who use Luxembourg as a platform for cross-border distribution. Major international and Chinese fund promoters had already set up RQFII funds through Luxembourg domiciled vehicles, using other jurisdictions’ quotas. Luxembourg’s European and global investor base will now be able to use the RQFII scheme directly to invest up to 50 bn RMB on the Chinese capital market.
Together with the designation of ICBC as RMB clearing bank in Luxembourg, the RQFII quota consolidates Luxembourg¹s prominent position as a leading
Photo: Neil Kremer. UBS Investor Watch Report Examines What Drives Millionaires
UBS Wealth Management Americas (WMA) today released its quarterly UBS Investor Watch report, “When is enough…enough?” revealing the anxieties that underlie the successes millionaires have achieved. The survey of 2,215 U.S. investors with more than $1 million in net worth revealed that while millionaires recognize their good fortune, they feel compelled to strive for more, spurred on by their own ambition, their desire to protect their families’ lifestyle, and an ever-present fear of losing it all. As a result, many feel stuck on a treadmill, without a real sense of how much wealth would make them satisfied enough to get off.
Climbing the Socioeconomic Ladder
Investor Watch found that more than three-quarters of millionaires (77%) grew up middle class or below. Working their way up the socioeconomic ranks was a conscious aim, as 61% aspired to become millionaires and 65% felt it was an important milestone to reach the $1 million mark.
Nearly three-quarters of millionaires (74%) surveyed feel like they have “made it” and the vast majority (85%) attribute their success to hard work. Forty-four percent said hard work was the single most important factor in becoming a millionaire.
Overall satisfaction with life rises considerably and consistently as net worth increases. The survey revealed that 73% of those with $1 – 2 million reported being “highly satisfied” with their life compared to 78% of those with $2 – 5 million and 85% of those with $5+ million. Millionaires recognize that their wealth buys them more than what their family needs: 37% of those with $1 – 5 million responded that their wealth allows them to live a fairly luxurious lifestyle, compared to 62% of those with $5+ million.
The Treadmill
However, with increased wealth come increased expectations. Investor Watch found that the wealthier people become, the more likely they are to have increased expectations for their standard of living. Fifty-eight percent of millionaires report feeling increased expectations for their standard of living over the last 10 years. As a result, millionaires keep striving for more.
Higher expectations cause stress for millionaires about their ability to maintain the life they’ve built. Among working millionaires with children at home, 52% feel like they are stuck on a treadmill, unable to get off without sacrificing their family’s lifestyle.
“The majority of millionaires say they have worked hard to earn their wealth and appreciate the lifestyle it affords them and their families. But enough never seems to be enough—even the wealthiest continue on the treadmill to achieve a better life,” said Paula Polito, Client Strategy Officer, UBS Wealth Management Americas.
Investor Watch revealed that no matter how much wealth is accumulated, millionaires still fear they could lose it all with one wrong move. Half (50%) of those with $1 – 5 million are afraid that one major setback (e.g., job loss, market crash) would have a significant impact on their lifestyle, vs. 34% of those with $5+ million. For millionaire parents working full-time, the anxiety is even greater–63% feel that one major setback would have a significant impact on their lifestyle.
Success Comes at a Price
Reaching the millionaire milestone does come at a cost, as 64% of millionaires report that they have had to give up precious family time to achieve their dreams. Most millionaires (68%) admit to having regrets, most commonly around making mistakes in a relationship with their spouse or family and not spending more time with family.
Millionaire parents with children at home struggle to provide the best for their children without spoiling them. They worry that their children will grow up without the right values–two in three (67%) already feel that their children take things for granted and more than half (53%) are at least somewhat worried that their children act entitled. Millionaire parents expressed concern that their children do not understand the value of money (65%), lack motivation (54%), harbor unrealistic expectations (54%) and fear that they will embark on an unstable career path (50%).
CC-BY-SA-2.0, FlickrPhoto: Philip Taylor. Three ‘Uncorrelated’ Trade Ideas for Multi-Asset Portfolios
Michael Spinks, portfolio manager of the Investec Diversified Growth Fund, discusses three multi-asset portfolio ideas that the team classes as ‘uncorrelated’ – these trades have a variable relationship with economic growth dynamics and overall risk appetite, with performance that is generally unrelated to real economic and corporate earnings growth
“As we enter the seventh year of this equity bull market and near the end of the 30+ year bond bull market, some investors are prophesising the end of the investment return-making world as we know it. While it seems hard to disagree that the days of low-hanging investment fruit are behind us, we believe that if investors rummage deep enough and look around in different places, opportunities still exist“, point out Spinks.
‘Uncorrelated’ return sources are one area of particular focus for Investec. These are investment opportunities that have a variable relationship with economic growth dynamics and overall risk appetite, so that performance is generally unrelated to real economic and corporate earnings growth. Not reliant on a strong market direction to be successful, they generate a different type of return stream compared to long-only holdings in equities and government bonds, providing possible diversification benefits to a portfolio. Relative value positions play a role here, constructed across equities, government bonds and currencies.
Whilst not easy to find, a broad opportunity set helps, as does a repeatable and structured idea generation process. Below we outline three ‘uncorrelated’ portfolio ideas to illustrate this view.
1) Taiwanese vs Singaporean equities
Our internal analysis ranked the Taiwanese stock market highly, but was much less positive about Singapore. “Taiwan, we concluded, offered quality growth potential at a reasonable valuation with supportive investor positioning and earnings revisions. Singapore, on the other hand, had poor fundamentals and a lack of earnings revisions, which outweighed the attractive valuations on offer”, said Investec manager.
Additionally, the respective sector composition was attractive as the Taiwan overweight to technology provided exposure to a US recovery and was less exposed to potentially higher US interest rates than other emerging markets. Singapore was characterised by a heavy bias towards banks with relatively high exposure to Chinese loans and a weakening domestic property sector. Therefore, in aggregate, this position offered exposure to the US and European growth cycles while hedging against further China weakness.
2) Hungarian forint vs Polish zloty
Although Investec was positive about the prospects of the Polish economy over the medium term, it had shorter-term concerns due to falling levels of inflation and the prospect of interest rate cuts in reaction to weaker industrial activity. Exposure to Russia and Ukraine also put pressure on growth. Hungary, on the other hand, offered strong economic growth, inflation that was picking up from a low base, and a stable interest rate environment. This position was a way to take advantage of diverging monetary policy and growth outlooks between the two countries, with the added advantage of the Hungarian forint being relatively cheaper than the Polish zloty.
3) Long Australia 10 year government bonds vs US 10 year government bonds
This idea was based on the view that divergent monetary policy and economic fundamental data would drive interest rates in Australia and the US in opposing directions. This trend had already been occurring for some time but, in our view, would continue to become more apparent in the period ahead as the US starts to gradually remove policy accommodation and Australia looks to provide more easing as it adjusts downwards to a once in a life-time terms-of-trade boom.
French asset manager Carmignac has announced the opening of its Zurich subsidiary headed by Marco Fiorini.
While the group has been distributing its funds in Switzerland for 12 years, it has now appointed six-person strong team headed by Fiorini in order to strengthen relationships with Swiss retail and wholesale clients.
Fiorini has been country head for Switzerland at Carmignac for the past four years.
Edouard Carmignac, chairman of Carmignac Gestion, said: “We are ready and able to help Swiss investors tackle their main challenges, namely helping them achieve financial security in retirement by preserving wealth and drawing an income from savings. ”
Headquartered in Paris, Carmignac now operates in Luxembourg, Frankfurt, Milan, Madrid, London and Zurich.
Josh Crabb. Old Mutual GI's Asian Equities Team Receives Regulatory Approval to Operate from Hong Kong Office
Old Mutual Global Investors is pleased to announce that the Asian Equities Team has received regulatory approval to operate from their Hong Kong office. This is the first time the business will have on the ground fund management capabilities in Asia.
Old Mutual Global Investors’ award-winning Asian Equities Team was hired in autumn 2014 and consists of four members, Josh Crabb, Diamond Lee, Kris Whitlock and Dmitry Lapidus.
The Team runs three funds, the Old Mutual Asian Equity Fund and the Old Mutual Pacific Equity Fund which are managed by Josh Crabb, who joined in October 2014 and the Old Mutual Greater China Equity Fund, managed by Diamond Lee, who joined the business in November 2014. The team now manages US $500 million in the region.
Old Mutual Global Investors, and its predecessors, have had a presence in Hong Kong for over 10 years. The business has expanded its Asian operations significantly in the last eighteen months, including the appointment of Carol Wong as Head of Distribution Asia in November 2013 and Simon MacKinnon as Asia Strategy Adviser, in February 2015. Old Mutual Global Investors also has a strong relationship with Capital Gateway, its Master Agent in Taiwan.
Julian Ide, CEO, Old Mutual Global Investors comments: “This is a significant development for Old Mutual Global Investors. Now we offer local products to the local market in Asia, we can connect with clients in in a way we have not been able to before. This is an award winning team with an enviable track record, which I believe offer a compelling choice for investors.
“Asia is a very important market for us and we are committed to building our business in the region. Asian industry is leading the field of endeavour in many sectors and we are keen to learn what makes the market so special. We will use this knowledge to ensure we deliver upon our ambitious plans for the region“, said Ide.
Josh Crabb comments: “We are really pleased to now be officially based in Hong Kong. The Asian equities market is hugely diverse and offers a great deal of potential for clients. The local market is incredibly important to us and we are keen to build partnerships in the region, as well as develop our funds.”
Photo: Philipp Meier
. IESE Business School Celebrates the 50th Anniversary of its MBA Program with a Prestigious Business Summit
The prestigious MBA program from IESE Business School is celebrating its 50th anniversary and the institution will hold a very special Summit in Miami, on 28th and 29th May. The event will gather companies, alumni and friends from all over the world –in particular from the Americas- in a working session named “Driving Sustained Growth:Challenges and Opportunities in the Americas”.
The Four Seasons Hotel at Miami will be the venue in which the CEO of Santander Private Banking, Álvaro Morales; Lionel Olavarría, Vice Chairman of BCI;and Teresa Foxx, General Manager Banking, Barclays, will discuss over “Sustained Growth in Banking. Challenges facing a sector poised for growth in Latam”, while Javier Estrada, Professor at IESE, will moderate.
First thing in the morning, Eric Weber, IESE Associate Dean and Professors Pedro Videla and Javier Estrada will welcome the participants. The program will be opened by world renowned cardiologist and inspiring keynote speaker Dr. Valentín Fuster, Director of Mount Sinai Heart in New York and recipient of the highest awards from the world’s major cardiovascular institutions.
To follow unique insights from top-level decision makers covering the Americas and its potential in the global business arena, including Saúl Kattan, President ETB; Karl Lippert, President SABMiller Latam; and Juan Manuel Ferrón, CEO Hispanic America Advisory Services PwC. Finally, the cross-roads of innovation, technology and entrepreneurship will allow Susan Amat, Founder Venture Hive; Pablo Slough, Head of Mobile Ad Solutions Google and Mary Spio, President and Co-Founder Vidaroo share their experiences.
Photo: Dennis Jarvis. Emerging Markets: Stay in the Car
Devan Kaloo, Head of Global Emerging Markets, Equities, at Aberdeen took on the role of a conjuror performing a magic trick with a couple of props, in a striking presentation to the investment conference. He gave a lesson to long- term investors in the importance of choosing the right time frame, with a pair of graphs that abruptly vaulted his audience from a pessimistic to an optimistic perspective on emerging market performance.
Mr. Kaloo used the first graph to acknowledge frankly that “over the past five years emerging markets have significantly underperformed developed markets – by something like 60%”.
However, as the next graph suddenly showed, “if you’ve been stuck in emerging markets for ten years, you’ve seen outperformance of about 40%”. Looking at markets on a long-term basis, he suggested that this decade-long period might be “the right time frame”.
He also pointed out that emerging markets underperformed developed markets by 8% in 2014 with a negative absolute return of 2% in U.S. dollars. But this still made emerging markets the second best performing asset class, doing better than Japan, Europe or the UK. While if you calculated returns in Euros, Yen or Sterling you made a positive absolute return.
In short perspective is important
Mr. Kaloo used his presentation to outline the potentially brighter future for emerging markets, with improvements in macroeconomic and corporate conditions likely to pay off in better stock market returns.
Core to his argument for a long-term assessment was the notion that temporary travails in emerging equities did not reflect fundamentals. “People quite often take the view that stock market performance in the short term reflects underlying issues in that market”, he said. However, “in emerging markets that clearly is not the case”.
This disconnect existed, Mr. Kaloo said, because emerging stock markets are often led by foreign investors. “Domestic institutional and retail investors are not consistent players in the market, so the guys who drive emerging markets are typically foreigners”, he explained. “This is important, because foreigners sometimes get concerned about different things from what’s actually occurring on the ground.”
For example, “what’s happening with quantitative easing, and the impact of the European Central Bank (ECB) and Bank of Japan, can have a large impact on liquidity flows into emerging markets, and a disproportionate impact on the performance of these markets”.
Moreover, because emerging stock markets are, in most cases, less liquid, it did not take much to send them up or down. “To put it in some sort of context, over the past three out of four years they’ve seen negative outflows”, he noted. “So there’s been a lot of money going out of emerging markets.” Or has there? Adding some clarity, Mr. Kaloo stated “Actually it’s not a lot of money. For 2014 we’re talking about $25bn. That’s a rounding error on the Federal Reserve’s balance sheet.”
“Although $25bn is not a huge amount of money in global macroeconomic terms, the illiquidity of emerging markets – largely because so much of the market capitalization is made up of shares that were not free-floating – meant that “it doesn’t take an awful lot of money to swing these markets around”, concluded Kaloo.
CC-BY-SA-2.0, FlickrPhoto: Nicolas. Net Assets under Management in Luxembourg Funds Continue to Grow with Record Net Sales in March
The Association of the Luxembourg Fund Industry (ALFI) has published its statistics as at 31 March 2015:
Luxembourg retains its position as the leading European domicile with EUR 3,524.79bn of net assets under management, growing 3.55% in the month ending 31 March 2015 and 13.89% so far in 2015
At EUR 49.92bn, net sales in March were the highest of all time
Net assets managed by investment funds under Luxembourg law grew by 30.10% in the past 12 months
The number of investment funds (legal entities) is 3,888 as at 31 March 2015
Germany remains the main initiator of funds domiciled in Luxembourg (2,812 in total), with Switzerland coming second (2,585 in total). However, funds initiated in the US and the UK have the most net assets under management (EUR 790,580m from the US, EUR 579,799m from the UK)
Marc Saluzzi, Chairman of ALFI, comments: “The low interest rate environment is obviously a decisive factor in the sustained growth of assets under management by the investment fund industry”.
He adds: “The exceptionally high net sales that we are registering in Luxembourg are the best proof of the continuous confidence of the international investor in the Luxembourg investment fund product. Equally, the diversified geographical origin of fund promoters in Luxembourg demonstrates that our fund centre remains the domicile of choice for the international asset management community.”
Francisco González, Chairman and CEO of BBVA, has presented the book Reinventing the Company in the Digital Age at Harvard University - Courtesy photo. Chairman of BBVA Analyzes Effects of Technological Revolution on Banking Industry at Harvard University
Francisco González has presented the book “Reinventing the Company in the Digital Age” at Harvard University. This is the seventh volume in BBVA’s annual series dedicated to analyzing the major issues of our time in which authors from around the world are participating with the goal of “helping people understand the changes that are continually reshaping our world”.
The Bank´s Chairman focused on how this technological and digital transformation has already reached the financial world. ”A new digital ecosystem is being built. One in which launching new products and services is much easier, cheaper and faster that it was a few years ago. Startups, developers, designers, large digital companies, all interact in this ecosystem, simultaneously competing and collaborating”.
In the opinion of Mr. González , “Many conventional banks are going to fall by the wayside. Those that make it will no longer be ‘banks’, but software companies, competing with the digital players and with a completely different value proposition”.
Francisco González expressed his conviction that BBVA “is now in a position to lead the process of transformation of the banking industry”, while bearing in mind that “we are leaders but we are running a race which as no discernible finish line, not even a pre-fixed route. Our strategy is to encourage change and to keep working to remove the practices and structures that stand in the way of change. This is the only way to maintain our leadership and extract value from it in the exciting new times to come”.
The transformation of banks must start with the foundation, the technological platform, said Francisco González, and this “is a long and complex process. We at BBVA know this, because we started our digital journey eight years ago” and the group’s first move was to significantly increase our IT investments to build a brand new, real-time client-centric, modular and scalable platform “not only to better satisfy our customer demands, but also to improve radically cyber security and data protection”.
At the same time, “at BBVA we have comprehensively reengineered our processes and promoted a change of culture in step with our technological overhaul”, added Francisco González, stressing that the bank has achieved very significant results over the last few years: “From December 2011 we have more than doubled our active digital customers. At the end of March 2015 we counted 12.5 million, of which 50% (more than 6 million) used mobile technologies”.
The Chairman of BBVA has also pointed out that in 2014 the Group created a Digital Banking division in order to accelerate the bank’s digital transformation across the board.
Along with Francisco González, the authors of the book, Peter Thompson, Professor at Henley Business School, and Esteban García-Canal, Professor at the Universidad de Oviedo, also participated in the presentation.
Peter Thompson remarked that in just one decade the digital revolution underway brought about more changes in the way we live than the industrial revolution did in a century.
In his opinion, societies are increasingly demanding higher–quality jobs that are smarter, more collaborative and flexible, more satisfactory and ensure a better balance between professional and personal lives. This need has spurred a revolution in work practices and management, including the use of technology to develop new physical and virtual work environments adapted to new requirements.
Esteban García-Canal has focused on the rise of emerging economies –which in just 20 years have gone from representing 15% of economic activity to 50% at present– and the companies with corporate offices in these economies. Many of these companies were small players until recently and today they are challenging the most consolidated multinationals.
In the opinion of García-Canal, these companies, created in countries with fragile institutional environments, have taken advantage of the experience acquired in their home countries to compete in complex environments. Furthermore, and although it seems paradoxical, their scant international presence has allowed them to adopt a strategy and an organizational structure that has been ideal in the current context in which emerging economies are growing very quickly.
Juan Alcaraz will be Global CEO Global at the new Pioneer Investments, and Giordano Lombardo, Global CIO. Pioneer Investments and Santander Asset Management to Join Forces Creating a Leading Global Asset Manager
UniCredit, Santander, and affiliates of Warburg Pincus and General Atlantic have signed a preliminary and exclusivity agreement to combine Pioneer Investments and Santander Asset Management to create a leading global asset manager.
Juan Alcaraz, current CEO of Santander Asset Management, will be the Global Chief Executive Officer, and Giordano Lombardo, current CEO and Group Chief Investment Officer (CIO) of Pioneer Investments, will be the Global CIO of the new company.
The combined firm, with approximately €400 billion in assets under management, will be one of the preeminent asset managers in Europe, as well as a comprehensively global firm with capabilities and client relationships around the world. The partnership between the two firms will provide for substantially enhanced economies of scale, a key advantage in the asset management industry, while also expanding the business’s diversification with respect to investment strategies, distribution channels and region. The combined firm will have robust market share based on deep client relationships in a wide range of markets including both growing and established regions, covering institutional, wholesale third party, and proprietary channels.
Building on a strong growth trajectory with total combined net inflows of over €25 billion in 2014, the combined company will have improved growth potential owing to an increasingly independent profile and a broader set of investment solutions to meet client needs across all channels worldwide.
Pioneer and SAM bring largely complementary platforms, investment capabilities, and client relationships, resulting in a more complete range of solutions and services to the benefit of all clients. Through this strategic transaction, the combined firm will be committed to maintaining the continuity and repeatability of its investment processes that have served clients well over multiple market cycles.
Furthermore, it will offer an expansive global distribution footprint, with a presence in over 30 countries and exposure to both growing and well-established regions such as Latin America, North America, Asia, as well as a leading position in Europe. In addition to Pioneer and SAM’s longstanding institutional and wholesale third-party relationships, long-term distribution agreements with UniCredit and Santander will result in unparalleled retail distribution capabilities in Europe and Latin America.
The preliminary agreement will lead to the establishment of a holding company, with the name Pioneer Investments, which will control Pioneer’s US operations along with the combination of Pioneer and SAM’s operations outside the US. UniCredit and the Private Equity Firms will each own 50% of the holding company, which will in turn own 100% of Pioneer US, and 66.7% of the combination of Pioneer and SAM’s operations outside the US, while Santander will directly own the remaining 33.3% stake. The combined firm will continue to operate as one global entity, led by a single global management team, focusing on meeting the needs of its clients worldwide.
The agreement is based on an Enterprise Value of €2.75 billion for Pioneer Investments and €2.60 billion for Santander Asset Management (including its 49.5% stake in AllFunds Bank). Furthermore, the transaction is estimated to enhance UniCredit’s capital position by approximately 25 basis points.
Following the signing of the preliminary agreement, the parties will work towards signing a definitive agreement subject to the customary regulatory and corporate approvals.
