CC-BY-SA-2.0, Flickr. Lorenzo Parages Appointed Head of Distribution by March Gestión de Fondos
March Gestión de Fondos, one of the largest Spanish private bank-owned asset managers, named Lorenzo Parages as its head of Distribution – responsible for the promotion of MGF funds in UK, Germany, Austria, Spain, Italy, Luxembourg and Latin America.
Prior to joining the Spanish asset management company, Parages was in charge of Allfunds Bank’s investment services operations in Latin America. Formerly, Parages worked in the equity sales division of Banco Urquijo, a Spanish private bank, before pursing his career at Axa Investments as financial advisor, then in several UK firms such as BSN Capital Partners, BlueCrest Capital Management and CMD.
March Gestión de Fondos CEO Jose Luis Jimenez said Parages would help maintain the rapid growth the firm has seen in Spain and overseas since the beginning of the financial crisis, namely a fourfold increase in asset under management since 2008.
He also commented: “Thanks to strong performance, we see continuing support for our range of global equity and bond products not only in Spain but also in Italy and increasingly in Latin America. With Germany being particularly supportive of investment in family business focused funds, we see potential for strong growth there too. In the UK, we are working towards establishing a more permanent base and so Lorenzo´s experience in London will prove particularly helpful.”
CC-BY-SA-2.0, FlickrPhoto: Honest Reporting. Fear of the Foreign
Investors are on edge. We’re barely into the New Year and markets have been left shaken by the Swiss franc’s biggest ever one-day move; an election win for a populist party that’s demanding to renegotiate Greece’s relationship with the European Union; more evidence of a slowdown in China; and worries that cheap oil reflects weak global demand rather than a turf war between producers. Against this uncertain backdrop investors are looking again to central bankers for coordinated action, yet policymakers look set to move in opposite directions.
Stock pickers hoping this year will herald a painless transition back to a world in which central bankers and liquidity play reduced roles in determining investment returns will most likely be disappointed. All this uncertainty is making it harder for the US Federal Reserve to decide when best to raise interest rates in the first step of so-called monetary policy ‘normalisation’, even as Europe and Japan remain committed to further stimulus.
More recently emerging markets have suffered. Within six months what had been a narrative of slow recovery has turned once again into an exercise in spotting the weakest link. Like predators isolating the weakest member of the herd, short-sellers are already said to be rounding on the currencies, bonds and equities of selected emerging markets.
Many of the arguments that sustain the critics have been around for a while: a rising dollar makes assets in ‘riskier’ parts of the world less attractive to international investors; countries that rely on foreign capital to plug gaps in current account deficits will come under pressure; higher US interest rates force emerging economies to follow suit despite sluggish growth.
All of which is true, to a degree. But emerging economies are still growing faster than most developed ones and will do so for many years to come; emerging economies are in better shape today because they began reducing current account deficits after the ‘taper tantrum’ of 2013, when the suggestion of an end to Fed stimulus policies caused a panic; and emerging markets hiked interest rates following the taper tantrum and so, with the collapse of oil prices driving deflationary pressures, actually have room to cut. At the country level, most emerging countries are well- positioned to handle the latest tempest.
Yet, now there’s a new concern – the level of corporate debt denominated in foreign currencies. The argument goes like this: ever since the global financial crisis, emerging market companies have gorged on cheap debt, especially dollar debt. So with the dollar (and now the Swiss franc) surging higher, corporate borrowers face ever more expensive debt repayments, even as revenues slow and show no sign of imminent recovery.
The numbers certainly look scary. From 2009 until last year, dollar- denominated borrowing by the private sector in the emerging markets increased more than 100 per cent, or by more than $1 trillion. With memories of the global financial crisis still fresh for many people, it is only right that the risks of excessive debt shouldn’t be lightly dismissed.
However, these numbers need to be reappraised within the proper context. While some economies may still be ‘emerging’ in terms of governance and market liberalisation, they now rank in size with the biggest. The obvious example is China which, by one measure, overtook the United States last year as the world’s largest economy.
All emerging markets grew rapidly over the past two decades and once the size of these economies is taken into consideration, a very different picture emerges. In fact, external emerging market debt as a percentage of gross domestic product (GDP) has been remarkably stable – around 40 per cent – since 1995. Meanwhile, external emerging market debt (as a percentage of GDP) that’s attributable to the private sector has been almost flat over the same period and remains well under 10 per cent.
That’s not to say it isn’t an issue. Debt levels – the total level of all borrowing – need to be carefully monitored. Let’s not forget that the lion’s share of debt in emerging markets is still denominated in local currencies and there has been an expansion of all debt. But we don’t think that existing levels of foreign debt specifically represent a systemic risk.
Another reason for our view is because a lot of this foreign currency debt is linked to borrowing by commodities companies, especially those in the oil and gas sector. Sharp falls in commodity prices are a problem, but it is also an industry in which dollar borrowing is matched by dollar revenues, so the danger of a currency mismatch of the type we saw in the 1997/98 Asian crisis is greatly reduced.
Of course, high-yield Chinese property bonds are now in the spotlight with Shenzhen-based Kaisa Group Holdings having missed a coupon payment and its creditors scrambling to protect their interests. Chinese companies have become some of the biggest issuers of foreign currency bonds as they sought to sidestep credit curbs at home. But investors still recognise that, on this occasion, the problems are company-specific and panic hasn’t spread to the larger developers. We’re still confident in the ability of the authorities to manage debt levels.
The coming year will be challenging for many markets, not just those in the developing world. However, we feel that most emerging markets are set to benefit from oil prices at current levels (although oil exporters are obviously big losers) and companies will continue to make steady progress trimming fat to operate more efficiently. Sure, investor sentiment remains poor and this won’t help with capital outflows, but with price-to-book valuations well below the five and 10-year averages we think there is plenty of value.
Column by Devan Kaloo, Head of Global Emerging Markets, responsible for the London based Global Emerging Markets Equity Team at Aberdeen AM
Photo: BTC Keychain. Bitcoin and Altcoin Transactions Will Shrink by More Than Half in 2015
A new report from Juniper Research has found that the value of all cryptocurrency transactions will fall sharply this year to just over $30 billion, compared with over $71 billion in 2014.
According to the report, the surge in altcoin transactions in 2014 was overwhelmingly attributable to brief spikes in activity during the first quarter in Dogecoin, Litecoin and Auroracoin. By the end of the year, daily dollar values of these transactions were at less than 5% of their earlier peak.
However, the report argued that the introduction of licensed, regulated exchanges could lead to a stabilization in currency values and with it an increase in retail transaction adoption. It pointed out that in an unregulated marketplace, consumer confidence had been eroded by the demise of the Mt Gox exchange in February 2014 and the recent theft of nearly 19,000 Bitcoins from BitStamp hot wallets.
Nevertheless, despite the fact that PayPal has now begun to allow US consumers to purchase digital goods via Bitcoin, the report argues that the scale of the challenges facing Bitcoin is so great that it will struggle to gain traction beyond a tech-savvy and/or libertarian demographic.
Real Time Transaction Settlement Opportunity
Instead, it identifies a longer term role for cryptocurrency protocols in the wider payment space. According to report author Dr Windsor Holden: “It is likely that we will see the technologies behind cryptocurrency deployed in areas such as real-time transactional settlement. Ripple Labs is already focusing overwhelming on that approach and in the medium term we may see a role evolution to this end amongst other cryptocurrency players.”
Photo: Allan Ajifo. Alternative Ucits Demand Reaches Record High
The alternative UCITS sector has grown strongly in 2014, increasing by 41%YoY to a total of €224.3bn, according to the latest Alceda UCITS review.
The study also highlighted that managed futures were the best performing alternative UCITS strategy, with the index gaining 14.3% while event driven strategies declined by -2.7%.
Overall, 2014 was a challenging year for active managers with the AH Global UCITS Index which encompasses a total of 498 funds, returning only 1.3% in 2014, compared to the almost 6% gains seen in 2013.
Michael Sanders, CEO and chairman of the Board at Alceda Fund Management S.A., said: “These results show the ongoing attractiveness and demand for alternative UCITS strategies globally with investors increasing allocations and managers, in particular in the US, choosing UCITS to target European investors.
“In addition, the recent implementation of the AIFM Directive has resulted in a greater focus on UCITS with managers looking to build sustainable distribution strategies for their products.”
CC-BY-SA-2.0, FlickrPhoto: Eneas de Troya. The Golden Rules of Multi Asset Investing
Underlying momentum in global growth moved to its best pace in four years during the second half of last year. Moreover, labour market dynamics, income trends and falling oil prices and interest rates bode well for further strengthening in the global cycle. Nevertheless, markets have been edge in recent months and volatility has started to trend higher after the Summer of 2014. Doubts about central bank behaviour, rising deflation risks, the economic and geo-political fall-out from oil price declines and renewed fears over Grexit have clearly weighing on sentiment and influencing investor behaviour.
Investors need to weigh these fundamental and behavioural cross-currents. The complex ecology of markets and the continuous mutual influencing of all components in the system makes it very hard to assess what the future direction of the market will be. Therefore, it is important to follow some principles to navigate the portfolio returns through the rough twists and turns of financial markets. Those are the 6 golden rules in ING IM´s multi asset investment approach:
1. Understand where you are
The environment around us is complex, not automatically reverting to an unobserved “equilibrium” and constantly changing. So, study the functioning of the ecology you operate in, map the players around you, understand how they interact. Key in this is to know what you don’t know. Be aware of the difference between uncertainty and risk, note the obvious limitations of the efficient market hypothesis due to heterogeneity of market players, bounded rationality and occasional irrationality, limits to arbitrage and the persistence of market “anomalies” and observed falsification of normally distributed returns.
This awareness helps to focus on robustness, both in the area of data research and portfolio construction. Balance portfolio exposures well across your opportunity set and between “safe” and “return” asset classes. While doing this always keep in mind not to under-estimate risk and not to over-estimate diversification benefits. Also, always expect the unexpected.
2. Expand your horizon
Continue to learn about the world you operate in and develop innovative research to explore the environment in the best possible way. This means not only understanding the underlying fundamentals well, but also developing expertise on the emotions and behaviour of the investors around you.
To do this effectively some creativity is needed. Information need to be found and utilized in an innovative way. On top of that the resulting data analysis needs to be rigorous and consistent to eliminate behaviour pitfalls, while also allowing investor skill to add insight on the unquantifiable like regime shifts at Central Banks or (geo) political shocks.
It also translated into the breath of your investment universe and the effective use of the diversity in investment opportunities, both across asset classes and through time.
3. Adapt to change
Allow yourself, said ING IM team, to be active, but make sure accountability is always in place and incentives an open minded way of thinking about the economy or markets. Therefore, change your opinion once the facts change or the market ecology has adapted. And while risk premiums are shifting during the process, take risk when opportunities are high and hide when uncertainty is not well rewarded.
4. Team up
Do not think you can do all of the above alone. Listen well to your stakeholders (clients, regulators, team members, other partners), determine the right risk tolerance and aim for a prudent investment solution. Utilize all skill in your investment team and stimulate cooperation and learning amongst team members against a backdrop of clear goals, responsibility and accountability. Play as a team.
5. Iron discipline
Make sure consistency of your investment decision is safeguarded well. Work with a strong investment process that works in different investment climates. Use strategist and portfolio manager skill and experience to construct a resilient investment toolkit. Have challenging discussion on motivations to deviate from guidance from the toolkit. Aim to have skin-in-the-game for decision takers.
6. Simplicity
Against the backdrop of the complex system of markets, keep it as simple as possible without damaging effectiveness. Identify clearly what the sources of returns are and where your own strengths lie in exploiting them. Value consistency over complexity and monitor liquidity, transparency and costs at all times aware.
CC-BY-SA-2.0, FlickrPhoto: www.pactomundial.org. State Street Corporation Signs United Nations Global Compact
State Street Corporation announced it has become a signatory to the United Nations Global Compact (UNGC), the world’s largest corporate citizenship initiative. The UNGC is based on 10 universal principles in the areas of human rights, labor, the environment and anti-corruption, which closely align with State Street’s corporate responsibility focus.
The UNGC initiative was officially launched in 2000 to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. State Street joins more than 12,000 other signatories from companies, governments, labor, and civil society organizations in approximately 145 countries.
“Our membership with the UNGC furthers our focus on these issues and emphasizes the importance of them to our clients, employees, shareholders and the communities where we live and work. We are pleased to become an official member of the UNGC initiative, as its 10 universal principles in the areas of human rights, labor, the environment and anti-corruption closely align with our own values,” said Alison Quirk, executive vice president and chief human resources and citizenship officer at State Street. “Our membership with the UNGC furthers our focus on these issues and emphasizes the importance of them to our clients, employees, shareholders and the communities where we live and work.”
By signing the compact, State Street confirms its support of the initiative’s 10 principles and its intent to advance those principles within its organization.
Photo: Gabriela Da Costa. Will 2015 Finally Be the Year When the Global Economy Returns to Normal?
Throughout the global economic expansion that is now stretching into its sixth year, we have experienced periods of accelerating growth followed by brief pauses or setbacks. Even with extraordinary monetary policy stimulus and ultra-low interest rates, the world economy has struggled to maintain an above-trend rate of growth. As a result, excess capacity remains. Little wonder that global inflation continues to surprise to the downside. “In other words, this expansion has been anything but normal”, point out MFS experts, Robert Spector, Institutional portfolio manager, Sanjay Natarajan, Institutional Equity portfolio manager, and Robert M. Hall, Institutional Fixed Income portfolio manager.
Will 2015 finally be the year when the global economy returns to normal?, asked. After all, consensus growth estimates reported by Bloomberg show an accelerating pace this year versus last year. And these forecasts probably underestimate the constructive impact of the sharp plunge in energy prices, which is likely a net positive for the global expansion.
“In our view, a normal economy is characterized by being relatively synchronized across regions, maintaining a self-sustaining growth rate at or above its potential without hyper- accommodative monetary conditions and having a functioning credit system so that easy central bank policies can work effectively. Let’s look at each of these three characteristics in turn”, they explain.
Synchronized across regions
The global economy remains unsynchronized. The United States is the undisputed growth leader among the major economies, with third-quarter real GDP growth hitting 5% at an annual rate, the labor market improving at an impressive clip and prospects for consumer spending looking solid. Energy-related capital spending will likely take a hit from lower oil prices, yet overall we expect US growth to be around 3% in 2015.
By contrast, European growth may struggle to hit 1%, given ongoing deleveraging and the threat of deflation. Although Japan could receive a boost from lower energy prices and a weaker yen, real wages may continue to stagnate, and structural reforms remain a headwind until they become a reality. Emerging economies in general face a muted global trade cycle and structural issues related to productivity. The bottom line is that the global economy will continue to grow in 2015, but without the reinforcing vigor of a synchronized expansion.
Self-sustaining growth at or above potential rate
Given these divergent growth trends, it will be difficult for the world economy to grow above the long-run potential rate on a sustained basis. “As a result, we expect global monetary conditions to remain super easy in 2015. Though the US Federal Reserve (Fed) has ended quantitative easing and is guiding the market toward a midyear rate tightening cycle, the timing of the first hike could be pushed out if inflation keeps undershooting expectations on downward pressure from crude oil prices or if US labor market improvements fail to generate wage gains”, says MFS.
Functioning credit system
Blockages in credit continue to get in the way of monetary stimulus, as money multipliers and the velocity of money are still falling. To be sure, deleveraging has reached an advanced stage in the United States, yet debt levels remain high by historical standards. Globally, there has actually been no net deleveraging since the financial crisis, owing to the debt buildup among European governments and emerging markets (EM). “Without the powerful accelerant of credit expansion, easy monetary policy can provide a buffer against deflation pressures and boost asset prices but cannot be the savior of global growth as in normal cycles”, concludes the MFS analysis.
The bottom line is that growth in 2015 may surpass last year’s tally, thanks mainly to the strength of the US expansion and the sharp drop in oil prices. However, we expect the recovery to remain far from normal, so the environment of low inflation and long-term sovereign yields should persist. “That would be good for equity prices and the US dollar. As long as the global economy avoids recession, which is our base case, global equities should outperform global government bonds in 2015”, they explain.
Photo: epSos.de . More Than 50% of Asset Managers Received Requests for Responsible Investing
New research from global analytics firm Cerulli Associates finds that more than 50% of asset managers received requests for socially responsible investing (SRI) and environmental, social, governance (ESG) mandates from institutional clients.
“Many executives we spoke with during our research interviews told us that they are getting more client inquiries regarding responsible investing strategies,” states Susana Schroeder, senior analyst at Cerulli. “Most managers deal with requests that involve restrictions against holding securities, which are often tied to responsible investing.”
Responsible investment encompasses several areas: ESG, SRI, mission-related investing, impact investing, and program-related investing.
“There is increasing acceptance among investors and managers that ESG factors, such as hazardous waste disposal and predatory lending practices, can have a material impact on a company’s financial wellbeing,” Schroeder explains. “Public defined benefit plans and nonprofits are most likely to incorporate ESG factors into their investment process, because of pressure from donors, students, taxpayers, and other constituents.”
“Institutional sales teams report that clients and prospects are inquiring about this area as they seek to better understand the different aspects of sustainable investing,” Schroeder continues. “Even professionals working in the trenches have witnessed this shift, including request for proposal (RFP) teams, which have reported a rise in the number of RFPs with embedded ESG-related questions.”
Miguel Salinero Barbolla, client service associate at Capital Group. Capital Group Expands Client Service Team
Investment management company Capital Group has announced the appointment of Miguel Salinero Barbolla as client service associate.
Based in London, Salinero is responsible for facilitating client servicing for Capital Group’s financial institutions and intermediaries in Europe.
He joins from BNY Mellon, where he worked most recently as head of international client services and prior to that as client service executive for Spain and Portugal.
Grant Leon, head of Sales for Capital’s Financial Institutions and Intermediaries business, comments on the appointment: “Miguel’s appointment is important as we continue to establish new – and deepen our existing – relationships with intermediaries and our distribution partners across Europe.”
Photo: José Luis Cernadas Iglesias. Riccardo Dallolio Joins H.I.G. Capital as Co-Head of European Real Estate
H.I.G. Capital, a global private equity investment firm with more than €13 billion of capital under management, is pleased to announce the appointment of Riccardo Dallolio as Managing Director and Co-Head of European Real Estate. Based in London, he will share these leadership responsibilities with Ahmed Hamdani, who has been a Managing Director in London since 2012.
With over 16 years in the real estate industry, Riccardo has extensive investment and transactional experience across a number of jurisdictions in Europe. Prior to H.I.G., he was at AXA RE where he was Head of Alternatives and Special Situations. During his time at AXA RE, he also held the positions of Head of Transactions in Europe and Head of Asset Management and Transactions in France. Prior to AXA, Riccardo was a Partner at Grove International Partners, and worked in the J.P. Morgan Real Estate Group in London.
H.I.G. Capital’s real estate platform targets opportunistic real estate investments, with a focus on adding value, improving performance, and achieving attractive risk adjusted returns. With offices in London, Madrid, and Milan, the H.I.G. European real estate team is active across a wide spectrum of real estate asset classes. It has completed 13 transactions across multiple jurisdictions in Europe in the last two years including the U.K., Spain, Italy, the Netherlands, and Finland. With the ability to invest in all parts of the capital structure, H.I.G. Capital is able to develop creative financing solutions and consummate transactions on an expedited basis. Typical investment size ranges from €10 million to €100 million.
In commenting on the appointment, Sami Mnaymneh, Co-Founder and Co-CEO of H.I.G., noted, “I am delighted to welcome Riccardo to the firm. He is a very experienced and successful real estate investor who significantly augments the expertise and capabilities of our team. I am confident he will play an instrumental role in H.I.G. Capital’s development and growth in the real estate asset class.”
