CC-BY-SA-2.0, FlickrJosé Miguel Maté is Tressis' CEO. Morabanc to Launch in Spain, Acquire Tressis
Andorra’s Morabanc is said to be launching in the Spanish market through the acquisition of fund platform Tressis, according to Expansión. It could pay 50 millions euros for the 85% of the business, according to its sources.
The details of the acquisition are not known yet, but the operation seems to be close to reach a final point.
Morabanc would be the fourth Andorran bank to launch in Spain. Banca Privada d’Andorra entered the market through Banco Madrid; Crèdit Andorrà launched through Banco Alcalá; while Andbank was the only Andorran bank to enter the Spanish market with his own brand and by recently acquiring Inversis Banco.
Photo: Official White House (Pete Souza). Shades of APEC Blue
Just about the time of the Asia-Pacific Economic Cooperation (APEC) summit late last year, my social media feed began filling up with stunningly beautiful images of autumn in Beijing. This made me feel like all my bad memories of the city’s haze and smog were merely delusions. The chatter that week was all about what was nicknamed “APEC Blue,” the clear blue skies that replaced the normally smog-choked atmosphere ahead of the economic summit—a result of intentional government closings of factories and roads. This was done expressly to clear the air before the world leaders arrived.
The APEC meeting was touted as the second-most important event in Beijing after the Olympics, and it was a great feat to clean the air even though results were just temporary. Beijingers have added “APEC Blue” to their urban slang and joke that it stands for “Air Pollution Eventually Controlled” Blue. While some companies may have taken a hit after shuttering their factories, the temporary blue skies also demonstrates that air pollution is controllable and it is not “pollution with China characteristics,” an overused term to explain differences unique to the country. It is just a matter of how much effort and priority one places upon this.
Producing APEC blue is a complicated and expensive task. In addition to shutting factories and closing roads, the government offered additional paid time off to local state workers, closing many businesses and postponing winter heating supplies to reduce coal burning.
In my view, air pollution is symbolic of growing pains. If you consider the history of London, Los Angeles, Tokyo and Chicago, almost all major metropolitans have gone through similar pains as they developed and industrialized. Beijing is not an outlier, even though environment protection was well-discussed in my 8th grade textbooks.
Thanks to President Barack Obama’s trip to China, Chinese President Xi Jinping proceeded to outline a climate change agreement with the U.S. during the APEC summit. The world’s two biggest greenhouse gas emitters have been at opposite ends of the negotiating table during almost two decades of attempts to strike a meaningful global pact to lower emissions. This is the first time China has agreed to cap its emissions, after arguing for many years that it needed to grow richer before worrying about climate change. Progressively, we hope to see more Chinese initiatives, not only aggressive and temporary ones that have led to such literal breaths of fresh air as APEC blue, but those more akin to such efforts as the Clean Water and Clean Air acts that have had more lasting benefits.
At Matthews Asia, we aim to seek firms well-positioned to ride on this wave and benefit from China’s environmental improvements as well as its shift toward a more service- and consumption-oriented economy.
Column by Raymond Z. Deng, Research Analyst at Matthews Asia.
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
The three main themes of the New Year are monetary policy, monetary policy and monetary policy. Far, far down the list is the question of the cyclical trend and – oh yes, there was one more thing, after the political uncertainties that are popping up everywhere.
First, monetary policy: the Bank of Japan is continuing its policy of monetary flooding. Although this policy has not brought about the desired results over more than 20 years, this is the only possible outcome of the re-election of Prime Minister Abe.
Second, monetary policy: over the Christmas holidays, another “Big Bertha” (“LTRO”)1 from the European Central Bank (ECB) ran out and repayments of the three-year tender of EUR 270 billion are due by February, which will shrink the central bank balance sheet and make the monetary guardian sweat, because the volume of the new conditional long-term tender fell short of expectations. The resulting balance sheet shrinkage is grist to the mill of proponents of extensive purchases of government bonds. This is all the truer as consumer prices are expected to go into reverse in future on the decline in the oil price. Things will not become interesting until 14 January, when the European Court of Justice, on the initiative of the German Federal Constitutional Court, announces its judgment on the OMT(Outright Monetary Transactions) purchases.
Third, monetary policy: the US Federal Reserve (Fed) is expected to introduce its first rate hike over the summer, but it is making every effort to protect the market as much as possible during this implementation.
For investors, this means: none of this does any good. Once the price of money is distorted, the result is misallocation of capital, and even macro- prudential measures only help under certain conditions. Some pay for this with negative real interest rates, others battle with valuations that increase with risk, with a tendency towards asset price bubbles. In addition, the focus is moving to the economy. We still do not expect deflation. The latest data from the US support that view. Furthermore the latest European consumer price indices need to be seen in the light of the oil price.
What remains is a set of geo-political uncertainties. The Russia-Ukraine conflict continues to smolder and shows that the laws of economics cannot be overridden, as indicated by the Ruble. Increased risk demands higher risk premiums. In Greece, new elections at end-January could put the entire reform process up for debate. One item that few have on the agenda: in May there will be elections in the United Kingdom and critics of Europe see an opportunity.
There remains just one thing: use volatility for active investment or make use of multi asset solutions.
Opinion Column by Hans-Jörg Naumer, Global Head of Capital Markets & Thematic Research, Allianz GI
CC-BY-SA-2.0, FlickrFoto: Eduardo Mar. A corto plazo las valoraciones en Brasil ya no resultan tan atractivas
Italy’s independent asset manager Azimut has signed a deal to acquire 50% of Brazil’s LFI Investimentos through AZ FuturaInvest, one of its Brazilian joint ventures, said italian media.
LFI is an independent wealth management company based in Sao Paulo, founded in 2009 with a proven track record on developing customized investment solutions for Brazilian HNWI.
The Brazilian company counts seven experienced professionals, with an average tenure of more than 25 years in the industry and approximately R$500m (US$190m) AUM.
AZ FuturaInvest is Azimut financial advisory arm for the Brazilian market providing professional advisory services on asset allocation, funds selection and financial education.
“With LFI, AZ FuturaInvest will be able to offer new and efficient wealth management solutions to families and HNWI clients leveraging on LFI experience to structure customized portfolios. The team of LFI will add up to the FuturaInvest advisory team which currently counts more than 40 professionals,” the company said.
The transaction, which is not subject to the approval by the competent authorities, involves a purchase price of around R$ 8.5m (around US$ 3.2m) to be paid to LFI founders in four tranches during the next five years depending on the attainment of specific targets.
Marcelo Vieira Elaiuy and Fabio Frugis Cruz, founders of LFI commented: “Joining Azimut project is a fundamental step to improve our business. We will be able to leverage on the entire Azimut structure maintaining our independent governance and focus on clients’ interests. We are confident that the quality of the new structure will result in huge benefits for our customers.”
Pietro Giuliani, Chairman and CEO of Azimut Holding, added: “Despite a tough 2014 for the Brazilian investment fund industry, our local operations registered an encouraging growth, confirming the value of our business model and the quality of our partners. The complementary nature of LFI and AZ FuturaInvest gives new strength to our project, which rests on providing asset allocation and financial advisory services to our clients. We continue to scout all the international markets in which Azimut operates in order to attract more talents, and the JV with LFI reinforces our focus on Brazil as one of the key markets for Azimut international expansion.”
Capital Strategies Partners, a third party mutual fund distribution firm, holds the distribution of AZ Fund Management products in Latin America
Photo: Kuhnmi. Threadneedle Appoints Head of European Insurance Sales
Threadneedle Investments has appointed Patrick Steiner as Head of European Insurance Sales. Patrick, who is based in Zurich, joined Threadneedle on 6 January and will report to Andrew Nicoll, Threadneedle’s Global Head of Insurance. In his role, Patrick will work closely with Threadneedle’s institutional sales teams across Europe with the objective of broadening and deepening Threadneedle’s relations with European insurance clients.
Patrick Steiner has 20 years’ experience in asset management and joins Threadneedle from Conning Asset Management where he had been a Business Development Director with a focus on European insurance clients since 2012. Before that, Patrick was a Business Development Director at Wellington Management International and prior to that, Head of European Distribution at Deutsche Asset Management in Switzerland.
Patrick started his career in the Credit Suisse Group in the mid-1990s and has an Executive MBA in international management from the University of Applied Sciences, St. Gallen, Switzerland.
He graduated with a Bachelor’s degree in Economics from Kaderschule Zurich. “Patrick’s appointment reflects our intention to leverage our significant insurance capabilities and credentials and extend these more fully across the European market,” said Andrew Nicoll. “His insurance experience and local knowledge will enable us to build new relationships and to provide a better level of service to our existing clients across the continent.”
Threadneedle currently has over € 55 billion under management from insurance clients across Europe covering a range of investment strategies.
Photo: Dennis Jarvis. “Make in India”: A Push for Manufacturing
India’s challenges in the manufacturing sector illustrate the complexities of implementation in real (versus theoretical) political and economic systems. Ownership barriers, rigid labor laws, complex land acquisition rules and weak infrastructure have conspired to stunt manufacturing growth. But whenever these barriers have been lifted, explains Sharat Shroff, portfolio manager at Matthews Asia, the response from the entrepreneurial community has been encouraging. The automobile industry, liberalized in 1991, was among the first segments of manufacturing to open up to private sector participation. Since then, output has grown 15-fold and, India is increasingly considered a destination for manufacturing and an export base for auto parts and automotive vehicles.
India’s newly elected Prime Minister Narendra Modi has made manufacturing a key agenda point, thinks Shroff. Specifically, his administration plans on building a globally competitive industrial sector that can steadily increase market share in exports. To support this, authorities have progressively lowered ownership barriers to foreign firms within manufacturing. Most recently, in the defense and railways sectors, it has increased the level of ownership permitted by foreigners to 49% and 100%, respectively.
Labor laws in India are more vexing because they are legislated concurrently by both the central and state governments. The Northwestern state of Rajasthan has taken the lead in labor deregulation by reducing government-approval restrictions on hiring/firing workers. Other proposed measures aim to provide greater flexibility in running factories, and in complying with existing labor laws. If the efforts in Rajasthan lead to greater job creation, it will be difficult for other states not to follow suit.
Formal job creation is surely a goal of Mr. Modi’s and the kinds of changes sought by the state of Rajasthan are certain to challenge some vested interests. But the recent elections have given a broad mandate of growth and governance over welfare entitlements to the incoming government, concludes the Matthews Asia expert.
Ethenea Independent Investors S.A. expands its Portfolio Management Team by a new colleague. Peter Steffen strengthens the team around Luca Pesarini, Arnoldo Valsangiacomo, Guido Barthels and Daniel Stefanetti as of January 2015. “We are happy to have experienced Portfolio Manager Peter Steffen aboard. The equities expert completes our team and will support us in the investment decisions of our funds”, says Chairman of the Board of Directors and Portfolio Manager Luca Pesarini.
Peter Steffen holds a Master’s Degree in Finance and Asset Management and is CFA Charterholder. He worked for different banks and gained relevant experience in the areas of Credit Research, Equity Research, Corporate Banking and Alternative Asset Management. In 2007 he joined Deutsche Asset & Wealth Management Investment GmbH in Frankfurt and New York. For three years he worked as analyst for US bank and insurance stocks. Since 2010, he occupied the position of Portfolio Manager and successfully managed the funds DWS Global Value and DWS Top Dividende.
Capital Strategies is Ethenea distributor in Spain and Portugal.
Photo: Eneas de Troya. Assessing the U.S. Economy in the New Era of Innovation
There are driving changes in the U.S. economy, affecting employment, productivity and profitability dynamics: the automation of knowledge work, advanced robotics and the energy revolution. These trends are just the tip of the iceberg, says Pioneer Investments. “Over the coming decade, radical changes in healthcare, education, communication, transportation and alternative energy – to name just a few – will transform the economy and the investment landscape. We believe that new modes of research and analysis will be necessary in order to interpret the impact of these changes on both the macro and micro levels of the economy”.
Selection in the Era of Innovation
In this era of accelerating innovation, Pioneer´s analysts believe that a fundamentally different analytical perspective on long-term factors shaping the economic landscape is required. “This framework, together with the more traditional sector/business financial analysis, will potentially enable us to identify unique return opportunities and uncover hidden risks in each market”. Key factors for the firm are:
New technologies’ impacts on sector trends
New business emergence
Rapidly evolving disruptive competitors
Business model flexibility; the ability to leverage a platform, respond to competitive threats, reshape product and service offerings
Demonstrable innovation track record (ability to enter new markets/launch new products)
The ability to attract/retain innovation talent, shed costs, rapidly increase productivity
Accelerating Innovation: Far-reaching, Positive Consequences on the Economy
The U.S. economy is in transition, moving rapidly towards a knowledge-based economy that will rely increasingly less on human labor to manufacture goods and provide many services. “We believe the trends we have discussed will rapidly reshape the economic landscape. With any dramatic change comes uncertainty and some fear. Many pundits have highlighted the possible downside of these changes. While we are sympathetic to these concerns, we believe that accelerating innovation will ultimately create more jobs than it destroys, produce dramatic wealth and have far-reaching positive consequences to areas of the economy that have historically been less productive (education and healthcare are good examples)”, explains Michael Temple, director of Credit Research at Pioneer Investments and portfolio manager for Pioneer Dynamic Credit Fund.
Every economic transition generates dislocations. Society ultimately adapts but the transition will be difficult to navigate for those unable to keep up. This has significant ramifications for the investment landscape, opines Temple. “Investors that use traditional frameworks to analyze the market, picking winners and losers based on outdated valuation relationships or assessing macro-economic policy based on irrelevant historical paradigms, run the risk of focusing on the wrong things”.
Photo: Alastair Mundy, Head of Value at Investec. Investec: “Finally Things Are Changing With Large Companies in UK”
Alastair Mundy, Head of Value at Investec Asset Management, discusses in this interview where he sees the best investment potential in 2015.
What has surprised you most in 2014?
What has really surprised me this year was quite how poor the performance of Tesco’s share price was. We knew trading was tough in the food retail sector and we knew their accounting was pretty aggressive, but even we were surprised when the accounting irregularities hit the screens.
However, we are keeping faith with Tesco, we still think they can turn the business around, and we think they can compete against discount retailers. There is now new management at Tesco, Dave Lewis has come in from Unilever, and we expect him to shake things up very quickly; perhaps sell the Asian or European divisions and/or some non-corporate businesses, and perhaps be more competitive against the discount retailers.
Where do you see good value in the UK equity market in 2015?
The best value we see in the UK equity market going into 2015 is in the larger stocks in the market. Companies like HSBC, Glaxo, BP and Shell have performed poorly against the mid-cap companies over the last decade and we think finally things are changing with these very large companies. Rather than looking for acquisitions they are making disposals, reducing their non-core assets, cutting costs and we believe focusing on what is right for the shareholder.
Why do you believe there is value in mega caps?
We think if mega-cap companies can shrink back to where they really have the strong competitive advantage, shareholders will be surprised at the amount of earnings growth these companies can deliver. They are on quite low valuations already compared to some other smaller companies in the market, so we think that is what is going to drive performance.
How are you positioning your portfolios in terms of strategy and style?
Our UK Special Situations portfolio is positioned increasingly towards the FTSE 100 companies, where we have a very large weighting. We have been reducing our weighting towards FTSE 250 companies over the last couple of years and this has continued in 2014. We also hold quite a lot of cash; not so that we can spend it if there is a small market fall, but to wait for some really fantastic opportunities or for individual stocks if they have profit warnings or fall significantly out of favour.
How are you positioned in your complementary assets on your Cautious Managed portfolio?
We think it is very important to focus our Cautious Managed portfolio on capital preservation at the moment, as we see a number of concerns around the world. These concerns range from geopolitical worries to fairly disappointing earnings growth for companies worldwide, and, of course, the end of quantitative easing in the US. All of these factors suggest that equity valuations should not be as high as they are. So, what do we need if we think equity valuations are going to fall? We need some complementary assets such as gold, gold equities, Norwegian krone, cash and index-linked bonds, both US and UK. We cannot be absolutely positive that these complementary assets will rise if equity markets fall significantly, but we are hoping that they will dampen volatility if equity markets become more volatile. The strategy of investing in out-of-favour companies and combining this with a focus on complementary assets that work well with equities in different times in the cycle has been a strategy that has been successful for us over the past 21 years on our Cautious Managed portfolio.
Photo: John Bennett, Head of European Equities at Henderson. Henderson: "Europe Remains the Global Whipping Boy"
Europe remains the global whipping boy, says John Bennett, Head of European Equities at Henderson. But among european countries, the Henderson team prefers Germany, “where balance sheets are improving and political headwinds are easing”.
What lessons have you learned from 2014?
I have long believed that we live in a world of momentum investing. Investors fail to anticipate inflection points; they like to chase it once the inflection has already happened. This is reflected in the amount of time that people waste from quarter to quarter, focusing on earnings per share (EPS) guidance as an indicator of a company’s prospects. This is a horrible trend that originated in the US. The way to get a competitive advantage, in my view, is to ignore it and focus on what really matters – cash flow. I always look at the cash flow, because cash will always out, as will value.
2014 also provided a reminder of why (with the exception of some of the Nordics), I prefer to ‘rent’ or trade European banks, holding stocks in the sector on a short-term basis. The industry has been a disappointing investment since the mid-1990s and it remains in a structural bear market, subject to short, sharp rallies.
Where do you see the most attractive opportunities within your asset class in 2015?
I think that large caps offer the best prospects in Europe, with investors willing to pay a higher price for quality businesses where they perceive a greater source of safe income. At a sector level, our established and often contrarian commitment to the pharmaceutical sector remains intact, while “smart cars” has been a consistent investment theme for two years now.
Recent months has seen us call off a major bear in telecommunications and utilities, two areas of potential opportunity in 2015. Merger and acquisition (M&A) speculation has fuelled a rally in the European telecommunications sector and we expect further consolidation going forward. The case for utilities is driven by delta – the rate of change we see in the industry. We are focused primarily on Germany, where balance sheets are improving and political headwinds are easing.
What are the biggest risks?
Europe remains the global whipping boy: the economy is in a mess, politicians are dysfunctional (a global problem) and there are fault lines in financial markets. I prefer to focus on the micro, identifying attractive sector and stock-specific opportunities, rather than geopolitical events we cannot influence and which may, or may not, be a factor.
Are you more positive or negative now than you were 12 months ago on the economic and investment outlook, and why?
The bull market is starting to look stretched in Europe and without a step-up in revenue growth leading to earnings growth any rise in equity markets can only come from an expansion of price/earnings (P/E) multiples. M&A activity is likely to remain in focus and may well accelerate. In the near term, investor uncertainty has risen and the market remains schizophrenic, while deflation remains a real and present danger. The European Central Bank is clearly seeking to underpin the eurozone and we saw in 2012 that this can be very supportive. But equities were cheaper back then and the cycle younger.
I think 2015 could see a significant pick-up in volatility, so investors should brace themselves for difficult markets. That is why I think stock picking is so important. By understanding a company’s strengths and weaknesses we can seek to be better positioned than the general market both in good times and bad.
