España archivos - Page 161 of 170

Could the Fed Trigger a Market Collapse?

¿Crédito high grade, high yield, o renta variable estadounidense? — . Could the Fed Trigger a Market Collapse?

The US central bank, the Federal Reserve, is the subject of criticism, no matter what it does. It has been roundly criticized for making money too easy and creating bubbles everywhere — in short, that its actions aren’t working. If its actions are working, then the talk is that this artificial support will have to be removed, and the Fed will trigger a market collapse by doing less.

I suspect, however, that the easy money accusation against the Fed —and the implication that stock prices have to fall without its efforts to keep rates low— may be erroneous. Here are my reasons:

Low rates and signaling

Now that its unusual program of bond buying known as quantitative easing has ended, the Fed is hinting that it will set out to slowly raise interest rates in 2015. By any comparison with previous cycles, rates are low and real rates, or stated government bond yields minus inflation, are abnormally low, especially when contrasted with the story of better growth in the US economy.

The Fed has already signaled its intention to let rates rise, and the equity market has continued to go up. Increases in interest rates, particularly those induced by the Fed, have historically been greeted by a rising, not falling, stock market. Why? Because such actions by the US central bank tend to occur in the face of expanding economic activity and the stock market welcomes sustainable growth. Also, price-to-earnings ratios often rise, not fall, in the face of protracted rate increases.

Debt and interest expense

The net debt held on the balance sheets of companies in the S&P 500 Index is much lower relative to their cash flow than we observed in the past three cyclical peaks. Therefore, a rise in rates won’t have the same negative impact on profits as in previous cycles. And the share of debt whose interest expense has been fixed is now at historical highs: 88% of the net debt of the S&P 500 is fixed with the issuance of public bonds, not at the mercy of flexible-rate bank loans. The high share of fixed-rate debt will also tend to cushion any shocks from rising rates.

Furthermore, US consumers — who buy most of the consumer goods and services produced by publicly traded companies — have far less debt relative to their disposable income than in other cycles. Thus, they won’t have to pull back spending that much to pay for higher debt service burdens.

Supply and demand imbalance

The world may be awash in government debt of all sorts, but it is also awash in savings and accounts that seek safety. Massive reserves have piled up in emerging markets, exporting countries and pension funds. These huge storehouses of money — accounting for about 28% of global GDP — reside mostly in US dollars and pursue primarily AAA-rated debt to purchase.

Yet the supply of triple-A debt has been dwindling as more countries receive lower ratings from credit agencies. And the United States, the world’s biggest supplier of new debt, has experienced smaller government deficits and so has less need to borrow. With the supply of good bonds shrinking while the demand for them rises, this imbalance tends to work in favor of higher bond prices and lower yields, which also puts a limit on how high US rates will go when the market, not the central bank, is determining rates.

Concluding thoughts

My first conclusion is that if the equity market was vulnerable to collapse from the Fed’s actions to taper this year and tighten next year, we would already have seen it by now. After all, the markets try to anticipate what is coming next. Fed rate increases should come as no surprise to investors who have known for years that rates haven’t been at the equilibrium levels that the markets would set.

Second, there is little support for the claim that the stock market is a bubble. Many valuation measures suggest the market is in fair value, not peak price, range. Third, inflation around the world is subdued or falling, further curbing the upward rise of interest rates.

Finally, the impressive profit performance of S&P 500 companies late in 2014 shows no signs of abating. I believe the evidence is piling up that the forward momentum of the US economy can support higher profits and higher rates.

Why are Americans so Pessimistic about the U.S. Economy?

| For Fórmate a Fondo | 0 Comentarios

¿Por qué los americanos son tan pesimistas acerca de la economía de Estados Unidos? — Photo: Seattle Municipal Archives. Why are Americans so Pessimistic about the U.S. Economy?

Five years after the Great Financial Crisis (GFC), despite improvements in GDP growth and employment, the U.S. public still seems to be oppressed by a cloud of negative sentiment. A recent PewResearch Survey found that a majority of Americans still perceive the economic climate as poor or fair at best (83%), a level still far below pre-crisis sentiment. Mike Temple, portfolio manager of the Pioneer Dynamic Credit Fund, explains the reasons for this pessimism.

In the eyes of many, a freight train of seemingly unsolvable problems –cost and quality of education, income disparity and structural unemployment– is leading to an accelerating decline of the U.S. and a possible near-term repeat of the GFC that ravaged investor portfolios. “We don’t deny that many daunting challenges lie ahead. But dynamic, longer-term trends are opening up entirely new avenues of invention and industry, which could potentially usher in an era of stunning growth and prosperity. We are optimists and think it is time to step back from the fear and uncertainty that currently characterizes the public mood and explore these trends, their impact on the economy and their implications for investors”, said Temple.

The Root of The Problem: What Happened to the Jobs?

“We believe much of the pessimism is rooted in the challenges that the labor sector is facing. The chart below provides evidence that the rate of recovery in employment, in the last two recessions, has slowed dramatically, which has led to a national debate as to whether the rise in unemployment is structural (permanent) or merely cyclical”, affirm the portfolio manager.

Enlarge

The Federal Reserve believes that the U.S. unemployment story remains largely cyclical (translation: all we need is a robust recovery). Some distinguished voices suggest that we have entered an era of “stagnation” and need to lower our expectations, said Temple, believing the employment challenge is evidence of an economic malaise brought on by an era of diminishing innovation and demographic headwinds. “While we agree with the Stagnation argument that the demographic tailwind of the Baby Boom era is behind us, we are convinced that the longer-term employment problem is linked to the technological replacement of human workers“, says Pioneer Investments research.

The Weak Employment Cycle Began a Long Time Ago

The weak employment cycle began a long time ago with the deceleration of the labor force growth driven by secular trends, which is the foundation of the Stagnationist argument – demographics, including retiring baby boomers, female labor and immigration.

The “participation rate” (the share of the working-age population that is actually in the labor market) has been on the decline since 2000 as more people retire and leave the workforce. However, it is the younger population and the most productive sector of the workforce (25-54 year olds) that is the key driver. This segment should be the most resilient to cyclical and demographic trends, but it has clearly suffered a setback.

From Geographical Outsourcing to Technological Outsourcing

Growing competition from China is one reason for structural weakness in the U.S. job markets, explain Temple. Relocation of manufacturing to areas of the world, where labor was dramatically cheaper resulted in a loss of jobs in the U.S. Despite losing 7 million manufacturing jobs over three decades and manufacturing declining as a percentage of GDP (currently 13%, down from high teens in 1990’s), the absolute size of manufacturing output still grew. Other major sectors such as Construction, Mining, and Information have also experienced a broad decline since the beginning of the 21st century.

“Yet over this time frame, the economy has continued to grow. What gives? We believe that the geographical labor arbitrage that took place in the manufacturing sector over the past 25 years masked a wider phenomenon of technological labor arbitrage. And it is technological arbitrage – which we will examine in our next blog – that will dramatically shape th U.S. economy in the coming decade”, concludes Temple.

Higher Costs on the Horizon as Tax and Regulatory Changes Continue to Bite

| For Fórmate a Fondo | 0 Comentarios

Asset managers, pension funds, banks and insurers expect to be spending more on tax and regulatory-related change in 2015 and for some years beyond, according to a new poll by BNY Mellon.

The poll, conducted at BNY Mellon’s recent third annual Tax and Regulatory Forum in London, found that 71% of the almost 250 delegates attending the event expected to see higher costs in the coming year compared to 2014.

While at the start of the event only 41% felt tax and regulatory-related costs would increase in 2015 – and 5% expected to see spending decline – by the conclusion of the day’s programme, which explored some 20 tax and regulatory changes, the consensus among delegates had shifted significantly.

Key findings of the poll included:

UCITS V will be a key focus for providers and clients alike in 2015. 43% of delegates believe the cost of compliance will be higher than for the Alternative Investment Fund Managers Directive (AIFMD), with 29% saying it would be about the same or less.
As was the case with AIFMD, delegates were concerned about the proposed timing of upcoming regulatory changes and the potential for another bottleneck around compliance and approvals to materialise in Q1 2016.
At this stage 65% of delegates polled were undecided as to when they will implement the necessary changes mandated by UCITS V.
Questioned as to when they expect to see the current wave of regulatory change to materially recede, 38% of delegates said 2017, while 54% said never.
When asked about outcomes for investors, responses echoed findings from previous BNY Mellon surveys. 51% of delegates expected investors will see higher costs and less choice – but also better protection.
There was marked optimism – 82% of delegates – in that firms also see some opportunities arising from the current changes, with half of those respondents saying these opportunities would be material to their own business.
Asked to identify those opportunities, 38% said cost savings, while 24% cited new markets and new asset classes. Only 15% identified new product developments.

Paul North, head of product, Europe, Middle East and Asia at BNY Mellon, said: “There seems to be a consensus that the next two years will be the most demanding in terms of tax and regulatory work and costs. Despite this, we also note the continued optimism among asset managers when they consider their longer term prospects around, and ongoing interest in, reducing costs and maintaining the pace of product development.”

“The global trend towards tax transparency is at the heart of regulatory reform,” said Mariano Giralt, head of EMEA tax services at BNY Mellon. “The challenge for financial institutions is to keep pace with a host of new initiatives which include FATCA, the OECD’s Common Reporting Standard and potentially a Financial Transaction Tax which would cover 11 EU countries. These initiatives are adding significant compliance costs for financial institutions.”

China Balances New Appetites with Food Safety

| For Fórmate a Fondo | 0 Comentarios

El gobierno chino considera la seguridad alimentaria como una prioridad — Photo: Raphael Labbé. China Balances New Appetites with Food Safety

Over the last decade, China’s disposable income per capita increased more than threefold at a compound annual growth rate of 12.3%. With rising consumption power, China’s population is spending more on food and beverages, not only in greater quantities but also on higher quality products.

That’s generally good news for food and beverage firms focused on China. Unfortunately, also on the rise has been the number of food safety issues in the country. This has affected items ranging from sausages to watermelon to baby formula, to name a few cases. Most recently, recycled oil from restaurant waste in Taiwan entered into the supply chain of hundreds of food manufacturers there, tainting several prominent brands that export products to China. Such cases have reinforced general consumer mistrust, even in well-established brands. Thus, people feel that they need to better self-regulate and avoid or limit most processed foods to minimize their exposure to potentially harmful chemicals and preservatives. By way of comparison, the average Chinese already consumes only a quarter of the amount of processed foods that the average American consumes.

Highlighting food safety as a priority, China has taken steps to improve nutrition and food manufacturing—efforts that were outlined for the first time in its last Five Year Plan (2011–2015). Furthermore, in 2013 China’s Ministry of Health mandated that processed food manufacturers disclose the nutritional value of their products using a standardized labeling format. As a result, consumers now have more data with which to make better-informed choices.

Some local businesses are addressing the issue of trust head on by proactively disclosing the source of their ingredients. During my recent research trip to Guangzhou, I ate at a popular Sichuan restaurant that promotes the memorable tagline “oil is used only once.” I decided to visit this restaurant after reading about its philosophy of using only the freshest ingredients. Its success was evident as there was a wait of more than two hours for a table.

Gaining, and especially rebuilding, consumer trust in China’s food and beverage industry will take time. There will inevitably be more scandals related to food safety. However, with each visit to China, I am encouraged to see progress being made toward a safer tomorrow, unleashing the strong underlying consumer demand and driving long-term sustainable growth in the food and beverage sector.

Column by Hayley Chan, 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.

Investec: Quality Businesses Typically Create Dependable Earnings Growth in Difficult Market Circumstances

| For Fórmate a Fondo | 0 Comentarios

Investec: “Las empresas de calidad típicamente son capaces de inspirar confianza en entornos como el actual" — Photo: Clyde Rossouw, head of Quality at Investec Asset Management. Investec: Quality Businesses Typically Create Dependable Earnings Growth in Difficult Market Circumstances

Clyde Rossouw, Head of Quality at Investec Asset Management, explains his outlook for 2015.

What has surprised you most in 2014?

In terms of market performance the biggest surprise in 2014 has probably been the strength of the US stock market compared to most other markets around the world. In fact, it has been the only game in town; we have had a strong dollar and a great performing US stock market almost at the expense of everything else. We know that at the margin people have had the expectation that the US was getting better and that looks like it is running its course now.

How will ‘quality’ companies fare in 2015?

The ‘quality’ businesses we target have typically been able to create dependable, meaningful earnings growth in difficult market circumstances such as we have now, i.e. falling bond and commodity prices. Therefore, we would expect to see a similar consistency of earnings in 2015. In the past, when market participants have started to look for more dependability, quality assets have moved back into focus. As a result, we would expect a relative re-rating of such assets and that is typically the type of business in which we would look to invest in our strategies.

Where do you see the greatest opportunity in 2015?

We are focusing on two distinct categories: Companies that have pricing power and business models that are able to embrace ‘disruption’ risk.

Typically, businesses that have pricing power are able to put through inflationary or above inflationary rates of increases in their product prices. Tobacco is an obvious example: every year excise duties go up all around the world and even though the incidence of smoking is declining, tobacco companies have this pricing power mechanism built into their business model and are able to put up prices.

The other opportunity that we believe investors should focus on is businesses that have very strong market shares or business models that are able to embrace disruption risk. Technology is changing the way in which businesses have to operate. Therefore, investing in companies that are part of the disruption, but at the same time have very strong cash-generating business models, such as Microsoft, is, we believe, one way of offsetting some of the pricing risks that are at play in the market place.

What are the biggest risks to these views?

The biggest risk to any equity-based investment strategy would be if markets were to be just dismal and disappointing. We have had various episodes in the past, such as the financial crisis in 2008/9, where there was no obvious tailwind for stock market performance, and also in 2011, when there was a fear the euro zone might implode.

The biggest risk for us, therefore, is that even though we are invested in businesses that we think are more dependable in terms of their earnings, there could potentially be a significant drawdown because they are part of the equity markets.

How are you positioning your portfolio?

The businesses we invest in are typically of high quality. We also have sector preferences and have done a considerable amount of work looking at which parts of the market are able to produce companies that have intrinsically high quality characteristics. So, in terms of the natural leanings in our portfolio, we will always have a relatively high weighting in consumer staple names, certain parts of the pharmaceutical market and also within areas of technology. This does not mean that other parts of the market do not interest us, but generally they will have smaller weightings.

A cornerstone philosophically of the way we construct our portfolios is what some people would conceive to be inherent biases. But, based on academic evidence, we would rather invest in parts of the market where we believe we can maximise our probability of investment success.

In terms of individual stocks, our top ten holdings comprise a technology company, three pharmaceutical companies, a non-bank financial stock and a range of consumer staples companies with a specific focus on beverages, food, tobacco and home & personal care products. We still see opportunities across the board, but it is very much motivated by bottom-up opportunities and looking for superior businesses that have those key characteristics.

Trends in Technology for 2015

| For Fórmate a Fondo | 0 Comentarios

¿Qué tecnologías darán que hablar en 2015? — Foto: Phsymys. Trends in Technology for 2015

The rapid pace of both innovation and obsolescence in technology offers a constant flow of investment opportunities worldwide. Hyper-connectivity, cyber security, smartphones, the “digital wallet” and Big Data are among the major themes three technology analysts from across Natixis Global Asset Management are closely following. They share their insight along with 2015 outlooks for technology in the U.S., Europe and Asia.

Tony Ursillo, CFA, Equity Analyst, Portfolio Manager Loomis, Sayles & Co. explain: “On the consumer technology side, we are intensely focused on the relentless shift to mobile smartphone usage. Apple’s introduction of the iPhone in 2007 marked the beginning of the modern era. In those seven years, smartphones have achieved an installed base of over two billion users globally, with more than one billion new smartphones being sold every year”.

While the early play on mobile was oriented around device sales, including tablets, “we believe the more lucrative opportunity now revolves around expanding usage of smartphones by that already installed base. We are focused on companies that offer compelling applications or solutions that can be adopted by that base”, says Ursillo.

Expanding the social network

“Within the corporate or enterprise end market, we see two powerful trends that are far outpacing the trend line of about 3% growth in information technology (IT) spending”, tells the portfolio manager. The first is the shift of IT resources to “the cloud.” The cloud can simply be thought of as a hyperscale data center environment managed by an IT vendor who acts as a servicer, providing access to resources that historically would have been implemented and managed on premise by the enterprise itself.

The second powerful enterprise trend, continues Ursillo, is the heightened concern around securing enterprise data. High profile credit card breaches at retailers such as Target, Home Depot, and Neiman Marcus, as well as online sites like eBay, have put the spotlight on how vulnerable the payment information and other personal data of tens of millions of U.S. consumers are to an increasingly sophisticated hacker community. And that has made security breaches not just a network risk, but a business risk.

Is the “digital wallet” here to stay?

It´s no surprise that many companies are positioning themselves to gain a foothold in the online and mobile payments space. Giants like Apple, Amazon, Google and PayPal already have brand-name recognition and can leverage hundreds of millions of existing customer accounts with attached credit card or bank account information. “We maintain our belief, however, that the vast majority of these transactions will continue to traverse the existing financial network infrastructure, largely controlled by Visa and MasterCard”.

Meanwhile, Hervé Samour Cachian, Head of Value & Opportunities – European Equities says that Natixis Asset Management technology focus today is on everything that is related to Hyperconnectivity – the use of multiple communication systems and devices that allow us to remain constantly connected to networks and streams of information. This includes trends like Internet of Things, Big Data analytics, digital commerce & payment and social media. There are numerous applications, including driverless car technology, Google GlassTM and contactless payment systems that could be game-changers in the future.

“Emergence of the digital economy is the main theme in technology for us. Digitalization is a tremendously disruptive force in society and it knows no boundaries. Companies that fail to amend and to adapt their business model accordingly could be at risk, while companies that are preparing for this new paradigm can be offered multiple opportunities to reap the benefits”, explains.

“We are finding a few European tech companies connected to digital payment solutions that appear attractively valued today. For example, Paris-based Ingenico, which is a global leader in seamless payment solutions for mobile, online and in-store channels, combines three key drivers in our view: structural growth, market share gain and expansion up the value chain. We believe it could benefit long-term from the adoption of chip cards in the U.S. and the emergence of mobile payments. Another area of growing interest interconnected to it all is digital security. Within this space, European firms such as Gemalto are leading providers of innovative digital security solutions globally”, affirms Cachian.

Outlook for European technology

Despite a gloomy macroeconomic picture for Europe and other parts of the world, Natixis GAM have a positive outlook for the technology sector in 2015. Search for growth could lead investors to increase their exposure to the tech-related stocks and especially the ones that either sell or create cutting-edge products. “We believe that Internet of Things is the area of technology that could offer the most promising opportunities in 2015 – driven by gadgets and the widespread adoption of wearable technology.”

Ng Kong Chiat, Equity Analyst, Portfolio Manager of Absolute Asia Asset Management conclude that 2014 extended the strong growth pattern for the technology sector seen over the past few years. Asia-ex-Japan technology stocks were driven by the launch of Apple’s iPhone 6 and iPhone 6 Plus in September. They were also boosted by the expiry of Microsoft’s support for Win XP earlier in the year – which gave rise to and supported a corporate PC replacement cycle. Further penetration of smartphones into the emerging markets and the moderate economic recovery in the developed markets, which prompted more corporate technology spend, also supported growth in the industry this year.

“But these positive factors in 2014 could turn into hurdles for the industry in 2015, as they have created a large base and are beginning to lose momentum. In addition, some of this growth was linked to a one-time event which we may not witness in 2015. Accordingly, we believe there will be less impact from the next version of the iPhone to be released in the New Year, as well as other Apple products. Also, we believe there will be a less robust PC replacement cycle in 2015, slower penetration of smartphones worldwide and more moderate technology capital expenditures by global companies. With such a backdrop, it may be trickier to navigate in the technology space”, argues.

The Biggest Risk for the High Yield Market in 2015 is the Energy Sector, Says Henderson

| For Fórmate a Fondo | 0 Comentarios

Kevin Loome, Head of US Credit and Co-Manager of the Henderson Horizon Global High Yield Fund, relates his experience in 2014, when the interest rates were key, and talks about his outlook for 2015.

What lessons have you learned from 2014?

The main lesson that was reiterated to me during 2014 is that when you manage a credit product, do not try to predict interest rates. I think we stayed true to our colours and stuck to credit selection as opposed to interest rate forecasting. I also learned that usually the sector of the market that borrows the most money will eventually be the worst performer, as was the case with the energy sector, which now accounts for almost 15% of the US high yield market and was by far the largest bond issuing sector in 2014.

Where do you see the most attractive opportunities within your asset class in 2015 and what are the biggest risks?

The most attractive opportunities in the US high yield market for 2015 are in bank loans, mining companies and energy and resource companies. Bank loans have become attractive as retail fund flows have reversed in the US and, if selective, it is possible to find opportunities in loans with good covenants, asset security and floating rate interest, which will be helpful when interest rates eventually rise. The mining, energy and natural resource companies present an opportunity because of valuations. These companies sold off throughout 2014 and are now trading at levels well below asset value in some cases. If we are patient and selective we may find some good investment opportunities in these sectors this year.

The biggest risk for the high yield market in 2015 is the energy sector. If oil stays below $65 per barrel for a sustained period of time we could witness a significant uptick in defaults in the high yield energy sector. The problem is that these companies are incredibly capital intensive and rely upon easy access to the debt markets to fund their business plans. To the extent that these companies become liquidity constrained for an extended period of time, we could see a decent number of defaults and restructurings. While these companies have asset values in the form of reserves, there has been no effort as yet by investment grade energy companies to acquire any of the high yield energy producers thus substantiating the asset value.

Are you more positive or negative now than you were 12 months ago on the economic and investment outlook, and why?

I am definitely more negative now than I was 12 months ago. The simple reason is that we are one year further into an already extended positive credit cycle. From what we are seeing in the new issue calendar, fear has turned to greed and issuers are getting aggressive when it comes to covenants, pricing, leverage and equity-friendly use of proceeds. In general, companies that we follow have exhausted their ability to cut costs and grow revenues. While most companies have refinanced debt with low coupons and pushed out maturities, their excess free cash flow is being diverted to equity holders at the expense of debt holders. Unfortunately, the desire for further credit improvement on behalf of most of the companies that we follow will continue to wane until we hit the next downdraft in the credit cycle.

Man Group to Acquire From Merrill Lynch the Investment Management Contracts of a US$2.1bn Fund of Hedge Funds Portfolio

| For Fórmate a Fondo | 0 Comentarios

Man Group compra a Merrill Lynch los contratos de gestión de una cartera de 1.200 millones de dólares de fondos de hedge funds — . Man Group to Acquire From Merrill Lynch the Investment Management Contracts of a US$2.1bn Fund of Hedge Funds Portfolio

Man Group has announced that it has entered into a conditional agreement with Merrill Lynch Alternative Investments to acquire the investment management contracts to manage a portfolio of multi-strategy and strategy-focused fund of hedge with total AUM of $1.2 billion. The Acquisition is expected to complete in the second quarter of 2015, subject to certain approvals and consents, including approval of the board of managers and investors of a US registered investment company.

Man Group’s fund of hedge fund arm, FRM, has been selected to manage the Portfolio following a due diligence process which assessed its investment expertise, quality of personnel, investment process and ability to service clients. Following the completion of the Acquisition, Man Group intends to offer the funds to other investors globally as well as Merrill Lynch’s and US Trust’s wealth management clients.

The Acquisition of the Portfolio follows Man Group’s recent Acquisition of Pine Grove Asset Management LLC. The strategic rationale for the Acquisition includes:

Continued participation in the consolidation of the fund of hedge fund industry.
Further expansion of Man Group’s footprint in the US.
Increased commitment to the US wealth management channel.
Synergistic partnership allowing Man Group and Merrill Lynch to deliver high quality
investment solutions for clients.
Broadened portfolio of US registered investment companies and complementary fund of hedge fund products.
Expansion of FRM’s existing co-mingled fund platform and managed accounts.

The assets, which will be acquired, are spread across 17 multi manager hedge fund and managed futures fund of funds. One fund is registered as an investment company with the US Securities and Exchange Commission, while the others are private. All of the funds would complement Man Group’s and FRM’s existing product offering, with 3 multi-strategy funds and 14 strategy-focused funds. This would include emerging markets, equity long / short, global macro, relative value, managed futures and other credit-focused products.

The consideration will be paid to Merrill Lynch in cash from existing resources, and comprises: An upfront payment of $2.9 million, paid upon completion of the transaction, 35% of the net management fees generated annually by the Portfolio, payable annually for five years and the total payments under the earn-outs cannot exceed $30.0 million.

As at 31st October 2014, the Portfolio generated run rate net management fees of $6.2 million. The transaction is structured as an asset purchase and, as such, no additional costs are expected to be incurred, nor synergies generated. The regulatory capital requirement associated with the Acquisition is expected to be approximately $10.0 million.

Michelle McCloskey, Senior Managing Director of FRM, stated, “We are excited that Merrill Lynch has selected FRM as the steward of its world-class portfolio of multi-strategy and strategy-focused funds, supported by a proven distribution platform. We look forward to continuing to deliver high quality products and services to Merrill Lynch’s clients, while expanding the investor base globally as investors increasingly seek exposure to alternative investments through managers like Man Group.”

Have Equities Become Too Expensive?

| For Fórmate a Fondo | 0 Comentarios

Global equities continue to offer good value, though Threadneedle beleives the case for active management has seldom been stronger given the diverging performance of regional markets and the emergence of powerful trends that are driving individual stocks.

The price to earnings ratio of global markets is currently below the average seen since 1997, which would certainly seem to suggest that equities are not overvalued.

Ampliar

However, there are marked variations in terms of regions (as measured by trailing PE ratios). Surprisingly, Europe is among the more expensive markets despite its well-known problems, but if one looks at PEs on a forward basis, Europe is more attractively valued. This reflects a belief that European companies will grow earnings at a faster pace than those in other parts of the world. While the weaker euro may support earnings growth, we are concerned that expectations may not be met given the economic difficulties facing the region.

Dividend yields also provide an interesting measure of the relative attractiveness of equities around the world. Globally, sovereign bonds yields are low (below 1% in Germany and Japan, for instance), whereas dividend yields on world equity markets average around 2.5%. Not only is this yield attractive at face value, it will grow over time – making equities an attractive option for investors in a low-growth environment.

The case for US equities

Although dividend yields are relatively low in America, the picture changes markedly once you add in the impact of share buybacks. Including these, US companies are actually returning more capital to shareholders than their counterparts around the world. There are other good reasons for investing in US equities. The domestic economic recovery is continuing and the shale energy revolution is providing the US with a competitive edge in a wide range of sectors, and is boosting the country’s external finances. Meanwhile, corporate earnings growth is solid, helped by good cost management and the effective use of capital. Low interest rates will support equity valuations and we believe the main risk facing the US economy is how it reacts when interest rates start to increase.

Profit margins are at historically high levels. Threadneedle believes that they are likely to moderate in the long term, but remain high over the next few years at least given that:

Wage inflation is controlled and the participation rate can rise as economy improves.
Capital expenditure plans are conservative, with companies favouring capital returns or M&A.
Energy costs are particularly low in the US, reflecting the development of shale resources.

Thus, the asset management firm believes that US companies deserve their premium ratings.

Opportunities in Japan

Threadneedle is also overweight in Japan, where the government of Prime Minister Shinzo Abe appears to be succeeding in transforming the deflationary landscape of the past 20 years or so via its “three arrows” policy programme into one of inflation. Thus, we now have underlying inflation of around 1.5% in Japan, a development that is encouraging people to go out and spend rather than waiting for the price of goods to fall even further. The first two arrows – monetary stimulus via a massive programme of quantitative easing and fiscal stimulus via increased spending are already in place. Investors are now concerned that the delivery of the third arrow of structural reforms to the economy, including labour reforms, deregulation and trade agreements is making disappointing progress.

However, Threadneedle believes that investors would do better to regard the third arrow as a form of acupuncture with lots of little needle pricks taking place across the economy. Thus, Threadneedle points out that we have seen progress in a number of areas, including the ability of companies to make redundancies, and the encouragement of more women and migrants into the labour force.

There has also been significant progress in terms of corporate governance. Thus in 2013, the authorities launched a new stock index. The JPX-Nikkei 400 aims to showcase the country’s most profitable and shareholder-friendly companies and it is having a major impact. On learning that it was not in the index, the toolmaker Amada, for example, promptly announced that it would pay out half of its net profits in dividends, and use the other half to buy back stock, and improve corporate governance by appointing two independent directors. Thus, the new index is changing corporate behaviour and the third arrow is bringing about a major improvement in returns. Indeed, Threadneedle believes returns on equity can almost double over a period of three to four years as companies are increasingly run for the benefit of shareholders rather than employees.

Our overall strategy in global equities

Given the low growth environment that we envisage over the next few years, Threadneedle is focusing upon businesses which are not dependent upon a growing economy to expand their earnings. They favour companies that are fuelled by secular growth trends. These include:

Disney: benefitting from the rising value of differentiated media content.
Facebook and Google – beneficiaries of increasing advertising on the internet.
TE Connectivity (electronic engineering) – benefiting from the rapid growth of electronic components within cars in areas such as safety, infotainment, emission control, and fuel economy.

Overall, a positive outlook for active managers

In conclusion, there a number of reasons to be optimistic about the outlook for equities including the fact that although valuations have risen they are not high in historical terms, while cash returns to shareholders provide support. However, Threadneedle is also seeing a growing divergence in the performance of individual economies around the world and the rise of nationalism and geopolitical instability. The asset management firm believes this underscores the need for an active approach to stock picking, while the prospect of low economic growth over the next few years supports our focus on companies that are well positioned to exploit secular growth trends.

ING IM Hires Convertible Bond Team from Avoca Capital

| For Fórmate a Fondo | 0 Comentarios

ING IM contrata al equipo de bonos convertibles de Avoca — . ING IM Hires Convertible Bond Team from Avoca Capital

ING Investment Management has confirmed the hire off Tarek Saber and Jasper van Ingen from Avoca Convertible Bond Partners LLP to add convertible bond investment capabilities.

Having joined in November, Saber and Jasper respectively fulfill the roles of investment team manager Convertible Bonds and senior portfolio manager Convertible Bonds, based in London. The two previously managed the Avoca Convertible Select Global Fund, which launched in April 2012.

Tarek Saber has more than 27 years of experiences in convertible bond markets. He joined Avoca in 2011 where he led the convertible bond business. Prior to joining Avoca, Saber was at ABP/APG, where he set up and managed the successful corporate opportunity strategy fund (COS fund), which consisted of investments in convertible bonds and equity linked instruments. Before this, he spent seventeen years in investment banking as global head of convertible bonds at HSBC Investment Bank and as head of European convertible bonds and global head of global depository receipts trading at Schroder Securities.

Jasper Van Ingen has more than 10 years of experience in convertible bond markets. Between 2004 and 2010, he was senior portfolio manager at APG’s COS Fund. Van Ingen played an important role in the development of the COS Fund. He was responsible for the day to day management of the fund in all aspects, ranging from fundamental analysis to trading and corporate restructuring. Before joining the COS Fund, Van Ingen worked as a portfolio manager at APG’s $5 billion Hedge Fund investment department in Amsterdam and New York.