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The Taper Tantrum 2022 is Underway

wallet-g3cd6b944c_640 — Pixabay CC0 Public DomainDólares estadounidenses . Taper Tantrum

The U.S. stock market started 2022 with the S&P 500 hitting an intraday record high on January 4 as the Omicron variant’s disease severity was downgraded. The next day, when the minutes of the December 15 FOMC meeting revealed a tightening bias that included the “run off” of the Fed’s $9 trillion balance sheet, the financial markets turned negative abruptly. Stocks declined sharply and the ten-year U.S. Note yield spiked higher. ‘Taper Tantrum’ 2022 was underway.

So far, how does the May 2013 Bernanke quantitative tightening surprise compare? To date 2022, the S&P 500 is down 5.6% vs 4.9% in 2013 and the ten-year U.S. Treasury yield is 27% higher vs 35% in 2013. In 1955, Fed Chairman Martin said the Fed’s job is ‘to take away the punch bowl just as the party gets going.’ How will Jerome Powell compare to Paul Volcker? On Saturday, Oct. 6, 1979, Fed Chairman Volcker held an impromptu evening news conference, dubbed the ‘Saturday Night Massacre.’ Mr. Volcker declared war on inflation and announced the Fed’s monetary policy would now control interest rates by targeting the money supply, with markets setting interest rates. The post-war Keynesian era of big government run economic policy was fading.

Job creation estimates for the January U.S. payrolls report released on February 4 were far below the actual data as the labor market recovery strengthened and the Omicron surge slowed. Bottom line: the U.S. job market is tight and wages are rising. The FOMC’s December 15 minutes also said the job market is ‘very tight.’ The next inflation data release is the CPI estimated to have annualized at 7.3%, the largest rise since 1982 when Mr. Volcker was ‘slaying the inflationary dragon.’

Market volatility remained throughout the month of January, with the S&P 500 declining as much as 11.5% for the month, while the technology-heavy Nasdaq slid as much as 16%. The volatility spilled over into merger arbitrage markets where spreads widened as investors’ risk appetites were tested, and downsides recalibrated. Despite volatility in markets, widened merger arbitrage spreads, and regulatory setbacks, we come out of a challenging month optimistic about the opportunities ahead. M&A activity remains robust in 2022 including the announced acquisition of Activision by Microsoft for $74 billion, and the acquisition of Citrix Systems by Vista Equity for $17 billion.

January was a difficult month across the markets and convertibles were no exception. With growth multiples moving lower, many equity sensitive convertibles moved lower with stocks. Additionally, with interest rates rising, the fixed income equivalents in the market trended lower as well. While this hurt performance for the month, we believe it presents an opportunity as there are now some convertibles trading at more attractive levels than they have in some time, and underlying equity valuations have become more reasonable.

We are of the mind that security selection will be key to performance this year. Typically convertibles do well in a rising interest rate environment, but there are two factors that could cause things to be somewhat different this time. First is the large amount of convertibles with 0 yield and high premium. Most of these are trading below par and are now considered a fixed income equivalent. These will be weak in a rising interest rate environment as investors demand greater yield to maturity. Additionally, given the majority of convert issuers are growth oriented, a continued re-rating of growth stock multiples could weigh on the equity sensitive side of the market. Given that backdrop our focus remains on total return convertibles with some high conviction equity sensitive names.

______________________________________

To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:

GAMCO MERGER ARBITRAGE

GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.

Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.

Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476

GAMCO ALL CAP VALUE

The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.

GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155

GAMCO CONVERTIBLE SECURITIES

GAMCO Convertible Securities’ objective is to seek to provide current income as well as long term capital appreciation through a total return strategy by investing in a diversified portfolio of global convertible securities.

The Fund leverages the firm’s history of investing in dedicated convertible security portfolios since 1979.

The fund invests in convertible securities, as well as other instruments that have economic characteristics similar to such securities, across global markets (but the fund will not invest in contingent convertible notes). The fund may invest in securities of any market capitalization or credit quality, including up to 100% in below investment grade or unrated securities, and may from time to time invest a significant amount of its assets in securities of smaller companies. Convertible securities may include any suitable convertible instruments such as convertible bonds, convertible notes or convertible preference shares.

By actively managing the fund and investing in convertible securities, the investment manager seeks the opportunity to participate in the capital appreciation of underlying stocks, while at the same time relying on the fixed income aspect of the convertible securities to provide current income and reduced price volatility, which can limit the risk of loss in a down equity market.

Class I USD LU2264533006

Class I EUR LU2264532966

Class A USD LU2264532701

Class A EUR LU2264532610

Class R USD LU2264533345

Class R EUR LU2264533261

Class F USD LU2264533691

Class F EUR LU2264533428

Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to ﬁnd out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reﬂect the manager’s current view of future events, economic developments and ﬁnancial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.

Amundi Creates the Amundi Institute to Bring Together its Research, Market Strategy and Asset Allocation Advisory Activities

| For Beatriz Zúñiga | 0 Comentarios

Blanqué Amundi — Foto cedidaPascal Blanqué, presidente de Amundi Institute y miembro del Comité Ejecutivo de Amundi.. Amundi crea la división Amundi Institute y reúne en ella sus actividades de análisis, estrategia de mercado y asesoramiento en asignación de activos

Amundi has announced the creation of the Amundi Institute, a new division to strengthen the advice, training and day-to-day dialogue to help their clients better understand their environment and the evolution of investment practices in order to define their asset allocation and help construct their portfolios. In this sense, the management company is responding to needs that it had been detecting for some time.

The Amundi Institute’s objective is to strengthen the advice, training and day-to-day dialogue on these subjects for all its clients – distributors, institutions and corporates – regardless of the assets that Amundi manages on their behalf, explained the firm in a press release. This new division brings together its research, market strategy and asset allocation advisory activities.

The Amundi Institute will also be responsible for conveying Amundi’s convictions and its investment and portfolio construction recommendations, thereby furthering its leadership in these areas. This new business line will continue to serve Amundi’s investment management teams and will contribute to strengthening their standards of excellence.

With an initial staff of around 60, the Amundi Institute will soon be strengthened to serve these new objectives. Pascal Blanqué has been appointed as Chairman and will supervise this new business line. He will be supported by Monica Defend, who will be Head of Amundi Institute.

“Inflation, environmental issues, geopolitical tensions… there are many structural regime changes underway. Investors across the board expect a deeper dialogue and sophisticated advice to build more robust portfolios”, said Blanqué.

Vincent Mortier will succeed Pascal as Amundi’s Group Chief Investment Officer. Mortier commented that the creation of the Amundi Institute will enhance the contribution of research to all of Amundi’s asset management activities so that they can “continue to create highperforming investment solutions over the long term, adapted to the specific needs of each client and taking into account all the parameters of an increasingly complex environment.”

Lastly, Matteo Germano, Head of Multi-Asset Investment, will be Deputy Chief Investment Officer.

GAM Partners with Liberty Street Advisors in the United States to Invest in Late-Stage Innovation Companies

| For Beatriz Zúñiga | 0 Comentarios

CEO GAM — Foto cedidaPeter Sanderson, CEO del Grupo GAM Investments.. GAM se asocia con Liberty Street Advisors en Estados Unidos para invertir en la última fase de firmas tecnológicas a través del private equity

GAM Investments has entered into a strategic partnership with the Liberty Street Advisors team specialized in investing in late stage companies in the United States. Its aim is to provide its clients access to these firms through private equity investments.

In a press release, the asset manager has revealed that they will invest in “leading late-stage privately-owned technology and innovation” companies with high growth potential. The team at Liberty Street is deeply experienced in private markets investing and has an extensive track record investing in this sector.

In partnership with Liberty Street, GAM plans to launch a capability which will leverage the expertise of Liberty Street’s private markets investment team. This capability will give clients the opportunity to gain exposure to a market which has historically been difficult for them to access.

The firm has highlighted that growth equity is a segment of the private equity asset class which sits between venture capital and traditional private equity and “is expanding at unprecedented levels, with disruptive technology-driven growth across multiple sectors and industries“. This growth has led to a proliferation of unicorns, with more than 900 venture capital backed companies currently valued at over USD 1 billion and many more on a similar trajectory.

In this sense, by investing in these types of late stage high-growth, innovation companies the Liberty Street team seeks to participate in their potential appreciation while they are under private ownership.

“We are delighted to partner with Liberty Street to provide our clients with access to leading privately-owned companies. The team at Liberty Street has deep, multi-decade investing experience, as well as established relationships within the venture eco-system, and is an ideal partner for us”, said Peter Sanderson, Group Chief Executive Officer at GAM Investments.

He also pointed out that an increasing number of their clients are seeking to diversify their portfolios by including longer-term private asset investment strategies. “In our view, privately-owned companies in their later-stage nonpublic funding rounds could offer investors strong long-term performance potential, while their historical downside resilience and lower volatility compared to public equities also make this asset class attractive for portfolio diversification”, he added.

Meanwhile, Kevin Moss, Managing Director at Liberty Street, commented that they are seeing companies stay private for longer, driven primarily by regulatory changes, ease of business model development in the private sphere and a larger pool of available private capital. “A significant portion of these companies’ value appreciation occurs prior to entry into the public markets, at mid or large cap size. We believe that late-stage, private growth companies can present an attractive balance of risk and return for investors, compared to early-stage venture investments and public equities”, he concluded.

China’s New Roar in the Year of the Tiger

| For Meritxell Sedo | 0 Comentarios

China’s roar has changed entering the year of the tiger. China will now emphasize quality over speed, not GDP growth at all costs.

2020 feels more like a decade ago than a year ago. The strong results provided by Chinese equities and bonds, the strong appreciation of the Renminbi, and the belief that a more balanced policy under President-elect Biden would occur; fueled their optimism going into 2021.

While KraneShares expected monetary and policy tightening going into 2021, they underestimated the intensity and reach of the tightening cycle.

Rapid developments were harder to predict, especially during a year of regulatory reconfiguration for one of China’s most lucrative sectors. Chinese internet companies were the targets of a broad regulatory campaign in China addressing anticompetitive behavior, cybersecurity risks, consumer data protection, and the financial risks posed by previously unregulated fintech companies. Even though 2021 was a challenging year for China, it was just a single year in the context of a much bigger opportunity.

2022 is an important year politically for China. China’s behemoth economy indeed suffers from imbalances with internal and external regulatory risks that could cost investors, especially in the short term. KraneShares believes the government is committed to dealing with these imbalances through reform and regulations. President Xi is expected to secure a third term during the Chinese Communist Party Congress (CCPC) assembly in the fall of 2022 and KraneShares is of the opinion that the government will seek to strike a positive tone in politics and business as the country continues its transition to high-quality growth. The US-China relations may see a moderate improvement in 2022 after their, albeit limited, progress over the past year. In absence of willingness to seek catastrophic confrontation, KraneShares believes the impact of US-China relations on markets will be neutral in 2022. The political importance of 2022 is also why they think China adopted a rapid-fire approach concerning internet regulations in 2021.

China’s policy darlings, which include health care, clean technology, 5G, and semiconductors, will continue to see support based on the most recent statement from the latest Central Economic Work Conference, which sets the government’s economic and financial policy framework each year. The takeaways from the Central Economic Work Conference, which was attended by senior political leaders in China, emphasized the stability, speed, and quality of growth in 2022. The conference acknowledged that China’s economy faces three pressures: demand contraction, supply shock, and expected weakness. The panel recommended that policy support, whether fiscal or monetary, be frontloaded in 2022. The recommendation explains the reserve requirement ratio (RRR) and loan prime rate (LPR) cuts in December, which KraneShares assumes will set the tone for a looser monetary policy in 2022.

In 2022, the country will continue to advance on many fronts, including climate, electric vehicles, health care, the internet, cloud, high-end manufacturing, and more. However, China’s leading industries, especially the internet sector, are undergoing an important shift from simply capturing ever more consumer spending to a focus on material innovations and the localization of import-reliant supply chains.

Consumer sentiment, the property sector, and China’s zero COVID policy are some of the risks facing China in 2022. The sporadic lockdowns in various Chinese cities and ports due to COVID-19 outbreaks hurt consumption and the feeling of security. Furthermore, real estate regulations aimed at setting a new normal in the property market hurt consumers’ sentiment. The recent earnings season in China confirmed consumers’ fatigue and household savings rates have surged since 2020.

Growth targets for 2022 will be more challenging to attain this year compared to last, especially as the favorable base effect recedes. Slowing GDP growth is to be expected, given the level of development that China has already achieved. KraneShares believes China will do whatever it takes to maintain the sentimental 5% level of GDP growth and we know skeptics will sound the alarm on the GDP level dipping below 5% for the first time, even though achieving 5% growth in a 16.8 trillion-dollar economy is like adding an economy the size of Germany every 3 to 4 years.

China’s roar may change its tone in 2022, but KraneShares thinks it will remain as loud as ever. As Joe Tsai, Alibaba’s co-founder and Executive Chairman put it during Alibaba’s investors day: “China is not going away.” The event’s tone was geared towards innovation and the future, without legacy industries hindering their progress. It represented what China is all about: innovation and progress.

KraneShares has always been constructive on China, especially in the long term. They encourage investors not to view China as a trade but rather as a long-term investment and encourage diversification across multiple industries to help reduce risks.

To find KraneShares’ in-depth outlook as well as investment opportunities for 2022 and beyond, please visit the following links:

UCITS

US (domestic market)

The Most Challenging Annual Forecasting in Years

| For Cecilia Prieto | 0 Comentarios

The world remains in a state of disequilibrium. While modern civilization has rarely found balance, the range of outcomes tied to central banks optimizing for future growth and political leaders navigating new domestic and international realities stands particularly wide. That makes our annual forecasting ritual more difficult. Last year’s prognostications of a resilient consumer and stubborn inflation proved correct, but a major conflict in Europe and the Federal Reserve’s war on inflation left our market optimism misplaced. Higher interest rates and the prospect of a recession spared neither stocks nor bonds and punished speculative fads along with blue chip stalwarts. For 2022, the S&P 500 was down 18%, nearly returning the index to its 2020 close.

The direction of markets in 2023 and beyond depends largely upon the answers to three questions: (a) will hot and cold conflicts in Ukraine and Taiwan, respectively, stay contained? (b) can the Fed return inflation to the low-single-digits without triggering deep economic and earnings recessions? and (c) given the altered political economic backdrop, what multiple should investors pay for stocks? Despite abysmal sentiment, market volatility remains subdued with inflation data driven rallies and sell-offs punctuating what has generally been a steady grind lower. We continue to await a market uplift (the so-called January effect) as tax loss selling abates.

Uncertainty in the board room and elevated borrowing costs curtailed deals and financial engineering. M&A normalized to pre-pandemic levels, totaling $3.6 trillion in 2022, down 32% from the record-breaking $5.1 trillion activity in 2021, excluding SPACs. Activity by both strategic and financial buyers reawakened late in the year as market dislocations presented bargains too enticing to resist. Portfolios benefited from several deals, including Philip Morris International’s recently completed acquisition of Swedish Match and the announced acquisition of Aerojet Rocketdyne (+20%) by L3 Harris Technologies, Aerojet’s second trip to the altar in as many years. A number of announced spin-offs, including Liberty Braves as an asset-backed company and a fourth separation involving Madison Square Garden could create future consolidation targets. The most active industries were Technology ($720 billion, or 20% of total dealmaking), Energy & Power (13% of deal volume), and Industrials (12% of deal volume). Private Equity accounted for a record 20% of M&A activity in 2022, with total value reaching $785 billion. The U.S. remained the top venue for M&A with deal activity totaling $1.5 trillion, or 43% of worldwide volumes, a similar proportion compared to 2021.

The contracting stock multiples, widening credit spreads and rising interest rates spared few asset classes. Convertibles were caught up in this storm, but there are some positive takeaways for our market. Specifically, convertibles outperformed their underlying equities this year, participating in only 56% of the downside.

The convertible market is now quite fixed income oriented with high yields, high premiums, and low deltas. While this is not the typical profile of our market, it presents a unique opportunity. At current levels, many convertibles should participate in very little equity downside from here. They offer yields to maturity that in many cases exceed the expected annual return of our market over the long term. Some of these issues are trading at double digit yields to maturity despite positive cash flows and growth opportunities. We have seen some companies that have addressed investor concerns by issuing more manageable converts and buying back or exchanging some percentage of their existing debt. This can be an accretive transaction for the company and usually improves the credit. One portfolio holding, Bandwidth, did a transaction like this during the quarter and it was one of our top performing convertibles as a result. As it becomes clear that a company is not on a path to bankruptcy the bonds will move higher regardless of the equity price. This is what we call a credit delta. Additionally, in the event that one of these companies is acquired, the bonds would be puttable at par. This would be a very attractive outcome for bond holders. We continue to look for value in this area of the market and have added a number of these issues to the portfolio.

After a record low year for convertible issuance in 2022, we expect the primary market to rebound this year. The issuance we saw in the fourth quarter came at attractive terms and we expect this to continue as there is a significant appetite among convertible investors for new paper. We believe many companies have delayed coming to the market and converts offer an attractive way for companies to add low cost capital to their balance sheets, particularly as interest rates move higher and other forms of financing such as High Yield become more expensive. Continued issuance allows us to stay current and we expect to selectively layer new issues into our portfolio to maintain the asymmetrical risk profile we are seeking to achieve.

AllianzGI Creates Unit Dedicated to Private Markets Impact Investments

| For Beatriz Zúñiga | 0 Comentarios

To enhance its commitment to impact investing, Allianz Global Investors (AllianzGI) has announced the creation of a dedicated Private Markets Impact unit within its Sustainable investment platform. This new area will be led by Matt Christensen, Global Head of Sustainability and Impact Investing.

The Private Markets Impact unit combines existing equity and debt investing expertise with a newly created impact measurement and management capability. The firm has revealed in a press release that this 12- strong unit, which will be overseen by Christensen, will complete the Sustainability platform created in 2021 to push the boundaries of sustainability for its clients.

Three impact teams

Martin Ewald, Lead Portfolio Manager, heads the Private Equity Impact Investing team, which seeks to invest in real assets and private companies that contribute to solve global environmental and/or social issues. He is currently responsible for EUR 500 million committed through the Allianz Impact Investment Fund and AfricaGrow initiative, and also the Emerging Market Climate Action strategy (EMCA) launched at COP26 by AllianzGI in cooperation with the European Investment Bank.

In this sense, AllianzGI reveals that with a target size of EUR 500 million, EMCA will invest in climate-focused investment funds and projects active in emerging markets and developing countries, with a focus on climate mitigation, climate adaptation, and access to electricity.

Meanwhile, Nadia Nikolova, Lead Portfolio Manager, is heading the Development Finance & Private Debt Impact Investing team, which currently invests in de-risked sustainable loans in emerging and frontier markets. The team brings together the expertise from the AllianzGI Private Credit platform with an impact investing lens. It focuses on building partnerships with Development Finance Institutions and Agencies, Donors and commercial investors to mobilize private capital for sustainable development, and already raised over USD 2 billion since 2017.

Also announced at the recent COP 26, the team manages the vehicle for the recently announced Managed Co-Lending Portfolio Program (MCPP) between Allianz and the International Finance Corporation (IFC), a member of the World Bank Group. “The new program, MCPP One Planet is the world’s first cross-sectoral portfolio of emerging-market loans aligned with the Paris Agreement”, the company explains.

In addition, AllianzGI announced the creation of an Impact Measurement & Management team, led by Diane Mak, and the launch of an impact framework to facilitate the due diligence and selection of investments that contribute to material and positive impact. The approach supports rigorous measurement and management of impact over the lifecycle of the investment to ensure that impact is being delivered. Diane Mak joined AllianzGI in August from Y Analytics where she oversaw TPG Global’s impact assessments and management activities.

“Impact investing is fast-growing out of its niche. Investors want to see a positive change for the planet while generating a return, and impact investing offers a solution to these twin goals. The future growth trajectory of impact investing depends on asset managers demonstrating how the impact can be measured and reported. Our new Impact Measurement & Management approach enables us to measure impact in private equity and debt investments and will allow us to develop further our offering according to the best standards”, said Christensen.

Lastly, Christensen has been appointed as a board member of the GRESB Foundation, a newly established not-for-profit organization that owns and governs the ESG standards upon which the GRESB real estate and infrastructure assessments are based. GRESB, a mission-driven and industry-led organization, provides standardized, validated and transparent ESG data to financial markets. The GRESB Foundation Board will guide the GRESB Standards to ensure they remain investor-led and aligned with responsible investment principles.

The Strongest Year On Record For M&A

| For Cecilia Prieto | 0 Comentarios

usa-g07a63680c_640 — Pixabay CC0 Public DomainEl año más alcista para el M&A. Toro

2021 was a great year for the U.S stock market and economy. Stocks were up for the month, 4^th quarter and year and posted their biggest three year gain since 1999. The strength of the S&P 500’s rally is reflected in its 70 record-high closes during the year, second only to 77 in 1995 back to 1928. The U.S. economy staged a strong recovery as rising demand offset supply chain and microchip disruptions, rising prices, labor shortages, and the drag of mutating COVID-19 infections on the services industries. More economic reopening’s, the consumer wealth effect, and inventory rebuilds bode well for 2022.

The above consensus jump in the core U.S. inflation rate took the FOMC by surprise and pushed the 10-year U.S. Treasury note yield up 60 basis points on the year to 1.51%, the most since 2013, when the yield rose 127 basis points to 3.03%. On May 22, 2013 Fed Chair Bernanke announced the start of a reduction of its quantitative easing bond buying and sparked the bond market’s ‘taper tantrum.’.

Chinese President Xi Jinping focused on the need to keep a “strategic focus” in his 2022 New Year address: “We must always keep a long-term perspective, remain mindful of potential risks, maintain strategic focus and determination, and ‘attain the broad and great while addressing the delicate and minute’.”

M&A activity remained vibrant in the fourth quarter of 2021, totaling $1.5 trillion, the sixth consecutive quarter that M&A exceeded $1 trillion and the second largest quarter ever. The strong fourth quarter brought full year M&A activity to $5.9 trillion, the strongest year on record and an increase of 64% compared to 2020 levels. Excluding SPAC acquisitions, which totaled $600 billion, or 10% of activity, 2021 M&A activity totaled $5.3 trillion, still the strongest year for mergers on record. We believe the drivers remain in place for continued robust deal activity in 2022 and beyond.

2021 proved to be a somewhat lackluster year for convertibles globally. After record performance over the past few years, convertibles finally took a breather, resetting valuations and terms. While new issuance continued to be strong this year, some of it was at unattractive terms. Those large issues that came with no coupons and premiums in excess of 50% tended to underperform and drag the market with it. Finally, convertibles have traditionally been favored by growing companies and the rotation from growth to value played a role. With rising interest rates, growth valuations started to seem a bit excessive and while convertibles outperformed their underlying equities as they moved lower, performance relative to the broader equity markets was disappointing.

Looking forward, we are optimistic for our market this year. First, 2021 was a bit of a reset. The market rejected some of the excessive terms and with growth valuations coming back down to earth, we are starting to see some attractive values amongst the carnage. While rising rates may force some growth valuations lower still, they set the table for more attractive issuance in the future. Rising rates have traditionally been good for the market, with convertibles moving higher each of the last 10 times we have seen a 100 bps increase in 10 year treasuries. While there may be more interest rate sensitivity this year, the majority of the market will still be driven by underlying equities.

______________________________________

To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:

GAMCO MERGER ARBITRAGE

GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.

Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.

Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476

GAMCO ALL CAP VALUE

The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.

GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155

GAMCO CONVERTIBLE SECURITIES

GAMCO Convertible Securities’ objective is to seek to provide current income as well as long term capital appreciation through a total return strategy by investing in a diversified portfolio of global convertible securities.

The Fund leverages the firm’s history of investing in dedicated convertible security portfolios since 1979.

The fund invests in convertible securities, as well as other instruments that have economic characteristics similar to such securities, across global markets (but the fund will not invest in contingent convertible notes). The fund may invest in securities of any market capitalization or credit quality, including up to 100% in below investment grade or unrated securities, and may from time to time invest a significant amount of its assets in securities of smaller companies. Convertible securities may include any suitable convertible instruments such as convertible bonds, convertible notes or convertible preference shares.

By actively managing the fund and investing in convertible securities, the investment manager seeks the opportunity to participate in the capital appreciation of underlying stocks, while at the same time relying on the fixed income aspect of the convertible securities to provide current income and reduced price volatility, which can limit the risk of loss in a down equity market.

Class I USD LU2264533006

Class I EUR LU2264532966

Class A USD LU2264532701

Class A EUR LU2264532610

Class R USD LU2264533345

Class R EUR LU2264533261

Class F USD LU2264533691

Class F EUR LU2264533428

Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to ﬁnd out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reﬂect the manager’s current view of future events, economic developments and ﬁnancial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.

Central Banks Facing a Dilemma

| For Beatriz Zúñiga | 0 Comentarios

black-3509513_1920 — Pixabay CC0 Public Domain. Los bancos centrales se enfrentan a un dilema

Inflation at a level not seen for a long time makes it possible: the topic monetary policy tightening has moved onto the agenda again. In the US, the Fed has begun reducing securities purchases – so-called “tapering”. And in some emerging markets, as well as in Norway, New Zealand and South Korea, key interest rates have already been raised. The European Central Bank (ECB), on the other hand, is being coy and hesitant. However, the markets do not really believe that the ECB will stand still for a longer period of time.

Will monetary policy gradually become more “normal” again – in the sense of balanced, with interest rate reactions upwards as well as downwards? Or is it more likely that, after tentative attempts at tightening, the first signs of displeasure from shareholders and stakeholders will lead central bank to reverse the monetary-policy course again?

Unfortunately, the latter is to be feared. The reason is the foreseeable costs and braking effects of higher interest rates. On the one hand, monetary tightening and the associated rise in real interest rates entail the risk of an unintentionally severe economic slowdown. On the other hand, this could have a massive impact on the financial markets: There, the long-standing central bank actions have seriously interfered with pricing mechanisms, overriding them in large parts of the bond market and leading to misallocations and overheating tendencies via the portfolio channel. Withdrawal of the drug “cheap money” therefore threatens turbulence. And last but not least: Global debt, which is getting out of hand, would no longer be financeable “for free”; fiscal woes would dominate.

Not so long ago, central bankers would probably have said “so what?” in view of such risks and acted within their focused mandate to maintain price stability. In the meantime, however, the regime has changed. Sustained action is therefore less likely: monetary watchdogs are unlikely to be prepared to face these consequences.

In an exchange of traditional behavioural patterns, the principle of reverse authoritativeness has now become established for the relationship between monetary policy and financial markets. Central banks are increasingly responding to the signals and needs of the capital markets rather than the other way round. The result is an asymmetrical policy: rapid and significant interest rate cuts, but only very hesitant and small interest rate increases, if at all.

How could it have come to this? The seeds for this development were sown with the worldwide deregulation and liberalisation of financial markets in the 1980s and 1990s. There is scientific evidence that this led to the birth and subsequent decoupling of the financial-market cycle from the business cycle. What is more, it is now clear that the former even dominates and lives about twice as long as the latter. Moreover, history teaches us that deep recessions and sustained deflationary scenarios result – if at all – from the bursting of asset bubbles.

If one wants to pinpoint the starting point of the change of heart to a specific date, the Fed’s reaction to the 1987 stock market crash can be considered a fall from grace. That was the first time that the central bank explicitly responded to falling stock prices. Wall Street later created a new term for this: the “Greenspan Put”. However, financial dominance really took off after the great financial crisis of 2008. Since then, the reaction pattern has been perfected. In this context, the ECB adopted the PFFC regime: “preserve favourable financing conditions”. And since the middle of this year the euro central bank has been regularly publishing a Survey of Monetary Analysts (SMA), in which it asks market participants for detailed information on when they expect the ECB to take which action. This feeds the suspicion of who is a cook and who is a waiter these days!

Against this backdrop and with a view to the question posed at the outset as to whether monetary policy will return to “normal”, the central banks thus find themselves in a dilemma. At present, no real departure from the aggressively relaxed approach that has been in place for years is to be expected. And this despite the formation of bubbles and sentiment-related exaggerations in sub-markets. Just think of the almost 70% weighting of US equities in the global index, real estate markets, cryptos, SPACs (Special Purpose Acquisition Companies) or meme phenomena.

For investors, this has three implications: First, more than ever, diversification is of utmost importance for any forward-looking investment strategy. Secondly, the same applies to agile active portfolio management, which includes a dynamic risk strategy. Both requirements may seem old-fashioned to investors, but they remain imperative. Thirdly and finally, income strategies are advisable in view of the low interest-rate environment that is likely to persist for a long time to come. In equities, these can be implemented by focusing on dividends, for example.

Ultimately, this triad is certainly primarily a reminder of traditional, conservative investment principles. However, monetary policy is currently upside down – keywords: financial dominance and the fight for rather than against inflation. Not to mention the Modern Monetary Theory (MMT). Its ultimate consequence would be the loss of central banks’ institutional independence, which would be deeply regrettable. In view of this threatening backdrop, the aforementioned reconsideration seems very suitable for at least putting one’s own capital investment on a solid footing.

Column by Ingo Mainert, CIO Multi Asset Europe at Allianz Global Investors

Axel P. Lehmann Replaces Antonio Horta-Osório as Chairman of Credit Suisse

| For Beatriz Zúñiga | 0 Comentarios

Foto cedida. Axel P. Lehmann sustituye a Antonio Horta-Osório como presidente de Credit Suisse

Uncivic behavior during the hardest moments of the pandemic is not only taking its toll on politicians, but also on top executives of large companies. The clearest example has been the case of Antonio Horta-Osório, who has resigned from his position as chairman of Credit Suisse Group in view of his behavior during the COVID-19 quarantine.

According to Spanish news agency Europa Press, an investigation by the bank’s Board of Directors has shown that Horta-Osório violated the COVID-19 quarantine rule on more than one occasion. “I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally. I therefore believe that my resignation is in the interest of the bank and its stakeholders at this crucial time. I wish my colleagues at Credit Suisse every success for the future”, the executive said in a statement released by the company.

Consequently, Credit Suisse Group has appointed Axel P. Lehmann as the bank’s new Chairman effective immediately. The bank believes that under his leadership, the Board and the Executive Board will continue to execute Credit Suisse’s strategy, driving forward the transformation of the bank.

“We respect António’s decision and owe him considerable thanks for his leadership in defining the new strategy, which we will continue to implement over the coming months and years. Axel Lehmann as the new Chairman, with his extensive international and Swiss industry experience, is ideally suited to drive forward the strategic and cultural transformation of the bank. We wish Axel every success in his new role and António all the best for the future”, commented Severin Schwan, Vice-Chairman and Lead Independent Director of the Board of Credit Suisse.

Following his appointment, Lehmann has taken office as Chairman. The Board will also propose him for election as Chairman at the upcoming Annual General Meeting on April 29, 2022. Lehman thanked the Board for the trust it has placed in him and looks forward to working even more closely with the Board and the Executive Board.

“We have set the right course with the new strategy and will continue to embed a stronger risk culture across the firm. By executing our strategic plan in a timely and disciplined manner, without distraction, I am convinced that Credit Suisse will demonstrate the renewed strength and business focus needed to generate sustainable value for all of our stakeholders”, he added.

Lastly, after his resignation, Horta-Osório highlighted that he has worked hard to return Credit Suisse to a successful course, and I claimed to be proud of what they have achieved together in his short time at the bank. “Credit Suisse’s strategic realignment will provide for a clear focus on strengthening, simplifying and investing for growth. I am convinced that Credit Suisse is well positioned today and on the right track for the future”, he concluded.

Blackrock’s CEO Larry Fink Sees “Stakeholder Capitalism” and Sustainability as Key to Delivering Value to Clients

| For Beatriz Zúñiga | 0 Comentarios

CEO BlackRock — Foto cedidaLarry Fink, CEO de BlackRock.. Larry Fink ve clave el “capitalismo de stakeholders” y la sostenibilidad para navegar en el nuevo entorno que deja la pandemia

Larry Fink, CEO of BlackRock, has published his annual letter to the CEOs of the companies around the world in which the firm invests on behalf of its clients. As every year, this missive seeks to encourage business leaders to manage companies with a long-term mindset that offers shareholders consistent returns over time.

Fink points out the importance of “stakeholder capitalism”, which, for him, is not about politics: “It is not a social or ideological agenda. It is not “woke.” It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism”.

He believes in its ability to help individuals achieve better futures, to drive innovation, to build resilient economies, and to solve some of our most intractable challenges: “In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders. It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long term. Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success”.

The CEO also highlights that the pandemic is “dramatically accelerating” how technology is reshaping life and business, has deepened the erosion of trust in traditional institutions and has exacerbated polarization in many Western societies. “This polarization presents a host of new challenges for CEOs. Political activists, or the media, may politicize things your company does. They may hijack your brand to advance their own agendas. In this environment, facts themselves are frequently in dispute, but businesses have an opportunity to lead. Employees are increasingly looking to their employer as the most trusted, competent, and ethical source of information – more so than government, the media, and NGOs”, he adds.

In this context, Fink arguments that “it’s never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy, and a long-term view”. That is why he encourages them to put their company’s purpose at the foundation of their relationships with stakeholders in order to achieve long-term success.

“Employees need to understand and connect with your purpose; when they do, they can be your staunchest advocates. Customers want to see and hear what you stand for as they increasingly look to do business with companies that share their values. And shareholders need to understand the guiding principle driving your vision and mission. They will be more likely to support you in difficult moments if they have a clear understanding of your strategy and what is behind it”, he says.

A new world of work

In the CEO’s view, no relationship has been changed more by the pandemic than the one between employers and employees: “As companies rebuild themselves coming out of the pandemic, CEOs face a profoundly different paradigm than we are used to. Companies expected workers to come to the office five days a week. Mental health was rarely discussed in the workplace. And wages for those on low and middle incomes barely grew”.

That’s why companies not adjusting to this new reality and responding to their workers do so at their own peril. “In addition to upending our relationship with where we physically work, the pandemic also shone a light on issues like racial equity, childcare, and mental health – and revealed the gap between generational expectations at work. These themes are now center stage for CEOs, who must be thoughtful about how they use their voice and connect on social issues important to their employees. Those who show humility and stay grounded in their purpose are more likely to build the kind of bond that endures the span of someone’s career”, Fink adds.

Besides, his letter shows that new sources of capital are fueling market disruption as over the past four decades, there has been an explosion in the availability of capital. “Young, innovative companies have never had easier access to capital. Never has there been more money available for new ideas to become reality. This is fueling a dynamic landscape of innovation. It means that virtually every sector has an abundance of disruptive startups trying to topple market leaders”, he says.

In his view, CEOs of established companies need to understand this changing landscape and the diversity of available capital if they want to stay competitive in the face of smaller, more nimble businesses. That’s why BlackRock wants to see the companies they invest in for their clients evolve and grow so that they generate attractive returns for decades to come. “We too must be nimble and ensure our clients’ assets are invested, consistent with their goals, in the most dynamic companies – whether startups or established players – with the best chances at succeeding over time”, he insists.

Sustainability and ESG

Regarding sustainability, Fink highlights that they focus on it not because they’re environmentalists, but because they are “capitalists and fiduciaries” to their clients. “That requires understanding how companies are adjusting their businesses for the massive changes the economy is undergoing. As part of that focus, we are asking companies to set short-, medium-, and long-term targets for greenhouse gas reductions. These targets, and the quality of plans to meet them, are critical to the longterm economic interests of your shareholders. It’s also why we ask you to issue reports consistent with the Task Force on Climate-related Financial Disclosures (TCFD): because we believe these are essential tools for understanding a company’s ability to adapt for the future”, he reveals.

In his opinion, divesting from entire sectors – or simply passing carbon-intensive assets from public markets to private markets – will not get the world to net zero. “Foresighted companies across a wide range of carbon-intensive sectors are transforming their businesses, and their actions are a critical part of decarbonization. We believe the companies leading the transition present a vital investment opportunity for our clients and driving capital towards these phoenixes will be essential to achieving a net zero world”, he says.

In this sense, he thinks that governments need to provide clear pathways and a consistent taxonomy for sustainability policy, regulation, and disclosure across markets. They must also support communities affected by the transition, help catalyze capital for the emerging markets, and invest in the innovation and technology that will be essential to decarbonizing the global economy. “When we harness the power of both the public and private sectors, we can achieve truly incredible things. This is what we must do to get to net zero”, the letter says.

Lastly, Fink points out that just as other stakeholders are adjusting their relationships with companies, many people are rethinking their relationships with companies as shareholders. “We see a growing interest among shareholders – including among our own clients – in the corporate governance of public companies”, he concludes.