Pixabay CC0 Public Domain. HSBC crea la primera serie de índices bursátiles del mundo basados en la biodiversidad
HSBC has announced the launch of the Euronext ESG Biodiversity Screened Index series, jointly developed with Euronext and Iceberg Data Lab. The firm has explained in a press release that these are “the first investable biodiversity screened benchmark indices based on a broad range of equities”.
Constituent companies of the Euronext ESG Biodiversity Screened Indices are selected from either the Euronext Eurozone 300 Index or Euronext World Index, using the following criteria: they are committed to the UN Global Compact Principles and are not involved in controversial weapons, tobacco production, or thermal coal extraction. Besides, their ESG Risk scores are determined by Sustainalytics, and their Corporate Biodiversity Footprint (CBF) score is calculated by Iceberg Data Lab, which assesses their impact on biodiversity from change of land use, greenhouse gas emissions, air and water pollution, taking into consideration their whole value chain.
“The Euronext ESG Biodiversity Screened Indices provide a benchmark for investors as to which stocks to include in their portfolios and which to exclude, based on how a company’s overall activities impact nature. They will also be able to invest in a range of products that track these indices. In this way, investors will have greater oversight of their portfolios’ ESG and biodiversity credentials”, said Patrick Kondarjian, Global Co-Head of ESG Sales, Markets & Securities Services at HSBC.
Meanwhile, Marine de Bazelaire, Group Advisor on Natural Capital, highlighted that they are helping to develop business and investment models for enterprises that are finding ways to restore, manage and protect nature. “Biodiversity and ecosystems provide value to society in a myriad of ways such as food security, medicine, clean water, carbon removal and weather regulation. The decline in natural capital has been rapid and is ongoing”, she added.
HSBC believes that COP26 has given added momentum to the importance of protecting biodiversity and achieving the goals set by the Paris Agreement: “More than 100 countries, which cover 85% of Earth’s existing forests, have now pledged to end and reverse deforestation by 2030”.
Regarding its business, the company points out that transition to net zero is one of its four strategic pillars. “We are putting nature and biodiversity at the heart of our net zero strategy because we believe that protecting and restoring nature is essential for a thriving global economy and a successful net zero transition,” commented Marine. In this sense, HSBC has committed to providing between US$750 billion and US$1 trillion in finance and investment by 2030 to support its customers across sectors to decarbonise and accelerate new climate solutions.
Pixabay CC0 Public Domain. Robeco prevé unos nuevos "tórridos años 20" que favorecerá el rendimiento de los activos de riesgo
Robeco has published its eleventh annual Expected Returns report (2022-2026), a look at what investors can expect over the next five years for all major asset classes, along with post-pandemic economic predictions. The asset manager shows a “tempered optimism” and expects an improvement of US labor productivity, a supply-side boost for the global economy and important technological growth for the next decade.
Specifically, the report anticipates an investment-led pick-up in productivity that will beat the subdued GDP-per-capita growth during the 2009-19 great expansion. “The fact remains that due to an atypical stop-start dynamic in 2020-21, macro-economic uncertainty hit its highest level in recent history, exceeding the levels it reached in the disinflation period in the 1980s and the 2008 global financial crisis. The question of whether inflation will be transitory or longer-term means that investors should keep an open mind as to how the economic landscape could unfurl over the coming five years”, says Robeco. In this sense, it believes that productivity boosts “are not a luxury”, but a necessity to deal with climate risks, ageing societies, and economic inequalities.
In its base case scenario -called the Roasting Twenties inspired by the Roaring Twenties of the previous century-, the firm expects the world to transition towards a more durable economic expansion after a very early-cycle peak in growth momentum in 2021. In its view, there is still “no clear exit” from the Covid-19 pandemic, although governments, consumers and producers have adopted an effective way of dealing with what has become “a known enemy”.
In this context, Robeco highlights that negative real interest rates drive above-trend consumption and investment growth in developed economies, while the link between corporate and public capex and the productivity growth that ensues remains intact, with positive real returns on capex benefitting real wages and consumption growth. “Workers’ bargaining power increases due to more early retirements by members of the baby boomer generation after the pandemic – not only in developed economies, but also in China. Central banks want their economies to grow, but not too much, and in this scenario they have luck on their side”, says the report.
Meanwhile, regarding the debate about whether inflation is transitory or on a secular uptrend, it remains largely unresolved, reflecting a stalemate between rising cyclical and falling non-cyclical inflation forces. This creates leeway for the Fed and other developed market central banks to gradually tighten monetary conditions, with a first Fed rate hike of 25 bps in 2023 followed by another 175 bps of tightening over the following three years.
Climate risk
According to Robeco, another reason to temper optimism is the growing awareness of the severity of the climate crisis. Global temperatures will rise to at least 1.5˚C above pre-industrial level by 2040, leading to more extreme weather events and increased physical climate risks in developed economies. The firm expects investors to incorporate climate risk factors into their asset allocation decisions more and more in the next five years. To help them do so, this years’ Expected Returns framework introduces an in-depth analysis of how climate factors could affect asset class valuations in addition to macroeconomic factors.
This analysis is based in a couple of considerations. The first one is that the composition of asset classes may be impacted more by climate change than expected returns, as it anticipates more issuance of shares and bonds from green companies going forward. Also, it considers that emerging equity markets and high yield bond markets are much more carbon intense than developed equity markets and investment grade bond markets, which will put pressure on their prices over the next five years.
Lastly, it highlights that active investors can add value by integrating their view of climate change and how policies, regulations, and consumer behavior will affect a company’s profits; and that massive divestment from fossil fuel companies may lead to a carbon risk premium.
“A year and a half after the initial Covid-19 outbreak, the world is at a crossroads. Amid the paradox of recovering economies and technological growth on the one hand and macroeconomic uncertainty and climate risk on the other, we believe the world will transition towards a more durable economic expansion, the ‘Roasting Twenties’. Negative real interest rates drive above-trend consumption and investment growth in developed economies, while the link between corporate and public capex and the productivity growth that ensues remains intact, with positive real returns on capex benefiting real wages and consumption growth”, comments Peter van der Welle, Strategist Multi Asset at Robeco.
Meanwhile, Laurens Swinkels, researcher at the firm, says that although 86% of investors from the survey believe climate risk will be a key theme in their portfolio’s by 2023, regional valuations do not yet reflect the different climate risks to which the various regions are exposed. “Therefore, this year’s Expected Returns publication takes into account, for the first time since its launch in 2011, the impact of climate change risk on returns”, he adds.
Frigid bond markets, torrid equity markets
Regarding expected returns for the 2022-2026 period, the report shows that current asset valuations, especially those of risky assets, appear out of sync with the business cycle, and are more akin to where they should be late in the cycle. “The dominant role central banks have taken on in the fixed income markets has forced yields well below the levels warranted by the macroeconomic and inflation outlook. Torrid valuations are suggestive of below-average returns in the medium term across asset classes, and especially for US equities. This is reason enough to keep an eye on downside risk at a time that many investors have a fear-of-missing-out, buy-the-dip mentality”, the document wars.
Ex-ante valuations have historically typically only explained around 25% of subsequent variations in returns. The remaining 75% has been generated by other, mainly macro-related, factors: “From a macro point of view, the lack of synchronicity between the business cycle and valuations should not be a problem given our expectations for above-trend medium-term growth, which bode well for margins and top-line growth. In our base case, we expect low-double-digit growth in earnings per share for the global equity markets to make up for sizable multiple compression”. According to Robeco, previous regimes in which inflation has mildly overshot its target – something else it expects in its base case – have historically seen equities outperform bonds by 4.4 percentage points per year. A world in which inflation is below 3% should also see the bond-equity correlation remain negative.
The report also considers that even though they expect real rates to become less negative towards 2026, negative real interest rates are here to stay for longer, which implies that some parts of the multi-asset universe could heat up further: “With 24% of the world’s outstanding debt providing a negative yield in nominal terms, investing in the bond markets is a frigid proposition from a return perspective as it is hard to find ways of generating a positive return. Sources of carry within fixed income are becoming scarcer, and are only to be found in the riskier segments of the market, such as high yield credit and emerging market debt”.
Lastly, Robeco believes that with excess liquidity still sloshing around and implied equity risk premiums still attractive, the TINA (There is No Alternative) phenomenon persists as alternatives for equities are hard to find: “Overall, we expect risk-taking to be rewarded in the next five years, but judge the risk-return distribution to have a diminishing upside skew. The possibility of outsized gains for the equity markets is still there, but the window of opportunity is shrinking”.
Therese Niklasson, nueva directora global de Inversión Sostenible de Newton IM nombra, parte de BNY Mellon IM. . Newton IM nombra a Therese Niklasson para el cargo de directora global de inversión sostenible
Newton Investment Management Limited, part of BNY Mellon Investment Management, has appointed Therese Niklasson as Global Head of Sustainable Investment. Reporting directly to Euan Munro, CEO, she will join the executive committee and be responsible for driving the firm’s strategic plan for responsible and sustainable investment globally.
The asset manager has explained in a press release that as part of this role, Niklasson will oversee the responsible research agenda and lead the integration, measurement and evidencing of ESG factors within the investment processes across strategies and asset classes.
To this end, she will manage the continued development of Newton’s responsible investment team of 19 specialists focusing on research, stewardship, data and product advocacy. She will also provide oversight of governance and processes relating to responsible and sustainable investing, as well as advancing the further development and innovation of the firm’s product capabilities to deliver responsible and sustainable investment outcomes to current and future clients.
With a career in responsible and sustainable investment spanning 17 years, Niklasson joins from Ninety One Plc (previously Investec Asset Management), where she was most recently Global Head of Sustainability, leading the development and execution of the firm’s holistic sustainability strategy. Prior to this, she was Global Head of ESG and Head of ESG research at the firm, and before that she held the role of Head of Governance and Responsible Investment at Threadneedle Investments.
“As a purposeful owner, Newton seeks to be long-term in its approach, selective in its choices, deep in its research and active in its engagement, always for the benefit of its clients. Our global head of sustainable investment is a pivotal role, leading the next stage in our 40-year responsible investment journey to help shape and promote awareness of Newton’s sustainable investment strategies and approach to responsible investment”, said Munro.
The CEO also believes that her extensive experience and proven track record in building global ESG capabilities and influencing and transforming investment teams’ approach to sustainability issues “will be instrumental in driving Newton’s vision and continued development of our sustainable investment franchise.”
Niklasson will officially join on 7 February 2022 and will be based in London, United Kingdom.
Foto cedidaMarie Fromaget, nueva analista del equipo de Stewardship de Allianz GI.
. Allianz GI refuerza su equipo de Stewardship con la incorporación de Marie Fromaget
Allianz Global Investors is strengthening its Stewardship team with Marie Fromaget, who will join the firm next January as analyst. She will be based in Paris and report to Antje Stobbe, Head of Stewardship.
In a press release, the asset manager has announced that Fromaget will be responsible for engagements, especially on inclusive capitalism, and voting on its holdings in EMEA.
Prior to joining Allianz GI, she was ESG analyst at AXA IM since 2018. In this role, she was in charge of research and engagement on the theme of human capital and diversity. She was also involved in strengthening the firm’s voting policy on gender diversity, and contributed to the integration of social issues within different asset classes.
“We are delighted to strengthen our team with a proven investment professional like Marie Fromaget. She brings skills in the analysis of social issues, a wealth of ESG convictions, as well as the thematic background required to both feed growing client demand and serve our ambition in active stewardship”, commented Antje Stobbe, Head of Stewardship.
Mark Wade, Global Head of Research and Stewardship, added that inclusive capitalism is one of their “three targeted sustainability thematic pillars” with Climate Change and Planetary Boundaries, as they believe they are interlinked and co-dependent. “Marie’s knowledge and experience in social issues will be key to developing our thematic engagement and voting policy in this thematic”, he concluded.
Foto cedidaCorporate Earnings Season Keeps Pointing Towards Higher Growth. Brújula
US equities propelled the market higher, with major indices achieving all-time highs. Despite the backdrop of supply chain issues, input cost pressures and tight labor markets, corporate earnings season highlighted higher demand and improved margins.
The FDA is on track to approve Pfizer’s COVID-19 vaccine for use in children ages 5-11 and booster vaccines continue to be distributed to the rest of the population. While the Delta wave of the pandemic is past its peak, the approaching holidays and winter months will test whether the U.S. can sustain that momentum.
Markets have shown that investors are expecting the Fed to raise interest rates next summer, following recent inflation reports and signals from other major central banks that they are moving towards tightening policy. Inflation has been linked to the supply chain crunch that is leading to shortages and shipping problems, which has already affected holiday shopping. Fed Chair Jerome Powell noted that while we see those things resolving, it is very difficult to say how big those effects will be in the meantime or how long they will last.
M&A continued pace in October with many notable deals making progress including Kansas City Southern and Canadian Pacific had their voting trust reaffirmed by the Surface Transportation Board leaving just Mexican regulatory approval outstanding for their $31 billion deal; and Kadmon received U.S. antitrust approval to be acquired by Sanofi for $9.50 cash, or about $1.6 billion, clearing the way for the deal to close in November.
Equity markets surged in October bringing convertibles along with them. In sharp contrast to the many concerns facing equities in September, the market shifted its focus towards earnings, which have been generally good so far. Convertible issuance stalled but should pick up again as we get closer to year-end.
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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.
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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.
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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
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Class R USD LU2264533345
Class R EUR LU2264533261
Class F USD LU2264533691
Class F EUR LU2264533428
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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.
Pixabay CC0 Public Domain. Protein Capital desembarca en Estados Unidos y abre su primera oficina en Miami
Protein Capital will establish its first office in the United States. As announced a month ago, this opening responds to the company’s expansion plans through which it expects to reach its target of 30 million euros (33.75 million dollars) by 2021.
The company has revealed in a press release that its interest in entering the North American country lies in the fact that it is the main market for this type of funds. Of the 397 in the world, 66.44% are in the United States, where Miami is becoming the most important crypto hub worldwide. In addition, Protein Capital believes the city is an ideal focus for “attracting talent and creating a high-level professional team”.
Due to the new opening, Alberto Gordo, CEO, traveled to the country to meet with the team of the new office and participate in the presentation event of Protein Capital Fund.
Protein Capital is the first hedge fund with 100% Spanish capital dedicated to digital assets. Founded in February 2021, it currently manages a €15 million fund through its offices in Madrid, Luxembourg and Miami.
Pixabay CC0 Public Domain. El 90% de las compañías a nivel mundial han aumentado o mantenido sus dividendos en los últimos 12 meses
Global dividends are rapidly recovering from the pandemic, according to the latest Janus Henderson Global Dividend Index. Thanks to rising profits and strong balance sheets, in the third quarter of 2021 payouts rose at a record pace of 22% year-on-year on an underlying basis to deliver an all-time high for the quarter of 403.5 billion dollars. The total was up 19.5% on a headline basis.
Janus Henderson revealed that its index of dividends is now just 2% below its pre-pandemic peak in the first quarter of 2020. Globally, 90% of companies either raised their dividends or held them steady, which, in the firm’s view, is one of the strongest readings since the Index began and reflects “the rapid normalisation of dividend patterns as the global recovery continues”.
The exceptional strength of Q3 payout figures, along with improved prospects for Q4, have led the asset manager to upgrade its forecast for the full year. It now expects growth of 15.6% on a headline basis, taking 2021 payouts to a new record of 1.46 trillion dollars. Janus Henderson anticipates that global dividends will have recovered in just nine months from their mid-pandemic low point in the year to the end of March 2021. Underlying growth is expected to be 13.6% for 2021.
The most relevant sectors and markets
The analysis shows that soaring commodity prices resulted in record profits for many mining companies; more than two thirds of the year-on-year growth in global payouts in Q3 came from this sector. Three quarters of mining companies in Janus Henderson’s index at least doubled their dividends compared to Q3 2020. “The sector delivered an extraordinary 54.1 billion dollars of dividends in Q3, more in a single quarter than the previous full-year record set in 2019. BHP will be the world’s biggest dividend payer in 2021″, said the firm.
The banking sector also made a significant contribution, mainly because many regulators have lifted restrictions on payouts and because loan impairments have been lower than expected.
The index also highlights that geographies that had seen the steepest cuts in 2020 and those most exposed to the mining boom or to the restoration of banking dividends saw a rapid recovery. Australia and the UK were the biggest beneficiaries of both of these trends. Europe, parts of Asia and emerging markets also saw large increases on an underlying basis.
Those parts of the world, like Japan and the US, where companies did not cut much in 2020 naturally showed less growth than the global average. Nevertheless, US company dividends rose by a tenth to a new Q3 record. A strong Q3 means Chinese companies are also on track to deliver record payouts in 2021.
“Three important things changed during the third quarter. First and most importantly, mining companies all around the world have benefited from sky-high commodity prices. Many of them delivered record results and dividends followed suit. Secondly, banks took quick advantage of the relaxation of limits on dividends and restored payouts to a higher level than seemed possible even a few months ago. And finally, the first few companies in the US to start the annual dividend reset showed that businesses there are keen to return cash to shareholders”, commented Jane Shoemake, Client Portfolio Manager on the Global Equity Income Team.
In her view, a big driver for 2022 will be the ongoing restoration of banking dividends, but it seems unlikely that mining companies can sustain this level of payouts given their reliance on volatile underlying commodity prices: some of these have already fallen. “Miners are therefore likely to provide a headwind for global dividend growth next year”, she added.
Implications for portfolio allocations
Ben Lofthouse, Head of Global Equity Income at Janus Henderson, pointed out that dividends are recovering more quickly than expected, driven by improving corporate balance sheets, and increased optimism about the future. “Two of the most impacted sectors last year were the commodity and financial sectors, and the report highlights that these sectors have been the most significant driver of dividend growth during the period covered. We have added to these sectors over the last year, and it is great to see shareholders being rewarded by increased distributions”, he said.
Foto cedidaMatthew Beesley, nuevo CIO de Jupiter AM. . Jupiter AM incorpora a Matthew Beesley como nuevo CIO
Jupiter AM has announced the appointment of Matthew Beesley as Chief Investment Officer (CIO), succeeding Stephen Pearson who is retiring following a 35-year career in the industry including nearly two decades at Jupiter. He will join the company in January 2022.
The asset manager has revealed in a press release that Beesley will initially work closely with Pearson to ensure a seamless handover. Besides, he will report to CEO Andrew Formica and join the Executive Committee. In his new role, he will have overall responsibility for the management of all of Jupiter’s investment professionals and strategies across equities, fixed income and multi-asset.
Supported by Jupiter’s eight-strong CIO office, “he will also have oversight of the associated functions that form the backbone of the company’s investment process”, including its dedicated stewardship, data science, dealing and performance analysis teams.
“The role of CIO is crucially important to the delivery of our strategic objectives through the guardianship of our dynamic, actively-driven investment culture at Jupiter. The fact that we have attracted a high calibre individual such as Matt is a testament to our talented fund management team and the enduring appeal of the Jupiter brand to an increasingly diverse global client base”, commentedFormica.
In his view, Beesley shares their commitment to actively-driven returns and has “a well-deserved reputation” for being an “effective and inspiring” leader: “We are confident that, under Matt’s leadership, we will continue to deliver the strong investment results for our clients that is a hallmark of Jupiter”.
With nearly 25 years of experience in the investment industry, Beesley joins Jupiter from Artemis, where he has been CIO since April 2020. Prior to this, he was Head of Investments at GAM Investments from 2017 to 2020, where he was responsible for the management and oversight of its investment strategies managed by teams based in Europe, Asia and the US. Beesley has also been Head of Global Equities at Henderson, responsible for a team managing significant assets in global, international (World ex US) and Global Socially Responsible investment strategies.
Production losses and rising commodity, energy and logistics costs are dampening economic growth and could lead to increased bankruptcies among companies with low earnings. Emerging markets such as India and Cambodia are also increasingly suffering from energy shortages and dramatic price increases. More than 50 per cent of energy production is based on coal, whose price has skyrocketed. Developing new deposits takes a long time and is politically undesirable. Inventories are empty and in addition to hitting the economy of the region, the power shortages that are expected would also worsen global supply-chain problems.
To what extent these losses can be compensated by higher prices depends on the structure of the economy. Net exporters of energy and commodities (e.g. Russia) currently have the advantage over net importers (e.g. Germany). Energy- and commodityhungry China will also likely see a decline in growth. September saw the first decrease in manufacturing activity since the beginning of the pandemic, due to production losses caused by the shortage of electricity in many parts of the country.
There are also signs of a crisis in the Chinese real estate market, where the difficulties of China’s largest real-estate developer Evergrande are causing unrest. The company has more than EUR 250 billion in liabilities, with bonds and bank loans accounting for around 30 per cent of this amount. The largest share is for liabilities to customers and suppliers, i.e. construction companies. It is common practice for property buyers to make advance payments for properties that are still under construction. A collapse of the company would therefore not only affect shareholders, bondholders and lending banks, but also property buyers and suppliers. The situation could become especially precarious if real-estate prices were to fall across a broad front, thereby causing difficulties for other real-estate companies. Given the great importance of the real-estate sector, which economists Kenneth Rogoff and Yuanchen Yang calculate contributes 29 per cent of China’s economic output, and real-estate assets that represent around two thirds of the total assets of Chinese households, a collapse in prices would have serious consequences for the Chinese economy.
The crisis, however, also reveals the structural weakness of the Chinese economy. Credit-financed investments in unproductive residential towers caused private household debt to grow strongly and inflated bank balance sheets. Since the financial crisis in 2008, total debt (private households, companies, government) has grown significantly faster than the growth rate of the economy (see Figure 1).
More and more yuan of additional debt must be incurred for each yuan of additional growth. This model has now reached its limits. The Chinese government is aware of this and Xi Jinping’s call to “strive for real and not excessive growth” may be taken as an indication that other areas of the economy, such as consumption and technology investment, will take priority in the future.
The Evergrande case will likely also make an example of the widespread problem of moral hazard, since a rescue of all interest groups is not expected. Ultimately, the Chinese state banks will work with the central bank and government to manage the crisis in a way that avoids social unrest in order to maintain the legitimacy of the leadership. Shareholders and bondholders will probably go away emptyhanded. It is exaggerated, however, to compare this to the Lehman Brothers bankruptcy and subsequent financial crisis, since there are practically no loans with parties abroad. The expected slowdown in the Chinese real-estate market will nevertheless also have a negative effect on global economic growth.
Given the strong growth in the USA, however, it would be premature to talk of global “stagflation”. This term, which was coined in the seventies, describes the simultaneous combination of falling or stagnant economic output and rising prices. At that time, an oil embargo by Arab exporters caused the price of oil to increase from three to 12 dollars within a year. Inflation rose to 12 per cent in the USA in 1974, while real growth was minus 0.5 per cent and remained below zero in 1975 (see Figure 2).
Although the current situation is not comparable to the seventies, a new inflation regime could become established if the inflation bump continues longer and leads to higher inflation expectations.
So-called second-round effects, in particular higher wage demands in future collective bargaining, will play a role in this. Even if the inflation bump has already receded again by then, the unions will not simply forget the increase in inflation this year but will instead demand extra compensation. This would increase the inflation base.
There are also structural factors that are likely to lead to a higher level of inflation in the long term: deglobalisation, decarbonisation and demographics.
• Deglobalisation: Supply-chain problems are causing companies to distribute their production facilities more broadly and, in some cases, renationalise them. However, choosing resilience instead of efficiency also increases costs.
• Decarbonisation: Climate protection is not without cost. This is politically intended. In addition to significantly increasing CO2 prices, which will have a direct effect on consumer wallets (electricity, petrol, natural gas), the energy transition will also increase production costs, which will indirectly lead to higher consumer prices.
• Demographics: The Baby Boomers will retire in coming years, thereby further worsening the already noticeable shortage of skilled workers. This will drive up labour costs. A growing number of older people who are no longer working will increase the costs of health and pension insurance, therefore also increasing labour costs.
A column by Bert Flossbach, cofounder at Flossbach von Storch
Foto cedidaMariano Belinky, Ex-CEO de Santander AM.
. Mariano Belinky ficha por Motive Partners como industry partner
The private equity firm Motive Partners, focused on financial technology, has announced the appointment of Mariano Belinky as an Industry Partner. The company has revealed in a press release that he will focus on areas that bring “strategic value” to its investment mandate.
Based primarily in the London offices, Belinky will focus on originating and diligencing transactions across financial technology, seeking to spot trends ahead of time, and sourcing deals and capabilities that can support the growth of Motive’s portfolio companies.
Motive Partners believes the adoption of new digital channels, innovative processes and game-changing technologies “will yield value-creating opportunities for forward-thinking alternative investment firms“. This appointment demonstrates its intent to continue building capabilities to support its platform’s mission of outsized returns, focusing on operator and innovator led value creation.
“We believe technology has the ability to unlock huge value for investment firms. All aspects will evolve, from how we invest to how we interact with our portfolio companies and clients”, commented Rob Heyvaert, Founder & Managing Partner at Motive Partners. In this sense, through Motive Create and Belinky’s appointment, they are seeking to extend their edge, as they “weaponize financial technology ideas” to empower their operations and portfolio companies by embedding these new financial capabilities to transform operations and gain scale.
Meanwhile, Belinky claimed to be “extremely excited” to join the firm and contribute to further accelerate its growth and those of its portfolio companies. “Fintech has reached a maturity point as an industry, and I believe Motive as a platform is uniquely positioned to capture the immense opportunities the space has created. I’m looking forward to joining forces with a terrific team of Investors, Operations and Innovators to make it happen”, he added.
Prior to joining Motive Partners, Belinky was the Global CEO of Santander Asset Management where he led the turnaround of the company since its re-acquisition from Warburg Pincus and General Atlantic. Prior to this, he co-founded and ran InnoVentures, Santander Group’s $400m fintech-focused global venture capital fund. Belinky has also been a junior partner with McKinsey and Company, where he advised global banks and asset managers across Europe and the Americas, and he was previously part of the research technology team at Bridgewater Associates.
