Wikimedia CommonsPhoto: Pixabay, Creative Commons CCO.. European Retail – Having to Adapt to Digital Disruption
All business has to respond to change. For the retail sector they have to cope with annual changes in fashion and at least in northern Europe the weather. Structural changes in shopping habits and property have moved much of the consumer activity from the high street to out of town shopping centres but now digital disruption is creating a huge challenge for the sector. Traditional store portfolios with large fixed costs associated with long leases on property are no longer as attractive. The competitive landscape is changing with competition from the likes of Amazon, who with huge buying power puts deflationary pressure on prices. Many traditional retailers are suffering and struggling to refine their business model to cope with these challenges in an overall weak environment where overall fashion retail is barely growing.
As is often the case challenges also present opportunities reflected here in market share changes. Location of sales outlets remains an important selling point but now the location includes websites and social media. This has profound implications for capital allocation, stock control, supply chain logistics, brand, advertising and promotion and most aspects of the business. Many of the key elements of success – a clear identity with customers and a value proposition remain important but these now have to be fused with a digital offer and the logistics to support this distribution channel. For many this means a radical change in the store portfolio to fewer larger flagship stores and less small stores. The impulse purchase once made via the store on the way home can now be made as easily by flicking through the web on a smartphone on the train home.
Several European businesses have taken advantage of these changes to boost their own position and find new areas of growth. Inditex is a successful traditional retail company headquartered in Spain, offering affordable fashion that has adapted while keeping several distinctive aspects. Unlike many who focus extensively on cost in the supply chain, Inditex has sacrificed some cost for proximity of supply and with that faster turnaround times to respond to fashion changes. This model results in fewer discounts, faster moving lines, as well as a good combination of central information, control and local store manager autonomy. They have extended this to the internet and integration with the physical store portfolio in the way they have incentivised staff and collection options for customers. Having taken their time to consider and launch their digital offering, they can now reduce investment in physical stores and with that capital intensity while still driving top line growth.
Zalando is a new challenger, based in Germany, created for the digital age. They grasped the importance of logistics and a scalable platform to create the network effect so common with digital offers. Their offer is all via the web and they host others’ products where they can literally deliver both the products and the shop windows in a better manner than many established brands. According to Zalando, they can deliver to over 80% of Europe within two days. For a sector with little overall growth they are growing sales in excess of 20% pa.
In Germany, Deutsche Poste has grown out of the postal service in the country into a broad logistics and delivery company. The mix of businesses face challenges – most obviously traditional delivery of letters is in decline but they also deliver parcels and have a strong infrastructure to do so. All these internet purchases have to find their way to the end consumer and this offers a solidly growing business that is strong enough in their own territory to compete with Amazon.
Companies are the place where we see adoption of new technology and techniques to run their business and to meet customer needs and wants. They have to adopt and change to survive but this remains part of the life blood of a growing dynamic economy.
Pixabay CC0 Public DomainFoto: Lifeofbreath. Una corrección, no un probable punto de inflexión
According to Marlène Hassine-Konqui Head of ETF Research and their Barometer, European ETF Market flows increased in November 2016. Net New Assets (NNA) during this month amounted to EUR4.3bn, above the year to date average of EUR3.7bn. Total Assets under Management are up 10% vs. the end of 2015, reaching EUR497bn, and including a limited market impact (+2.2%). ETF flows experienced a great rotation from fixed income to equities and from emerging to developed equities. The pick up in developed equities was mainly focused on US and European underlyings, following Trump’s election.
Equity ETFs saw 11-month record high inflows at EUR7.6bn. US equity ETF flows accelerated at EUR3.6bn, mainly during the days following the US election. European ETFs saw a significant trend reversal at EUR 2.5bn, though they still haven’t made up for the huge outflows observed earlier in the year. Global developed equities also benefited from increased investor confidence with EUR1.7bn of inflows. The confirmation from the Fed of the next interest rate increase triggered some outflows from emerging markets at EUR1.3bn, mainly on broad and Asian ETFs. Within Smart Beta, the value style continued to see high interest with EUR621M of inflows together with some flows on the low vol factor, while Minimum Volatility ETFs continued to see outflows in this more risk-on environment. Overall, Smart Beta flows reached EUR614M this month.
Fixed income flows saw a trend reversal with outflows of EUR3.3bn following 16 months of inflows. These outflows mainly concerned government bonds from both developed and emerging countries at -EUR1.3bn and -EUR1.9bn respectively, having been negatively impacted by changes in interest rate expectations following the US election. Flows on investment grade corporate bonds also saw a halt with EUR319M of outflows following 9 months of positive flows, and a one year average of EUR1.2bn, likely reflecting investor doubts on a QE extension. On the other hand, due to increased inflation fears in the market after the US election, inflation-linked ETFs continued to see inflows at EUR284M, mainly on US TIPS. Inverse strategy ETFs which benefit from interest rate increases (double short bund or UST) also saw significant interest with inflows of EUR248M, a one year record high as both US and European interest rates rebounded on expectations of a rate hike by the Fed and a change in US fiscal policy.
Pixabay CC0 Public DomainPhoto: NASTER. Robo-Advisors May Now Include Active Funds in their Offering
ifund and fundinfo have launched Digital-Advisor, a cloud-based, expert system for fund selection.
The tool scores active and passive funds based on scientific criteria derived from up-do-date and in-depth research on a wide range of success factors. It analyses data about fund houses, fund managers, and their investment processes, then combines the results with an investor’s preferences and convictions to instantly generate a list of recommended mutual funds and ETFs.
Fund analysts can use Digital-Advisor to obtain a short-list of attractive funds which they can evaluate in greater detail with fund managers. Banks can use the plug-in within their advisory services to rapidly identify funds that best reflect the CIO’s current view and customer specific requirements. Robo-Advisors may now for the first time include active funds in their offering.
Jan Giller, Head of Marketing and Sales at ifund and fundinfo said, “Digital-Advisor is the first expert system that evaluates both active and passive funds based on many years of research and scientific evidence, then combines the results with individual investor preferences and emotional convictions. Thanks to this unique technology, funds can be selected far better than with the usual past performance-related data.”
Digital-Advisor takes advantage of years of due-diligence performed on an ongoing basis by fund experts at ifund based in Switzerland. Thousands of active and passive funds have been analysed in a highly structured manner so that their information may be systematically evaluated and scored by Digital-Advisor. By constantly monitoring the legally relevant aspects of each fund such as business scope of the fund house, ownership, legal terms, guidelines for the fund, employment of derivatives and leverage, etc., the tool also ensures that customers and advisors fulfill the regulatory requirements at all times.With Digital-Advisor, investors can invest in funds that meet specific criteria such as fund house profile, investment style, sustainability, and manager experience; the tool takes investor’s personal preferences and convictions into account. Digital-Advisor may be used as a stand-alone tool, or embedded into existing investment advisory solutions via APIs.
Aberdeen Asset Management has made a number of appointments to strengthen its global distribution platform.
John Campbell will join Aberdeen in early January as Global Head of Strategic Clients reporting to Campbell Fleming, Global Head of Distribution. His role will be focussed on how Aberdeen works even more closely with its largest clients to help them achieve their financial goals. Aberdeen has a specific programme for its largest clients and John will look to build on this strong base.
John is a well-respected financial services leader, having led the Scottish financial community through the 2008 crisis as Chairman of Scottish Financial Enterprise. He has spent the last 16 years at State Street, most recently as Business Head of Global Services UK, Middle East and Africa. John was awarded an OBE in 2008 for services to the financial services industry.
Jeff Klepacki will also join early in the New Year as Head of Distribution – Americas reporting to Bev Hendry and Campbell Fleming. The U.S. is home to half of the world’s wealth and is of strategic importance to Aberdeen. John will provide vital leadership for Aberdeen’s distribution efforts in the Americas where the Group already manages around $65 billion.
Jeff brings with him a proven 23-year track record of leadership in financial services with world class organisations including Capital Group, Delaware Investments and Allianz Global Investors.
Separately Antony John, former chief executive BNP Paribas Investment Partners/FundQuest, and Richard Pursglove, who has held senior distribution roles at a number of companies, will join on a consultancy basis to work with senior management on driving forward Aberdeen’s distribution strategy.
Campbell Fleming, Global Head of Distribution at Aberdeen Asset Management, comments: “I am delighted that Aberdeen will be able to draw on the experience and expertise of John, Jeff, Antony and Richard. It says a lot about Aberdeen that we are able to attract individuals of such high calibre. Aberdeen is one of the few global asset managers to offer such a comprehensive range of investment capabilities from equities and fixed income through to property, alternatives and multi-asset portfolios. We’ve got to map these to the specific needs of our clients. The whole team globally is going to be focussed on doing this and these new appointments will really help those efforts.”
Pixabay CC0 Public DomainCourtesy photo. Nils Bolmstrand: New Head of Nordea Asset Management
Nordea has appointed Nils Bolmstrand new Head of Nordea Asset Management, the largest asset manager in the Nordics.
“Nils Bolmstrand is the right person to maintain the very strong momentum and development of Nordea Asset Management. He has the competencies and experience within the asset management business, and he has strong leadership and personal skills,” Snorre Storset, head of Nordea Wealth Management says.
Nils Bolmstrand, 44, comes from a position heading Nordea Life & Pensions, and he has previously held managerial positions within Nordea Asset Management and the asset management-division of Skandia and Old Mutual. He starts in his new position on January 1st, 2017.
Nordea Asset Management is year-to-date number 1 in Europe in attracting new assets and has during the last 4 consecutive years been among top 10 in Europe of best-selling asset managers. Since 2011 60 % of Nordea Asset Management-sales have been to clients outside Nordea. Nordea Asset Management has total Assets under Management at EURO 215 billion end of third quarter 2016.
Johan Nystedt has been appointed acting Head of Nordea Life & Pensions, he will retain his position as Head of the Swedish Life & Pensions-organisation during the period as acting Head.
Pixabay CC0 Public DomainPhoto: miniqueaustralia. Erste AM Appoints Head of Multi Asset Management
Erste Asset Management (Erste AM) has reorganised the Multi Asset Management department. Discretionary Portfolio Management was set up as self-contained department at the beginning of December. Mixed fund solutions for retail and institutional investors remain with Multi Asset Management. This step was decided on within the context of appointing a Head of Multi Asset Management.
Alexander Lechner, previously fund manager with Erste AM, will take over as Head of Multi Asset Management. In his new position, he will focus on umbrella fund strategies in the retail and institutional segment, and he will develop the investment processes in cooperation with Gerold Permoser. Senior fund manager Jürgen Wurzer will also join the Erste AM team, having previously worked for Macquarie Investment Management.
Thomas Bobek has been Head of Discretionary Portfolio Management (DPM) since the beginning of December. He had previously held a managerial position in asset management with Credit Suisse in Vienna, and knows ERSTE-SPARINVEST very well from his former function as Head of Equity with the institute (2003-2011). He will be in charge of the entire range of DPM solutions across borders, and he will ensure the implementation of the investment processes in all markets.
Gerold Permoser, Chief Investment Officer (CIO) of Erste AM: “By reorganising Multi Asset Management and Discretionary Portfolio Management and appointing Alexander Lechner and Thomas Bobek as department heads, we are well-positioned for the future and can develop our range of products and services in a consistent fashion.”
Pixabay CC0 Public Domain. Capital Strategies selected by Investec Asset Management for exclusive representation
Capital Strategies Partners, an independent securities firm specialising in the representation of international asset management companies in the South European and LatAm market, has been chosen by global investment manager Investec Asset Management, to be its selected independent distribution partner in Spain, Portugal and Andorra.
Investec Asset Management is a specialist provider of active investment products and services to institutional and individual investors. Established in South Africa in 1991, the firm has been built from a small start-up into a successful international business, now managing over 117 billion dollars.
The firm provides investment solutions to clients across a range of global and emerging market asset classes. This global approach, combined with a footprint in both emerging and developed markets, has characterised the evolution of Investec Asset Management’s strategies.
Capital Strategies Partners has a 16-year track record of representing international asset management companies, interested in further developing the markets in which they operate. According to Daniel Rubio, CEO of Capital Strategies, “The launch of Investec Asset Management in Spain provides investors with access to a new suite of successful global, regional and especially emerging market solutions”. He also stated that Investec’s investment philosophies include “intelligent” diversification metrics and bottom-up security selection, which provide a framework for portfolios, and which may help to support more attractive risk / return characteristics for investors.
Stef Bogaars, Head of the Europe Client Group at Investec Asset Management said, ‘This partnership is exciting to us as it allows us to offer a broad range of investment solutions to a new and sophisticated investor base. We look forward to working with a firm that is able to provide the highest standard of client services alongside insight and access in this market.’
Pixabay CC0 Public DomainVincent Taupin . Vincent Taupin, New Global Head of Edmond de Rothschild Asset Management
Edmond de Rothschild Group, the wealth and investment manager, announced that Vincent Taupin will assume global responsibility for Edmond de Rothschild Asset Management with effect from 1 January 2017, alongside his existing role as President du Directoire of Edmond de Rothschild France. This follows Roderick Munsters’ decision to resign from his role as Head of Edmond de Rothschild Asset Management for personal reasons. However, he will continue to contribute to the Group by joining the board of Edmond de Rothschild Asset Management (France).
Commenting on his departure, Roderick Munsters said, “In a short but exciting period at Edmond de Rothschild, I have been able to review and prepare a new and integrated asset management strategy. I have reluctantly taken the decision to step down and to return to the Netherlands.”
Ariane de Rothschild, Chairwoman of the Group Executive Committee, commented, “I fully understand the reasons for Roderick’s decision to step down from his leadership role in Edmond de Rothschild Asset Management, and wish him all the best for the future. I have asked Vincent Taupin to assume responsibility for the asset management business alongside his existing French Private Banking role, as I believe that now is the right time to accelerate the convergence of our expertise, businesses and geographies. This is what our clients expect from a leading investment house.”
Commenting on his new responsibilities, Vincent Taupin said, “I am very much looking forward to taking on this additional responsibility, having worked closely with Roderick over the last six months.”
In related promotions, it was also announced today that Renzo Evangelista and Stéphane Pardini have been appointed Deputy Directors in the French Private Bank. In addition, Didier Deléage has been appointed CEO of Edmond de Rothschild Asset Management (France).
Commenting on these promotions, Ariane de Rothschild said, “I am proud to be able to strengthen the management team by nominating colleagues from within our excellent talent pool. I congratulate them and wish them success in their new roles.”
Pixabay CC0 Public Domain. Riding the S Curve of Creative Disruption
The S-curve, which shows the growth trajectory of a company creating a new product or even a new industry can be an ally or enemy for investors. Find such a company toward the front end of the S curve and you could potentially own the stock through its explosive growth period. Invest at the top of the S curve, and you’ve missed much of the growth. It’s at that point – when most of their growth is behind them – that many companies graduate to the larger stock indexes. Skilled active managers try to find these companies much earlier on in the curve, with an eye toward tapping greater growth potential.
Consider the adoption of the personal computer in the 1980s and 1990s, which started slowly when they were cumbersome and expensive. But once PCs became easier to use in the early 1990s and allowed multi-tasking, prices fell sharply and soon they were on virtually every desktop within major corporations. Retail prices fell further, bringing the PC within reach of the home user. The introduction of the web browser in the mid-90s suddenly unleashed a wave of demand for computers, software and related products that culminated in the dotcom bubble which burst so memorably in the spring of 2000. Eventually the market for personal computers matured and became saturated. They became a low-margin, commodity product with little to differentiate one from another.
Personal computers spawned an industry which has had unprecedented impacts on many aspects of society, including the way we work, learn and consume content. The ripple effects of the PC revolution continue to be felt, even as the devices themselves evolve.
Under such creative disruption scenarios, the investment opportunity for skilled active managers comes from: 1) understanding where a company is in its growth trajectory along with key drivers of growth in a given industry and 2) an ability to reassess as the market matures. Are we in the early adoption or infancy phase, where there is great potential but the need for patience? Are we in the expansion phase where growth accelerates almost vertically? Or the maturity phase, where competitors flood the market, the product becomes commoditized and margins compress?
As history has shown, these cycles repeat. In recent years the smart phone has displaced the personal computer. Instead of storing data on floppy disks, we now store it in the cloud. Instead of consuming entertainment content at home on a television, increasingly we consume more of it on the go on a mobile device. Creative disruption is a never-ending process, creating opportunity and risk at every turn. Having an integrated research platform helps a skilled manager identify the opportunities and the risks and make decisions accordingly.
The market is a discounting mechanism of all available information. What we do as managers is to try and determine what the market has discounted and whether it’s correct. Our goal is to recognize a trend or an undervalued asset and risk-weight that asset appropriately. Having diverse points of view across the organization — in terms of exploring opportunities from both a fundamental and quantitative perspective, across geographies and from analysts in different sectors—can all play a role in creating better investment decisions, and hopefully better outcomes.
A collaborative culture and an integrated research platform can help skilled managers understand the ripple-effects created by disruptive new technologies. Teams of talented managers and analysts are better positioned to think-through the ramifications on a global scale than those focused strictly on the technology or product itself. For instance, would a new technology, such as electronic payment methods be adopted more rapidly in developed markets owing to an infrastructure advantage, creating opportunities for incumbent technologies to gain market share in less developed markets? This is the type of issue where a skilled active manager who cross-pollinates ideas across disciplines and stress-tests assumptions among investment team members would hope to stay ahead of the curve.
Robert M. Almeida, Jr. is MFS Institutional Portfolio Manager.
CC-BY-SA-2.0, FlickrPhoto: josip2
. UBS Wealth Management´s Ideas for 2017: US and Emerging Markets Equity and US Treasuries Hedged Against Inflation
UBS Wealth Management’s Chief Investment Office (CIO) predicts a polarized political world in 2017. Global gross domestic product (GDP) growth is likely to rise to 3.5% from 3.1% this year as US growth improves, despite the ongoing slowdown in China. With elections set for the Netherlands, France and Germany, investors will need to be conscious of increased post-Brexit division in Europe.
In the US, CIO expects the Federal Reserve to hike rates once in December and twice in 2017, but new fiscal stimulus should support growth, and inflation is likely to rise more than rates. In the Eurozone, the European Central Bank will probably start to taper quantitative easing. China will likely continue to manage its slowdown and let the USDCNY exchange rate depreciate to 7.0 in 12 months.
Mark Haefele, Global Chief Investment Officer at UBS Wealth Management, says: “We believe that central banks in the US and Europe will continue to err on the side of loose monetary policy. This means equities can remain supported, most notably in the US and emerging markets, and that investments with a decent yield will remain sought after. Investors will also need to consider means of hedging portfolios against rising inflation.”
The lessons of 2016
Don’t confuse a base case with a done deal. The past year has been ignominious for base case forecasts. Donald Trump won the US election. The UK voted to leave the EU. And central banks were forced to ease policy more than previously thought necessary.
Don’t panic. 2016 rewarded investors who remained calm amid uncertainty. The MSCI All-Country World Index dropped 13% early in the year on concerns over China, but bounced back by the end of March. After the Brexit vote, markets regained prior highs within three weeks.
Don’t underestimate central banks. Central bank policy surprises this year meant that even some negative-yielding assets provided positive returns.
Top 10 ideas for 2017
US equities. US earnings should grow 8% in 2017, supported by stabilizing oil prices, accommodative monetary policy and potential fiscal stimulus from the Trump administration.
Emerging market (EM) equities. A softer US dollar, low developed market (DM) interest rates and stabilizing GDP growth and commodity prices should continue to help EM stocks next year.
EM FX basket. Low DM rates help make high-yielding EM FX – real, rupee, ruble, & rand – attractive versus growth-sensitive DM peers – Australian & Canadian dollars & Swedish krone.
Asia Pacific real estate investment trusts should also benefit from low DM rates. Yields relative to government bonds are attractive compared with global averages.
Dividends and buybacks. With yields ultra-low in the Eurozone, Japan, and Switzerland, companies offering reliable incomes there have become even more appealing.
US senior loans. Senior loan yields offer a 4% pickup over short-maturity investment-grade corporate bonds, which is attractive even if default rates rise to long-term averages.
US Treasury Inflation-Protected Securities (TIPS). CIO expects TIPS to benefit from higher wage growth, stabilizing oil prices, potential fiscal stimulus and a weaker US dollar.
Palladium and platinum. A pickup in industrial activity, political uncertainty and falling real interest rates should support both precious metals in 2017.
Alternatives. Traditional asset class returns are likely to be moderate in 2017. The uncorrelated exposure offered by hedge funds, private markets, and short-term investment opportunities will be more valuable than ever.
Sell high-grade bonds. Yields are negligible and risks are rising. Investors could consider replicating some of the asset class’s insurance features with other approaches, including systematic hedging and allocation strategies.
Recommended long-term investment themes for 2017 and beyond
Emerging market healthcare catch-up. In developing nations, spending on healthcare is far outpacing GDP growth, creating opportunities for companies and impact investors.
Energy efficiency. Governments are increasing incentives to cut down on carbon emissions and lower energy consumption. Such standards now cover 30% of the fuel used worldwide.
The education gap. Companies are helping to meet demand for higher education and training as governments struggle to keep up.
As investors look forward to 2017, CIO’s End Game offers the opportunity to play policymaker and see how solutions to the world’s economic issues can affect economies, markets, and portfolios. A recent survey of UBS’s Industry Leader Network of entrepreneur clients globally underscored the importance of policy in investment planning: 25% named the political landscape as the biggest potential change for their business in 2017, compared with 19% who cited technology upgrades, 12% who cited a different shift, and 44% who saw no change.
