CC-BY-SA-2.0, FlickrFoto: 401(K) 2012. Tres factores clave que podrían determinar el rumbo de los mercados de deuda privada
The global private credit market, an alternative source of financing for small and medium sized enterprises, is flourishing, with institutional capital supporting increased lending in Europe in particular, according to a report by the Alternative Credit Council (ACC), a private credit industry body affiliated with the Alternative Investment Management Association (AIMA), and Deloitte, the business advisory firm.
The private credit market has grown from $440 billion last year, to $560 billion today. The research, Financing the Economy 2016, found that institutional capital is boosting lending in Europe and much of this growth has been driven by demand from European businesses. However, the US still remains the largest private credit market, both in terms of overall assets under management, and new assets raised in 2015.
The research is the second paper to be published by the ACC and Deloitte, and is based on a survey of alternative lenders, representing assets under management totalling $670 billion, of which $170 billion is allocated to private credit strategies.
Stuart Fiertz, the Chairman of the ACC and President of Cheyne Capital, said: “As the recovery from the financial crisis continues, business innovation and demand for credit shows no signs of slowing. Alternative lenders are primed and ready to continue to fill the lending gap, but this is not necessarily at the expense of the traditional lenders. We see a cooperative relationship occurring between banks and alternative asset managers.”
CC-BY-SA-2.0, FlickrPhoto: Live4Soccer. Spanish Revenge: Their Bonds Yield Lower Than Their Italian Counter-Parts
Amongst the 3 things Pioneer Investments’ European Investment Grade Fixed Income team talked about recently was Spain.
In the last 16 of the recent Euro 2016 football championships, Italy gained revenge for a 4-0 drubbing in the Euro 2012 final by beating Spain 2-0.
Tipped as one of the pre-tournament favourites, Spain’s exit prompted the departure of their coach Vicente Del Bosque and led to concerns that it might have been the end of a golden era for Spanish football that saw them win Euro 2008, the World Cup in 2010 and the Euro championships again in 2012. “However, Spain’s footballing woes are being offset by a stellar out-performance in European bond markets,” says Tanguy Le Saout, Head of European Fixed Income, Executive Vice President at Pioneer.
Having traded as high as 20bps above similar-duration Italian sovereign bonds at end-March 2016, Spanish 10-year government bonds now yield over 20bps lower than their Italian sovereign counter-parts. “Why has this happened? ” Asks Le Saout. “We think there are a couple of reasons”
Firstly, he believes the Spanish economy is experiencing relatively rapid growth. Q2 GDP was revised higher to 0.83% quarter on quarter, suggesting that an annualised growth rate of 3% is on the cards for 2016. That would make Spain the 3rd fastest growing region in the Eurozone after Ireland and Slovakia.
Secondly, he mentions Spain has made much better progress in consolidating and recapitalising its banking industry than Italy.
Thirdly, Spanish banks were large sellers of Spanish government bonds in 2015 in order to reduce their large existing exposure, whilst Italian banks did not undertake the same action with respect to their holdings of Italian government bonds. “But since the start of 2016, Italian banks have been buying non-domestic Eurozone sovereign paper, and especially Spanish government bonds.”
Finally, according to the Pioneer expert, “the political situation had been looking a bit clearer in Spain, with the incumbent PP party accepting the conditions set out by a smaller party (Ciudadanos) for forming a coalition. That coalition would still fall short of an overall majority but a minority government could potentially be formed, ruling out the possibility of a third election within 12 months. Y Viva Espana.” He concludes.
CC-BY-SA-2.0, FlickrPhoto: Drew Barrymore. What Do Tony Robbins, Kevin O'Leary, Drew Barrymore, Jim Cramer, Ivanka Trump, and Cynthia Rowley Have in Common?
What do Tony Robbins, Kevin O’Leary, Drew Barrymore, Jim Cramer, Ivanka Trump and Cynthia Rowley have in common? They all experienced a “financial grownup moment” when they realized that they had to pay attention to money, and that the financial decisions they made had a significant impact on them and the people they cared about.
These financial Role Models, and 24 others, tell their financial grownup stories and share the lessons they learned in “How to Be a Financial Grownup: Proven Advice from High Achievers on How to Live Your Dreams and Have Financial Freedom,” the new book by award-winning Reuters journalist Bobbi Rebell.
“Most people don’t expect a personal finance book to mention a sex scandal, repeated battles with cancer, tales of living out of a car, or extreme childhood poverty—but these are the real, raw stories behind these inspiring Role Models’ financial grownup moments,” said author Rebell. “To add to the Role Models’ contributions, I also consulted a team of financial experts for actionable information and advice to help readers make immediate improvements to their financial lives.”
“How to Be a Financial Grownup” features:
Tony Robbins on owning the choices you make
Kevin O’Leary on making sacrifices to reach your goals
Drew Barrymore on pouring your heart into your work
Jim Cramer on the need to be financially literate
Ivanka Trump on the difference between spending and splurging
Cynthia Rowley on taking risks and trusting your vision as an entrepreneur
Elliot Weissbluth on good vs. bad debt
Terry Lundgren on choosing the best career for your financial goals
Amanda Steinberg on spending money without busting your budget
Roger Crandall on realistic investing strategies tailored to goals
Sallie Krawcheck on the financial impact of work/life choices
Spencer Rascoff on making the best real estate choices
Aaron Shapiro on mixing friends and finances
Alexia Brue on how healthy eating along with mindfulness pay off financially
And more
Though she began work on the book with millennials in mind, Rebell quickly determined that these skills and lessons are essential at every life stage – from setting up post-college, to getting married and having kids, to the often-scary prospect of retirement.
Northern Trust expects most investments to generate single-digit positive returns over the next five years, predominantly due to slow economic growth and persistent low interest rates.
This Slow Growth Angst – one of six key themes profiled in Northern Trust’s annual five year market outlook – is a key driver behind the company’s return forecasts for global investors of 5.8 percent for global equities and 2.1 percent for investment-grade bonds.
“While we expect markets may be volatile at times, we remain convinced the global economy is in a narrow and slow growth channel,” said Northern Trust Chief Investment Strategist Jim McDonald. “Current regulatory and fiscal policies have greatly restricted the boom-bust cycles and, although the risk of a recession increases, if one does materialize it should be shallow due to a lack of economic excesses and financial system stability.”
Despite these subdued, yet positive, projections, Northern Trust believes the three-month German Bunds and Japanese Government Bonds will turn in negative returns during the next five years.
“Developed economies overall will continue their slow pace, expecting annual real economic growth of 1.4 percent over the next five years, and the outlook for emerging economies remains similarly subdued,” said Wayne Bowers, chief investment officer for Northern Trust Asset Management in Europe, Middle East and Africa and Asia-Pacific. “Ultimately, while concerns over slow growth are further impeding global growth, investors need to resist becoming bearish during market weakness or bullish when the economy appears strong and instead scrutinize any future dramatic swings – positive or negative.”
In addition to the theme of “slow growth angst”, Northern Trust has identified five more themes expected to shape the global markets over the next five years including:
CC-BY-SA-2.0, FlickrFoto: Chris Dlugosz. Por qué el euro ya no llegará a la paridad con el dólar
Over the recent weeks, the Federal Reserve has signaled its willingness to move ahead with a second rate hike. Such a move would follow the December 2015 decision to raise policy rates. Statements from Yellen and Fisher left opened the possibility of a rate hike as soon as September 21st, when the FOMC will meet next.
However, and according to Lyxor AM’s latest weekly brief, “the decision is not straightforward considering the disappointing US GDP growth figures in H1-16 and the associated falling labor productivity. Financial markets remain somewhat unconvinced but at the same time they cannot ignore the Fed guidance. As a result, short dated Treasury yields moved higher and the USD appreciated against major currencies.” Says a team headed by Jean-Baptiste Berthon, Senior Strategist and Jeanne Asseraf-Bitton, Global Head of Cross Asset Research.
Market movements related to the new Fed guidance had a differentiated impact on hedge fund strategies. CTAs underperformed last week as a result of their long fixed income and short USD positions. Meanwhile, Global Macro managers outperformed. They benefitted from their long USD positions, a stance they have maintained for some time on the back of the growth divergence thesis between the US and the rest of the world.
Contrasted views
Interestingly, most funds within each strategy share the same stance on the USD (i.e. most CTAs in our sample are short USD and most Global Macro are long USD). But there is a much wider disagreement across Global Macro managers on US fixed income. “The aggregate exposure of Macro managers on the asset class is close to zero, but at the fund level we see approximately half of the managers being long US bonds and another half being short. That reflects the conflicting signals on the US economy. A vibrant job market has fuelled household consumption but this is not reflected in GDP numbers.” They write.
Economic expansion was actually pulled back in H1-16 by declining capex as companies are not investing to expand production capacities. “All in all, we tend to be rather in favor of the CTA stance. We believe that the Fed is unlikely to move as soon as September. There are simply too many uncertainties regarding the strength of the US economy to act now. The Fed will probably err on the side of caution in our view and the USD upward pressure may abate, a support for CTAs over Macro funds.” Lyxor AM concludes.
CC-BY-SA-2.0, FlickrPhoto: Doug8888, Flickr, Creative Commons. Liquid Alternatives and Private Debt Likely to Benefit Most from Brexit
According to investment consultant bfinance, the list of asset classes benefitting through the Brexit is long with gold and govies being seen as safe havens. In their study “Brexit, One Month On-Working Through the Investment Implications” they stress that the US equity market also benefitted “to a certain extent” from a flight to quality from equity investors.
Overall, they believe that Brexit will probably have “a relatively mild impact on global equities and bonds, but to have a more direct impact on those asset classes within the UK,” the consultant estimates.
bfinance highlights that liquid alternatives and private debt are two asset classes which are likely to perform well in a Brexit landscape.
“Liquid alternatives will benefit from the increased dispersion associated with the greater uncertainty at both stock and sector level. Private debt, which includes corporate, real estate and infrastructure debt, is set to benefit from the relatively high yield, the reduced competition from banks and the resilience to a downturn in values and cashflows,” bfinance argues.
It specifies that this is particularly the case for more senior debt and less so for higher yield or mezzanine debt that has less of a cushion to protect loans from value declines.
Morningstar announced that its board of directors has appointed Kunal Kapoor, CFA, chief executive officer, effective Jan. 1, 2017. Kapoor, 41, who currently serves as president for Morningstar, has also been appointed to Morningstar’s board of directors.
Company founder Joe Mansueto will become executive chairman effective Jan. 1, 2017 and will continue to serve as chairman of the board. To limit the number of inside directors, Don Phillips has voluntarily opted to step down from the board, effective Dec. 31, 2016.
Joe Mansueto, chairman and chief executive officer of Morningstar, said, “I can’t think of a better person than Kunal to lead Morningstar as we head into the next stage of our company’s innovation and growth. He’s a Morningstar veteran who lives and breathes our mission of creating great products that help investors reach their financial goals.”
Kapoor originally joined Morningstar as a data analyst in 1997 and has been president of the company since October 2015. In his current role, he is responsible for product development and innovation, sales and marketing, and driving execution and accountability across the company. He previously served as head of global products and client solutions and has served in a variety of other leadership roles for Morningstar, including director of mutual fund analysis, director of business strategy for international operations, president and chief investment officer of Morningstar Investment Services, and head of Morningstar.com and the company’s data business.
As mentioned above, Don Phillips will step down from the board of directors, effective Dec. 31, 2016, and will be succeeded by Kapoor. He will continue in his role as a managing director for Morningstar, focusing on research innovation. Mansueto added, “Don has been an outstanding board member since we first formed a board in 1999, and his perspective on the industry is second to none. Don is a beloved leader in the Morningstar community, and I am grateful for his commitment to Morningstar’s success.”
CC-BY-SA-2.0, FlickrPhoto: Susanita, Flickr, Creative Commons. Brexit will Fuel Fund Launches in Europe
According to Detlef Glow—Lipper’s Head of EMEA Research, and Christoph Karg—Content Management Funds EMEA at Thomson Reuters Lipper, at the end of Q2 2016, equity funds dominated the scene with a market share of 37% of the funds available for sale in Europe, followed by mixed-asset funds (28%), bond funds (21%), and money market funds (3%). The remaining 11% of “other” funds were real estate funds, commodity funds, guaranteed funds, and funds of hedge funds.
At the end of June 2016 there were 31,815 mutual funds registered for sale in Europe. For Q2 2016 a total of 689 funds (437 liquidations and 252 mergers) were withdrawn from the market, while only 463 new products were launched. However, the Thomson Reuters’ professionals expect that following the “Brexit” vote and its possible implications for fund distribution in Europe, “the number of products to rise over the course of the next two years. Investment managers based in the United Kingdom will ensure their access to the continental European market with the launch of products that are domiciled in the EU, while EU-based asset managers may start to launch funds that are domiciled in the U.K. The first scenario is expected to lead to an even higher dominance of Luxembourg and Ireland as international fund hubs in Europe, while the latter may drive up the number of products domiciled in the U.K.”
Additionally, they believe that market and fund-flow trends will impact the activity of the European fund promoters in one or another direction, “since these trends normally lead to the launch of new products or, contrarily, to the closure of existing products that have fallen out of favor with investors. With the increasing pressure on profitability, at least for bank-or insurance-owned asset managers, fund promoters will also further clean up their product ranges to become more efficient in an environment of increasing costs from the permanently increasing regulatory demands.”
For Q2, Luxembourg continued to dominate the fund market in Europe, hosting 9,109 funds, followed by France, where 4,452 funds were domiciled.
You can read the full report on the following link.
CC-BY-SA-2.0, FlickrPhoto: Minwoo, Flickr, Creative Commons. Santander Will Also Pass Negative Interest Rates to its Institutional Clients
Banco Santander is supposedly joining other European lenders, like Deutsche Bank or BBVA in passing on the region’s negative interest rates to some of its financial institutional clients. According to Bloomberg, Spain’s biggest bank notified clients of its securities services unit that it will introduce a fee on their deposits.
At a time when the European Central Bank is charging banks on overnight deposits to encourage spending, the rate, is of -0.4%.
Spain’s second-largest bank, Banco Bilbao Vizcaya Argentaria, is charging between 0.15 and 0.25% since July.
Santander Securities Services has about 700 billion euros ($782 billion) in assets, according to its website.
Ludovic Colin . Ludovic Colin New Head of Global Flexible Investment at Vontobel AM's Fixed Income Boutique
As of 1 September, Ludovic Colin has been appointed Head of Global Flexible Investment team at Vontobel Asset Management’s Fixed Income boutique. The newly created team will be responsible for the management of the Vontobel Fund – Bond Global Aggregate and Vontobel Fund – Absolute Return Bond.
Ludovic Colin will take over as lead Portfolio Manager of the Absolute Return Bond strategies, with Jack Loudoun as deputy Portfolio Manager. Ludovic Colin joined Vontobel Asset Management in 2015 as senior Portfolio Manager. Prior to that, he was a Cross Asset Macro Specialist at Goldman Sachs and Portfolio Manager at Amundi in London. Jack Loudoun, who joined Vontobel Asset Management in 2015 as Portfolio Manager for the Absolute Return Bond strategies, has a long track record in managing absolute return bond strategies going back to 2002, mainly working for Invesco and Deutsche Asset & Wealth Management. Throughout his career, Jack has been responsible for global rates, credit and macro strategies.
“The new team will further broaden our well established flexible fixed-income capabilities, providing our clients with both total and absolute return offering”, said Hervé Hanoune, Head of Fixed Income at Vontobel Asset Management.
Vontobel’s Zurich-based Fixed Income boutique was established in 1988 and focuses on four actively managed product lines: Global & Swiss Bonds, Corporate Bonds, Emerging Markets Bonds and Global Flexible Bonds. The boutique is comprised of 24 investment professionals with an average of 15 years of investment experience. Vontobel’s bond experts share the belief that fundamental research, independent thinking and active portfolio management are the key to consistent outperformance.
During recent years, Vontobel has seen the assets under management of its fixed-income offering grow to CHF 25 billion. Besides the acquisition of TwentyFour Asset Management, one of the key drivers of this growth has been the inflows into the Flexible Bond funds of Vontobel Asset Management’s Zurich based Fixed Income boutique.
