Photo courtesyMike Gitlin, Director Global de Renta Fija de Capital Group
Capital Group and HSBC will extend a long-standing relationship through the distribution of the Capital Group Global Corporate Bond Fund (LUX) (GCB) to HSBC’s clients globally.
HSBC will work with Capital Group to launch the fund globally across its Global Private Banking, Wealth Management, and Retail client segments, in several markets globally.
The GCB fund aligns with the HSBC Global Private Banking and Wealth CIO’s high conviction themeOpportunities in Quality Credit, which focuses on global investment grade corporate credit. GCB’s global approach provides diversification across markets and greater liquidity, while its focus on high quality may offer a degree of long-term stability. The fund could form a core allocation in clients’ investment portfolios, where appropriate for that client, with high-quality credit potentially playing a stabilising effect due to its low correlation to equities, should volatility remain elevated.
Launched in 2018, over the past five years the Luxembourg-domiciled UCITS fund outperformed the reference index and peer group3. The portfolio, driven by fundamental research, is managed by a lead portfolio manager and a global team of 16 sector analysts investing in their highest convictions.
Mike Gitlin, Global Head of Fixed Income, Capital Group, said: “We are delighted to deepen our partnership with HSBC as Capital Group celebrates 50 years of fixed income investing. We’re proud to be one of the largest, active fixed income managers globally with around US$470 billion in assets2.
“While markets have been challenged over the last few years, the return of income to fixed income means that investors can benefit from putting cash to work in high quality bonds with attractive yield for potential future income. Harnessing Capital Group’s strong fixed income capabilities and the Global Corporate Bond fund’s track record with HSBC’s global distribution network, we look forward to supporting more clients around the world to build a balanced portfolio.”
Annabel Spring, Chief Executive of HSBC Global Private Banking & Wealth, said: “We are pleased to be working with Capital Group to offer our clients access to its Global Corporate Bond Fund (LUX). This fund firmly aligns with our CIO view to focus on quality bonds, where current yields are at a decade high and we are nearing the end of the Fed’s tightening cycle. Historically, investing at current levels has provided investors with attractive total returns from income and capital growth.
“This arrangement further enriches our strong mutual funds offering and underscores our approach of offering a wide range of leading investment solutions to help clients unlock opportunities globally.”
The Securities and Exchange Commission announced charges against Broward County, Florida resident Sanjay Singh and his trucking and logistics company, Royal Bengal Logistics Inc., with fraudulently raising approximately $112 million from as many as 1,500 investors through an unregistered securities offering that primarily targeted Haitian-Americans.
The SEC’s complaint alleges that, from at least 2019 through 2023, Singh, through Royal Bengal Logistics Inc., offered and sold investors high-yield investment programs that purportedly generated 12.5 to 325 percent in guaranteed returns. As alleged, Singh and Royal Bengal promised investors the company would use their money to expand operations and increase its fleet of semi-trucks and trailers.
According to the SEC’s complaint, defendants assured investors that these investment programs were safe, and that Royal Bengal generated up to $1 million in revenue per month. In reality, the SEC alleges, Royal Bengal has operated at a loss and used approximately $70 million of new investor funds to make Ponzi-like payments to other investors.
As alleged in the complaint, Singh misappropriated at least $14 million of investor funds for himself and others, who did not provide any legitimate services in exchange for those investor funds. Singh also allegedly diverted more than $19 million of investor funds to two brokerage accounts he controlled, engaged in highly speculative equities trading on margin in those accounts, and, as a result, lost more than $1 million of investor money.
“As alleged in our complaint, Singh targeted many members of the Haitian-American community to raise money in a Ponzi-like scheme to enrich himself,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We are committed to holding accountable individuals like Singh who prey on investors through lies and deceit.”
The SEC’s complaint, filed in U.S. District Court for the Southern District of Florida, charges Singh and Royal Bengal with violating the registration and anti-fraud provisions of the federal securities laws. The complaint also names Sheetal Singh, the spouse of Sanjay Singh, and Constantina Celicourt, the spouse of Royal Bengal Logistics’s Vice President of Business Development, as relief defendants.
The District Court granted the SEC’s request for emergency relief, including preliminary injunctive relief, asset freezes, the appointment of a Receiver, and an order prohibiting the destruction of documents. The SEC is also seeking an officer and director bar against Singh and permanent injunctions, civil money penalties, and disgorgement of ill-gotten gains with prejudgment interest against both of the defendants and the relief defendants.
The SEC’s Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force have issued an Investor Alert with tips on how investors should avoid investment decisions based solely on common ties with someone recommending or selling the investment.
The SEC appreciates the assistance of Florida’s Office of Financial Regulation, the U.S. Attorney’s Office for the Southern District of Florida, the FBI’s Miami Field Office, and the U.S. Department of Transportation, Office of Inspector General, Southern Region.
Leste Group (“Leste”) and Opportunity Fundo de Investimento Imobiliário (“Opportunity”), a private investment firm based in Rio de Janeiro, Brazil, announced they have formed a new real estate development company, LORE Development Group (“LORE”).
The new venture will focus on developing primarily multifamily residential units and condo developments in South Florida.
LORE adds multifamily development to Leste’s diverse real estate strategies, which currently include equity investment and lending in the multifamily, single-family, healthcare, hospitality, and industrial asset classes.
The new firm will source and acquire properties, and work with third-party construction teams to build its projects. In Florida, LORE plans to develop more than $1 billion in multifamily projects over the next five years.
“We are excited to expand Leste’s real estate practice by adding a development capability to our existing real estate portfolio,” said Stephan de Sabrit, Managing Partner at Leste. “We have known and collaborated with Opportunity for many years and look forward to using our ‘boots on the ground’ to establish a vibrant partnership in a location we know very well. Miami is enjoying exponential growth, and we believe LORE is well-positioned to create desirable residences for both current residents and new arrivals.”
The first property being developed by LORE is a 442,000-square-foot, 500-unit multifamily building located at 1015 SW 1st Avenue in Miami’s trendy Brickell district. The $500 million project will feature state-of-the-art amenities, 2,000 square feet of ground floor retail, and ample parking in a prime location near Brickell City Center with easy access to public transportation.
“Brickell is the ideal neighborhood for our first multifamily development in South Florida. The thriving area has become one of the most desirable places to live, work and play in Miami, which is continuing to benefit from strong domestic and international migration, low unemployment, and a favorable tax environment,” said de Sabrit. “This property will set a new standard in luxury living for the area with its exclusive amenities, prime location, and breathtaking design.”
Opportunity is one of the largest independent asset management companies in Brazil, and today it operates one of the largest real estate investment funds in the country. Over the past 25 years, Opportunity has developed more than 6.5 million square feet of real estate.
“Leste’s broad investment expertise, combined with our strong real estate development background, will enable LORE to identify and capitalize on the best multifamily investment opportunities in South Florida,” said Jomar Monnerat de Carvalho, Director at Opportunity.
Alantra has strengthened its investment banking capabilities in the US by hiring Aakash Bhasin and Petru-Santu Acquaviva as Managing Directors based in New York City.
Aakash started his career at JP Morgan in New York and joins Alantra from Turtle Bridge Advisors, an M&A boutique Aakash founded. Before that, Aakash was a Managing Director at Wells Fargo Securities focusing on Industrials M&A.
Petru-Santu joins Alantra from BNP Paribas Investment Banking Group, where he was Head of Industrial Services Investment Banking (Engineering & Construction, Building & Utility Contractors, Environmental Services). Before that, he worked as Corporate Development and M&A Manager at ENGIE in Houston and Mexico City. Petru-Santu started his career at Leonardo & Co. focusing on Energy & Infrastructure M&A.
The Alantra team in the US is composed of more than 60 bankers across the firm’s offices in New York City, Boston, and San Francisco. The firm’s ambition is to significantly scale its operations in the US by building out deep sub vertical expertise in its existing sectors (Industrials, Consumer, Healthcare, Tech, and Tech enabled Services), and by adding new verticals, in which Alantra has a competitive advantage due to its strong track record in Europe (i.e., Energy Transition and FIG).
As part of a broader strategy to promote stronger cross-border collaboration within Alantra’s Investment Banking division and a more integrated service offering for the firm’s clients, Jon de Perdigo, a Director from the Madrid office, and Alexandre Maroufi, a Vice President from the Paris office, are relocating to the New York City office. Earlier this year, Philipp Krohn was appointed CEO of Alantra US and moved to the US.
Alantra will continue to hire talented professionals that can help deliver on its growth ambitions. Year-to-date, the firm has significantly strengthened its capabilities in Germany (Jan Caspar Hoffman, CEO), the Nordics (Daniel Lilliehöök, Partner), Spain (Pedro Urresti, MD in FIG, and Ernesto Plevisani, MD), and Switzerland (Michael Maag, CEO, and Martin Gamperl, MD).
After hiking its policy rate at 10 consecutive meetings since March 2022, the U.S. Federal Reserve paused in June, but expects more tightening ahead. Given strong recent economic data and the Fed’s revised projections, PIMCO believes this pause is likely a “skip” and that we’ll see another – and probably final – rate hike in July.
Further out, the base case includes a weakening U.S. economy in late summer or fall that will likely prompt the Fed to pause hikes past July. However, if continued strong data pressures the Fed to keep hiking, the risk of a sharper slowdown will likely increase.
Fed officials are balancing the risks of high inflation, which made little progress in the first half of 2023, and the lagged effects of the 500-basis-point tightening campaign. While Fed officials have suggested they hoped to take more time to assess the impact of monetary policy, stubbornly firm core inflation and resilient labor market reports since the Fed hinted at a pause complicate its balancing act.
Hawkish Pause
At its June meeting the Fed left rates and balance sheet policy unchanged, while signaling that further rate hikes may be required. The new Summary of Economic Projections includes hawkish adjustments to the dot plot; participants raised 2023 interest rate projections such that the median dot moved up by 50 basis points (bps) to 5.6%.
A significant majority (12 of 18 participants) sees at least an additional 50 bps of tightening this year, which suggests that Chair Jerome Powell and other members of the Fed’s leadership are among those expecting more hikes.
Fed officials also adjusted economic projections in a hawkish direction, and now anticipate lower unemployment, stronger growth, and stickier inflation this year, consistent with their projections that more monetary policy tightening is likely to be needed.
Interestingly, several officials slightly raised their longer-run policy estimates – a proxy for the neutral rate of interest. While the median remained unchanged at 2.5% (consistent with PIMCO’s New Neutral range), the upward revisions suggest officials may be considering whether the neutral interest rate has evolved since the pandemic.
Maintaining Optionality
In the press conference, Chair Powell suggested that the pause in interest rate hikes may be short-lived. The Fed is endeavoring to maintain optionality to hike or skip at each meeting as conditions warrant. Slowing the pace of tightening while continuing to leave markets expecting more hikes may help keep financial conditions appropriately tight while buying more time for lagged effects of prior rate hikes to show up in the macro data.
The Fed continues to see the risks of doing too little to cool inflation as greater than the risks of doing too much. While Chair Powell hinted the Fed could potentially hike at every other meeting, our forecast for macro weakening in the second half raises questions around whether the Fed will deliver all the hikes included in its latest projections, the report says.
Macro risks are building
Despite the recent strong data, PIMCO sees a two-handed U.S. economy. On the one hand, inflation data, like the labor market, has remained resilient, particularly since the previous Fed meeting in May. On the other hand, payroll growth has continued to decelerate, companies are cutting hours, and inflation sectors that have been stubbornly sticky, such as rental inflation, finally seem to be peaking.
Government policy changes are also likely to add macro volatility in the latter half of the year, potentially disrupting the U.S. economy just when Fed officials gather for the September meeting. The resumption of student loan payments in September as well as delayed tax deadlines in October are likely to be meaningful headwinds to consumption in the third quarter. While we continue to believe healthy household balance sheets can help buffer the overall economy, higher debt service costs are likely to eat away at excess household savings, reducing what has been an important support to U.S. growth.
“Our cyclical outlook still includes a recession. We believe one more hike in July will likely take the Fed to its peak for this cycle, but if stronger realized data pressures the Fed to keep hiking, then the chances of a more significant slowdown would also increase,” the report concludes.
Nearly half of U.S. investors in a recent Morgan Stanley survey want opportunities to invest in LGBTQ+ equity and inclusion, across a broad range of products and strategies.
This demand increases substantially among LGBTQ+ investors (86%), heterosexual investors with an LGBTQ+ household member (76%) and younger investors (67% of Gen Z and 56% of Millennials). However, there are very few investment options today focused purely on LGBTQ+ equity.
For asset managers and wealth managers, exploring these options may have the benefit of helping to improve equity and inclusion for the LGBTQ+ community while meeting investor demand and capturing investible assets from younger investors.
The Market for Investments Advancing LGBTQ+ Equity & Inclusion
Although the LGBTQ+ community in the U.S. is growing, with 26 million people representing 8% of adults overall and 21% of Gen Z adults, individuals still face social and economic disparities. Half of LGBTQ+ workers report that they have experienced workplace discrimination5 and LGBTQ+ founders have raised just 0.5% of venture capital in the U.S.
Investor capital could act as a lever to address such inequities. “Investing with LGBTQ+ objectives describes the effort to direct investment capital toward the advancement of populations historically disadvantaged based on their sexual orientation or gender identity,” says Susan Reid, Morgan Stanley’s Global Head of Talent and Director of the Institute for Inclusion. “The goal is to advance equitable and inclusive opportunities for the LGBTQ+ community, while also delivering market-rate financial returns.”
The business case for LGBTQ+ investment products includes both investors who identify as part of that community as well as younger investors: Investors born after 1980, regardless of their identity, could play a significant role in demand for these products.
A majority of Millennial and Gen Z investors expressed interest in finding investment options that advance LGBTQ+ equity and inclusion. As older generations transfer wealth to their heirs in the coming decades, $73 trillion is predicted to move to investors more interested in investible products and strategies advancing LGBTQ+ equity.
In Morgan Stanley’s analysis, holding all else equal, this generational wealth transfer could drive demand growth by boosting the assets of those interested in LGBTQ+ equity investing by more than 40%.
Meeting the Opportunity
Despite this investor interest, investment options today are limited. Among interested investors, 42% highlighted a lack of LGBTQ+ equity investment opportunities. Nearly a third did not know how to invest in this theme (32%) and lacked research or data on the theme (31%).
This demand creates opportunities for asset managers to differentiate themselves among investors within and beyond the LGBTQ+ community. “Our research suggests that nearly $20 trillion9 is currently held by investors interested in products or strategies that advance LGBTQ+ equity but don’t have viable options to do so,” says Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing. “Any new product or strategy aligned with this theme—from screening approaches to funds that target positive impact—could be well-received by interested investors, giving asset managers the opportunity to potentially differentiate themselves in the market.”
Investors may also consider philanthropic giving to organizations with the primary mission of advancing LGBTQ+ equity, or major programming dedicated to the LGBTQ+ community.
The survey found that demand for philanthropic giving targeting LGBTQ+ equity and inclusion was particularly high among people who identified as heterosexual but have an LGBTQ+ household member (89%), even higher than responses from LGBTQ+ investors (87%).
In addition, to specific investments that advance LGBTQ+ equity, 80% of LGBTQ+ investors and 40% of non-LGBTQ+ investors see this issue as an important factor when selecting a financial advisor or platform. In fact, 80% of LGBTQ+ and 31% of non-LGBTQ+ investors would switch financial advisors or investment platforms based on LGBTQ+ equity and inclusion opportunities.
More disclosure from corporates and reputable data providers will be needed to help scale LGBTQ+ equity investing and close the supply-demand gap for products and strategies targeting this theme. As younger generations more interested in LGBTQ+ equity investing inherit and build more wealth, and as the U.S. LGBTQ+ population increases, asset managers and financial advisors would be wise to examine the opportunities and position themselves for potential market leadership.
To view the full report, click on the following link.
The impact of mergers and acquisitions (M&A) in the registered investment advisor (RIA) channels has rippled across the financial advice industry. A fragmented market with a growing service sector and a recurring revenue model, the RIA channels are attracting the attention of private equity (PE) giants that typically dominate sectors like industrials, technology, and healthcare, according to Cerulli’s latest white paper,Private Equity Carves Out Its Place in the RIA Space.
Based on Cerulli’s market estimates, the opportunity for RIA acquisitions grew to $3.7 trillion as of year-end 2021. The “buy to build” model is particularly effective in the RIA space, where the market is highly fragmented and few growth-focused businesses achieve the scale necessary to succeed as an acquirer.
This has built a steady base of RIA firms ripe for consolidation and partially fueled the affiliate growth of RIA acquirers over the last decade.
The key drivers of PE interest in the RIA channels include a perfect storm of market opportunity, fragmentation, and revenue.
According to Cerulli, total assets in RIA channels jumped from $2.3 trillion to $8.2 trillion over the last decade, a 13.2% 10-year compound annual growth rate (CAGR). Combined, the RIA channels now control 27% of asset marketshare, growing by seven percentage points since 2011.
“The rapid expansion of the RIA channels coupled with consistent consolidation has driven private interest in the marketplace to new heights,” says Stephen Caruso, research analyst. “With the opportunity for RIA acquisitions eclipsing $3.7 trillion in AUM across advisor retirements, new breakaway advisors, and growth-challenged RIAs, there is no shortage of potential acquisition targets.”
A reliable revenue model is also driving PE interest. RIAs operate in a fee-based model with sticky client relationships and a predictable stream of recurring revenue. On average, RIAs derive 82% of their revenue from asset-based fees and experience annual average asset inflows per advisor of $6.8 million across six new client relationships. This organic growth, combined with a strong recurring revenue base, presents an attractive opportunity for firms.
Yet, as the number of private equity firms in the RIA market grows, finding white space will be decidedly difficult. “PE firms will need to ensure their growth metrics, timelines, and business strategies mesh with the consolidators they are looking to acquire,” says Caruso. “While operational guidance from experienced investment partners is advantageous, any misalignment of objectives could cause significant friction,” he concludes.
T. Rowe Price released its outlook for global financial markets for the balance of 2023 and the message is reluctantly bearish for the short term, with more room for optimism over the longer term.
Contributing factors making the near term uncertain include stubborn inflation, despite some recent slowing, tightening financial conditions and higher interest rates, a risk of recessions in many developed markets and reduced lending after the failure of several U.S. regional banks.
The resilience of many world economies is being tested as the effects of a steep U.S. Federal Reserve interest rate hiking cycle and a shift from quantitative easing to quantitative tightening are still being felt.
Labor markets remain strong and are an important signal for investors to watch as any softening could increase the risk of a recession.
As always, company earnings are an important focus. Although equity markets have delivered gains in the first half of 2023, earnings estimates may be too high for a weakening economy, putting further pressure on equity valuations.
Bonds, which suffered badly in 2022 alongside stocks, present potentially attractive opportunities in high yield, bank loans, and sovereign and local currency debt in certain emerging markets.
“The market is trying to reconcile two very different scenarios – one where the U.S. economy remains fairly strong and the Fed doesn’t cut rates, and one where the Fed has to cut by several percentage points. In Europe, I expect both the European Central Bank and the Bank of England to raise rates despite the associated economic risks. The Fed and other central banks in developed markets will lower rates eventually, but the timing is tricky. Rates are likely to remain higher for longer. Some emerging markets may be on the verge of rate cuts, but they are only attractive on a very selective basis,” said Arif Husain, Head of International Fixed Income and Chief Investment Officer.
In addition, Sébastien Page, Head of Global Multi-Asset and Chief Investment Officer commented: “Whenever the Fed has slammed on the brakes, someone’s head has gone through the windshield. This time it was some U.S. regional banks. Stock valuations aren’t broadly attractive right now, but small- and mid-cap stocks are trading at significant discounts to their historical averages, with small-caps priced like it’s 2008. In an uncertain environment, market dislocations are inevitable. With both stocks and bonds, skilled active management can help navigate market volatility by taking advantage of opportunities and avoiding riskier exposures. My takeaway fits in a fortune cookie: stay invested, stay diversified.”
Sandro Pierri,CEO of BNP Paribas Asset Management, was elected as EFAMA’s President for a two-year term, running until June 2025.
Sandro Pierri has been the CEO of BNP Paribas Asset Management since 2021. He has over 30 years of experience in various leadership roles within the asset management industry, including as former CEO of Pioneer Investments.
Massimo Greco, Vice-Chair Asset Management EMEA at JP Morgan Asset Management, was also elected as EFAMA’s Vice-President. Mr Greco has been Vice-Chair Asset Management EMEA since earlier this year, after heading EMEA Funds for J.P. Morgan Asset Management since 2012. He has 25 years of senior leadership experience at JP Morgan Asset Management and has previously served two terms as an EFAMA Board member.
President of EFAMA, Sandro Pierri, commented: “It is an honor to serve as EFAMA President for the next two years. In a challenging financial environment, regulation has become a key competitive component for our industry while navigating through major strategic transitions such as the retail investment strategy, sustainable finance and tech. I am deeply convinced that EFAMA has an essential role to play, to help build a true European Capital Markets Union to serve our clients and European savers but also finance the net zero transition. Our industry needs clear rules that allow fund and asset management companies to operate efficiently throughout the Union and beyond and I am truly committed to ensure the voice of our industry is heard at European and international levels.”
Pierri takes over from Naïm Abou-Jaoudé, CEO of New York Life Investment Management and EFAMA President since 2021.
Mr. Abou-Jaoudé commented: “I would like to congratulate and wish the best of luck to my successor and friend, Sandro Pierri. I have full confidence that he will lead EFAMA with excellence, ensuring our industry’s continued growth and success. I would also like to welcome EFAMA’s new Vice-President, Massimo Greco, and wish the very best to both of you in your mandate.”
Fidelity International released its annual Sustainable Investing Report 2023, entitled Nature Positive. The report details Fidelity’s approach to sustainable investing and the progress made in 2022in several key areas of the ESG dimension.
“As an asset manager, Fidelity remains committed to climate change mitigation and, through this report, recognizes the weight of nature in achieving emissions neutrality and the power of effective governance in driving systemic change,” the firm said.
Jenn-Hui Tan, Fidelity International’s Global Head of Sustainable Investment and Oversight, commented: “Despite the enormous challenges of geopolitics and inflation that plagued economies in 2022, sustainable investing continues to evolve apace and our focus is shifting as systemic issues, such as nature, become more relevant. As around half of the world’s GDP is heavily or largely dependent on nature, we realize that reversing the loss of nature is vital to ensure the long-term prosperity of the global economy.”
Some of the highlights of the report include updating the Sustainable Investment Principles to reflect the evolving approach to active ownership, and introducing an Influence Framework to identify opportunities for dialogue with stakeholders around issues of systemic importance over several years.
On the other hand, the development of Fidelity’s ESG tools to drive dimension integration. In this regard, with the deployment of climate ratings, the ODS tool and ESG ratings currently cover around 4,000 companies.
In addition, the report highlights that the thermal coal thematic dialogue program was launched, designed to accelerate the phase-out of thermal coal by 2030 in OECD markets and by 2040 globally, in line with the IEA’s 2050 net zero emissions scenario.
Finally, Fidelity highlights the development of a Deforestation Framework that “will help deliver on our commitment to do everything in our power to address the risks of deforestation caused by commodity sourcing in our investment portfolios by 2025 and, on neutrality.”
.jpg)
