Pixabay CC0 Public DomainMuriel Danis, directora global de Plataformas de Producto y Soluciones Sostenibles de la división de Banca Privada Internacional (IPB) de Deutsche Bank .. Deutsche Bank ficha a Muriel Danis como directora global de Plataformas de Producto y Soluciones Sostenibles
Deutsche Bank’s International Private Bank (IPB) announced this week the appointment of Muriel Danis as Global Head of Product Platforms & Sustainable Solutions, effective March 14, 2022.
In this newly created role, Danis will be responsible for the continuous development of Deutsche Bank’s product and services platforms across the IPB’s client segments and will “ensure robust governance across regions”. The firm clarified in a press release that this will include responsibility for trading and capital markets governance, funds, alternatives and accounts, cards and payments products as well as supporting the development of the IPB’s sustainable solutions in line with the commitments laid out at the Sustainability Deep Dive in May 2021.
“Muriel Danis’ appointment is testament to our business’ ability to attract leading industry talent to our fast-growing product platform and reflects our ambition to become the house of choice for clients who wish to make positive social change. Her role will be a significant driver as we pursue delivery of the IPB’s ESG targets”, said Claudio de Sanctis, Global Head of the IPB and CEO EMEA.
Danis has over 22 years of experience across Global Markets and Private Banking, most recently at HSBC in London as Global Chief Operating Officer in the Wealth Management division’s Products and Investment Groups. Prior to that, she held an array of roles, including Global Head of Advisory, as well as Global Head of Product Management and Business Development. She was also a Director in the Family Office Partnership, Middle East and Africa in Dubai. Before joining HSBC, she had a number of positions within Credit Suisse’s Private Bank and Global Markets divisions.
Foto cedidaMario Aguilar, estratega de carteras senior en Janus Henderson Investors. . Mario Aguilar se incorpora a Janus Henderson como nuevo estratega de carteras senior
Janus Henderson Investors is bolstering its Portfolio Construction and Strategy team with the hiring of Mario Aguilar as Senior Portfolio Strategist. In this newly-created role, he will support clients in the Latin American, US Offshore and Iberian markets.
Aguilar, who assumed the role on 1 December 2021, will be based in London and report to Adam Hetts, Global Head of Portfolio Construction and Strategy Group. The asset manager has revealed in a press release that in his new position he will serve as “a crucial partner” to clients by delivering actionable investment strategy insights through customized portfolio analytics and proprietary thought leadership, across all asset classes.
Janus Henderson has highlighted that Aguilar brings “a wealth of industry experience” having joined fromAllspring Global Investments (formerly Wells Fargo Asset Management), where he was an EMEA Client Relations Director since 2013. In that role he had multi-asset product coverage responsibilities for EMEA and Latin American clients, engaging with those clients in a variety of formats including individual client portfolio consultations, group presentations, and providing investment and market commentaries. Prior to that, he worked as a Client Services Director at Markov Processes International where he was an expert on their flagship portfolio analysis software.
The Janus Henderson Portfolio Construction and Strategy (PCS) team performs customized analyses on advisor portfolios, providing differentiated, data-driven diagnostics, and publishes proprietary asset allocation and macro insights. The firms points out that through guidance from the PCS team, “advisors can build more resilient client portfolios through deep performance/risk model analysis and unique investment perspectives”.
Aguilar’s appointment brings the headcount of the PCS team to a total of 12 people covering Janus Henderson clients across US, US Offshore, LatAm, and EMEA.
“I am delighted to have Mario onboard to offer clients in Latin America, US Offshore and Iberia the specialist knowledge of our PCS team. We are dedicated to growing our private bank network in these regions and the value propositions that the PCS team will be able to offer advisors will be invaluable in helping them to deliver results in line with their investors’ long-term objectives. We are confident that the combined technical expertise of Mario, PCS technology and the local expertise of our sales colleagues on the ground will result in a superior client experience”, said Ignacio de la Maza, Head of EMEA Intermediary & LatAm said.
Meanwhile, Adam Hetts, Global Head of Portfolio Construction Strategy, commented that Aguilar is “a critical addition” to their growing global team: “He brings a tremendous mix of local expertise and global investment acumen that is ideally suited to our clients’ needs in the Latin America, US Offshore, and Iberia markets”.
In his view, thanks to this addition, Janus Henderson and their sales colleagues are deepening their client relationships in these “key strategic markets” by delivering an even wider array of customized portfolio construction insights and market perspectives. “Mario brings unique perspective to how we can best apply our global team’s resources to his local markets, and we are all very excited for what he will accomplish on behalf of our clients”, he concluded.
Foto cedidaPhilippe Couvrecelle, consejero delegado y fundador de iM Global Partner.. Philippe Couvrecelle, consejero delegado y fundador de iM Global Partner
iM Global Partnerannounced in a press release that its Luxembourg-based Oyster fund range has changed its name to iMGP Funds. The decision is part of “an extensive rebranding effort” in response to its accelerated company growth and a renewal of its corporate vision.
“At the heart of the rebranding initiative, is a change of the company’s Oyster fund range to iMGP Funds”, the firm added. Specifically, the US funds changed their name on 16th December 2021 and the Luxembourg-based SICAV on January 10th.
The worldwide investment manager highlighted that 2021 was “a milestone year” for its business, as it broadened its asset management network with two new partners:Richard Bernstein Advisors who joined in July 2021 andAsset Preservation Advisors in September 2021. In its view, both have provided clients with access to “an even wider selection of distinctive high-quality funds”.
The firm also acquired 100% of the Litman Gregory wealth management and funds businesses, strengthening its US distribution footprint and capabilities. Consequently, iM Global Partner’s assets under management almost doubled in 2021 from US$19.6 billion in December 2020 to US$38 billion in December 2021 and staff numbers grew from 50 to 115.
“In the last few years, iM Global Partner has cemented its status as a market leader in distinctive fund products. We experienced over 90% growth in assets under management last year. This growth reflects the increased recognition that asset managers must provide transparent funds that perform competitively on a risk adjusted basis”, commented Philippe Couvrecelle, CEO and Founder of the company.
In this sense, he believes that this announcement provides them with “the unique opportunity” to ensure their brand becomes synonymous with quality: “Our brand reflects the strength, sustainability and flexibility of our investments solutions”.
Couvrecelle explained the announcement demonstrates the confidence his team has in the company’s future and lays the groundwork for further expansion which will be demonstrated in 2022. He added that the firm plans to reach $60-65 billion in 3 to 4 years and $150 billion in 2030, with 4-6 new partners by 2023/2024.
“The iMGP Funds range illustrates the diversity of our high-performing team of top-notch asset managers spread throughout the world. At iM Global Partner, our clients know that our brand stands for quality – we search the world to find the most capable fund managers with the tenacity and innovation to achieve investment returns in any market environment. Therefore, we are confident that 2022 will be another good year for iM Global Partner and particularly iMGP Funds,” he concluded.
Pixabay CC0 Public Domain. Should I Stay or Should I Go?
After three consecutive years of extraordinary equity markets returns – the last two while the economy was being savaged by the pandemic – investors, as in the famous song of The Clash, are singing to themselves: “Should I stay or should I go?”
Many see similarities between the historical period that preceded said song, and our time. When punk-rock emerged in the mid-1970s, the world economy was mired down by persistent inflation; caused in large part by growing union power coupled with misguided monetary and fiscal policies. The concern is that the comparisons do not end there, and that as happened back then we will suffer another lost decade for equity markets.
But comparative history requires us to be very careful with the context. Lessons were learned from that period, and in 1982, when the band released their most celebrated song, the economic policies that had led to high inflation were beginning to reverse in full force; ushering in the period of greatest macroeconomic stability ever experienced.
In the decades that followed the charge against inflation led by Chairman Volcker, corporate profits boomed. The liberalization of trade and finance (accelerated after the fall of communism), as well as the productivity increases brought about by the introduction of personal computers and the Internet, also contributed greatly.
We are still benefiting vastly from these events, which have not only contributed to global economic growth, but have also proven to be key to keeping inflation in check. Offshoring (or the threat of it) significantly reduced collective bargaining power in developed countries; and technology, combined with globalization, contributed to the drastic cheapening of many goods and services.
To infer that because we have had a bout of inflation we are going to go straight back to the 70s is a very naïve interpretation of economic history. The pandemic has altered the prevailing economic regime in the short term, but it hardly has the potential to fundamentally change it. It is supply-side constraints that have been responsible for the recent surge in inflation, not fiscal and monetary largesse. In fact, without the support from governments and central banks we would have experienced a deep (and deflationary), recession.
Proof that past mistakes are unlikely to be repeated is that the Fed has announced (earlier than expected) that it will begin to dial down its support. Therefore, the main risk for the economy is not falling into a 70s-style stagflation trap, but rather that the dose of stimulus has had to be so disproportionate that reducing it can easily cause “withdrawal symptoms”.
This helps explain the apparent paradox of long-term interest rates remaining stubbornly low while inflation reaches levels not seen in decades, all while the Fed is about to begin tightening. The reading is clear, the bond market is discounting that either inflation eases, or the Fed will have no choice but to cool demand to prevent a price spiral.
For investors, the key takeaway of all that has happened in 2020 is that the thesis of “lower for longer” interest rates has successfully passed an extreme stress test. If rates have barely increased, despite inflation nearing 7%, when will they?
With this in mind, investors should not be overly concerned about a valuation shock. However, they do have to worry about the sustainability of the recovery, as any sign that the economy is slowing down could cause a major correction in equity markets. With this in mind and contrary to the prevailing narrative, Growth stocks should be less vulnerable than Value and Cyclicals.
In a way, the year that begins marks the return of “business as usual” for investors; with corporate profits back to center stage. And here the risk goes both ways. On the one hand, we can see a reversal to the historical trend, given that the pandemic appears to have provided a counterintuitive boost to earnings. But on the other hand, the trend may continue as long as the corporate world continues to profit (with winners and losers) from the digitization push; something that the pandemic has accelerated even further.
This is the implicit wager of being long equities these days. The only certainty we have is that it will be next to impossible to repeat a year like 2021, in which all S&P 500 sectors had positive returns, and the index reached 70 new highs. But since bonds hardly offer an alternative, the opportunity cost of not staying invested is simply too high if a correction does not finally occur. Or giving a twist to the song, “If I stay there will be trouble (…) And if I go it will be double (…)”.
Foto cedidaValérie Baudson, consejera delegada de Amundi.. Ser líderes europeos en ETFs y una línea de negocio de soluciones alternativas líquidas: así es la apuesta de Amundi tras la compra de Lyxor
After six months of preparatory work andthe completion of the acquisition of Lyxor, Amundi explained this week the strategic benefits for its business and growth plans. Three key ideas were the focus of the press conference: to be the leader in the European ETF market, to have a platform of liquid alternative investment solutions and to add new skills and talent to its team.
“The acquisition of Lyxor is another important step in the deployment of Amundi’s strategy. It elevates Amundi to the top position among European ETF providers and enriches our active management offering with a leading position in liquid alternative assets. Amundi is fully prepared to be the partner of choice in these areas of expertise for both retail and institutional clients in Europe and Asia, and to continue its growth in two promising markets,” said Valérie Baudson, CEO of Amundi, during her presentation.
The head of the asset manager explained that the integration of both companies will generate synergies in terms of annual costs of 60 million euros before tax (68 million dollars), the full impact of which is expected to be visible in 2024. By the same date, Amundi’s CEO estimates synergies in terms of annual current income to be €30 million (34 million dollars). “The integration process will be carried out progressively over the next two years with several stages: IT migration, legal mergers, creation of a new organization,” she clarified.
Founded in 1998, Lyxor has more than €140 billion in assets under management and advice. In addition, the asset manager is a major player in the ETF market with €95 billion under management, making it the third largest player in Europe with a market share of 7.7%.
Regarding the active management business, “Lxyor has developed a recognized expertise in active management, with €45 billion under management, in particular through its leading alternative platform. Thanks to this acquisition, Amundi benefits from strong levers to accelerate its development in the ETF segment, which is currently experiencing rapid growth, as well as complementing its active management offering, particularly in liquid alternative assets, as well as advisory and OCIO capabilities, and fiduciary management,” Baudson emphasized.
Commenting on the roadmap, Lionel Paquin, CEO of Lyxor, added: “Lyxor joins Amundi with remarkable business momentum across all franchises and fully committed to ambitious new development goals. Driven by a pioneering spirit they have always shared, the Amundi and Lyxor teams will now work as one to build for their clients an even stronger and more innovative leader.”
ETFs, smart beta and indexed solutions
As highlighted by Fannie Wurtz, global head of ETFs, Indexing and Smart Beta business, “the acquisition of Lyxor will propel Amundi’s passive platform to the position of Europe’s leading ETF provider.” Overall, the combined ETF business represents more than €170 billion in assets under management, representing a 14% share of the UCITS ETF market for Amundi.
She also argues that the new expanded ETF range will provide investors with “efficient access to one of the largest and most comprehensive ranges of UCITS ETFs available on the market”. This range of more than 300 products includes some of the most attractive strategies, especially in ESG, weather, thematic investing, emerging markets and fixed income.
“In a market where size and scale are key, Amundi’s passive platform, bolstered by more than €282 billion, is an important step in cementing Amundi’s unique positioning as the European partner of choice in passive management for retail and institutional clients around the world. The Amundi Passive platform has set itself the target of increasing its assets under management by 50% by 2025,” she added.
Wurtz explained that their new position will allow them to continue to grow in an industry segment that has been driven in recent years by clearer, more concise and transparent regulation, as well as the transformation towards ESG and the digitization of distribution channels. Supported by this growth experienced by the ETF universe, Amundi expects strong growth in adoption by retail investors, both through ETF portfolio models and the acceleration of the European self-directed ETF segment, especially through online platforms. “In this broad retail segment, Amundi will leverage its global firepower and deep understanding of local market specificities to partner with distributors to co-design comprehensive and fully tailored solutions, including services such as digital and training support,” the asset manager says.
In this regard, Amundi anticipates growing interest from European institutional investors who are keen to increase their use of ETFs, especially for fixed income and ESG allocation. As Wurtz clarified, the fund manager has identified a strong appetite from non-European institutions, as the UCITS ETF franchise has proven attractive. “Thanks to the group’s long footprint in Asia and its presence in Latin America, and the breadth and depth of its offering, Amundi is well positioned to establish itself as the preferred European passive provider in these regions,” she commented on what its main regions of interest will be.
Finally, the firm wants to take advantage of the high demand for ESG solutions to grow the ETF business. Its conviction is that ESG ETFs will contribute to democratizing access to meaningful investment in a cost-effective way. In this regard, Wurtz announced that Amundi’s existing product range is being strengthened with the addition of innovative products from Lyxor ETFs. “In particular, with the Green Bond and Net Zero Climate ETFs, the newly expanded range of Amundi ESG & Climate UCITS ETFs, with a market share of around 20%. Going forward, responsible investing will be the primary focus of any product launches within the platform,” she said.
In addition, in line with Amundi’s 2025 ESG Ambition plan and Net Zero commitment, Amundi ETF will aim to double the proportion of responsible ETFs – i.e. classified as SFDR 8 or SFDR 9 – available to investors, reaching 40% of the total ETF range by 2025. As announced by the fund manager, all these growth targets and projects will be led by Arnaud Llinas, who will head the Amundi ETFs business division.
New business line: liquid alternative solutions
The second key to the deal, Baudson and Wutz insisted, is to enable Amundi to create a new business area focused on liquid alternative solutions, where Lyxor has extensive expertise and a strong business. “The integration of Lyxor allows Amundi to enrich its active management capabilities with the addition of alternative investment expertise, giving investors access to innovative sources of diversification and performance for their portfolios,” the asset manager noted.
Amundi has therefore made the strategic decision to create a dedicated Liquid Alternatives business line called Amundi Alternatives, thus complementing its range of investment solutions to better serve the needs of all its clients worldwide, including institutions, private and wealth investors and asset managers.
The Liquid Alternatives business is currently valued at more than €23 billion, including the Liquid Alternatives UCITS Platform and the Dedicated Managed Account Platform (DMAP) business, which represents €16.7 billion of assets. As announced, this division will be headed by Nathanaël Benzaken.
With this decision, the asset manager reaffirms its position as a leader in alternative investment, aiming to increase assets under management on the UCITS Alternative platform by 50% by 2025 and accelerate the development of DMAP towards institutional clients internationally. “This new platform is well placed to generate resilient, long-term growth thanks to Lyxor’s historical position as a trusted partner to the best names in the global alternative investment industry, as well as to the world’s largest and most sophisticated investors,” the fund manager concludes.
Internal organization
During the presentation of this ambitious plan, Amundi’s CEO emphasized that the Lyxor team will be integrated with the current Amundi team. Thus, as of January 1, 2022, Lyxor is a subsidiary of Amundi and will be integrated into the group’s operations with significant changes to its structure.
In particular, Lionel Paquin, CEO of Lyxor, joins Amundi’s Executive Committee; and Arnaud Llinas, head of ETF and index solutions at Lyxor, assumes responsibility for the ETFs, indexing and Smart Beta business line for the consolidated perimeter within Amundi. In addition, Nathanaël Benzaken, Chief Client Officer at Lyxor, also assumes responsibility for the new Alternatives business line at Amundi. According to the fund manager, in their new roles, Arnaud Llinas and Nathanaël Benzaken will report to Fannie Wurtz, a member of Amundi’s General Management Committee.
In addition, Florence Barjou, currently Chief Investment Officer of Lyxor, will become Chief Investment Officer of Crédit Agricole Insurance, effective March 1, 2022. And Edouard Auché, Lyxor’s Secretary-General, will be in charge of the migration of Lyxor’s IT and operations to Amundi’s platform, in addition to his current duties. Finally, Coralie Poncet, Head of Human Resources at Lyxor, is in charge of leading the integration of Lyxor employees into Amundi, in addition to her current duties.
The fund manager notes that all other Lyxor businesses and country managers report to the corresponding business and country managers within Amundi. In a second phase following the legal transactions, scheduled for mid-2022, Lyxor will merge with Amundi.
Pixabay CC0 Public Domain. Los activos privados y alternativos toman el camino de la resiliencia y la sostenibilidad
As the new year begins, asset managers take stock of what has happened in their main business units. In this context, M&G has highlighted that its £65 billion (87.7 billion dollars) Private & Alternative Assets division deployed more than £11.5 billion (15.5 billion dollars) in the 12 months to 30 November 2021.
The firm has revealed that this division, with a history of investing in private markets in excess of two decades and over 150 years investing in bricks and mortar real estate, deployed the capital across a plethora of markets, including leveraged finance, unlisted real estate equity, unlisted infrastructure equity, real estate finance, private asset-backed securities and books of consumer loans and mortgages.
Their high level of activity over the past year demonstrates the importance that investors are giving to alternative investments. “The pandemic has clearly done little to deter the prevailing trend of increasingly diversified lending markets post the Great Financial Crisis. In Europe, the banking system continues to hold around 75% of lending assets as a share of GDP – still significantly above the level in the US – and we would expect this to decrease against a backdrop of tightening bank regulations”, said William Nicoll, Chief Investment Officer of Private & Alternative Assets at M&G.
In his opinion, this situation is creating “significant opportunities” for pension funds and insurance companies looking for diversification and potentially high risk-adjusted returns in areas such as residential mortgages and consumer loan pools, while the banks retain the relationships and service the end-consumers.
At the same time, he believes sustainability is becoming a key driver in markets: “Some investors are allocating capital to address the biggest challenges facing our society, particularly in relation to the health of the planet and climate change, as well as social issues such as financial inclusion. This is particularly prevalent in our real assets investments such as real estate and infrastructure, where we can support the changing needs of society whilst delivering sustainable returns for investors”.
Nicoll pointed out that despite the Covid-19 pandemic prompting the most extraordinary consumer bailout ever seen, no business was left untouched by the impact that various lockdowns had on operations. “Last year, we dedicated our resources to understanding how companies were impacted and to ensure they were capitalized appropriately to navigate operational turbulence that continues to persist”, he added.
Looking ahead, he is convinced that for patient, long-term investors with the ability to embrace technology and complexity, innovate in evolving markets and be nimble when opportunities arise, “the private markets are an exciting place to be”.
M&G’s accomplishments
In response to these market trends, M&G has achieved important milestones this year. For example, the launch of Catalyst, which is investing up to £5 billion into privately-owned businesses where capital is required to drive innovation and impact to create a more sustainable world. “The 25-strong investment team based in the UK, USA, India and Singapore, is deploying the mandate on behalf of millions of customers invested through the £143 billion Prudential With Profits Fund”, the firm says.
Besides, almost £3 billion was deployed by the direct real estate investment team, with over £1 billion of this in the Asia-Pacific region where the business has been actively investing since 2002. This includes establishing a new partnership to develop an Australian real estate portfolio investing in the logistics sector, on behalf of a third-party client; and launching into the UK’s Shared Ownership sector to initially create more than 2,000 new, sustainably designed and affordable homes, through establishing a strategic partnership with Hyde Housing.
Meanwhile, Infracapital, the unlisted infrastructure equity division,raised €1.5 billion (1.7 billion dollars) from investors for its latest greenfield investment strategy. M&G has revealed that “over 50% of the capital is already allocated to companies at the forefront of delivering energy transition or digital connectivity”. This includes EnergyNest, a Norwegian thermal battery company deploying innovative technology to decarbonise energy intensive industries and improve their sustainability.
All in all, its commitment to the private and alternative assets business is clear. In fact, last year the Specialty Finance teampartnered with Finance Ireland to bring long dated fixed rate mortgages to the Irish market for the first time. The asset manager has also worked on the internationalization of origination capabilities through the first direct private investments in India, Chile and the Czechia Republic.
Foto cedidaMatt Christensen, director global de Inversión Sostenible y de Impacto de Allianz Global Investors. Matt Christensen, director global de Inversión Sostenible y de Impacto de Allianz Global Investors
We spoke to Matt Christensen, Global Head of Sustainable and Impact Investing at Allianz Global Investors, about the development of ESG investment policies across continents and countries, as well as the fund manager’s approach to sustainability, which has recently launched a range of equity funds aligned with the SDGs. The manager also tells us about his experience as a guest at COP26 and gives his views on the commitments made there.
In the drive towards the green transition, we find different speeds in different regions. Why is it taking so long for the US and Latin America to jump on the sustainability bandwagon?
Ibelieve that what I see in Europe will start to happen here, and it’s just a question of speed. Why hasn’t it happened faster here? I think from an American perspective, there has always been a lot of confusion about whether this is a ‘lose money to feel good’ thing. There were even sectors that thought: Is it something to solve the problems on the coast? In fact, ESG is about a focus on material risk factors that can help provide better insights for asset management. In the USA context, ESG has sometimes been used as a political debate and even at this moment, is caught up in discussions around Biden’s climate bill; however, longer term, ESG will move out of this current debate and become part of the toolkit for fund managers.Now, if you look at Lipper’s revenueinflow data, it is striking that the main inflowsover the last year and a half have been sustainable investment funds, so that is scientific evidence around the longer term trend.
In Latin America, similar to the US, there might still be this preconceived and established mentality, as in this region many companies are from more traditional sectors. Requiring mining and oil companies to rethink their business models is not always easy in any country, but that is precisely what they are now doing in Latin America. Moreover, I think this is a trend that, regardless of who is the next president of the US or any Latin American country, is already difficult to turn back.
I am particularly interested in what the asset management industry is doing from an innovation point of view. Every five years we have new trends, we could almost talk about fads, like thematic funds, green bonds… What are you doing from a product innovation point of view for the industry?
First of all we are pushing everything related to showing the client that the return risk profile is better with ESG assets, which is what much ofthe academic evidence now shows. We have done a lot of work to bring the reports to life, both in terms of the ESG score and in terms of the scores and narrative reports per company. In terms of product innovation, probably where it has taken off the most is in the themes that connect best with the Sustainable Development Goals.
We are also developing a range of blended finance and blended finance vehicles. What we do is we can take some of the risk out of going into emerging markets by having loss protection programmes with groups like the International Finance Corporation or the Inter-American Development Bank, which take a loss, if there ever is one, and then create a return profile, subject, of course, to any credit risk we are exposed to with those entities. Think of this more as a fixed income approach to start generating a four to five per cent fixed income rate of return, which tends to be better than most types of sovereign debt yield products in Europe. That’s really interesting.
So it’s a fixed income fund that you are developing?
We have it available, but it is not in an open-ended fund structure. That’s why I say it’s a blended finance vehicle. You would think of it as a fixed income approachfocused within the private debt asset class. But to your question on product innovation, actually, with both listed and unlisted, we are developing more and more products in this sense. We are very keen to link listed and unlisted products over time for our clients around impact investing.
Are most thematic funds focused on sustainability primarily equity or fixed income? What proportions for each type do you manage at Allianz?
First would be equities, then fixed income green bonds and then private equities. Roughly we have maybe 5% in impact investing, 10% in public funds and 5% in green bonds. But 100% of our assets have an ESG risk profile. That’s about $700 billion. As far as ESG integration is concerned, it will affect publicly traded assets which will represent $150 billion of the $700 billion. By the end of the year the whole of our private market, which is 110 billion, will have fully integrated ESG criteria.
The issue of embedding ESG for risk mitigation is what I think should be the first piece of the pedagogy we have to do in the market. It is no longer about sustainable and responsible investing where you exclude things or make them adherent to your specific values. 100% of our assets must incorporate at least an ESG risk assessment.
Looking at emerging markets, when you do this ESG assessment, sometimes there is a love-hate relationship, like with Chinese products (goods). We all hate them, but we all buy them. These are products that are probably not ESG-compliant in many respects. How do you treat the emerging part of your portfolios?
We are seeing a big push for ESG in small-cap emerging markets because there is such an interest in ESG that it is quickly getting coverage. Now in the emerging market we have probably around 70-80% of that ESG coverage. So that’s already very good. We have to be honest, the ESG level in emerging economies is not the same. And that’s why we are rating the ESG practices of emerging economies at a level that is commensurate with their own context. Our role is to say that we can look at the ESG risks of any company in the world and have a point of view because we are not saying they are perfect. They are not. We look at what are the social and environmental governance risks of companies in the countries themselves.
And for emerging companies is it the same, does investing in companies with a high ESG rating really reduce risk, is it more important or less important than in developed countries?
It certainly isimportant for us in the sense of getting good information to make a decision, because there is typically less ESGinformationavailable. Ijust hired two peoplein Hong Kong in order to help bring a bottom-up ESG view to our investments in the Asia Pacific region. They are based locally in order to help us gain access to ESG information that we cannot easily get from traditional data providers at this time.
Were you at COP26, what was it like, what were your impressions?
I made the closing speech on the first day of a dedicated investment event and the room was packed. At the same time, outside of the event were protesters, Greta Thunberg and all the others, saying that actions to reduce global warming were not going fast enough. They are right. But I live in France and in France, a few years ago, the government tried to go faster by adding a fuel tax, and that led to this famous yellow vest movement, which created social unrest for a number of months.
So, on a personal level, I can agree that society is not going fast enough.But on a political level, if we go too fast, we risk populations becoming angry and creating social unrest. The tension is a delicate balance for countries to manage.
Related to the COP26 topic, we at AllianzGI have threesustainable investmentthemes of our enterprise: climate change, planetary boundaries,(which is the connectivity between climate, ocean water, blue finance, biodiversity of the earth, etc.), and inclusive capitalismrelated to a post-COVID world.These are the three themes that we, as a company, are looking at in our product design, our innovation, our research data and how we start to think about it. In our view, these are the big drivers for the next decade.
What do you exactly mean by ‘inclusive capitalism’?
Inclusive health, education, gender gaps, digitalisation gaps, access to those who can work in offices, those who can’t work from home, those who don’t have any digitalisation. So they are stuck doing menial jobs while the rest of the world has digital access. So you also have to look not only within the country, but also between the developed world and the western world. And I think that’s going to be a big trend after COVID.
At COP26 there was a lot of signing of documents, we were constantly publishing, is this really important, do you think the industry has really united and committed to sustainability after COP26, what do you think?
The Glasgow initiative was a good initiative. Although, it is not a new initiative in the sense that it is something we have just invented, it serves to bring together financial services players to share their sustainability policies. For example, Net-Zero Asset Owner is an asset management initiative chaired by Allianz. There are others and they are all brought together in this group called the Glasgow ‘The Guns’ Initiative. There was also a lot of discussion around climate and all the areas we need to address to be successful.
Overall, I think it’s a positive outcome for the asset management industry as it creates more awareness and measurability and speaks to fixing. What we need from these policies is a top-down target-setting exercise. In the end it comes down to how much we, as an industry, keep pushing the government, the public sector, to deliver on those promises that are made.
Pixabay CC0 Public DomainNueva York, Estados Unidos.. Nueva York, Estados Unidos.
BBVA Corporate & Investment Banking (BBVA CIB) has announced that it is opening new trading and sales hubs in Hong Kong and in New York. The decision is part of the plan the bank started in 2019 to boost its equities business for institutional and corporate clients.
Contributing to the renewed BBVA CIB strategy in the US, a full-fledged equity hub is being consolidated in New York where the trading desk for US equity transfers from Mexico City as well as Marc Fauvain, responsible for this desk. Additionally, the bank has recently set up a specific local securities issuance program, thus enabling US investors to access BBVA’s investment products. The new trading desk, together with the distribution team in New York, will be able to add more value to current and future clients both in the US and in Latin America.
Meanwhile, the Hong Kong hub will be a local extension of the global product capabilities of BBVA in the manufacturing of structured investment products for private banks and asset managers in Hong Kong and Singapore, both through traditional and digital channels. Last July Eric Michl joined BBVA from Natixis to lead this new global equities activity in Asia.
“The addition of two regional hubs, fully aligned and integrated with our operations in Madrid and Mexico City, is a key milestone for BBVA in achieving a high-quality local delivery of global investment products”, commented Roberto Vila, Global Head of Equity.
A strategy that started in 2019
Since 2019, the bank has been upgrading its technological platform to improve the scalability of its equity investment product platform and has focused on improving its digital distribution channels globally. In a press release, the firm has highlighted that from the outset, this has been an ambitious bet “that is already beginning to bear fruit” in the form of different types of deliveries.
In this sense, in May 2020 BBVA launched the epricer,a web-based price discovery tool for its equities and credit-linked structured products. In November 2020 it concluded the development of a new cloud-based tool named C-Fit to boost the equity team’s efficient and robust risk management capabilities. Later on in the year, a new business line was created to focus on the design, manufacturing and distribution of Quantitative Investment Strategies. Besides, a complete family of ESG indices has been available since the first quarter of 2021.
The setting up of those two equity trading and sales hubs in Hong Kong and in New York follows the same strategy “to build a robust, diversified and global investment product franchise”, BBVA says.
Pixabay CC0 Public DomainRiesgos en las bolsas. Wall Street
The U.S stock market set a record high in mid-November before a sharp selloff that started when the new COVID-19 variant, Omicron, was identified, and ended the month with a slight loss. Other factors in the backdrop were supply chain disruptions, labour shortages, a higher U.S. dollar and lower oil and UST yields. Rising inflation, previously termed “transitory” by Chair Powell who now says, “It is probably a good time to retire that word,” shortened the bond taper timetable.
From Economist Gary Shilling’s Insight: ‘Historically, global supply shortages haven’t existed outside of wars, so the current episode, the result of temporary supply-chain bottlenecks and economy reopening disruptions, is unusual. But the reaction to it by consumers and businesses isn’t, as they rush to order and buy in anticipation of shortages and price increases in a self-fulfilling cycle.’
Another note, from economist Ed Hyman, on stock market tops vs Fed tightening: ‘The last three major S&P peaks occurred after 6 hikes in fed funds to 6.50% in 2000, after 14 hikes to 5.25% in 2007, and after 9 hikes to 2.50% in 2018.’
M&A activity remained robust in November with newly announced deals to the portfolio including: American Tower’s acquisition of data center operator CoreSiteRealty for $10 billion; Novo Nordisk’s acquisition of biopharmaceutical company Dicerna Pharmaceuticals for $3 billion; GIC and CPP’s acquisition of IT security company McAfee for $15 billion; KKR and GIP’s acquisition of adata center operator CyrusOne for $15 billion; and, DuPont’s acquisition of specialty materials company Rogers Corp for $5 billion. Deals that closed in November included Merck’s acquisition of Acceleron Pharma for $11 billion, Pfizer’s acquisition of Trillium Therapeutics for $2 billion, and Paper Excellence’s acquisition of Domtar for $3 billion.
From the WSJ’s Buyout Boom Gains Steam in Record Year for Private Equity: ‘Private-equity firms have announced a record $944.4 billion worth of buyouts in the U.S. so far this year, 2.5 times the volume in the same period last year and more than double that of the previous peak in 2007…The IPO market is also running at a record pace, and merger volume in the U.S. is twice last year’s level.’
Lastly in the convertibles space, similar to the first quarter, the market saw multiples contract, which disproportionally affects growth equities. The convertible market is generally more growth oriented, so there was some weakness as the month came to a close. Despite this, issuance picked up significantly and we expect global issuance for the year to come in just below last year’s level. This expands our investible universe and is a sign of a healthy market.
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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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GAMCO ALL CAP VALUE
The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.
GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.
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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.
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Class F USD LU2264533691
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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. HSBC Launches a Thermal Coal Phase-out Policy
HSBC has recently set out a detailed policy to phase out the financing of coal-fired power and thermal coal mining by 2030 in EU and OECD markets, and worldwide by 2040. In recognition of the rapid decline in coal emissions required for any viable pathway to 1.5°C2, the policy will mean HSBC phasing out finance to clients whose transition plans are not compatible with HSBC’s net zero by 2050 target.
In a press release, the firm has pointed out that this measure builds on its current policy that prohibits finance for new coal-fired power plants and new thermal coal mines; “broadening the approach to drive the phase-out of existing thermal coal”.
The new policy, which will be reviewed annually based on evolving science and internationally recognized guidance, is a key part of executing on the bank’s October 2020 ambition to align its financed emissions – the greenhouse gas emissions of its portfolio of clients – to net zero by 2050 or sooner. It includes short term targets to help drive measureable results in advance of the phase-out dates.
Besides, a science-based financed emissions target will be published in 2022 to reduce emissions from coal-fired power in line with a 1.5°C pathway. HSBC also intends to reduce its exposure to thermal coal financing by at least 25% by 2025 and aims to reduce such exposure by 50% by 2030, using its 2020 Task Force on Climate-Related Financial Disclosures (TCFD) reporting as its baseline.
Client transition plans
“Thermal coal financing remaining after 2030 will only relate to clients with thermal coal assets in non EU/OECD markets, and will be completely phased out by 2040. HSBC will report annually on progress in reducing thermal coal financing in its Annual Report and Accounts”, the bank said. It also revealed that it will work with impacted clients and will expect them to formulate and publish transition plans by the end of 2023 that are compatible with HSBC’s net zero by 2050 target.
“Client transition plans will be assessed annually, based on a range of factors including: level of ambition to reduce greenhouse gas emissions; clarity and credibility of transition strategy including any proposed abatement technologies; adequacy of disclosure and consideration of the principles of ‘just transition’”, HSBC commented. If no transition plans are produced, the bank will need to assess whether to continue to provide financing for that client, as there will be no basis on which to assess alignment with its commitment to phase out coal financing.
In this sense, it will decline to provide new financing (including refinancing) and advisory services to any client that fails to engage sufficiently on its transition plan, or where plans are not compatible with its net zero by 2050 target. In addition, HSBC will seek to withdraw any financing or advisory services with any client that makes a commitment to, or proceeds with, thermal coal expansion after 1 January 2021.
The energy transition in Asia
Given the bank’s substantial footprint across Asia, with the region’s heavy reliance on coal today and its rapidly growing energy demand, HSBC recognized it has “a critical role to play in helping to finance the region’s energy transition from coal to clean”. That’s why it will expect its clients to lay out credible transition plans for the next two decades to diversify away from coal-fired power production to clean energy, and from coal mining to other raw materials, including those vital to clean energy technologies.
”We want to be at the heart of financing the energy transition, particularly in Asia. This is where we can have the biggest impact to help the world achieve its target of limiting global warming to 1.5°C. We have a long history and strong presence in many emerging markets that are heavily reliant on coal for power generation. We are committed to using our deep relationships to partner with clients in those markets to help them transition to cleaner, safer and cheaper energy alternatives in the coming decades”, pointed out Noel Quinn, Group Chief Executive.
Meanwhile, Group Chief Sustainability Officer, Celine Herweijer, added that they need to tackle “the tough issues head on” to deliver on their net zero commitment, and for a global bank like HSBC with a significant presence across fast growing coal-reliant emerging economies, unabated coal phase out is right up there.
“Asia’s ability to transition to clean energy in time will make or break the world’s ability to avoid dangerous climate change. Whilst our coal phase out dates and interim targets are driven by the science, we need an approach that recognizes the realities on the ground in Asia today. The transition will only be successful if development needs are addressed hand-in hand with decarbonization goals”, she added.
In this sense, she insisted that their clients in Asia are at different starting points to their EU/OECD counterparts, with more infrastructure, resource, and policy obstacles, “but many have declared a strong interest and ambition to invest in the transition and diversify their businesses”. In her view, the good news is that zero-marginal-cost renewables, rising carbon prices and a terminal contraction in coal demand are factors helping them diversify.
