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Listed Infrastructure’s Crucial Role in the Clean Energy Transition

It is in one area in particular where listed infrastructure is emerging as a viable alternative to its private counterpart: clean energy.

It’s abundantly clear that renewables and sustainability-related sectors will be a magnet for infrastructure investment in the coming years. Both governments and an increasing number of large multinational corporations have committed to ambitious carbon reduction targets in the post-Covid era.

This will require trillions of dollars of capital to be re-directed to clean energy assets. The shift was already gathering momentum prior to the public health crisis.

In the year before the pandemic, the renewables sector had accounted for the largest share of private-sector infrastructure investment. It drew in more than USD40 billion in new capital in 2019 alone – or over 40 per cent of the total amount invested in infrastructure that year. This is up from 20 per cent at the start of the decade (1).

That looks modest compared with what could unfold. According to the International Renewable Energy Agency, cumulative investments in the energy system will need to increase 16 per cent to USD110 trillion between 2016 and 2050 from what’s currently planned to meet climate targets.

If that happens, investment opportunities in the electrification and infrastructure segment – which includes power grids, EV charging networks and hydrogen or synthetic gas production facilities – could expand to as much as USD26 trillion by 2050. It is a similar picture in renewables.

Public infrastructure: gaining depth

And there are reasons to believe that the public market could attract a significant share of this capital.

The rise of blank-check financiers, popularly known as SPACs (special purpose acquisition companies), is a crucial development in this regard.

SPACs start off with no assets and go public to pool capital with the intention of merging or acquiring targets. They provide a quicker and more efficient alternative for firms to raise capital than through a traditional public listing.

According to US law firm Vinson & Elkins, the number of announced “de-SPAC” transactions by clean energy companies – or the post-IPO process of the SPAC and the target business combining into a publicly traded operating company – set a record in 2021 while IPOs of energy transition SPACs have been equally robust.

Among the most popular industries targeted by SPACs are electric/alternative fuel vehicles, vehicle autonomy and grid-level battery storage (2).

The V&E report adds: “with projected capital requirements to meet carbon goals and deep investor appetite for these investments, activity to date may be but a prelude to even more robust activity over the next decade.”

The average clean-energy SPAC is estimated to have an anticipated enterprise value – a measure of a company’s potential takeover value – of USD1.8 billion (3).

Traditional IPOs in the clean energy industry are also strong in some regions. In Spain, partly in response to the EU’s green recovery investment plan, at least four companies, including Repsol, are working on possible IPOs of renewable assets this year.

Green infrastructure for impact

As the world accelerates efforts to decarbonise and become more resource efficient, listed infrastructure firms specialising in clean energy and sustainable solutions are both a complement and alternative to private assets.

Listed infrastructure stocks, especially in clean energy and sustainable sectors, also allow investors to align their investment return objectives with their environmental and social goals.

Pictet Clean Energy strategy: investing in energy transition

Pictet AM’s Clean Energy strategy is ideally placed as a complement for institutional investors looking for exposure in sustainable infrastructure.
The strategy invests in companies supporting and benefiting from the energy transition. It aims to deliver long-term capital growth with a scope to outperform major global equity indices over a business cycle.
The strategy invests in broad and diversified clean energy segments, not only in renewable energy but also technologies, innovations and infrastructure supporting smart mobility, energy efficient buildings and efficient manufacturing.
Utilities and industrials make up at least 40 per cent of the portfolio.
About a third of the portfolio is directly exposed to infrastructure assets and investments, while the remaining has indirect exposure which should also benefit from growing inflows into green infrastructure.
The portfolio is nearly 100 per cent exposed to US President Joe Biden’s USD2 trillion stimulus.
Launched in 2007, Clean Energy strategy has a track record that is one of the longest in the industry. The experienced team that manage the Clean Energy strategy sit within our pioneering Thematic Equities team that manages around USD53 billion across a range of strategies.
Data as of 31/03/2021.

Opinion written by Xavier Chollet, Senior Investment Manager in the Thematic Equities Team co-managing the Clean Energy Strategy at Pictet Asset Management

Click here for more insights on clean and sustainable infrastructure

Notes:

(1) Source: Global Infrastructure Hub. Investments combining debt (75%) and equity (25%) flows.

(2) Source: Vinsons and Elkins, 13.01.2021

(3) Shayle Kann, a San Francisco-based managing director at Energy Impact Partners, in an InterChange podcast entitled “The Cleantech SPAC Attack.”

Información importante:

Este material va dirigido exclusivamente a inversores profesionales. Sin embargo, no deberá ser distribuido a ninguna persona o entidad que sea ciudadano o residente de cualquier lugar, estado, país o jurisdicción en el que dicha distribución, publicación o uso sea contrario a sus leyes o normativas. La información utilizada para la elaboración del presente documento se basa en fuentes que consideramos fiables, pero no se hace ninguna manifestación ni se da ninguna garantía en cuanto a la exactitud o integridad de dichas fuentes. Cualquier opinión, estimación o previsión puede modificarse en cualquier momento sin previo aviso. Los inversores deben leer el folleto o el memorándum de oferta antes de invertir en cualquier fondo gestionado por Pictet. El tratamiento fiscal depende de las circunstancias individuales de cada inversor y puede cambiar en el futuro. Las rentabilidades pasadas no son indicativas de rentabilidades futuras. El valor de las inversiones, así como la renta que generen, puede disminuir o aumentar y no está garantizado. Es posible que usted no recupere el importe inicialmente invertido.

Este documento ha sido publicado en Suiza por Pictet Asset Management SA y en el resto del mundo por Pictet Asset Management Limited, sociedad autorizada y regulada por la Financial Conduct Authority, y no podrá reproducirse ni distribuirse, ni parcialmente ni en su totalidad, sin su autorización previa.

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Pictet Asset Management: It’s in the Price

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Just four months into 2021, global equity markets have already hit our targets for the year (returns of 10 per cent). That and tentative signs that economic and corporate earnings growth may be peaking has led us to take some profits. We therefore downgrade equities to neutral, and trim our exposure to cyclical stocks.

Our business cycle indicators suggest the global economy is recovering well from the pandemic, but growth momentum has slowed slightly. That’s particularly true in China, where weaker-than-expected first quarter data has prompted us to trim our 2021 GDP growth forecast there to 10.0 per cent from 10.5 per cent. This slowdown is partly due to a cooling in credit growth. China’s credit impulse, our own measure of credit flowing through the economy, has dropped off sharply since October is now broadly in-line with its long-term average of 6.5 per cent of GDP.⁽¹⁾ This is in keeping with the view that China will stick to its promise of maintaining continuity and stability in economic policies.

In the euro zone, the recovery is not self-sustaining yet and is fully conditional on successful control of the pandemic, the vaccination campaign and on the persistence of accommodative monetary and fiscal policies. Economic activity in the US, meanwhile, continues to beat expectations – for now. We expect growth to peak in the current quarter, before slowing into the year-end as the fiscal boost starts to fade. Reinforcing our view, a New York Fed survey shows US households plan to spend just 25 per cent of the their stimulus cheques; 34 per cent of the cash will be used to pay down debt and the balance saved.

Our liquidity indicators show that private credit conditions – credit flowing to household and corporations – have normalised globally. Overall liquidity, however, remains marginally supportive for riskier assets thanks to continued central bank stimulus. However, this support is likely to ease over the coming months. We think that the US Federal Reserve may move faster than expected on tapering QE; it could flag the shift in policy as soon as its June rate-setting meeting.

That, in turn, adds to the case for dialling down exposure to equities – particularly in light of extremely stretched valuations. The total return ratio of US equities versus bonds is now at a historic high, and a staggering 47 per cent above its long-term trend (see Fig. 2). The gap between stocks’ earnings yields and government bond yields, meanwhile, is at its lowest since the 2008 financial crisis.

Globally, stocks’ earnings multiples should come under further pressure in the coming months as monetary stimulus fades. Any further upside for equities will thus have to come from corporate earnings growth. This could indeed continue to surprise on the upside for a while longer, but with investor positioning in – and sentiment towards – stocks already at very bullish levels, any positive market reaction to news of stronger profits is likely to be muted, while weaker-than-expected results could be severely punished.

Technical indicators suggest we are about to enter a three-month long period of negative seasonality for equities (the period running from May to July tends to be associated with weak stock market performance). While investment flows into equities remain strong, the momentum is slowing even if our indicators do not yet suggest stocks are ‘overbought’. For bonds, the overall technical signal remains negative.

Opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist.

Discover Pictet Asset Management’s macro and asset allocation views.

Notes:

(1) China’s credit impulse is a broad measure of credit and liquidity to the real economy, which we calculate as year-on-year change in total social financing quarterly flow (ex-equity).

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.

Important notes

This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.

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AUM’s Growth for the Afores Will Fuel Local and Global PE Investments

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mexico-4879142_1280 — Pixabay CC0 Public DomainPhoto: Dezalb . Foto:

In 12 years, the Mexican institutional investor has increased its investments in private equity through public vehicles registered on the local stock market (CKDs and CERPIs). Today these investments reflect a market value of 16.186 billion dollars of which 13.544 billion dollars come from the Afores (84% of the total), with the remaining 16% coming from other institutional investors such as insurance companies and such.

The total represents 1.4% of Mexican GDP and this figure doubles if one considers committed capital, which amounts to 32.824 billion dollars. This figure highlights the importance that the CKDs and CERPIs are gradually acquiring, as well as their great potential.

According to Santander’s area of analysis in the document: How Should Mexico’s Pension Reform Benefit Its Financial System? prepared by Alan Alanís, Claudia Benavente, Héctor Maya and Jorge Henderson (February 2021), it is estimated that Afores’ AUM could more than double from 237 billion dollars at the end of 2020 to 537 billion dollars by 2027, via employee contributions, investment returns, and benefits from the pension reform. This growth means that assets under management will go from 20% of Mexican GDP in 2020 to 32% in 2027.

The same document comments that in the last decade, assets under management increased at a compound annual growth rate (CAGR) of 13%, with 7% originating from returns and 6% from employee contributions.

Additionally, if the assets under management double in six-year periods, the potential investments in bonds, equities and private equity, among others, will also experience a boom.

Of the 12 years that institutional investors have been investing in private equity, in the first 6 years (2009-2015) investments were focused on local investments (CKDs) reaching a market value of 7.835 billion dollars. By 2021, this has almost doubled reaching 12.944 billion dollars (+ 65%).

In 2018, the year in which the Afores began investing globally, the market value of available CERPIs was of 1.827 billion. By March 2021, it had already reached a market value of 3.243 billion dollars (+ 78%), which represents 1.4% of the assets under management of the Afores while the investments in local private equity (CKDs) is 4.3% to reach a combined total of 5.7%.

If this 5.7% of total assets under management is simply maintained, does not grow at all, if it were applied to the 537 billion dollars projected in total AUM by Santander for 2027 it would represent 30.6 billion dollars.

In the past 12 years that the CKDs have been in place there have been 121 funds, while in the three years since the creation of CERPIs there are already 51. The explosive growth in the issuance of CERPIs with respect to the CKDs is due to the fact that they have primarily focused on fund of funds (43) while the others have been more sectorial focused as can be seen in the table.

This fund of funds CERPIs’ trend has led to their creation according to the risk profile of the investor or by the age of the workers affiliated (years of retirement of the worker to get their pension and / or money saved), or “Target Date Funds”. Blackrock, for example, issued 7 series of its CERPI in 2019, while Lock Capital and Spruceview México released 7 and 8 series respectively in 2020. These three issuers alone represent 22 of the 51 CERPIs.

With this projected dynamism, investments in local and global private capital through CKDs and CERPIs will continue to grow.

Column by Arturo Hanono

Janus Henderson Prepares its Global Bond Team for the Departure of Nick Maroutsos

| For Beatriz Zúñiga | 0 Comentarios

Nick Janus — Foto cedidaNick Maroutsos, actual responsable de bonos globales y cogestor de las estrategias de retorno absoluto y renta fija multisectorial global de Janus Henderson. . Janus Henderson prepara a su equipo de bonos globales ante la salida de Nick Maroutsos

Janus Henderson has announced succession plans for its Global Bond team due to the departure of Nick Maroutsos, Head of Global Bonds and Co-Portfolio Manager of the Absolute Return Income and Global Multi-Sector Fixed Income related strategies. In a press release, the asset manager has revealed that he will be leaving the firm next October “to take a career break”.

As part of its succession planning, during the next six months, Maroutsos will work closely with the global bonds team “to ensure a smooth transition and handover of responsibilities“.

Effective October 1, 2021, the team will be left under the leadership of Jim Cielinski, Global Head of Fixed Income. The firm has highlighted that the following portfolio managers will continue to work in their current roles and will maintain the investment processes that have been “so impactful” for their clients to date. In this sense, Jason England and Daniel Siluk will remain co-portfolio managers on the Janus Henderson Absolute Return Income strategy and related funds. Also Andrew Mulliner, currently Head of Global Aggregate, will continue to serve in this role and oversee the multi-sector global bond portfolio strategies.

“While my decision to take a career break is bittersweet, I have the utmost confidence in the team and their investment process. Having worked closely with the team for many years, I have no doubt their talent and unwavering dedication to serving our clients will position them to generate solid returns. I thank the team and senior management for their trust over the past 15 years and will miss their professionalism and friendship”, Maroutsos said.

Meanwhile, Cielinski commented that their client commitment “has always been and will continue to be to seek to deliver dependable investment outcomes” to support their clients in achieving their long-term financial goals: “As a firm, we take a collaborative team-based approach focused on growing talent from within the teams, which allows for robust succession planning and a seamless transition for clients when we have personnel changes”.

He also thanked Maroutsos for his contribution to Janus Henderson, his “unwavering commitment” to clients, and his involvement “in developing the next generation of investors”. “Our dedicated Absolute Return Income team consists of thirteen people, of which Nick is one, split across the US and Australia. Given the lengthy transition period, and the breadth and depth of the experienced team, we are confident that this will be a smooth transition for our clients. Our global bonds effort has been and remains a strategic priority for the firm, and we will continue to invest in our team”, he concluded.

Janus Henderson’s Global Bonds team is built on collaboration across multiple geographies and anticipates no disruption to its cohesive global approach. Further it ensures global coverage across all major markets allowing for broader, more open collaboration, and increased idea exchange.

Correspondent Banks Face New Challenges under the AML Act of 2020: Should Foreign Banks Worry?

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On January 1, the U.S. Congress enacted the Anti-Money Laundering Act of 2020 (AMLA), which represents one of the most significant changes to the anti-money laundering laws of the country since the USA PATRIOT ACT of 2001. The Florida International Bankers Association (FIBA) warns that one provision of the law could place foreign banks in a particularly difficult position.

“While AMLA has received considerable coverage, one provision seems to have been added to the legislation without much fanfare, presumably at the behest of the U.S. Department of Justice”, says FIBA in a notice. It refers to its Section 6308, where AMLA expands the authority of the Department Treasury and the DOJ to seek and obtain banking records located abroad, “while potentially limiting the ability of foreign banks to argue that the production of those documents would violate local banking laws and regulations”.

The association points out that the PATRIOT ACT since 2001 granted the Treasury and the DOJ the authority to subpoena any foreign bank that maintains a correspondent account in the U.S. and request records “related to such correspondent account,” including records maintained abroad. A limiting principle was that the subpoena had to seek documents “related” to the correspondent account. Further, a bank subpoena recipient could, if applicable, move to quash the subpoena by arguing that compliance with it would violate the law of the jurisdiction from which the documents were sought.

“Unsurprisingly, Section 6308 was a topic of keen interest at the recent FIBA AML Conference. Despite assurances from regulators and the Department of Justice that it would be used ‘judiciously’, it remains important to note that it eliminated both limiting principals“, states FIBA. In this sense, it expands the authority of Treasury and the DOJ to seek any records relating to the correspondent account “or any account at the foreign bank,” including records maintained outside the U.S. so long as they are subject to several enumerated categories, specifically, any investigation of a violation of U.S. criminal law, any investigation of an AML violation, a civil forfeiture action, or an investigation pursuant to the USA PATRIOT ACT.

Obligations for financial institutions

For FIBA, the key language is “or any account of the foreign bank” because no longer must the subpoena seek documents related to the correspondent account: it can seek records relating to any account. Further, while the bank recipient may still move to quash the subpoena, the AMLA states that the “sole basis” can no longer be that compliance would conflict with a provision of foreign secrecy or confidentiality law.

“This greatly expands the DOJ’s reach into foreign bank records and creates additional obligations for U.S. financial institutions to keep records and monitor the foreign banks’ compliance when subpoenas are served”, FIBA says. U.S. financial institutions may be subject to fines or penalties if the foreign bank does not comply with the subpoena, with no specific definition of what constitutes “compliance.” In this sense, the U.S. financial institution may be obligated to terminate the correspondent relationship with the foreign bank or be subjected to fines of up to $25,000 per day.

In their view, this puts U.S. institutions in a position where they must monitor the foreign bank’s compliance with a subpoena and forces U.S. banks to get involved in foreign bank compliance. “It is foreseeable that U.S. banks will end up in court to argue over what it means for the foreign bank to comply with the subpoena: is good faith all that is needed, or is there a degree of adequacy that must be met? All of these additional monitoring requirements will increase the cost of compliance for financial institutions”, the association points out.

An open issue is whether Section 6308 is intended to replace traditional processes designed to respect the sovereignty of foreign nations. Section 9-13.525 of the DOJ Manual provides that, “U.S. law, in the form of mutual legal assistance treaties, requires that the United States attempt to obtain records using the mutual legal assistance process prior to resorting to unilateral compulsory measures.”

“More worrisome is that Section 6308 might be utilized against foreign banks as part of an aggressive enforcement strategy. The issue of whether specific jurisdiction can be asserted over a foreign bank embroiled in a third party’s unlawful activity will likely prove fertile ground for argument before both state and federal courts”, FIBA warns.

In their opinion, “time will tell”, but for now, foreign banks need to be “keenly aware” of the U.S. government’s expanded subpoena powers.

United States Resumes its Role as the Engine of Global Economic Growth

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The United States has resumed its role as the engine of global economic growth, points out Banque de Luxembourg Investments in its monthly analysis, “Highlights”. In the first quarter of 2021, US GDP grew at an annualised rate of 6.4% compared with the last quarter of 2020, thanks to strong fiscal support and the acceleration of the vaccination campaign.

“Household consumption and business investment both contributed to the improvement in economic activity. Net trade was the only drag on growth, since the increase in imports resulting from the acceleration of domestic demand was not matched by an improvement in exports, which even fell slightly”, says Guy Wagner, Chief Investment Officer and managing director of the asset management company.

In the Eurozone, GDP fell by 0.6% quarter-on-quarter, due to considerably more moderate fiscal stimulus and a less advanced vaccination campaign. In BLI’s view, the expected reopening of the European economies in the coming months should boost the recovery that began in the second half of 2020.

Meanwhile, in China, signs of the economic recovery weakening in February and March were confirmed with the publication of Q1 growth figures. However, “household consumption and business investment are expected to pick up again from the second quarter onwards, even though the monetary and fiscal support measures are much less generous in China than in the US” says Wagner. As for Japan, he believes that the current disruptions in global supply chains are preventing the export sector from reaping the full benefit of the mini boom in global manufacturing demand.

An unchanged monetary policy

As the bank expected, the Federal Open Market Committee left its monetary policy unchanged at its April meeting. The analysis reminds that Fed Chair Jerome Powell reiterated his view that the current pick-up in inflation is temporary, and that any hint of a slowdown in the Fed’s asset purchases would be premature despite signs of economic acceleration. “Only a change in long-term inflation expectations above the 2% target could trigger a shift in the FOMC’s attitude towards a less expansionary stance”, says Wagner. In Europe, the ECB opted for the status quo in terms of its anti-crisis toolkit, as expected. The significant increase in the pace of public and private debt buybacks decided in March is set to continue, he adds.

BLI’s analysis also shows that after rising since August 2020, US Treasury bond yields stabilised in April. In the Eurozone, long-term interest rates saw little change, with yield spreads between core and peripheral countries widening slightly after narrowing the previous month. After a strong rise in share prices in the first quarter, the equity markets continued their good run in April.

“Robust economic growth in the United States, the acceleration of the vaccination campaigns and the publication of excellent corporate results continue to provide a favourable climate for equities despite very high valuation levels“, states Wagner. He also highlights that sector divergences were less pronounced in April, with tech stocks regaining favour among investors as most of the sector’s leaders reported “spectacular results”. Meanwhile, oil stocks “levelled off after rising sharply in the first quarter,” he concludes.

Jupiter Launches Global Equities Fund with its US Partner NZS Capital

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win-1820037_1920 — Pixabay CC0 Public Domain. Jupiter lanza un fondo global de renta variable con su socio estadounidense NZS Capital

Jupiter has launched this week the Jupiter NZS Global Equity Growth Unconstrained fund SICAV, a global portfolio of companies that can adapt and thrive in a world dominated by disruption. The fund is managed by Brad Slingerlend and Brinton Johns, portfolio managers at NZS Capital, Jupiter’s US-based strategic partner. It invests in companies that maximize Non-Zero-Sum, or win-win, value for the benefit of all stakeholders, including customers, employees, society, and the environment.

In a press release, Jupiter has highlighted that “with extensive expertise gained from a combined total of 70 years of investment experience, the NZS team has a track record of generating significant outperformance for investors”. Based on the science of Complex Adaptive Systems, the NZS investment philosophy seeks adaptable and innovative companies that will successfully navigate the increasing pace of disruption as the global economy transitions from analogue to digital.

The asset manager believes that, while the technology sector is driving innovation today, in the coming years, the wave of disruption will impact every sector across the economy including industrials, consumer, financials, energy, and healthcare, and weightings in the strategy will evolve over time to reflect these changing dynamics.

“The team believes that the Information Age affords an unprecedented level of transparency, and companies still using the traditional methods of high barriers, wide moats, and information hording to extract value from customers are losing ground to adaptable companies that maximize Non-Zero-Sum, or win-win outcomes”, they add.

Adaptability for a disruptive future

At the heart of the NZS Complexity Investing philosophy is constructing a portfolio that balances two sets of companies the team calls “resilient” and “optionality”. In this context, resilient companies are those able to adapt and evolve to disruption and changing conditions, while optionality companies are adaptable, but earlier in their lifecycles with high asymmetry.

The fund will hold 50-70 stocks: the resilient portion will typically comprise 10-20 companies with a position size greater than 2.5% each, and the optionality component will have 30-50 names that are each less than 1.5% of the overall portfolio. The holdings will typically have market capitalizations above 5 billion dollars.

“As the global economy moves from the analogue-based Industrial Age to the digital-based Information Age, a vastly different set of characteristics are needed for success. We believe that the two things that matter most as the world makes this switch from analogue to digital are adaptability in the face of an uncertain future and a company’s ability to create more value than it takes – what we call Non-Zero Sum, or NZS”, Slingerlend commented.

In his view, investing in a world shaped by disruption and free-flowing information requires a new approach, and they have “carefully honed” their Complexity Investing framework over the last decade for success in this new investing frontier. “We are delighted to share this strategy with Jupiter’s clients in the shape of this new fund”, he added.

Meanwhile, Andrew Formica, Jupiter’s CEO, pointed out that Slingerlend and Johns are “talented fund managers with a carefully-constructed process” that has the potential to deliver long-term returns. He believes their approach is “clearly aligned” with Jupiter’s culture and focus on high conviction, active fund management, centered around client outcomes.

“We have already seen a real client interest and strong early growth in the strategy since confirming the partnership with NZS, and the launch of this fund will bring the company’s total assets over 1 billion dollars while offering a further opportunity for our clients to access this exciting new strategy, a key strategic priority for Jupiter”, he concluded.

Olivier de Larouzière, New CIO for Global Fixed Income at BNP Paribas AM

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BNP Paribas nombramiento — Foto cedidaNadia Grant, directora de Renta Variable Global en BNP Paribas AM.. BNP Paribas AM nombra a Nadia Grant para el cargo de directora de Renta Variable Global

BNP Paribas Asset Management has announced in a press release the appointment of Olivier de Larouzière as Chief Investment Officer for Global Fixed Income. He will be based in Paris and will report to Rob Gambi, Global Head of Investments.

De Larouzière will be responsible for managing BNP Paribas AM’s global fixed income platform, with a strong focus on investment performance and commercial success. He will also retain his existing responsibilities as Head of the Global Multi Strategy Product (GMS) team and will additionally join the Business, Investment and Investment Management committees.

De Larouzière joined the asset manager in January 2019 to manage the GMS team and currently has more than 25 years’ experience in the fixed income investment area. The global fixed income group of BNP Paribas AM that he will be responsible for includes 80 investment professionals located in London, Paris, New York and Asia-Pacific. Collectively managing more than 168 billion euros of assets in single- and multi-strategy products across sovereign debt, corporate credit, emerging market debt, structured securities and currency, the group also encompasses money market products, insurance products and credit research.

“During the past two years in which he has headed multi-strategy fixed income, Olivier has been instrumental in developing the investment philosophy and approach of the teams for which he has been responsible. I welcome him to his new role and look forward to working with him as he develops our fixed income capabilities further in order that we can continue to deliver long-term sustainable returns to our clients”, said Rob Gambi, Global Head of Investments of the firm.

Prior to joining BNP Paribas AM, De Larouzière was Co-CIO of Fixed Income at Ostrum Asset Management and senior portfolio manager at Credit Lyonnais Asset Management, having begun his career as a fixed income portfolio manager at Ecureuil Gestion. He holds a Masters in Applied Mathematics from Paris Dauphine University.

James Tomlins: “High Yield Floating-Rate Bonds Provide an Attractive Way to Play the Reflation Theme”

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M&G - James Tomlins — Foto cedidaJames Tomlins, gestor del fondo de bonos flotantes de M&G.. James Tomlins: “Los bonos flotantes high yield ofrecen una forma atractiva de jugar la reflación y protegerse de una subida de los tipos”

In times of economic uncertainty, high yield floating rate notes (FRNs) often offer an attractive source of income. That’s why we spoke to James Tomlins, manager of the M&G (Lux) Global Floating High Yield fund, about how the asset class has performed and what role it can play in portfolios today.

Question. Has this asset class lived up to expectations? How would you assess its performance over the past year?

Answer. The crisis should probably be viewed in isolation given its scale and the lack of any modern-day precedent. The high yield floating rate market faced the same uncertainties as other risk assets when the pandemic struck, so it initially sold off, before recovering strongly during the rest of 2020. The bonds retained the relatively high yield levels that are not present in government bonds or investment grade credit however. High yield FRNs are insulated from rising bond yields, and would even benefit through higher interest coupons if central banks were to begin to increase interest rates. Overall, the asset class has performed largely as one might expect in the prevailing circumstances as the crisis took hold and as the world has tackled it.

Q. Investors have now turned their minds to the economic recovery, which is set to arrive with the vaccination roll-out. In this recovery scenario, what can these assets contribute to investors’ portfolio?

A. Investors should probably express some caution as much of that optimism is already factored into credit spreads, which have returned to levels that prevailed as 2020 dawned. Nevertheless, if bond yields continue to increase, undercutting fixed rate bond values, floating rate bonds will not see the same hit to capital. If, in due course, central banks decide to begin increasing interest rates to combat rising inflation, high yield FRNs will actually benefit from those higher short term interest rates in the form of higher interest coupons, thus being able to provide larger income streams. Such a scenario is the so called “FRN Happy Place”.

Q. Higher inflation is also expected. What are your expectations for inflation and how will it impact this asset class?

A. The prospect of higher inflation and what this means for financial markets has become a key area of focus for investors in recent months. Some factors could indeed push inflation higher, in our view, in particular the unprecedented levels of fiscal and monetary stimulus, combined with the release of pent-up demand as the global economy reopens.

I believe high yield FRNs provide an attractive way to play the reflation theme and to protect against rising interest rates. This was demonstrated in February as concerns over rising inflation triggered a sharp sell-off in global government bonds. In contrast to many fixed income assets, high yield FRNs proved resilient during this period, with their floating rate nature helping to offset the negative impact of rising bond yields. Indeed, if central banks respond to the inflationary threat by hiking short term interest rates, FRNS benefit from higher coupons and therefore higher returns.

Q. In the same vein, what are your expectations for the interest rate horizon and how is this reflected in your M&G (Lux) Global Floating Rate High Yield fund?

A. At present, none of the main central banks appear likely to change their policy stance of being supportive, and begin increasing interest rates. They are likely to prefer to allow economies more time to build on their respective recoveries, even if it means higher inflation begins to become more entrenched. We typically do not attempt to position the fund for particular interest rate moves, preferring to look manage the fund conservatively and invest in value opportunities as we identify them. The more important question though is what does the market expect and can these expectations change. It’s this that will drive the volatility in the fixed rate market. If investors are concerned that this volatility will hurt their fixed income holdings, what FRNS do is provide a safe harbour from such stormy conditions in the bond market.

Q. Where do you see the main opportunities right now?

A. One of our key preferences is to hold lower-priced issues in the fund, as we believe the prevailing market climate offers them greater scope to generate returns than issues that are less market-sensitive and priced closer to par (100), as high yield FRNs typically have lower call prices than their fixed rate counterparts. We also retain underweight allocations relative to the benchmark, to some of the more economically sensitive sectors such as energy and leisure. While the economic backdrop of ongoing stimulus and low interest rates is supportive of companies and risk assets, such as high yield credit, there is a risk that the recoveries may falter and put pressure on credit valuations.

Q. The COVID-19 crisis and governments’ and central banks’ stimulus measures have generated a debate about what is underpinning the quality of fixed income assets. In the case of high yield floating rate bonds, are you concerned about asset quality?

A. Investing in high yield markets means taking on some additional degree of credit risk compared to investment grade markets and even in the most benign conditions, defaults can occur. This is why having a large and deeply experienced team of analysts, dedicated to undertaking the most robust assessments of the credits we hold, is so crucial. Our preference is to focus on issues that offer investors more protection in the event of a default, such as senior secured bonds.

Q. What can the M&G (Lux) Global Floating Rate High Yield strategy provide investors’ portfolios?

A. We believe the strategy, with our careful and conservative management approach, can offer investors the opportunity to achieve an appealing level of returns in a low interest rate environment. It is insulated from the negative effects that rising yields can have on fixed rate bond strategies and actually benefits from rising interest rates, through higher interest receipts.

Why Investors Seeking Returns and Impact Should Consider Water

| For Beatriz Zúñiga | 0 Comentarios

water-4429191_1920 — Pixabay CC0 Public Domain. Por qué los inversionistas que busquen rentabilidad e impacto deben tener en cuenta el agua

As sustainable investing grows in popularity, investors often ask us what they can do to position their portfolios to make a positive social and environmental impact without sacrificing potential returns. Our answer is always the same: Consider making a dedicated allocation to water as an investible theme.

The societal benefits of investing in water are clear. One-in-three people globally lack access to safe drinking water, a shortfall contributing to the avoidable deaths of nearly 1,000 children daily. Along with this human toll is a costly economic drag: The millions of lost hours spent seeking potable water could instead be used for education and other productive activities that could lift countless people out of poverty. Our water crisis is so severe that the United Nations lists “Ensuring access to water and sanitation for all” as one of its 17 Sustainable Development Goals. However, achieving that goal requires a massive buildout of infrastructure driven by a massive marshaling of investment capital.

The need for water-related investment is not limited to the developing world. Over the next decade, billions of dollars will be spent on water infrastructure in Europe and the US, where demand for water outpaces supply, driven by population growth, the expansion of agriculture and more water-intensive consumption as living standards continue to rise. Factors such as industrial growth, the increasing number of data centers or the electrification of transport will inevitably result in more water needed for power generation needs. Already in the US, power generation makes up 40% of total freshwater withdrawals, on par with water used for irrigation in farming.

As the world industrializes, electrifies and grows in population, water consumption has increased by more than 150% in the past five decades while supply—mainly from rainwater—remains static, and unevenly distributed, leaving locals with few choices to address water shortages.

The most obvious two choices are to proactively address this imbalance by protecting existing freshwater resources from misuse and wastage, or by making water use more efficient. Various technology and product solutions are available, but both approaches require initial capital outlays in addition to the billions of dollars that will be required simply to maintain existing water infrastructure in countries like the US, where much of the existing infrastructure is more than 100 years old. The environmental benefit to investing in water resources preservation is also obvious, given its essential nature and the fact that no substitute exists.

Our water challenges are exacerbated by climate change, which is resulting in more severe weather patterns including prolonged droughts, flooding and unseasonal temperatures. As a result, places that once had adequate water might now require significant infrastructure upgrades to weather storms and meet individual and industrial needs. The good news is that we can fix these problems if we apportion enough public and private capital to build out and improve water infrastructure globally. As such, investors can help meet this need for capital by investing in the long-term structural growth of the water sector while helping fix one of our most pressing environmental problems.

So, how can investors deploy capital? We see three areas where investors can become part of the solution while also benefitting from the upcoming investments to address water shortages:

Increasing access to water: Companies that distribute water to growing populations, improve water storage capacity or help to covert salt or wastewater into useable water
Improving water efficiency: Companies with products that allow customers to reduce their water footprint without loss in productivity, i.e. by reducing wastage or fixing leakages.
Enhancing water quality: Companies that help to manage wastewater, often by recovering some of the huge amount of water flushed down drains or toilets, or companies which help to ensure our drinking water is and stays safe for consumption.

By targeting these areas, investors can access a potential source of long-term growth at risk levels that have historically been lower than other types of growth stocks. Unlike many other growth areas such as tech innovators, companies in the water segment tend to offer already well-established and cash-generating business models with strong client relationships that are not easily disrupted, given that the reliance on sufficient and safe drinking water creates high barriers to entry.

Of course, like all investments, water-related companies carry their own asset-specific, idiosyncratic risks. For that reason, investors should stick to fundamentals and diversify their holdings across companies, regions and sectors. There are over one hundred companies globally across these categories, offering enough options to construct a diversified portfolio of pure play water holdings.

These characteristics make water-related companies an ideal target for investors looking to incorporate sustainability into their portfolios. However, investors looking to capitalize on this opportunity should move quickly. Infrastructure is at the center of the political agenda in the US, where the Biden administration is planning a $2 trillion infrastructure investment. Europe, China and other locations are increasing investment, too. This spending has the potential to trigger a flood of projects aimed at replacing old, hazardous lead pipes and upgrading water infrastructure from its current old economy brick-and-mortar state to a more automated, smart, digital, 21^st-century iteration.

There is an even more compelling reason for investors to act now. As a society, we are long overdue to address the problem of water access. We know how to solve it; all we need is the will and the capital. Investors can help with both. By stepping up now, investors can reap the potential financial rewards while also driving positive impact in an area where it is needed most.

A column by Andreas Fruschki, CFA, Head of Thematic Equity at Allianz Global Investors; and Alexandra Russo, member of the Thematic Equity team at AllianzGI, based in New York.

Hear more from Andreas and Alexandra at AllianzGI’s virtual Sustainability Day event on May 12.