Foto cedidaGregor Hirt, nuevo director de inversiones global de multiactivos de Allianz GI.. Gregor Hirt, nombrado director de inversiones global de multiactivos de Allianz GI
Allianz Global Investors has announced in a press release the appointment of Gregor Hirt as Global CIO for Multi Asset as of July 1. He will be based in Frankfurt and report to Deborah Zurkow, Global Head of Investments.
In his new role, Hirt will work closely with the firm’s Multi Asset experts in Europe, Asia and the US to ensure Allianz GI continues to strategically develop and grow its Multi Asset business in areas of client demand, including risk management strategies and multi asset liquid alternatives.
Hirt brings 25 years of experience in Multi Asset investing from both a wealth management and asset management perspective. He joins from Deutsche Bank, where he has been Global Head of Discretionary Portfolio Management for the International Private Bank since 2019. Prior to that, he was Group Chief Strategist and Head of Multi Asset Solutions at Vontobel Asset Management, having also gained strong experience at UBS Asset Management, Schroders Investment Management and Credit Suisse.
“Allianz GI has a rich heritage in Multi Asset investing, with one of the strongest teams in the industry. Marrying the best of our deep expertise in both quantitative and fundamental approaches, while integrating ESG considerations, will be pivotal in ensuring that our offering is as successful for clients in the next generation as it has been in the past. With just the right mix of leadership experience, market insight and client understanding, we are delighted to be welcoming Greg. As well as significant experience across asset management and wealth management, he has deep appreciation for quantitative discipline while having a background in fundamental analysis”, highlighted Zurkow.
Allianz GI currently manages 152 billion euros in Multi Asset portfolios for retail and institutional clients around the world. AllianzGI’s Multi Asset investment approach combines a systematic assessment with the insights of fundamental analysis with the dual objective of mitigating risks and enhancing return potential for clients.
Pixabay CC0 Public Domain. Los gestores siguen siendo optimistas sobre los lanzamientos de megafondos en China
China is a major player in the global fund industry. Blockbuster fund initial public offerings (IPOs), which have seen popular new funds being oversubscribed and sold out within a day after sales commence, have become more common in the country over the past few years. While short-term investor sentiment has been hurt by the recent market downturn, Cerulli Associates points out in its latest analysis that the trend could resume over the long run.
China’s mutual fund assets under management, including that of ETFs, recorded robust year-on-year growth of 37.5% to reach 19.7 trillion renminbi (3 trillion dollars) in 2020. Total assets garnered through mutual fund IPOs reached 3.2 trillion renminbi, double the size in 2019. The average IPO volume of new funds also improved to 2.2 billion renminbi, compared to 1.5 billion in 2019.
Local media reports show that in 2020, over 100 new funds were sold out within one day after subscriptions commenced, and 15 of these IPOs successfully garnered assets of over 10 billion renminbi. “The trend continued in the beginning of 2021, according to China Fund News reports, when a total of 122 new mutual funds were rolled out in January, raising assets of almost 500 billion renminbi, the second largest monthly amount for IPO assets recorded in the market”, Cerulli says.
Among the factors behind blockbuster new fund launches the firm identified are optimistic investor sentiments, star managers with good track records, and sufficient liquidity in the market. Over the past few years, the Chinese government has introduced a series of monetary easing measures to stimulate the economy following the U.S.-China tensions and COVID-19 pandemic. “Part of the money supply went to the real economy and real estate market as traditional long-term investment vehicles for local residents, while the rest was available to asset management products. This created plenty of opportunities for mutual funds, as other investment products in general are not attractive enough”, they add.
In this sense, some managers Cerulli spoke with said that the fast-track fund approvals introduced by the China Securities Regulatory Commission (CSRC) have also facilitated their new fund launches. Extensive marketing efforts and digital distribution have also supported mega fund launches.
Following this year’s Chinese New Year holiday, the stock market plunge dampened investors’ interest in new fund launches. However, despite the potential challenge to fundraising, the firm’s analysis shows that managers focused on the long term are still upbeat about the industry’s prospects, and are “confident that mega fund launches will resume if the stock market turns bullish again”.
In Cerulli’s view, mutual funds’ long-term growth prospects should continue because profits earned by listed enterprises which survived COVID-19 will eventually enter the stock market, and funds have an inherent advantage over other financial products.
“The cooling of market sentiments is normal, and it is also an opportunity to educate small-ticket young investors who have not experienced many market cycles. As long as the recovery does not take too long and a bear market is avoided, the long-term outlook for mutual fund IPOs should remain positive”, said Ye Kangting, senior analyst at the firm.
The independent investment advisory firm Insigneo continues to boost its New York network with the hiring of Margaret Rivera, who joins from Wells Fargo’s International office.
“Insigneo is continuing its New York City expansion, please welcome our new International Financial Advisor Margaret Rivera from Wells Fargo’s International office in NY. Margaret has been a financial advisor covering clients across the globe for over 29 years”, reads the company’s posting on its LinkedIn profile.
Rivera started in the financial services industry at Smith Barney in New York. She spent the majority of her career at Chase Investment Services and at Citi International, where she worked for 17 years before joining Wells Fargo.
“Margaret brings a wealth of experience in international markets to our new Insigneo NY office in Midtown Manhattan, she is a great addition to our team. We are looking forward to working with her and continuing to expand our footprint in New York City”, said Jose Salazar, Head of Business Development for the US Offshore market at Insigneo.
Meanwhile, Rivera claimed to be “very pleased” to be part of an expansion which “truly caters” to the international client. “I am reunited once again with former colleagues from Citigroup and Wells, and most importantly: my clients won’t have to worry on any business model changes because International is the core model for Insigneo. It is perfect all around and it just feels right”, she insisted.
This appointment comes after the recent opening by Insigneo of a new office located in midtown Manhattan and the hiring of Alden Baxter and Adelina Rodriguez.
Despite the huge popularity of green bonds, NN Investment Partners believes that their specific environmental focus and use-of-proceeds structure mean they might not be the best option for every issuer as some have insufficient environmental projects to issue a green bond. In its view, there is also a role for other types of sustainable bonds, like the more flexible sustainability-linked bonds (SLBs), as a financing tool for companies that still want to take positive steps towards sustainability.
Analysis by the asset manager indicates that sustainability-linked bonds do not command the equivalent of a green premium (greenium) which is the case for some green bonds. “This shows that there is more scepticism in the market as to the how sustainable SLBs really are“, they say.
These bonds have key performance indicators (KPIs) set by the issuers that are aligned with their sustainability strategies. NN IP points out that their goals can be more general and overarching rather than the bond’s proceeds being tied to the financing of specific projects that create a positive environmental impact, which is the case for green bonds. The market for SLBs has grown rapidly from 5 billion dollars in 2019 to over 19 billion in the first half of 2021.
“SLBs offer companies an instrument to tackle sustainable or social issues that are not directly climate-related. Many are not large CO₂ emitters and do not have sufficient environmentally linked financing needs to enable them to issue green bonds. Issuing an SLB gives these companies the opportunity to look beyond the pure environmental theme at the bigger sustainability picture”, says Annemieke Coldeweijer, co-lead Portfolio Manager Sustainable Credit at NN IP.
The analysis shows that investors have some degree of scepticism about SLBs because there is less concrete information on how their proceeds will be used and the potential impact they will have. The flexible structure of the KPIs also makes “sustainability washing” easier. To combat this risk, the asset manager recommends investors to consider four key factors when assessing the robustness of a bond’s sustainability KPIs:
Climate-related
Any KPIs related to the climate crisis should be aligned with the company’s carbon neutral target by 2050 (1.5°C scenario). In its opinion, issuers should establish this target and have it verified by an external party, such as the Science Based Target Initiative.
Focus on emission scopes
Climate-related KPIs should focus on the key emission scopes of the issuer. For example, while some companies have more emissions in Scopes 1 and 2 -directly generated by the company or related to its upstream activities, such as its power sources- others, such as automotive manufacturers, have more emissions in Scope 3, which include emissions that are a consequence of a company’s operations but are not directly owned or controlled by it, such as when consumers use its products.
NN IP believes that SLBs should have KPIs that accurately address the crucial sustainability problems that the issuers are facing. Recent examples include healthcare company Novartis, which issued a sustainability-linked bond with KPIs linked to patient access, and food retailer Ahold Delhaize, where the SLB had KPIs linked to food waste.
Independently verified
The KPIs should be well-documented and verified by independent parties, such as Sustainalytics or ISS. Issuers should report on their progress in terms of the KPIs annually and have them audited externally.
Lastly, Coldeweijer highlights that transparency and corporate disclosure are key when it comes to assessing the impact of an SLB and a company’s ESG targets and achievements; but she warns that data and reporting on sustainability is still a challenge for both companies and investors, and although increasing regulatory requirements are improving standards, there is still some way to go.
“This is also why in our bond selection process we do not rely solely on data from the companies themselves or on third-party ESG data sources alone. We carry out our own thorough ESG analysis of the issuer, both qualitatively and quantitatively. This ensures we develop a proprietary view on the ESG/sustainability performance, before investing in any issuer and in any bond”, she concludes.
Pixabay CC0 Public DomainLa Administración Biden contempla una fuerte inversión en infraestructuras. Golden Gate
The U.S. stock market rose to a record closing high at the end of April, scoring its best monthly gain since November. The spring rally was powered by a strong stimulus fuelled economic recovery and corporate earnings reports that by month end had topped analysts estimates by a wide margin. Berkshire Chairman Buffett commented at the annual meeting on May first that U.S. fiscal and monetary stimulus ‘did the job,” and 85% of economy is running in ‘super high gear’. However, the U.S. economy remains about eight million jobs below its pre-pandemic level in February 2020. Continued gains at March’s pace of 916,000 new jobs and a six percent unemployment rate would take a while to catch up and may bump into the time frame when the Fed is expected to start tapping on the monetary brakes. Fed chairman Powell addressed this market concern at the April FOMC meeting when he said, “We don’t have to get all the way to our goals to taper asset purchases, we just need to make substantial further progress.”
As we look for new investment opportunities, our equity research continues to focus on infrastructure. President Biden’s American Jobs Plan (AJP) has spending proposals targeting transportation, including roads, bridges, train service, and the transition to electric vehicles. Plus, upgrading public water systems and improving broadband access and connectivity to rural Americans.
Mr Buffett commented on the current backdrop for deals from Berkshire’s perspective. Here are some of the dots. Berkshire has not made a major acquisition since 2016 and has $70 billion to $80 billion of its $145.4 billion cash hoard it would “love to put to work.” But the ‘casino’ effect from SPACS has made it difficult to compete for deals. Despite environmental concerns, Mr. Buffett said he would ‘not feel uncomfortable’ owning ‘the entire business’ of Chevron, but did not say that was his intention. Berkshire held Chevron shares at year-end 2020. Chevron’s market capitalization is about $200 billion compared to about $630 billion for Berkshire. An upbeat Mr. Buffett said he is looking forward to seeing everyone at next year’s annual meeting in Omaha.
M&A activity remained vibrant in April with nearly $500 billion in newly announced transactions, providing merger arbitrageurs with an expanded menu of investment opportunities. Performance in April was bolstered by deals that made continued progress towards closing, improved deal terms, and deals that were completed in April. Notably, Alexion’s acquisition by AstraZeneca received antitrust approval in the U.S. without an extended review, in what was viewed as an early test of the Biden Administration’s approach to pharmaceutical mergers. Kansas City Southern received an overbid from Canadian National Railway, and Suez reached an agreement in principle to be acquired by Veolia under improved terms. We believe these dynamics highlight a desire and urgency to acquire strategic assets, and believe it bodes well for a healthy M&A environment.
After a record first quarter, April’s global convertible market issuance returned to a more normal cadence and continued on more attractive terms than previously occurred at the beginning of the year. The market moved higher as underlying equities advanced, but many new issues traded lower. There were two reasons for these moves. First, the convertible valuations were a bit stretched. It was reasonable for companies to take advantage of the market to improve their capital structures, but convertibles with zero coupons and 60 or 70% premiums very rarely make attractive investments. Second, many of these convertibles came from growth companies where high valuations were somewhat dependent on low interest rates. As investors include higher interest rates in their valuations, weakness has developed in growth equity and in turn weakness in their aggressively priced convertibles. This has left the convertible market in a compelling place. We anticipate that issuance will continue this year, as the convertible market is one of the most attractive ways for companies to raise capital while allowing investors to participate in equity performance in a risk adjusted way. There are also many existing converts that are now more attractively priced and offer asymmetrical profiles that should participate in more equity upside than downside.
To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:
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.
Class I USD – LU1216601648 Class I EUR – LU1216601564 Class A USD – LU1216600913 Class A EUR – LU1216600673 Class R USD – LU1453359900 Class R EUR – LU1453360155
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.
Class I USD LU2264533006
Class I EUR LU2264532966
Class A USD LU2264532701
Class A EUR LU2264532610
Class R USD LU2264533345
Class R EUR LU2264533261
Class F USD LU2264533691
Class F EUR LU2264533428
Disclaimer: The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.
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.
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
(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.”
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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.
(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.
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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.
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.
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.
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.