Has it all worked out for you? Wake up, take stock, be honest.
Are you a gambler? Do you own real estate funds with office and hotel portfolios that were exposed to the Covid-19 lockdowns? Too bad. Do you own private equity funds that use leverage exceeding 7x cashflows for companies struggling during this crisis? Too bad. Are you invested in early-stage venture backed companies with no sure path to liquidity? Too bad! It really is too bad when investors gamble with risk.
The Covid-19 crisis exposed risk most investors never anticipated in owning leveraged office and hotel portfolios that will take years to recover, if they survive the financial pressures imposed by the crisis. Most investors never anticipated that their highly leveraged portfolio companies would see their revenues disappear during such a time. Investors never imagined that early-stage venture backed companies they liked would be scrambling for cash to survive over the last 12 months.
Conversely, those investors who cared about risk management and chose strategies that minimized use of leverage are feeling much more secure and hopeful. While GDP driven investment themes are cyclical and struggle during recessions, downturns, and global pandemics, we advised our clients to ignore temptations and instead commit to disciplined managers who create real value, avoiding unnecessary risk.
Over the last two years, we shared the following with our clients and these themes have served them well. Why? Because all of them have one thing in common. That is, they are all strategies that consider risk first and are mitigated.
Do you think proven, innovative biotech treatments will lead us to revolutionary outcomes? We do.
Do you think demographically driven real estate opportunities present less cyclical risk? We do.
Do you think proven pre-IPO growth companies have a chance to capture value that leveraged buyout transactions can’t? We do.
Do you think niche, sector specific, high quality private credit without much competition deserves our attention? We do.
Do you think a highly disruptive alternative to secondary liquidity providers deserve investment? We do.
Do you think owning minority stakes in a portfolio of large and growing private investment management firms is a good thing? We do.
So, we hope it has worked out for you! We hope you discovered a better way to invest in private investment funds by thoroughly understanding their risk profiles and choosing lower risk options. How many more shocks do we need to experience before we wake up and start taking risk considerations more seriously? Hopefully we are all aware now of how to invest by paying more attention to underlying risk because 2020 has been a needed wake up call for many private equity investors.
Column by Alex Gregory, founder of Better Way, LLC
Pixabay CC0 Public DomainAntoine Onfray, nuevo director financiero de Tikehau Capital.. Antoine Onfray, nombrado director financiero de Tikehau Capital
Tikehau Capital, the alternative asset management and investment group, has announced in a press release the appointment of Antoine Onfray as Chief Financial Officer. In this position, he will be responsible for developing and implementing the group’s financial strategy and will report to Henri Marcoux, Deputy Chief Executive Officer of the firm.
Onfray began his career in 2007 in the General Inspection department of Société Générale. Between 2010 and 2016, he was Head of Financing and Treasury and Head of Investor Relations at Unibail-Rodamco-Westfield and he was then named Deputy Chief Financial Officer at Eurosic. Prior to joining Tikehau Capital, Onfray was Group Deputy CEO of Paref, a listed real estate group, where he arrived at 2017 as Chief Financial Officer.
“We are delighted to welcome Antoine, who brings a wealth of expertise in the financial function of listed groups. He will be a major asset in the growth dynamic of Tikehau Capital, whose solid financial structure with 2.8 billion euros shareholders’ equity, contributes directly to the achievement of the Group’s strategic objectives,” said Henri Marcoux, Deputy CEO of Tikehau Capital.
Foto cedidaAdrie Heinsbroek, director de sostenibilidad de NN Investment Partners.. NN Investment Partners nombra a Adrie Heinsbroek director de sostenibilidad
NN Investment Partners (NN IP) has announced in a press release the appointment of Adrie Heinsbroek as Chief Sustainability Officer, as of 1 January 2021. In this newly created role he will advise the Board on sustainability matters and challenges, and their implications for the entire organization.
Heinsbroek will be responsible for bringing external developments that shape the operational surroundings and society, such as increased regulations and climate change, directly to the Board. He will also advise on NN IP’s own footprint and the further implementation of its responsible investing approach in its strategies. He will continue to report to Arnoud Diemers, Head of Innovation and Responsible Investing Platform, and will additionally take on a direct advisory role to Satish Bapat, CEO of NN IP.
The asset manager believes that Heinsbroek will help them remain “at the forefront of global sustainability and ESG developments”. In their view, his appointment enables NN IP to leverage on his knowledge and experience whilst setting priorities and make decisions for the future.
“As a responsible investor, we aim to improve both our clients’ returns and the world we live in. We do this by looking beyond financial performance, because the people we work for and with, represent more than just the investments we manage. The announcement illustrates our strong commitment as a responsible investor”, said Satish Bapat.
Heinsbroek joined NN IP in February 2017 as Principal Responsible Investment and has over 20 years of experience in the field of sustainability and ESG integration.
At the beginning of last September, I met by video conference with the Grifols (GRF) Investor Relations Team. We talked about accelerating immunoglobulin sales in developed markets such as the US, Canada, and some European countries. GRF produces and sells immunoglobulins for intravenous and subcutaneous administration, and they are used in part to treat diseases of patients with Primary Immunodeficiency (PIDD).
During the last week of September, I conversed with an American hedge fund manager, as we are both research contributors to Seeking Alpha (SA). In that conversation, the manager recommended Koru Medical Systems (KRMD), highly penalized by the market, but the underlying business was excellent. KRMD is an American manufacturer of low-price subcutaneous infusion devices for delivering immunoglobulin therapies in chronic diseases such as primary immunodeficiencies (PIDD), chronic inflammatory demyelinating polyneuropathy (CIDP), and others.
PIDD is a diverse group of genetic disorders caused when some immune system components (especially cells and proteins) do not work correctly.
Does it sound familiar? I repeat, patients with PIDD
Thanks to the investment in GRF and the good prospects for the immunoglobulin business, I decided to do more research on KRMD.
Its business model is very attractive due to its high recurring income component, a consequence of the fact that on many occasions, a patient with PIDD must treat for all life. Also, the maintenance and the purchase of accessories generate recurring income and high switch costs, a consequence of the fact that a machine can often only use spare parts of the same brand.
So what are the main drivers of future growth?
1. Diagnose more PIDD and SID patients
PIDD (primary immunodeficiencies) is a group of more than 400 rare genetic diseases that cause a malfunction of the immune system. These diseases affect one in every 2,000 people, 60% of cases diagnosed during childhood, and up to 10% detected at birth in countries with the corresponding screening program. According to different academic studies, globally, there are 650,000 people diagnosed and 6M who have not yet been.
Most of the people diagnosed with PIDD are in the US, specifically 500,000 of whom 130,000 receive some immunoglobulin (Ig) therapy. Of these 130,000, 35,000 are receiving subcutaneous Immunoglobulin (SCIg); therefore, there is the possibility of converting 95,000 patients from intravenous (IVIg) to subcutaneous (SCIg). PIDD therapies represent an annual recurring income per patient of $ 750, according to data from Koru Medical.
Sometimes due to external factors (those that are not caused by genetics), people develop what is known as secondary immunodeficiency (SID). As a result, patients can undergo repeated rounds of antibiotics and hospitalization for treatment. SIDs are much more common than primary (genetic) immunodeficiencies.
Chronic inflammatory demyelinating polyneuropathy (CIDP) is a rare neurological disorder that causes inflammation of the body’s nerves. Although your immune system generally keeps you healthy by fighting germs, your immune system does not recognize parts of your nerves and attacks them. Over time, this can cause gradual weakness, numbness, and loss of feeling in the arms and legs. If left untreated, CIDP can cause permanent nerve damage. CIDP therapies represent an annual recurring income per patient of $ 1,500, according to data from Koru Medical.
2. Increased adoption of subcutaneous therapies
Many reasons explain the preference for subcutaneous vs. intravenous, both by patients and doctors. Some of them are: 1) It can be self-administered at home without the help of a nurse, 2) fewer side effects in a patient with low blood pressure, 3) flexibility in scheduling injections, 4) gradual adsorption of the Immunoglobulin, 5) does not require premedication, 6) the patient can continue to perform their tasks while injecting and 7) higher frequency of administration (weekly) in SGIg.
Although SCIg therapy is more expensive in terms of price per gram than IVIg, some studies indicate that over a year, a patient generates an average savings of $ 10,000.
3. Medical devices and self home administration
There are three different SCIg infusion systems, mechanical, electronic, elastomeric, and push. Mechanics are the cheapest, and this is the segment where Koru Medical operates. The electronics inject a constant flow. They are programmable, but their sale price is higher, and they require batteries and some previous training from the patient. We will analyze in more detail the mechanical pumps and a semi-electronic one.
3.1) FREEDOM60 from Koru Medical Systems: Completely portable syringe infusion system, without the need for electricity or batteries and operates at a constant and safe pressure. The FREEDOM60 pump could use for almost any subcutaneous or intravenous administration in a standard 60 ml syringe.
3.2) Crono S-PID 50 from IntraPump: The newest, high volume ambulatory infusion pump for subcutaneous drug therapies always with a prescription. It combines high technology with an innovative design. It’s small and light, accurate, and has the flexibility to change flow rates during an infusion with ease, making it ideal for home therapy. Its use with 50 ml dedicated syringe. There is also a Crono Super PID pump designed for pediatrics with reliable 10, 20, and 100ml syringes.
3.3) EMED Technologies SCIg60 Self-Powered Pump: Utilizes a reusable constant pressure mechanical pump monitored by the VersaRate flow controller. This disposable device allows the physician and patient to adjust the inflow flow better. Today, this device is still pending clearance from the FDA.
In mid-November, and after speaking with the company’s management, it was clear that Koru Medical was present in a business with excellent growth potential and located in the right segment (subcutaneous immunoglobulins). However, I still had three questions to answer:
A. Was there a margin of safety?
B. What is the best medical device for administering SCIg?
C. Is the business model scalable outside the US?
To answer the first and most straightforward of the three questions, we must make a rough assessment of the business. We know that Koru Medical’s strategic plan is to reach $ 50M in sales by 2022, a gross margin of 70%, and organic and annual sales growth of + 20%. We propose the fundamental valuation based on two methods, and for simplicity, we do not include the clinical trials and international segments (Less than 20% of total sales).
1) Company guidance
Growth of 15% for 2020, 20% for 2021 and 25% for 2022, less than company guidance. In the gross margin, we started from 68% in 2020 to 70% in 2022. We think the company will reduce its salary cost to 40% of total revenue, which implies an Ebit margin of 23% in 2022. To estimate the target value, we applied 5x sales or 25x profits to reach a theoretical value of 6.35 dollars. At the current trading price (3.90 dollars on November 11), we obtained an upside potential of over 60% for estimates below the company’s target.
2) Total addressable market (TAM) in the US
FREEDOM60 use in 35,000 subcutaneous patients, but there are 130,000 intravenous patients. Therefore, Koru Medical has the opportunity to convert an additional 95,000 patients. If we perform the same calculation for CIDP, we see the possibility of converting 4,750 patients. If we estimate that Koru Medical will capture 30% of the market opportunity in PIDD and 15% in CIDP, we achieved target sales of 51.3 million dollars, a figure very much in line with the company’s strategic plan. Applying the valuation multiples above, we obtained a target price of 7.65 dollars or a potential upside of 96%.
Because of the assessment achieved, there is no doubt that we obtained a sufficient margin of safety, but we still had to answer two more questions. Most fundamental analyzes end at this point or much earlier. Even at DRACO GLOBAL, we go one step further, and we need to contrast the information we have obtained from the company, analysts, or colleagues.
Information Contrast
At DRACO GLOBAL, we do not make an act of faith. We believe what the company, a report, or an analyst tells us; Instead, we contrast the information with those who best know your product or service (Clients, suppliers, distributors, etc.). On this occasion, we got in touch with BarcelonaPID Foundation and we talk to your president and pediatric immunologist, Pere Soler Palacín.
The PID Foundation is a non-profit organization founded in 2014 as the initiative of a group of professionals dedicated to pediatric patients with Primary Immunodeficiencies (PID) and their families. Its objective is to promote the knowledge, study, research, and dissemination of PIDs and the complications derived from these diseases.
As president of the foundation and with more than 25 years of experience in IDPs, Dr. Soler extended information to our study with the following words:
• There is a wide variety of PID diseases, and some are more or less common and more or less serious.
• More typical in children, but it can also occur in adults.
• Treatment for PIDs can reduce the number and severity of conditions and help children and adults lead as everyday lives as possible.
• Immunoglobulin treatment is the essential treatment for many of these PIDD, helping protect against a wide range of infections and reduce autoimmune symptoms.
• Dr. Soler confirms that they mostly use the subcutaneous route due to: less need for injections, self-administration at home with prior instruction to the patient, faster administration, fewer side effects, and lower QoL.
• Artificial plasma could be a very long-term option, but today it is not possible in any case.
• SIDs (secondary) is also an exciting opportunity, although there is still a lot of work.
While talking to Dr. Soler, I convinced that I had found a great investment idea, but when I asked him about existing medical devices, his answer left me blank.
• From 2006 to 2009, they used the typical low-cost mechanical pump called the Infusa T1 from Physan. In his experience, the infusion pump did not generate a constant flow. It was easily clogged and made it difficult to administer medication. In 2009, they chose to change their supplier to InterPump, the company that owns the Crono S-PID 50 device. This device significantly reduced the problems related to tube occlusion and drug inlet fluidity. Its size is smaller, and its design is lighter, making it ideal for home therapy and providing complete freedom for the patient to administer medications at any time of the day without interrupting daily life or leisure activities.
After this revelation, I went to the InterPump website and began to read testimonial comments that had used both devices and just confirmed everything that Dr. Soler told me.
Finally, I asked Dr. Soler if there was any explanation why FREEDOM60 used more than Crono S-PID 50 in the US, and according to his opinion:
• The fact that healthcare is private and expensive encourages you to buy low-cost devices like FREEDOM60. On the other hand, healthcare subsidies in Europe and Spain and the cost is not the main problem.
Finally, I understood that the investment thesis could be valid in the US as long as the current health system continues but not in Europe. A part of Koru Medical’s future growth is international expansion, Europe included. Still, after Dr. Soler’s revelation, my opinion changed radically to the point that I am rethinking my investment in Koru Medical Systems.
There is always the possibility that Koru Medical will consolidate the market and buy another company, and why not one of its best competitors. InterPump (Crono) is a small Italian company and does not trade on the stock exchange. You never know if the owner would be willing to sell it. In the release of the 3Q20 results, the CEO of Koru Medical spoke that they are always attentive to the M&A possibilities offered by the market and that after the June capital increase, they could use the $ 32M they have in the box.
In this article, I wanted to show how we analyze and contrast the DRACO GLOBAL information before investing, especially in small companies. Unfortunately, it is not a common practice in the sector, but in DRACO GLOBAL we try to do it.
PS: I want to publicly thank Dr. Soler for his time, his kindness and encourage people to read this article and go to the PID Foundation website.
Column by Quim Abril, President and Portfolio Manager of Draco Global Sicav at Gesiuris AM.
Pixabay CC0 Public Domain. Amundi amplía su gama de ETFs ESG con una nueva estrategia de renta variable alemana
Amundi announced in a press release the expansion of its ESG ETF range, with the addition of a new passive investing strategy that offers broad exposure to the German equity markets while incorporating sustainable investment criteria. The fund is listed on Xetra and is offered “at a competitive price of 0.19% OGC”, stated the asset manager.
The Amundi DAX 50 ESG UCITS ETF is composed of the 50 largest German companies with strong sustainable profiles. It tracks an index that excludes all companies violating the international standards and involved in controversial weapons, as well as some sectors such as tobacco and thermal coal.
Amundi offers a comprehensive range of ETFs designed to make sustainable investing accessible to investors no matter what their ESG integration requirements and risk budgets are. In their view, this approach empowers investors to cost-effectively reflect their individual goals and values within their ESG allocations.
“We are delighted to enhance our offering of responsible ETFs, providing investors with the choices they need to implement cost-effective ESG portfolios. Building on our existing range of core ESG ETFs, we are now extending our offer through country flagship exposures like the S&P 500 ESG and today the DAX 50 ESG”, said Fannie Wurtz, Head of ETF, Indexing and Smart Beta at Amundi.
Meanwhile, Juan San Pío, Head of Sales at Amundi ETF for Iberia and Latam pointed out that with the expansion of their range, they make available to investors “new instruments that allow them to build and diversify their ESG strategies by helping to meet their sustainable investment needs with a simple, transparent and cost-efficient solution”.
Pixabay CC0 Public DomainBroker observando la evolución de las acciones en Wall Street. Wall Street
As every month, Gabelli provides investors a fresh overview of what has happened in the markets the previous month. In November’s outlook, Gabelli’s experts pay attention to three main topics.
Value
U.S. equities rallied sharply in November, posting its biggest monthly gain since 1987. Prospects for improved economic growth have been supported by progress on vaccines, expectations for more government fiscal stimulus, and a continued U.S. Federal Reserve accommodative monetary policy.
The greatest tailwind for U.S. stock was the upbeat news regarding coronavirus vaccines. Pfizer (PFE) and BioNTech (BNTX) disclosed that an initial analysis of a late-stage study showed their coronavirus vaccine candidate was more than 90% effective, while follow-up data put the efficacy rate at 95%. Shortly after, Moderna (MRNA) and AstraZeneca (AZN) also reported positive news with effective rates that also exceeded 90%. Despite the renewed spike COVID-19 cases, investors remain focused on the distribution and short-term availability of the vaccine.
Former Vice President Biden defeated President Trump in the U.S. Presidential election while the widely previewed “blue wave” failed to come to fruition as Republicans narrowed the Democrats’ majority in the House of Representatives and appear to be in a position to retain control of the Senate. The idea of a split Congress suggests minimal changes in tax and regulatory policies in the near future.
The removal of election uncertainty may have helped put more focus back on a statistically strong Q3 earnings season. As Value Investors, we will continue to use the current market volatility as an opportunity to buy attractive companies, which have positive free cash flows, healthy balance sheets and are trading at discounted prices.
Merger Arbitrage
Mergers and acquisitions activity remained robust in November with $388 billion of deals announced, an increase of 18% over November 2019 levels. Through the end of November, global deal activity totaled $3.2 trillion, down only 11% from 2019 activity.
December is off to a fast start with salesforce.com acquiring Slack Technologies for cash and stock totaling $26 billion, and consolidation of asset managers continued with Macquarie agreeing to acquire Waddell & Reed Financial in an all-cash deal valued at $1.6 billion.
We are finding investment opportunities in newly announced deals attractive, and continue to add to existing positions in our portfolio. Our absolute return investments also positively impacted performance in November. More specifically, HD Supply Holdings (HDS-$55.78-NASDAQ), a distributor of industrial products for maintenance, repair & operations, and other infrastructure applications, agreed to be acquired by The Home Depot for $56 cash per share, or about $8 billion. Home Depot previously sold its HD Supply business to private equity in 2007, and was taken public in 2013.
Convertible Securities
Global converts have outperformed as their asymmetric exposure to stocks and high concentration of tech, software, and other “stay-at-home” names proved to be valuable benefits amid the high volatility post-lockdown backdrop.
As of today, the global convertibles market has expanded more than 35% in 2020 to over $460bn, its largest size since fall 2008.
The portfolio management team is keenly focused on what the “reopening” may suggest about a cyclical rotation within the CB space, which currently has a heavy concentration of tech and growth names, We believe that in 2021 equities will grind higher while volatility remains supported amid the economic recovery, we are of the belief that the momentum in CBs will persist and that unprecedented monetary easing will continue to encourage aggressive behavior in risk assets. We think converts will once again prove valuable in this environment as they allow investors to own the upside cautiously with the benefit of asymmetric exposure.
We think the macro backdrop will remain broadly supportive of CB issuance in the near-term given stocks are close to highs, market volatility is still elevated, credit spreads remain wide versus pre-COVID levels, and investor appetite for new deals is strong. We have seen the pace of High Yield issuance picking up versus CBs in the second half of 2020 as spreads trended tighter. Nonetheless, we are confident CBs will still be relatively attractive to borrowers despite the decline of their explicit cost savings as they allow for easier and speedier access to capital markets than HY bonds
November proved to be a volatile month as investors weighed the US presidential election and rising COVID cases in both Europe and the US. Outright global CBs excelled as the ICE BofA Global Convertibles G300 (VG00) added more than 9.8% on a local currency basis last month, outperforming all other global asset classes and bringing its year-to-date total return to +25.8%. (see chart below)
US Converts posted their best monthly returns in November (+13.5%) and the U.S. convertibles market size finally breached the previous peak (in May 2008) to reach $373.8bn in market value.
Recent economic data may be suggesting that inflation has begun to rebound from its post-COVID lows, and inflationary concerns have begun to manifest in the prices of various assets, including gold and TIPS but our analysis of both convertible bond floors and cross-asset performance suggests that CBs are much less negatively impacted by rising inflation as traditional fixed income assets.
Column by Gabelli Funds, written by Michael Gabelli
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.
Class I USD – LU0687944552 Class I EUR – LU0687944396 Class A USD – LU0687943745 Class A EUR – LU0687943661 Class R USD – LU1453360825 Class R EUR – LU1453361476
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
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.
Pixabay CC0 Public Domain. Aberdeen Standard Investments crea una plataforma para invertir en el universo hedge funds
Aberdeen Standard Investments (ASI) has created a new platform that will allow investors to track a broad spectrum of investable hedge fund benchmarks for the first time. Drawing on the public market equity tracker model, where half of US equity assets are passively invested, the product looks to take a share of the 3 trillion dollars hedge fund market and attract new investors, explained the asset manager in a press release.
The platform will allow ASI to launch products which track the HFRI 500, a fund weighted index comprised of 500 investable hedge funds across a broad range of strategies calculated and published by Hedge Fund Research Inc. (HFR). The flagship HFRI 500 index tracking strategy is targeting an initial fundraising of 500 million dollars by May 2021 and will have an investment capacity in excess of 50 billion dollars.
The platform will also give access to HFR’s investable index family, with almost 30 underlying investable hedge fund strategy, sub-strategy and thematic indices giving investors the opportunity to choose those most suited to their needs. This is the latest development following a partnership formed in 2019 between ASI and HFR which will see the launch of a series of products on ASI’s dedicated index tracking platform.
“Own” the benchmark
“Our partnership with HFR means we are able to launch genuinely innovative benchmark tracking products. Before now products that attempted to track hedge fund benchmarks were both narrow in scope and the implementation approach resulted in investment outcomes that deviated from the return of the hedge fund industry. The funds available on the ASI index tracking platform are able to address these issues by physically owning each underlying fund benchmark constituents at the index weights, helping overcome the historical impediments”, said Russell Barlow, global head of alternative investment strategies at the asset manager
He also pointed out that the platform not only allows allocators to “own” the benchmark but also to express strategy, sub-strategy and thematic views in a pure way. “By doing so they can avoid the variability in return outcome comes from the idiosyncratic views expressed by a single fund”, he added.
Meanwhile, Joseph Nicholas, founder and chairman of HFR, stated that they are pleased to support this launch because, for the first time, investors can access HFRI Benchmarks. “The flagship HFRI 500 index is a global, equal-weighted benchmark comprised of the largest hedge funds that report to the HFR Database which are open to new investment and offer quarterly liquidity or better. It offers clients a benchmark that’s more representative of the hedge fund industry return while also allowing tracking products to deliver the return of the index as a gateway to investing in a broad, diversified set of hedge fund strategies from some of the most prominent managers in the world”, he commented.
Pixabay CC0 Public Domain. Los activos en fondos europeos alcanzaron los 11,8 billones de euros en 2020
Franklin Templeton has announced the launch of the Franklin K2 Emso Emerging Markets UCITS Fund, a sub-fund of the Luxembourg-domiciled Franklin Templeton Alternatives Funds (FTAF) range.
This new Emso product seeks to generate capital growth through strategic investment exposure, both long and short, primarily to debt securities of sovereign and corporate obligors and currencies, including derivatives related thereto, all principally in emerging markets, explained the asset manager in a press release.
The fund will mirror the strategy of the Franklin K2 Alternative Strategies Fund and will be managed by the same team, Emso’s CIO Mark Franklin and John Hynes, Senior Portfolio Manager. Since becoming a co-manager in April 2015, the strategy has an annualised return of 5.4% with a standard deviation of 4.5%.
Franklin Templeton stated that this range –which was launched last October- offers European investors access to liquid hedge fund strategies in a UCITS format with daily liquidity and transparency from K2 Advisors, “one of the pioneers in the development and use of low fee liquid hedge funds”, through their Managed Accounts Platform (MAP).
“We currently have five managers spanning across long/short equity, relative value, and event driven strategies and are delighted with the addition of the K2 Emso Emerging Markets fund to the platform. The manager’s flexible mandate allows the team to invest where they see value across a large universe, applying a consistent investment framework”, said Bill Santos, Senior Managing Director at K2 Advisors.
Meanwhile, Julian Ide, Head of EMEA distribution at Franklin Templeton, pointed out that, since the acquisition of Legg Mason in July, they have become “one of the biggest providers of alternative solutions globally” with 124 billion dollars in assets under management. “As we continue to focus on strengthening our cost-effective product range of liquid alternative solutions in Europe, we are pleased to launch this fund, which offers a differentiated global macro style of alpha generation and provides further robust diversification to client portfolios”, he added.
Pixabay CC0 Public Domain. El 85% de los profesionales de la inversión tienen en consideración los factores ESG en sus inversiones
A new global research study released by CFA Institute reveals that 85% of investment professionals say that they take ESG factors into account when investing, up from 73% three years ago. The report shows how sustainable investing will shape the investment industry over the next decade, a trend that has been accelerated by the COVID-19 pandemic.
“The Future of Sustainability in Investment Management: From Ideas to Reality” demonstrates that this growth has been driven by client demand, with 69% of retail investors and 76% of institutional investors having interest in ESG. Although the future of sustainable investing includes many unknowns, the study advances three tenets where it goes further than its forerunners: it is additive to investment theory and does not mean a rejection of foundational concepts; it develops deeper insights about how value will be created going forward using environmental, social, and governance considerations; and it considers many stakeholders.
“Incorporating sustainability in investment management has become part of our industry’s mission to serve society by improving long-term outcomes. This moment represents a valuable opportunity for organizations to address this challenge and help shape a future worth investing in. As the focus on sustainability in investing gathers increasing momentum, it will eventually dictate the sustainability of investing itself”, says Margaret Franklin, CFA, President and CEO of CFA Institute.
Key areas of sustainable investing
The report also focuses on four key areas of sustainable investing. The first one is the rise of alternative data and its importance in sustainability analysis: 71% of participants believes that the rise of alternative data will make sustainability analysis more robust, while 62% agree that sustainability is an area where human judgement and active management will thrive, highlighting the often subjective and contextual nature of sustainability data.
The second area is the increased demand for sustainable investing expertise, as there is a relative scarcity of sustainability talent in the investment industry. CFA Institute used LinkedIn Talent Insights and found that the supply of expertise among core investment roles is limited but growing quickly. Of the 1 million LinkedIn investment professional profiles examined, less than 8,000 list ESG as an area of expertise. However, this figure has increased 26% in the last year. Meanwhile, 18% of 1,000 portfolio manager job posts on LinkedIn mention the desire for sustainability-related skills.
This contrasts with the growth of investor demand, that’s driving firms to change their business models and expand product offerings. In this sense, the research points out that, among the various ways to incorporate ESG into the investment process, ESG integration and best-in-class approaches are more popular than negative or exclusionary screening. That’s why future growth opportunities in the product space include ESG index tracking and quant funds, ESG thematic products, ESG multi-asset products, climate transition strategies, long-term engagement, and better benchmarks.
The last key area is the relevance of systems thinking in sustainability analysis. The study concludes that the COVID-19 pandemic has emphasized the urgency of sustainability issues, highlighted the interconnectedness of the financial system, and how corporate value creation both affects, and is affected by, the ecosystem in which it operates. CFA Institute believes that the integration of sustainability issues will require a more widespread application of system-level thinking.
“The demand for sustainable investing continues unabated, driven by push and pull factors, catalyzed by societal expectations, and accelerated by the Covid-19 pandemic. Investment firms that incorporate sustainability into their business models need access to specialist knowledge to enrich their investment capabilities and to bridge the data gaps. Education and training in the ESG space, along with the rise of alternative data sources and enhanced disclosure frameworks, will equip firms to deliver on the potential of sustainable investing”, says Rhodri Preece, CFA, Senior Head of Industry Research for CFA Institute.
All in all, the research explores the influences driving the sustainability trend and sets out implications for investment firms, including the need to better integrate data and to develop expertise to meet client expectations with innovative products. It includes perspectives from over 7,000 industry participants, including investment clients, investment practitioners, ESG specialists, and more.
China and India are jostling for greater geopolitical influence, within the emerging world and beyond. Their ambitions are manifold. For instance, China aims to lead the world in AI technology, India to take China’s manufacturing mantle. But over the long run, they won’t achieve their aims through armed conflict on some high Himalayan glacier.
Rather, they’ll only do so by working towards the same goal of limiting global warming – and, along the way, will ensure the survival of the glacier they both claim.
A major, concerted effort at limiting how much global temperatures rise over the coming decades will pay significant dividends not just in China and India but for emerging economies generally. Were developed and emerging countries to work together in limiting global warming, they could roughly halve the loss in output they face by the end of the century compared to if there were no further climate change.
Emerging economies are much more vulnerable to rising global temperatures than their advanced counterparts. For instance, major cities around the world face annual losses of between USD300 billion and USD1 trillion in output from climate change-related sea level rises, according to modelling by Oxford University’s Smith School, in a report sponsored by Pictet Asset Management. China alone has 15 cities that risk losing as much as 4.7 per cent in GDP per capita per year from rising sea levels.
But this is not where China’s worries about global warming end. Temperatures in the country have been rising faster than the global average. Current projections are for a 13 per cent fall in the country’s crop yields by 2050 compared with 2000.
Meanwhile, India stands to be one of the biggest losers from global warming, risking more than a 60 per cent shortfall in GDP per capita by the end of the century relative to if temperatures stayed the same. A hotter climate threatens the country’s productivity levels. Knock-on effects to education will prove a drag on the accumulation of human capital and thus economic development. Agricultural output will also decline.
In Brazil, climate change will have a major impact on water availability – by the end of this century, two-thirds of the country will be classified as arid. This will hurt harvests and also energy production – hydro power accounts for some 60 per cent of the country’s electricity supply. Similar issues confront Mexico, Indonesia and South Africa.
Of major emerging market economies, only Russia is likely to benefit from rising global temperatures – at least, on the face of it. A melting Arctic would free more of Russia’s coastline, opening the region to trade and the exploitation of the region’s wealth of natural resources. But there’s a caveat. This doesn’t factor in the impact climate change would have on other countries’ demand for Russian goods. Subdued GDP elsewhere would very likely hurt Russian exports.
Read more about the Oxford-Smith paper at this link.
Except otherwise indicated, all data on this page are sourced from the Climate Change and Emerging Markets after COVID-19 report, October 2020.
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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