Pixabay CC0 Public Domain. Amundi lanza un nuevo ETF de renta variable libre de combustibles fósiles con exposición a los mercados emergentes asiáticos
Amundi and the Asian Infrastructure Investment Bank (AIIB) have launched a new Climate Change Investment Framework. As announced by both firms in a press release, this benchmark investor tool will for the first time holistically assess climate change risks and opportunities in line with the three objectives of the Paris Agreement at the issuer-level.
Endorsed by Climate Bonds Initiative, a major international certifier and industry thought leader in the green and climate bond market, the framework translates the three key objectives of the Paris Agreement into fundamental metrics, equipping investors with a new tool to assess an issuer’s level of alignment with climate change mitigation, adaptation and low-carbon transition objectives.
While groups of leading institutional investors have responded to the climate challenge by integrating climate change into investment processes, AIIB and Amundi highlighted that this tool takes a holistic approach that current private capital mobilization efforts lack.
“Equity capital markets currently focus on thematic funds and commonly face strong sector bias, while low-carbon indexes have a pronounced focus on mitigation efforts. In fixed income, green bonds have been the main climate finance solution for debt capital markets, but they do not consider exposure to climate investment risks and opportunities from the viewpoint of an issuer’s entire balance sheet”, they stated in the press release.
Extra financial impact
Investors can expect portfolios aligned with this framework to deliver a potential financial impact by benefiting from any future repricing of climate change risks and opportunities in the capital market. It also enables them to measure issuer performance against the three objectives of the Paris Agreement, which allows investors to systematically include in their investment portfolio A list issuers (those that are already performing well on all three objectives) and B list issuers (those that are moving in the right direction but are not in the A list yet). An investment strategy targeting both A and B List issuers should be more resilient to climate change risk and more exposed to opportunities not yet priced in by the market.
In addition, they pointed out that the framework also delivers extra financial impact as it is designed to encourage the integration of climate change risks and opportunities into business practices by targeting the engagement of so-called “B-List” issuers to help them transition to “A-List” credentials.
Yves Perrier, CEO of Amundi, said they are proud to launch this tool with AIIB as they continue to make strides in the field of climate finance. “Mobilizing key stakeholders in supporting the Paris Agreement in Asia is in line with Amundi’s commitment to ESG investing and reflects our extensive commitment to the region. This new Framework will further help the investment community address climate change through the mobilization of capital to emerging markets where it is much needed”.
Jin Liqun, AIIB President and Chair of the Board of Directors, commented at the Climate Bonds Initiative international conference that in launching this framework they show their “commitment to playing an important role in the battle against climate change, by contributing to strengthening market capacity and driving the green agenda in Asia”.
A group of senior bankers from Santander Private Banking International has joined Wells Fargo in Miami. The team includes Gustavo Mariosa, Gastón Ricardes, Gabriel Patrich, Laureano Bello and Advisor Sebastián Ramírez. Sofía Fernández Morell and Nelson Rodríguez will also join Wells Fargo as Client Associate.
With this move, Mariosa concludes an employment association with Santander which has lasted almost 30 years. He began in 1991 as a representative in the Sao Paulo branch in Brazil, where he spent more than five years, and then held the same position in Mexico, where he worked for seven years. Later he held the same position in Peru for six years. In 2009 he was appointed Senior Vice President at Santander Private Banking International, a position he´s held until now.
Meanwhile, Ricardes and Bello both share a vast experience in private banking, starting with the Bank of Boston in Miami in 1993 and 1992, respectively, until they both joined Santander in 2007. In the Spanish company, they both held the position of Senior Vice President.
Patrich joined Santander in 2007 as an executive banker and senior vice president. He holds an MBA from the University of Pennsylvania.
Sebastián Ramírez, who has a CFA certification, worked at Santander as an investment advisor from September 2013 until this month, according to his LinkedIn profile.
“I am pleased to announce that as of September 18th, 2020, I joined Wells Fargo Advisors as Managing Director and Financial Advisor in their Miami, Florida office,” says Ramirez’s description. Prior to his work at Santander, Ramírez was an institutional sales and portfolio manager in several management companies in Buenos Aires and Miami.
The team will report to Martha Chinea, Senior Vice President, who reports to the International Market led by Mauricio Sanchez, Managing Director.
Next October it will be 11 years since the first issuance of a CKD in the Mexican market. RCOCB_09 issued by Red de Carreteras del Occidente (infrastructure sector), was the first CKD that was placed on the Mexican Stock Exchange that gave institutional investors access to private equity through a public vehicle. RCOCB_09 presents a net IRR in pesos of 15.2% and if the inflows and outflows at the exchange rate of each movement are considered, the net IRR in dollars is 10.3% in accordance with own estimates prepared with public information from the issuer (august 31, 2020). These IRRs are good considering that the investment takes 11 years and that it will expire in April 2038, that is, in 18 more years.
Just as we have this success story for the 164 CKDs and CERPIs as of August 31, trying to assess the performance of an entire industry that is worth 31.538 million dollars in committed capital of which just over half has been called (57%) equivalent to 18.012 million dollars; The issue becomes more complex since when weighting all the CKDs and CERPIs, the net IRR in pesos does not reach two digits since the resource requirements and distributions are different and of course the valuation of the investments they generate in what individual issuers and the different sectors (7) to which they belong. In addition to the above, there is the problem that in the first three years (2009 to 2012), the CKDs were pre-funded at 100% (29 of the 164 CKDs and CERPIs).
So far only two CKDS have expired and another six are identified that could expire this year so these two CKDs and six to expire cannot tell the story of the 164 that there are. It cannot be ruled out that some of these CKDs exercise the possibility they have of postponing their expiration.
At an aggregate level, in the entire life of CKDs the best years have been 2009, 2013, 2014, 2018 and 2019, which present an IRR between 7 and 10% which has been improving as time passes. The years 2009 and 2013 practically already called 100% of the capital committed (100 and 96%), while in 2014 they are 71% and in 2018 and 2019 they are between 30 and 25% of the capital called, so as the new investments are made, the observed IRRs will be modified.
The sectors with the best IRR in pesos are the fund of funds, credit, infrastructure and real estate sectors as of August 31.
When reviewing the 15 highest sector IRRs per year from 2008 to date, we have IRRs that are between 8.0% and 16.5%. The infrastructure sector is the one that has had four very good years such as 2009, 2010, 2012 and 2015. The credit sector has had three good years (2012, 2014 and 2019), and with two good years are the real estate sectors , energy and private capital.
Although the IRRs shown are not yet outstanding in the averages, there are 36 CKDs (as of August 31) that present IRRs above 10% that represent 22% of the 164 CKDs. Another interesting fact is that only 46 CKDs have called 100% of the committed capital, which means 28% of the total supply of CKDs and CERPIs.
Several factors make CKDs underperform so far:
For the institutional investor (insurance companies and AFOREs, among others) to participate in private equity, it was necessary to create a public instrument that was listed on the stock market. This meant incurring issuance and placement expenses, among others, that a global private equity fund does not incur.
The money has not been called 100% so many of the investments are still in their initial phase. All CKDs and CERPIs are missing 9 years on average where 57 will begin to expire as of 2030.
There are 29 CKDs that were pre-funded (100% of the capital called in their placement).
The average supply of CKDs is 13 per year, where, for example, there was the case that 38 were placed in 2018. That year the offer was important since the CERPIs were allowed to invest 90% of their resources globally.
Of course, there are good and bad years; There are sectors that require more time to present results and it must also be recognized that there have been good and bad CKDs, but those can only be seen as they expire. The observed IRRs will continue to change and little by little results will be seen.
Foto cedidaEric Varvel, Global Head of Asset Management and Chairman of the Investment Bank at Credit Suisse. Credit Suisse AM and Qatar Investment Authority Partner to Create a Private Credit Platform
Credit Suisse Asset Management and the Qatar Investment Authority (QIA) announced a strategic partnership to form a multibillion dollar direct private credit platform. As they stated in a press release, it will provide financing primarily in the form of secured first and second lien loans to upper middle-market and larger companies in the US and Europe.
The platform is part of Credit Suisse Asset Management’s Credit Investments Group (CIG), which is led by Global Head and Chief Investment Officer, John Popp. The CIG team is one of the largest providers of leveraged finance solutions in the industry, with approximately USD 60 billion in non-investment grade credit positions. For more than 20 years through various market cycles, CIG has maintained a disciplined approach and demonstrated leading experience in sourcing and servicing credit relationships, highlights the press release.
Eric Varvel, Global Head of Asset Management and Chairman of the Investment Bank at Credit Suisse, believes this strategic partnership with QIA presents “unique opportunities” for borrowers seeking credit solutions to partner with their Asset Management and Investment Bank franchises. “The Credit Investments Group, within Credit Suisse Asset Management, has extensive industry and lending relationships that, when combined with Credit Suisse’s unmatched leveraged finance and financial sponsors franchises, uniquely positions us to provide capital and liquidity to the private credit market”, he added.
Meanwhile, Mansoor Al Mahmoud, CEO of QIA said they see “significant potential” in the growing private credit market and they are “excited” to work again with Credit Suisse. “This strategic partnership, with one of the foremost leaders in asset management, is aligned with QIA’s objectives as a long-term diversified investor across asset classes both in the US and globally”, he stated.
He believes this private credit platform is a natural extension of their business as a leading provider of capital solutions to non-investment grade companies in the US and Western Europe. “The current market environment presents an ideal entry point into the private credit space, with capital and liquidity now at a premium”.
Foto cedidaPIMCO, miembro del Consejo Asesor Global de PIMCO.. PIMCO incorpora a Michèle Flournoy a su Consejo Asesor Global
PIMCO announced in a press release that Mark Carney, economist and former Governor of both the Bank of England and the Bank of Canada, will join its Global Advisory Board. The Board provides PIMCO investment professionals with insights on global economic, political, and strategic developments and their relevance for financial markets.
Established over four years ago, it is “an important part of the firm’s investment process and is designed to provide a deeper understanding of the policies and institutions that influence financial markets”, says the document. Former Federal Reserve Chairman Ben Bernanke is the Chair of the Board, which is comprised of seven members including Carney.
“Mark’s extensive experience as an economist and central banker, combined with his focus on transforming climate finance, makes him an invaluable addition to this renowned group of thinkers,” said Emmanuel Roman, PIMCO’s Chief Executive Officer.
Meanwhile, Dan Ivascyn, Group Chief Investment Officer, pointed out that the Board “continues to be an important part of our investment process, providing unique global insight, and challenging our bias and assumptions, as we pursue the best investment outcomes for our clients around the world”.
Carney is currently UNSpecial Envoy on Climate Action and Finance. From 2013 to March 2020, he served as the Governor of the Bank of England and Chair of the Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulation Committee. In addition, he served as Chair of the Financial Stability Board (FSB) from 2011 to 2018, and First Vice-Chair of the European Systemic Risk Board. He was Governor of the Bank of Canada from 2008 to 2013.
Other members of the PIMCO Global Advisory Board are Gordon Brown, former U.K. Prime Minister and former Chancellor of the Exchequer; Ng Kok Song, former CIO of the Government of Singapore Investment Corporation (GIC); Anne-Marie Slaughter, former Director of Policy Planning for the U.S. State Department; Joshua Bolten, former White House Chief of Staff; and Jean-Claude Trichet, former President of the European Central Bank.
Foto cedida. UBS WM nombra a Anja Heuby-Egli responsable del área de soluciones de inversión sostenible
UBS Wealth Management has appointed Anja Heuby-Egli to lead a newly-created sustainable investment solutions function, reported Citywire Selector. She will be responsible for sustainable investing solutions at global wealth management, including general advisory, discretionary and advisory mandates, funds and alternatives.
According to an internal memo referred to by the publication, Heuby-Egli will join UBS chief investment office’s global mandates and investment content team (CIO GMIC) and will report directly to its head, Bruno Marxer. She will also become a member of the unit’s management committee.
Within global wealth management, her role only covers the CIO’s global mandates and investment content function. Andrew Lee will remain head of sustainable and impact investing for its other investment functions, which are known internally as the CIO investment office (IO), informed Citywire Selector. That unit is responsible for investment frameworks, for example asset allocation, methodologies and associated research and thought leadership.
Meanwhile, global mandates and investment content team is in charge of investment products, including those implementing investment views of the IO. When it comes to the 100% sustainable portfolios, Lee will continue to oversee the portfolio framework and methodology and any thought leadership associated with that.
Heuby-Egli’s team will work on the implementation of that framework in products, in collaboration with other content teams. Her primary focus will be EMEA, APAC, and Switzerland, and she will also collaborate with the Americas sustainable investing solutions team.
Experience in sustainable investment
Heuby-Egli started at UBS in 2005 and has worked in the investment bank, group functions, and global wealth management, primarily in the area of risk and investment process methodology. She was in charge of CIO’s data innovation and also worked with the CIO sustainable investment team, where she and her team developed the proprietary ESG scoring platform at the core of the firm’s personalised sustainable investment advice offering. Her new role will be covering wealth management activities, opposite to those of the whole UBS group.
An economic recovery appears to be gathering pace. That means emerging market stocks, and some cyclical sectors, are looking more attractive.
It’s looking increasingly like a V-shaped economic recovery. True, in some regions the bounce back has been a little less robust. But in others, notably China, economic conditions are largely back to where they were pre-Covid – in July, industrial profits were up 20 per cent year on year. Meanwhile, after reviewing its approach to monetary policy, the US Federal Reserve has formally become a much more dovish institution at the margin, though it stopped short of a radical overhaul anticipated by some in the market.
Markets have noticed. Yet after a powerful rally across all assets during the past few months – sending leading US stock market indices to record highs – we feel that prospects for further broad-based gains are limited, with greater divergence among regional markets.
So while governments may yet offer more fiscal stimulus, not least in the US, liquidity provision is slowing worldwide. There are also political risks associated with US elections in November. And all the while there’s Covid-19. Not only is there the possibility of a significant second wave of the virus, but there is also little clarity on how soon a vaccine might be developed. At the same time, Shinzo Abe’s decision to step down after being Japan’s longest-serving prime minister introduces some uncertainty around geopolitics and the possibility that the world’s third largest economy will change its policy approach.
As a result, we remain neutral on all the major asset classes, though within equities we favour more cyclical sectors.
Our business cycle indicators show that the economic recovery is proving to be strong enough to warrant an upgrade to our 2020 economic forecasts. Our economists now expect full year global GDP to come in at -4 per cent from -4.2 per cent previously, but next year’s forecast has been cut to 6.1 per cent from 6.4 per cent.
In the US, retail sales have registered the strongest and fastest ever rebound after the deepest and quickest downturn in history to where they’re now – running at above pre-recession peak. Most past cycles have taken at least three years to play themselves out. This time, it’s been only a little more than three months. Retail sales are also back to trend in the euro zone.
However, it’s notable that only China’s real-time indicators are back to pre-Covid levels. Elsewhere, they’ve flattened out at between 10 per cent and 20 per cent below.
And while inflation could yet prove to be a risk if demand remains firm and supply fails to catch up, that’s not likely to be an issue until the back half of 2021.
Global liquidity conditions remain very supportive, with new liquidity creation running at 25 per cent of GDP, but there is clear evidence that monetary stimulus growth has peaked [see Fig. 2]. At the same time, banks are tightening credit standards. And the Chinese central bank is now at neutral, while the country’s credit surge has tapered back down.
One upside liquidity risk, though, is that US Treasury cash balances held by the central bank could be drawn down.
Our sentiment indicators paint a mixed picture. The balance of equity calls to puts suggests a degree of market complacency, and our indicators show hedge funds have crowded into a handful of concentrated positions, particularly in the largest of the large cap stocks. On the other hand, retail investors seem cautious about shares and sentiment surveys remain depressed, while fund manager positioning in the asset class is below historic trend. A “wall of cash” remains, with some recently flowing into bonds and credit – both appear overbought.
Finally, our valuation indicators suggest equity prices look stretched after a 50 per cent rally in the S&P 500 – on our models, they are at their most expensive in 12 years, trading two standard deviations above their 6-month moving average. Even relative to bonds, equity valuations no longer look particularly cheap. The gap between the global earnings yield and global bond yield is at its lowest in a decade at 4.5 percentage points. But we’re not yet into bubble territory. If current low bond yields, which have fallen 100 basis points this year, are sustained, this valuation impact on US equities exactly offsets the 20 per cent decline in earnings. Our valuation score on equities has moved from negative in January, to strongly positive in March and is back down to negative now.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
Important notes
This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.
Banorte-Ixe Securities International, member FINRA and SIPC, an investment management and brokerage service company, has relocated its U.S. headquarters to Houston. Led by a new and experienced management team, the relocation of the headquarters closer to the company’s client base and the expansion of technology-infused product offerings marks a pivotal shift in the company’s operating strategy.
A subsidiary of Grupo Financiero Banorte, the second-largest financial institution in Mexico, BSI applies the same time-tested, relationship-driven approach to providing investment solutions to a growing base of Mexican and domestic clients.
“Our relocation of the U.S. headquarters to Houston is the start of a new chapter for Banorte Securities,” said Grupo Financiero Banorte’s Private Banking Managing Director, Luis Pietrini. “With a new seasoned management team at the helm and an expanded array of technology-driven products to appeal to our sophisticated clientele, we are committed to extending the same trusted expertise fueling Banorte in Mexico for the past 100 years to clients across North America.”
BSI’s brokerage services offer numerous investing options including mutual funds, equities and fixed income products, while the company’s advisory services deliver a globally diversified investment strategy tailored to meet client’s specific short and long-term financial objectives.
BSI’s newly instated management team is led by Houston-based CEO Xavier Ibarrola. Ibarrola came to the company from the BBVA Group where he spent more than 20 years in investments and financial management positions.
In addition to unveiling the company’s new headquarters and announcing its leadership team, BSI is expanding its product offerings to existing, Mexican-based clients with the launch of BAM Digital. Created in partnership with BlackRock, BAM – Banorte Asset Management – Digital is BSI’s first-ever fully digital investment alternative. Easy to access via the website or through an app, BAM Digital features globally diversified portfolio options designed by BlackRock and backed by a team of seasoned advisors.
“Everything we do at Banorte Securities is designed specifically with our client’s needs in mind,” said Banorte Securities CEO Xavier Ibarrola. “As our clients become increasingly tech-savvy and ‘hands on’ in their personal financial journey, developing an easy to use, fully digital investment platform was the logical next step in growing our market segments and building stronger, long-term relationships with our clients.”
Ibarrola continued, “We are eager to unveil BAM Digital to our existing clients in Mexico and look forward to introducing this fully-digital platform to our domestic clientele in the near future.”
While BSI’s headquarters is located in the Galleria area, the company maintains a branch in The Woodlands, a suburb north of Houston, and plans to expand across Texas, as well as Miami and San Diego in the coming years. In addition to providing brokerage and advisory services, Banorte Securities will host a variety of programs aimed at empowering customers on their personal financial journeys.
“Houston’s proximity to a large portion of our client base, growing economy and connection to Banorte’s Mexican culture makes it the perfect home for Banorte Securities’ U.S. headquarters,” continued Ibarrola. “We are excited to deepen our roots in Houston and look forward to helping this amazing community – clients and nonclients alike – achieve their financial goals.”
Located at 5075 Westheimer Road, the company’s new 10,000-square-foot headquarters currently houses 24 full-time employees with space to accommodate 42 total employees in the years to come. Designed by AMB Architects, the open concept office infuses flares of Mexican/Houston culture through brightly colored pops of graffiti art décor including two 6 by 8–foot custom murals.
The longest economic expansion and market upward cycle in history came to an end with the outbreak of the pandemic. A major part of this long extension of the cycle is explained by the superior performance of U.S. and technology sector equities, which have performed close to 10.8% over the past five years. In fixed income, investment grade corporate bonds and U.S. Treasury bonds provided the highest yields. At 5.7% and 5.6% per year respectively, they far outperformed European debt yields.
In looking ahead to the next five years, Pictet Asset Management believes it is inevitable to consider the long-term implications that the pandemic will have on the economy and the markets. Although it is still early to draw conclusions, Luca Paolini, the management company’s Chief Strategist, says that the pandemic has been more a factor in accelerating existing trends rather than a catalyst for new ones.
As the economy recovers from the impact of the Coronavirus, it appears that the underlying growth trends in the global economy have remained intact. However, Paolini highlights three aspects that, in his opinion, represent a change in this new phase of recession: more debt, more government interference, and more Asian leadership.
The significant increase in debt
Both the level of government deficits and the level of corporate leverage are at record highs. Currently, the level of public debt as a percentage of GDP in developed economies is close to 120%. This is close to the level experienced in the 1940s, but there is a difference. At that time, demographics were much more favorable and potential growth was stronger, making it easier to free oneself from the burden of debt.
The problem facing the global economy now is how to move forward with such a high level of debt in an environment where political austerity is no longer considered an option. At this point, it is necessary to keep in mind that when you start a cycle with a high level of debt it is very difficult to create growth. As Paolini explains, the most obvious solution is an accommodating monetary response to support government spending. After a crisis of great dimensions, the population is going to require greater social aid from the governments and this can be financed at a lower cost if the central banks maintain their accommodating policies.
Greater government involvement in the global economy
From the pre-COVID position in which governments played a regulatory role and private interests dominated, there is a shift to a new scenario in which the public interest is given priority. As a result, greater government intervention can be expected, both in terms of legislation, such as minimum wage issues, and in industrial policy issues, where sectors considered strategic will receive greater attention, seeking national autonomy and sufficiency.
A greater role for Asia in the global economy
The Asian region has clearly emerged stronger from this crisis. Their economies have a higher manufacturing component and a strong technology sector, something that has clearly played in their favor and made them more resilient. In the debt markets, Chinese sovereign bonds are proving to be a more interesting option than corporate debt in developed markets, as they are currently trading at a record spread against US Treasury bonds. The People’s Bank of China has been less expansionary than other central banks, so it has more room for maneuver and the risk of inflation is lower. Meanwhile, in the Chinese stock market, stocks show cheap valuations and the renminbi is also at favorable levels.
What is the next step for central banks?
Central banks in major economies have fewer and fewer instruments to try to revive the economy. The Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan have all implemented quantitative easing programs including government and corporate bond purchases. All have offered subsidized loan programs to their banks and have kept indications on the future direction of their monetary policy (forward guidance). In addition, some central banks, such as the European Central Bank and the Bank of Japan, have experimented with negative interest rates.
Recently, the Fed has revised its inflation target and soon we may see the implementation of formal or informal instruments that exercise control over the yield curve. In Paolini’s opinion, the extreme version of monetary financing implied by modern monetary theory (MMT) is not ruled out for now.
With all this intervention, investors should be concerned about the possible impact that these actions by central banks may have on asset class valuations. The market consensus on this issue seems to be that, as central banks continue to issue money, asset prices can only go up. In Paolini’s opinion, this is a very simplistic version of reality, but he recognizes that the fact that central banks have injected a huge amount of liquidity into the markets is supporting valuations in a way that would have been unthinkable just a few months ago.
Equities remain more attractive than government bonds
A decade of qualitative easing and accommodative monetary policies has made it very difficult to find value in the markets today. For example, the dividend yield on the S&P 500 index is 1.6%, while the yield on US sovereign debt is 0.6%; if you take an average of these yields, the current yield on a balanced portfolio is less than inflation. Currently, most assets are at levels of valuation that would typically be associated with a period of expansion, while the reality is that we are in a period of recession.
Financial repression, understood as a situation in which bond yields are artificially kept below GDP growth, has undergone a significant change from the previous year. If the expectation a year ago was that bond yields would increase – even if not significantly – today interest rates are expected to remain lower for longer, with all the implications this has for financial assets.
Another issue to consider is that, although GDP growth and monetary stimuli are not very different from those seen in the last 10 years, there will be a significant change in regional leadership, especially in the equity market. If the undisputed leader of the last bullish market cycle was the United States, in the bullish cycle that began in March a rotation could be expected. As has been the case for the last 30 years, it is very likely that another market will start to pull the strings, so Paolini comments that it is a good time for the American investor to diversify his portfolios between Europe and emerging markets.
For Pictet AM’s Secular Outlook report, detailing key market trends and investment insights for the next five years, download here
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
Important notes
This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.
Longevity is about ‘whole of life’ – not just end of life. People of all ages are likely to use goods and services that come under this umbrella – which includes wellness, health and medical treatments as well as silver spending, senior care and funeral services.
Below, Peter Hughes and Dani Saurymper , Portfolio Managers at AXA IM, highlight how the longevity economy is impacting peoples’ lives worldwide and show how they are benefiting from the innovations and solutions being offered by a wide variety of companies.
1. Your workout
Keeping fit and healthy is important for a longer life. People over 65 are the UK’s most frequent gym goers, with gym usage peaking at age 72, according to a study by Nuffield Health[1]. But many regular gym-goers have had to stay at home during coronavirus lockdowns, and have turned to trying virtual exercise classes at home. Low-cost European gym provider Basic Fit has an app that offers a range of programmes for training at home, including virtual classes and a personalised nutrition plan.
2. Seeing the doctor – virtually
Sometimes it can be difficult to schedule a doctor’s appointment, especially if you need to fit it around work or family responsibilities. And during the coronavirus pandemic, many medical practitioners have preferred to conduct online or video consultations. Global virtual care provider Teladoc Health saw total visits increase 92% to two million in the first quarter of 2020, as the coronavirus pandemic took hold[2]. Its services include being able to a speak to a doctor or mental health specialist over the phone, uploading photos for a dermatologist to review and getting a prescription that can be sent electronically to the pharmacy for you to collect.
3. Home treatment
If you are unwell or have had an operation, studies have suggested that recovery at home leads to shorter hospital stays, reducing the burden on hospital beds without a negative impact on patient outcomes[3]. But sometimes professional help is needed, for instance physical therapy or wound care. Amedisys is an example of one of the companies offering home health visits across the US, aiming to help their patients keep their independence and quality of life.
4. Managing an ongoing condition
Six in 10 US adults have a chronic disease[4] and the need to manage an ongoing condition is a global theme. Medical innovations and the use of digital technology have made managing chronic diseases such as Type 2 diabetes much simpler. For instance, Dexcom offers a glucose monitoring system which can send an alert to your smartphone if your blood sugar levels become too low. In addition, medical technology company Masimo has a product for use at home that can measure oxygen levels, pulse rate and more.
5. Optimising your health
Vitamins and supplements are also a big market, with key players including Reckitt Benckiser – who says its Digestive Advantage is the number one probiotic gummy brand[5]. A National Health and Nutrition Examination Survey found that around one in two US adults supplement their diet with vitamins[6]. Meanwhile the European dietary supplements market was worth $14.3bn in 2018 and is expected to reach $20.9bn by 2026[7].
6. And not forgetting your pet
Almost 50% of US households own a pet according to the latest US census data[8] with owners spending $528 per year on average[9]. Meanwhile the Asia Pacific region is seeing the highest growth globally in sales of cat and dog food, as pet ownership there increases[10]. Many people own pets for companionship or to encourage them to take exercise, such as walking a dog.
But having a pet means caring for them when they are sick and keeping up with regular treatments as well as their changing needs as they age. Petcare firm Zoetis is an example of one of the companies in this space that is innovating to develop new products and solutions for animal health.
7. Improving your career prospects
As we are living longer and the world changes more quickly – for example via digitalisation – we cannot expect everything we learned at school or university, or even in our early 20s, to still be enough – or relevant – throughout our working lives. You might choose to study to improve your skillset or advance your career or retrain to change jobs. Many employers also offer their workers the opportunity to gain qualifications as a way of retaining staff – for instance, through Strategic Education’s Degrees@Work programme.
8. Protection
Many people choose to take out critical illness cover which pays a lump sum on diagnoses of a covered condition, to help protect against unexpected financial hardship – for instance not being well enough to continue working. During the global coronavirus-driven lockdowns, British multinational insurer Prudential found that downloads of its digital health app more than trebled between early March and mid-May[11] and said it was expanding the number of products that could be sold virtually.
9. Self-care
Over the next 10 years, over 50% of the growth in consumer spending in developed countries is expected to come from the over-60s[12]. And most of us don’t just want to live longer, we want to live healthier for longer. Personal care is an important way we can contribute to this goal. Whether you’re buying Curel moisturising cream to care for your skin (owned by Japanese company Kao) or just topping up on everyday essentials such as Colgate (owned by Colgate-Palmolive), the 60-plus age group has significant spending power – and often more time to shop.
10. Leisure
Travel and tourism among the older generations is growing and it is estimated that by 2050 the over 60s will account for more than two billion trips annually[13]. It is undeniable that the coronavirus pandemic, has put immediate pressure on travel and tour operators. However, in many cases, travellers have already rescheduled their trips for 2021. For instance, Royal Caribbean Cruises said in May that bookings for 2021 are already in historical ranges and at higher prices compared to the same time in 2019.[14]
Despite the coronavirus outbreak, global populations continue to age, and we expect global life expectancies to creep higher over the longer term. So, although we may see some changes in consumption patterns post-COVID-19, the key drivers of the longevity economy remain intact. For investors with a longer-term investment horizon, these are key structural growth trends, which combined with shifting demographics can provide some interesting opportunities.
To learn more about this topic, please contact Rafael Tovar, Director, US Offshore Distribution, AXA IM.
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