Pixabay CC0 Public Domain. BlackRock lanza su primer fondo de inversión de impacto que contempla los Objetivos de Desarrollo Sostenible de Naciones Unidas
BlackRock announces the launch of a high-conviction active equity impact strategy with its BlackRock Global Impact Fund. The new Fund gives investors the opportunity to direct their investments toward companies helping to address major world challenges. The addition of the impact strategy forms part of BlackRock’s continued efforts to expand its sustainable investment platform as it delivers against its commitment to make sustainability its standard for investing.
The Fund’s impact is achieved by investing in companies which contribute to the advancement of the United Nations Sustainable Development Goals (SDGs) and targets. The portfolio is comprised of companies that map back to the firm’s proprietary impact themes including increasing access to quality education and affordable housing, advancing healthcare innovation to help with societal challenges such as the current COVID-19 pandemic, expanding financial and digital inclusion, preventing climate change, reversing environmental degradation, and increasing efficiencies in water usage and deployment.
The Fund is managed through BlackRock’s Active Equities Impact Investing team which recently formed under the leadership of Eric Rice, who joined the firm in October 2019. Eric will draw upon his 30 years of industry experience, most recently exclusively developing and managing impact strategies, and including his prior experience working for the World Bank as a development economist and as a U.S. diplomat in Rwanda.
Rachel Lord, Head of Europe, Middle East and Africa for BlackRock commented, “Eric joined BlackRock with a strong track record in developing alpha-seeking impact strategies and his expertise will lead our impact investing efforts during this challenging time and beyond. While launching the Global Impact Fund during a global pandemic is coincidental, it does highlight that the opportunity inherent in investing in companies committed to doing good is enduring, and is of increasing relevance to the world today.”
Alongside the impact goals, the Fund seeks to maximise long-term total return and to outperform the MSCI All Country World Index (ACWI). To achieve the Fund’s objectives, the team has set stringent impact criteria for the portfolio companies including:
materiality – whereby a majority of revenues or business activity advances one or more of the SDGs or targets;
additionality – defined as delivering a new technology or innovation to market, serving an underserved population, or operating in an unaddressed market; and
measurability – in that the impact must be quantifiable.
“Impact investing is becoming more and more attractive as investors increasingly require their investment targets to advance their sustainability objectives,” said Eric Rice, Portfolio Manager of the BlackRock Global Impact Fund and Head of Active Equities Impact Investing at BlackRock. “Launching the Fund during the COVID-19 pandemic has further highlighted the important role companies play in society. COVID-19 is one of the greatest societal challenges the world faces right now, and we see impact investing playing a meaningful role in how we overcome it. Capital from the Fund will be put toward the search for alpha by investing in companies focused on medical diagnostic tools and vaccines to combat the crisis, as well as crisis mass notification systems and microloans, amongst others.”
The team intends to run a low-turnover, long-term buy and hold concentrated portfolio strategy and use active dialogue and partnership with companies to drive improvement towards impact outcomes, alongside long-term value creation. The Fund is USD-denominated and available for investors located across Europe.
Impact investments are designed to generate positive, measurable impact alongside a financial return. The Fund uses the World Bank’s IFC Operating Principles to ensure impact considerations are integrated throughout the investment lifecycle. Reporting plays an integral role of the investment offering where clients will receive regular updates and reports on the positive environmental or social impact that Fund companies are achieving.
BlackRock’s active equities impact offering will sit alongside existing impact strategies in the fixed income and alternatives business areas. The Active Equities group manages USD $316bn * of assets on behalf of its clients and has managed Environmental, Social and Governance (ESG) investment strategies for over four years.
The Fund forms a part of BlackRock’s Sustainable Investing platform which manages USD $107bn* in dedicated sustainable strategies, comprising of ESG outcome oriented, sustainable thematic and impact funds. Sustainable investment options may have the potential to offer clients better outcomes and is integral to the way BlackRock manages risk, constructs portfolios, designs products and engages with companies.
Pixabay CC0 Public Domain. PineBridge Investments y LarrainVial anuncian alianza estratégica para distribución en el mercado wealth management en América Latina
PineBridge Investments, a global asset manager focused on active, high conviction investing, today announced a distribution partnership with LarrainVial, one of Latin America’s leading financial services companies. Under this new partnership agreement LarrainVial will market and offer PineBridge funds to the wealth management channel including private banks, family offices and fund-of-funds in the US offshore segment, as well as investors in Chile, Peru, Colombia, Argentina, Uruguay, and Panama.
PineBridge’s Latin America business has seen significant growth in assets under management from institutional clients, primarily in Chile, Colombia, Peru and Mexico. While the firm continues its focus on the Latin American institutional client base, this new partnership adds new wealth management distribution capabilities and geographies by leveraging LarrainVial’s extensive regional platform. LarrainVial will initially market and offer a range of PineBridge’s UCITS funds across asset classes, including Asian equities, fixed income, and global multi-asset.
“Our ability to deliver results for our clients has led to an increased demand for our diverse set of investment solutions in Latin America. We are excited to be able to enhance our ability to offer our products to a sophisticated and growing wealth management client segment as well as continue to serve our established institutional client base,” said Adrien Grynblat, Senior Vice President, Americas Business Development, at PineBridge. “We see tremendous growth across Latin America and are delighted to partner with LarrainVial’s experienced team to expand our reach in this key region for the firm.”
Juan Miguel Cartajena, Partner and Institutional Distribution Manager at LarrainVial said, “PineBridge is a world-class asset manager whose funds in specialized asset classes are an important addition to our product offering. We are very pleased to enter this partnership, which will allow us to strengthen our presence, especially in the US Offshore market.”
PineBridge has an investment management and client servicing presence in Latin America with offices in Santiago, Chile and Mexico City, Mexico.
Pixabay CC0 Public DomainPhoto: Robert Lukeman. Photo: Robert Lukeman
Megatrends are a discrete group of powerful social demographic environmental and technological forces of change that are reshaping our world. Investors can’t afford to ignore them.
There can’t be many countries that worship the car as much as the US. Americans’ love affair with the open road has long been one of the nation’s defining features, romanticised in classic movies such as Thelma and Louise and Bonnie and Clyde. But there are signs that the chemistry is not as powerful as it used to be. Since the early 2000s, travelling by car has become a less popular pursuit. Having risen every year since the Second World War, driving among individuals in America has declined by some 10 per cent over the past decade.
“Megatrends have the capacity to redraw the investment landscape”
On average, people in the US now drive 500 fewer miles every year than they did in 2000, while less than 70 per cent of 19-yearolds now have driving licences, compared with around 90 per cent 20 years ago. The allure of the auto looks set to diminish further over the next several decades.
According to Barclays, US car sales could drop by some 40 per cent over the next 25 years. In time, there could be fewer than 100 million vehicles on US roads, compared with 250 million today.[1] It is a tectonic shift, but what is causing such disruption? At Pictet Asset Management, they can explain this transformation using a framework based on structural forces they call megatrends.
These trends are changing our world
Megatrends are a discrete group of powerful social, demographic, environmental and technological forces of change that are reshaping the world. They evolve independently of the economic cycle, and while they may develop in different ways and at a different pace, they each possess the capacity to redraw the investment and industrial landscape.
Using this framework as a vantage point, they find that the auto industry is being buffeted by three of the structural trends that form part of our model. The first of these is sustainability, or the increased importance that individuals, businesses and policymakers place on protecting the world’s environment and natural resources. As cars cause environmental damage, they are simultaneously subject to tighter regulations and losing their appeal among younger segments of the population.
Fig. 1 The megatrends transforming the world
Source: Pictet Asset Management
The second trend transforming the auto sector is technological development, or the unprecedented pace at which technology is now evolving. In the car industry, this trend manifests itself in a number of ways, most obviously via the development of self-driving and electric vehicles being developed by firms such as Tesla.
The third trend shaping the car industry is the growth of the network economy – the increased inter-connectedness of individuals and businesses that is resulting in the speedier transfer of goods and services from provider to receiver.
Some would describe this phenomenon as the sharing economy, and one company that has harnessed this trend to good effect is car-sharing service Uber. Technological progress, the world’s increased concern about the sustainability of our planet and the network economy are, however, just three of the many enduring trends that will have a profound effect on the interactions between individuals, organisations and the environment over the years and decades to come. There are many others (see Fig. 1).
How to analyse megatrends
What makes understanding and investigating megatrends especially important is the fact that all of these changes are unfolding at the same time. According to Rudolph Lohmeyer, consultant and director at the Global Business Policy Council of A.T. Kearney, a global management consulting firm, the rate of change the world is experiencing is unprecedented.
Fig. 2 – Interaction between Pictet Asset Management and its advisory boards
Source: Pictet Asset Management
At Pictet Asset Management, they have tackled this problem by working in collaboration with several megatrends experts, a distinguished group of industry practitioners and academics – each of whom have developed a deep understanding of the structural trends transforming our world. They don’t dictate which stocks we should hold in Pictet Asset Management’s portfolios. Rather, their role is to shed light on megatrend dynamics and how they might shape the prospects of the industries in which the investment managers invest on behalf of their clients.
Having managed thematic investments for more than 20 years, Pictet Asset Management has discovered that by focusing on megatrends, they have been able to help their clients develop a longer-term perspective.
This, according to clients, has not only proved invaluable during times of financial and economic uncertainty and change – it has also been a source of investment success.
[1] Source: Barclays
Important notes
This marketing material is issued by Pictet Asset Management (Europe) S.A.. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet or at Pictet Asset Management (Europe) S.A., 15, avenue J. F. Kennedy, L-1855 Luxembourg.
The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments or services.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.
The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested.
Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.
Any index data referenced herein remains the property of the Data Vendor. Data Vendor Disclaimers are available on assetmanagement.pictet in the “Resources” section of the footer.
This document is a marketing communication issued by Pictet Asset Management and is not in scope for any MiFID II/MiFIR requirements specifically related to investment research. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any products or services offered or distributed by Pictet Asset Management
Pixabay CC0 Public Domain. Morningstar se hace con el 100% de Sustainalytics
Morningstar has reached an agreement to acquire Sustainalytics, a globally recognized leader in environmental, social, and governance (ESG) ratings and research. Morningstar currently owns an approximate 40% ownership stake in the firm, first acquired in 2017, and will purchase the remaining approximate 60% of Sustainalytics shares upon closing of the transaction.
The transaction consideration includes a cash payment at closing of approximately EUR 55 million (subject to certain potential adjustments) and additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues. Based on the upfront consideration, Morningstar estimates the enterprise value of Sustainalytics to be EUR 170 million. The closing of the transaction is subject to customary closing conditions and is expected to occur early in the third quarter of 2020.
“Modern investors in public and private markets are demanding ESG data, research, ratings, and solutions in order to make informed, meaningful investing decisions. From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism. Whether assessing the durability of a company’s economic moat or the stability of its credit rating, this is the future of long-term investing,” said Morningstar Chief Executive Officer Kunal Kapoor. “By coming together, Morningstar and Sustainalytics will fast track our ability to put independent, sustainable investing analytics at every level – from a single security through to a portfolio view – in the hands of all investors. Morningstar helped democratize investing, and we will do even more to extend Sustainalytics’ mission of contributing to a more just and sustainable global economy.”
For more than 25 years, Sustainalytics has been ahead of the curve, recognizing the need to provide ESG solutions to investors, banks, and companies worldwide. The firm is widely known for its security-level ESG Risk Ratings – which are integrated into institutional investment processes and underpin numerous indexes and sustainable investment products – as well as serving an ever-increasing number of use cases across the emerging sustainable finance landscape. Sustainalytics offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries.
Since 2016, Morningstar and Sustainalytics have teamed up to supply investors around the world with new analytics, including: the industry’s first sustainability rating for funds, rooted in Sustainalytics’ company-level ESG ratings; a global sustainability index family; and a large span of sustainable portfolio analytics that includes carbon metrics and controversial product involvement data. With this acquisition, Morningstar plans to continue to invest in Sustainalytics’ existing business while also further integrating ESG data and insights across Morningstar’s existing research and solutions for all segments, including individual investors, advisors, private equity firms, asset managers and owners, plan sponsors, and credit issuers.
“Sustainalytics welcomes the opportunity to join the Morningstar family. Our collaboration over the past several years has helped to extend the understanding and use of ESG insights and strategies to a multitude of investors, advisors, asset owners and managers across the globe,” said Sustainalytics Chief Executive Officer Michael Jantzi. “This new ownership structure will amplify our ability to bring meaningful ESG insights, products, and services to the global investment community and to companies around the world. Importantly, I am thrilled that my colleagues and I are joining a firm with a belief in our mission and intent to help us further expand our reach.”
Dutch-domiciled Sustainalytics has a global business that includes more than 650 employees worldwide spanning 16 locations, and all are planned to join the Morningstar family under the existing Sustainalytics leadership team. Morningstar intends to fund the transaction with a mix of cash and debt. The transaction is expected to have minimal dilution to net income per share post-closing, excluding any impacts of purchase accounting and deal-related expenses, as the company expects to incur costs to integrate certain capabilities and fund growth opportunities.
Bob Doll, Nuveen. Las nuevas predicciones de Bob Doll para 2020 mantienen a los gestores activos como ganadores, pero Trump pierde la elección
Last January, Bob Doll, Chief Equity Strategist at Nuveen made his 10 predictions for 2020 saying that after 2019 was a tough year to forecast (though he was mostly right, getting eight out of 10 correct) in 2020, the theme was “Uncertainties diminish, but markets struggle.” However, the coronavirus pandemic and resulting economic and market upheaval have since changed everything.
“In early March, consensus expectations for 2020 global GDP growth were +3%. Now they are -3%.1 A 6% swing would be unusual over a three-year time period. We just saw one in a month. We’re going to continue keeping track of (and scoring) our original predictions through the rest of 2020, but in the interest of providing investors with an updated and more relevant perspective, we’re also offering a mostly new list that speaks to what investors might expect from here.: Doll mentions.
In general, “the views for the rest of the year are predicated on our expectation that the coronavirus pandemic will peak in the second quarter, paving the way for a slow economic recovery in the second half of the year. We also think the massive policy stimulus should aid the recovery.”
Bob Doll’s (Mostly New) Ten Predictions for 2020 are:
The U.S. and world experience a sharp, but reasonably short recession with noticeable recovery before year-end.
All-time low yields move higher during the second half, with the 10-year Treasury closing the year above 1%.
Earnings collapse, but rise smartly by the fourth quarter.
Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years.
The dollar weakens as global growth strengthens in the second half.
Value and cyclicals outperform growth and defensive stocks in the second half.
Financials, technology and health care outperform utilities, energy and materials in the second half.
Active equity managers outperform their indexes for the first time in a decade.
The cold wars within the U.S. and between the U.S. and China continue.
The coronavirus recession and rise in unemployment cause Donald Trump to be a one-term president.
For the full version of Bob Doll’s (Mostly New) Ten Predictions for 2020 follow thislink.
Foto cedidaPhoto: Peter Harrington-Howes, Portfolio Consultant with the Solutions Group at Natixis Investment Managers. Photo: Peter Harrington-Howes, Portfolio Consultant with the Solutions Group at Natixis Investment Managers
According to Peter Harrington-Howes, Portfolio Consultant with the Solutions Group at Natixis Investment Managers, portfolio managers should avoid making dramatic changes in their portfolio allocation at this point. As a growing number of COVID-19 cases is spreading across the United States and Europe, the global market sentiment has been thrown into upheaval. During these uncertain times, portfolio managers could possibly obtain better results for their clients if they left their portfolios to stay the course, as de-risking or increasing risk positions to them may have an adverse effect on the recovery of the portfolio.
The virus outbreak is still far from having reached a global peak, the number of people affected by the disease in the United States, especially in New York, Italy or Spain are still substantial. The market sentiment is bearish, equity markets continue to experiment outflows, but credit outflows seem to have capitulated. So far, the markets have priced in a deep but short recession, however the global economy is far from showing signs of restarting.
The recovery could happen in many different shapes. Depending on the duration of the coronavirus outbreak, it may take the form of a U-shaped recovery – a deep but short global recession, being the base of the U a function of fiscal and monetary policy response and the time taken to contain the outbreak-, a W-shaped recovery -a global recession that sets in but massive fiscal and monetary response provides backdrop for a sharp recovery in risk assets, however risk appetite, consumer and business sentiment are slow to recover- or a L-shaped recovery – a global recession in which the demand shock and the lack of confidence lengthens the economic recovery. Although a possible V-shape recovery has been disregarded, it is still too early to identify which will be the final recovery shape that this crisis will take. Therefore, Harrington-Howesadvises to evaluate how the portfolio is doing with its current allocation, rather than going risk on or risk off the portfolio as this could increase the unpredictability of the returns.
Historical comparison with previous market drawdowns and recoveries
Over the past 30 years, the S&P 500 index has experienced several drawdowns: the Operation Desert Storm in 1990, the Asian Financial Crisis in 1998, the Tech Bubble in the early 2000s, the Global Financial Crisis in 2008 – 2009, the Oil crisis in 2014-2016 and most recently the Coronavirus crisis together with the Saudi Arabia’s oil price war. By looking at the recovery path followed by the S&P 500 index after each crisis, it could be said that it follows a random pattern. Some of the recoveries have been quick, happening in a bit more than 51 days. Whether or not the coronavirus crisis takes a V-shape recovery will depend on the resurgence of cases in China, where the outbreak started first and some parts of the country have already resumed their normal activity.
Looking at the anatomy of the drawdown of the S&P 500 during the Global Financial Crisis and hoping that the Covid-19 crisis will not be tracing the previous one, Harrington-Howesexplains that back in October 2007, at the very beginning of the crisis, the market plunged a 45%. Luckily, the market has not reached those levels during the current crisis, but it has been close, reaching a 33% drawdown from its peak in February.
Impact on Latin America & US Offshore moderate model portfolios
To evaluate the impact of the COVID-19 crisis on the model portfolios with a moderate risk profile in Latin America and US Offshore, the Portfolio and Consulting Group of Natixis Investment Managers created an index version of these portfolios.
The index version of the Latin American and US Offshore moderate portfolios is a collection of indexes with allocations that corresponds to the average allocations of 38 moderate profile model portfolios managed by financial advisers and wealth management companies in the United States and Latin America that Harrington-Howes and his team analyzed during the second semester of 2019 through their complementary Portfolio Clarity Service.
The main objective of this exercise is to get an idea of which assets are contributing to the returns of the portfolios and which assets have hurt them from a historical perspective. This index version invested 40.7% in equities (15.3% Global Equity, 9% Equity US growth, 8.9% Equity US value, 2.2% Equity Europe, 0.9% Equity Japan and 4.4% Equity Emerging Markets), 39.5% in fixed income (13% Global Aggregate (Hedged), 16.19% US Aggregate, 3.9% Global High Yield (Hedged), 0.7% US TIPS, 1.8% EM Dollar, 2.8% EM Local, 0.2% bank loans, 0.8% preferred securities, 0.2% convertible bonds), 8.9% in multi-assets (2.2% conservative multi-assets, 3.4% moderate multi-assets, 3.4% Aggressive multi-assets), 7.3% in liquid alternative assets, 2.6% in monetary assets and 1.1% in commodities.
During the period between February 19th and March 25th, the index version of the model portfolio with a moderate profile of US Offshore and Latin America experienced a 14.8% drawdown, with the main detractors of performance being the positioning in Equity US value, with a loss of 29.3%, Multi-assets aggressive, with a drop of 28.1% and European equities with a decline of 23.5%. On the positive side, the contribution of 0.3% in returns for US TIPS and 0.2% in returns for monetary assets.
One of the things that Harrington-Howes considers important to know about the model portfolio is to have a look at the correlation of its assets. Over the last three years, there has been a negative correlation between the US Aggregate Bond and the S&P 500 indexes, but during the recent drawdown the correlation between these two indexes has increased. However, the correlation between the US Aggregate Bond index and other fixed income instruments (Treasuries, EM dollar bonds, EM local bonds and bank loans) have spread out, experiencing an increase in negative correlation in that space.
It is necessary to know how diversified safety assets within the model portfolio are. Assets that are more correlated tend to move in tandem, therefore it is important to identify them to have a better idea of whether there are enough sources of diversification among assets to mitigate risk in the portfolios.
Themes to watch
Both ESG and Min Vol strategies have been big topics of conversation among advisors and clients. Comparing the returns obtained from February 2017 to January 31st of 2020 (3 years before) to those obtained from February 19th to March 25th (peak to drawdown in recent markets), both ESG and Min Volatility strategies have obtained better results that the broad indexes (MSCI World Index, MSCI US index and MSCI Emerging Markets).
Since the oil and gas industry is one of the most affected sectors during the current crisis and the ESG strategies mitigate their exposure to this industry, the ESG strategies have demonstrated this time that they are not only “feel good” strategies, as they have outperformed the market.
For more information on Solutions or Portfolio Clarity contact your relationship manager at Natixis.
Bjoern Jesch, courtesy photo. Bjoern Jesch se une a DWS para reforzar el área Multi Asset
Bjoern Jesch will join DWS on July 1, 2020 as Global Head of Multi Asset & Solutions. He joins the firm from Credit Suisse, where he was Global Head of Investment Management within the International Wealth Management division. Bjoern will succeed Christian Hille, who has decided to leave DWS for personal reasons after 13 years with the firm.
Multi Asset & Solutions is one of DWS’ three targeted growth areas: With net inflows of EUR 7.2 billion, Multi Asset was a significant driver for the firm’s flow turnaround in 2019. Globally, Bjoern will be responsible for a team of 82 investment professionals and AuM of EUR 58 billion (as of 31 December 2019).
Stefan Kreuzkamp, DWS’ Chief Investment Officer and Co-Head of the Investment Group says: “We are very happy that Bjoern has decided to join DWS. He enjoys an excellent reputation across the asset management industry and the market as a top notch investor and thought-leader. Multi Asset & Solutions is a crucial part of our business, now more than ever. In a volatile market it can truly differentiate itself for investors“.
Bjoern Jesch adds: “In times of extremely low interest rates and simultaneously high levels of volatility Multi Asset is the differentiating investment strategy for one of the biggest fiduciary asset managers in the market. I look forward to tackling this challenge along with the outstanding investment team at DWS”.
Over the course of his career spanning three decades Bjoern has held senior positions at Union Investment, where he served as Chief Investment Officer and Head of Portfolio Management, Deutsche Bank and Citibank. At DWS, he will report to Stefan Kreuzkamp. He will be a member of DWS’ CIO Management Committee.
March was one of the worst months in stock market history, with the novel coronavirus that causes COVID-19 spreading rapidly around the globe, and societies everywhere responding with various forms of “social distancing” that escalated throughout the month, culminating with most of the global economy being effectively shut down.
Many questions about Covid-19 remain: Will it wane with warmer weather? Will it become endemic like the flu? When might effective treatments and a vaccine be developed? The data we do possess from China, South Korea and Italy unfortunately suggest cases in the US will continue to escalate sharply, but eventually moderate. Life in China, where the virus originated last fall, appears to be slowly returning to normal. The strain on the United States health care system will be severe and the death toll – currently estimated at 100,000-240,000 – will be massive, but two dynamics give us hope. First, technology should allow us to track, treat and defeat this virus faster than any in the past. Notably, technology has also offset some of the heavy burdens of quarantine – the citizenry of the Spanish Flu of 1918 did not benefit from ecommerce, remote working/learning or Disney+. Second, after some delay, all levels of government and most businesses and individuals are instituting the practices needed to flatten the infection curve, putting us on path to put Covid-19 behind us. Many private companies have already unveiled promising developments in terms of tests that provide rapid results, therapeutic treatments and even vaccines, though many of those will likely not likely be available until 2021 at the earliest.
The cost of closures and social distancing is considerable. The global economy has nearly ground to a halt triggering what will likely be a severe recession. While there will be significant pent-up demand on the other side of this crisis, fear will need calming, supply chains will require realignment, and balance sheets will demand repair. Government action – both monetary and fiscal – is crucial, and the CARES Act signed into law on March 27th is a good start in providing relief to both individuals and businesses. The Fed has slashed rates near zero, and is also buying securities in a number of asset classes –treasuries, mortgaged backed securities, asset backed securities, corporate credit, loans backed by the Small Business Administration – in order to stabilize markets and the economy. Further fiscal stimulus will likely be needed, and we expect legislation directed at more medium to long term measures that can actually drive spending and demand (e.g., a long overdue infrastructure bill) as opposed to simply providing more relief. Ultimately this recession, like all prior, will birth a new expansion. We currently expect a return to growth in Q3 after a sharp decline in Q2, though the pace of recovery will depend on the effectiveness of both measures to contain and combat the virus, as well as measures to keep individuals and businesses afloat for when the economy opens up again.
While this one has been especially painful due to its quickness and severity, we are reminded that bear markets, like recessions, are necessary to the capitalist system, cleansing its excesses. Over the four decade plus history of our firm, there have been 5 bear markets ranging in length from 3 to 30 months. We had been anticipating a correction for some time, though the trigger for and pace of the decline (one of the most rapid in history) took us by surprise. The market already quickly bounced into technical “bull market” status from its lows, though those lows may be re-tested as the case and death counts rise to alarming levels. Ever the world’s best discounting machine, the market will need clarity on a peak in cases and government fiscal action before a sustained rally. That could be anticipated at any point which is why an attempt to time the market could result in significant forgone profits.
We believe recent volatility, attributable in some measure to the popularity of algorithmic and passive trading, has laid the groundwork for investors to again focus on fundamental stock picking. Capital preservation is especially important in bear markets. The market is offering bargains unseen since 2008. Some are opportunities to add to companies already owned, others are in companies and industries whose prior valuations put them out-of-reach. We continue to emphasize the basics: Does a company’s business model remain sound? Does it have a strong enough balance sheet to withstand the short term pain? Is management focused on shareholder value? The situation changes daily, but we believe the best way to participate in the return of health and prosperity is to own a portfolio of excellent businesses.
Merger Arbitrage was not immune from market volatility either. During the month, mark-to market merger spreads widened as levered multi-strategy and quantitative hedge funds faced margin calls and sold stocks to delever and raise cash. We experienced similar instances of this dynamic before, for example, in the Crash of 1987 and in Long-Term Capital debacle in September 1998. It is important to note that none of the deals in our portfolio were terminated in March. The outcome is that we have an excellent opportunity to earn significant returns from existing deals which will close in the months ahead.
These market dislocations force arbitrage investors to reassess the standalone value of target companies, driving target company prices lower as comparable valuations decline. Our philosophy is to take advantage of these market dislocations by adding to positions at lower prices. This is what we are doing at present, with a selective focus on deals with short-term catalysts – tender offers, deals that are expected to close soon and strategic deals that have our highest level of conviction. We are continuously evaluating deal risks and outcomes. Globally, companies and government agencies have safety measures in place in response to COVID, allowing them to remain operational.
Column by Gabelli Funds, written by Michael Gabelli
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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.
Gold has been considered a safe haven for many years and whenever markets are faced with uncertainties, their numbers soar. Such is the case now with futures which on Tuesday April 14th are on track for a fourth straight session climb, gaining support from concerns about weakness in the global economy as well as in corporate quarterly results due to the cessation of business activity intended to stem the spread of COVID-19.
According to Steve Feldman, co-founder of Bullion International, “The way people feel and the narratives that they have gets in the way…”
As he mentioned last month during INTL FCStone’s Vision 20/20: Global Markets Outlook Conference, main narratives today include the idea that “this time is different; Strong stock market implies a strong economy; Low interest rates justify high P/E; Corporate stock buybacks support the market; and You should not fight the Fed. Meanwhile US debt and liabilities are at all time highs in a moment where US household debt is also massive.
It is the same on a global scale… “With global debt as a percentage of GDP near all time highs, there is no way this debt can be paid off.. So inflation is the only way out, besides default and so there will be inflation” Feldman warns.
If he could however change one narrative, that would be that “Gold doesn’t need a crisis.” To support this, he mentioned that the asset class has delivered positive returns over the long run,can be used as an inflation hedge, and has outperformed every single currency in 100 years.
In his opinion, gold is a better hedge against market dislocation than bonds and has no default risk, “so it is the best cash.” However he does warn that for short term investors, “if tomorrow coronavirus gets a vaccine the gold price will go down because that risk has an impact into the world.”
Wikimedia CommonsPhoto: Hctr. Santander Bank, Summer Street, Boston
Santander Holdings USA, (Santander US) has hired Brian R. Yoshidaas Chief Legal Officer, effective May 4, 2020, and Joe Abruzzo as Head of Commercial Banking for Santander Bank, effective June 1, 2020. Both Yoshida and Abruzzo will report to Tim Wennes, Santander US CEO and Country Head, and Santander Bank President and CEO, and will be members of the Santander US executive leadership team.
Yoshida will oversee all legal operations for Santander’s US businesses. He will lead the Santander US Legal Department and oversee legal risk management, and provide legal advice and support for Santander entities, businesses and functions across the United States. Yoshida will also oversee Santander US Government Relations and Public Policy, Regulatory Relations, the duties of the Corporate Secretary, and Governance functions.
Abruzzo will oversee all aspects of Commercial banking – including middle market, mid-corporate, ABL, government banking, treasury management, risk management, underwriting and portfolio management, and international solutions – “with a focus on continuing our growth in our geographical and vertical markets, while leveraging Santander’s global presence and capabilities.”
“I am pleased to welcome Brian and Joe to the Santander US team,” said Tim Wennes. “Brian will easily step in to lead our legal, policy and governance teams as we continue to strengthen our regulatory framework, deepen and improve customer relationships, increase profitability and enhance our culture. Joe brings deep expertise delivering growth across all aspects of commercial banking, and will lead initiatives to leverage the strength of Santander’s global resources with our personalized Commercial banking capabilities here in the US.”
Wennes continued, “These leaders bring a wealth of knowledge and experience to Santander and will complement our dynamic leadership team. Their strategic vision for Santander in the US will be of great value as we work to continue execute on our strategy of growing the Bank, leveraging the strengths of our US businesses, and providing outstanding service to our customers and communities.”
Yoshida joins Santander Bank after serving most recently as Senior Vice President and Senior Deputy General Counsel of M&T Bank Corporation. During his tenure at M&T, Yoshida specialized in general corporate matters, including mergers and acquisitions, securities, financial reporting, treasury/ALCO, bank regulatory, corporate governance and executive compensation. His experience at M&T also included overseeing litigation, labor and employment, corporate real estate, vendor contracts, commercial lending and leasing, wealth management, corporate trust, intellectual property and information security, and legal support for the Corporate Secretary’s Office, Investor and Shareholders Relations, Corporate Communications, the M&T Charitable Foundation and the M&T Political Action Committee.
Abruzzo joins Santander Bank from HSBC, where he has served in several key leadership roles including head of the large corporate and mid-market segments in Commercial Banking and, most recently, as CEO of HSBC Private Banking Americas and Chairman of the Board for HSBC Private Bank International. He also spent 26 years at JP Morgan Chase in executive positions in both Corporate and Investment Banking and Commercial Banking.
