Jose C. González and Emilio Veiga Gil, courtesy photos. FlexFunds nombra CEO a Jose C. González y vicepresidente Ejecutivo a Emilio Veiga Gil
Given the growing demand for asset securitization services that FlexFunds provides and the strong growth experienced in recent years, which have made it an international reference in structuring investment vehicles, FlexFunds has announced the reinforcement of its management team.
Jose C. González has been appointed Chief Executive Officer. Jose, founder of the company and majority shareholder, is also the founder of Leverage Shares, FlexInvest, co-founder and former director of Global X, a provider of exchange traded funds based in New York. Jose was instrumental in the success of Global X, making the company a reference as a supplier of ETFs that today has exceeded $10 billion in assets managed in more than 60 different products. Throughout his career, Jose has acquired extensive experience in the asset management and brokerage businesses, having served in Prudential Securities, MAPFRE Inversión and Banco Santander. Jose obtained his degree at Universidad Autónoma de Madrid.
Emilio Veiga Gil, the company’s current Chief Marketing Officer, has been promoted to Executive Vice President. Emilio brings 20 years of experience in marketing and business development in financial services, banking, and consumer goods. Following his beginnings at PricewaterhouseCoopers, Emilio held senior positions in marketing and business development in leaders of multinational industries such as MoneyGram International and Dean Foods Corporation. He has led multicultural teams in four continents and has implemented international initiatives in more than 50 countries around the world. Emilio has a degree in Economics and Finance from St. Louis University, an MBA and a postgraduate in Marketing from ESADE Business & Law School and Duke University, and an Executive MBA, with High Honors, from The University of Chicago, Booth School of Business.
With these appointments, FlexFunds reinforces its management team to accelerate the growth experienced to date, which has led the company to exceed $4 billion in securitized assets in more than 200 issues and in 15 jurisdictions around the world.
For more information about FlexFunds, visit them at their site or write to info@flexfunds.com.
Foto: Casa Blanca. A Year of Living Less Dangerously
The publication last week of the U.S. — China trade deal and the final macro numbers for 2019 should set the stage for healthy economic performance and stronger market sentiment in China in 2020, but the risk of a return to tense relations between Washington and Beijing looms over 2021 and beyond.
The “phase one” trade deal should create a truce in the tariff dispute. President Trump appears to believe that declaring victory over China will boost his re-election prospects, and it seems that Xi Jinping is willing to cooperate. There are no signs, however, that the Trump administration will scale back its willingness to confront Xi on a range of issues, especially those related to technology competition. The resulting political tension, as well as the deal’s unrealistically high purchasing targets, could break the truce in 2021.
Headline writers will continue to focus on slower year-on-year (YoY) growth rates in China, but most investors understand that the base effect allows the economy to expand by far more today than at the faster speeds of a decade ago. This creates greater opportunity for Chinese firms selling goods and services to local consumers, as well as for investors in those firms.
Assessing the trade deal
The trade deal will likely accomplish Trump’s main objective: creating the appearance of an important accomplishment as the election approaches. But the deal did not create effective new solutions to most of the trade-related problems cited when the tariffs were launched.
On intellectual property issues, a Trump administration priority, the deal accomplishes little. Many specific steps in the agreement were previously announced by Beijing, and the new steps are incremental. Most importantly, the agreement does not require China to make legal and structural changes needed to ensure compliance. There also were no significant new commitments on exchange-rate management or industrial policy.
Overall, this deal is not a significant improvement over the Trans-Pacific Partnership (TPP) program cancelled by the Trump administration, or the draft bilateral investment treaty (BIT) with China that was negotiated by the Obama administration but abandoned by Trump.
The deal also leaves in place much of the tariff burden already borne by American companies and consumers. “Even after the deal goes into effect, Trump’s tariffs will still cover nearly two-thirds of all U.S. imports from China,” according to Chad Brown of the Peterson Institute for International Economics. “He will also have increased the average U.S. tariff on imports from China to 19.3%, as compared to 3%” before the dispute began.
The 2020 deal upside
There are important positive consequences of the deal. I think Trump wants the deal to succeed to boost his re-election prospects—and Beijing seems willing to cooperate—so the trade truce is likely to hold at least through November. By significantly reducing the risk of the tariff dispute escalating into a full-blown trade war, the deal is likely to boost sentiment among Chinese companies and global equity and bond investors who are thinking about increasing their China exposure.
The 2021 deal risks
Two things could derail the trade truce next year. First, there are as yet no signs that the Trump administration will scale back its campaign to confront Xi on a broad range of issues, especially those related to technology competition. By next year, it is possible that Xi may reconsider whether cooperating with Trump on trade makes sense at a time when Washington is taking a confrontational approach on most other issues. Of course, if there is a new American president next year, Beijing will wait to see how that administration approaches the relationship with China.
My second concern is that the deal calls for what I believe are unrealistically large increases in Chinese imports from the U.S. According to the terms of the deal, in 2020, China’s overall imports from the U.S. should increase by 50% over the 2017 baseline, and then increase by another 20% YoY in 2021, for a total two-year increase of US$200 billion. This includes increases over the 2017 baseline of 52% for agricultural and 257% for energy imports in 2020, and then further increases in 2021—19% YoY for agriculture and 60% YoY for energy.
There is, of course, room for the Trump administration to play with the numbers. The text of the deal states, for example, that aircraft orders as well as deliveries will count toward the Chinese commitment, so Beijing could sign a lot of contracts for possible later delivery to inflate the numbers. But this kind of thing will only work if both governments cooperate. As U.S. Trade Representative Robert Lighthizer acknowledged, “This deal will work if China wants it to work.” And if, after the election, the Trump (or a different) administration also wants it to work.
As an aside, the deal text includes a long list of goods that are targeted for increases to hit China’s import targets. Some of them are puzzling. Iron and steel, for example, are on the list, even though in 2017, the U.S. exported less than US$500 million worth of that to China. Also on the list: “perfumes and toilet waters”; “preparations for use on the hair”; and “tea, whether or not flavored.” (Yes, China is the world’s largest producer of tea.)
Yes, Virginia, China’s growth rate is decelerating
As we switch to the topic of China’s economic health, I want to start by addressing the headline writers who pointed out that last year’s GDP growth rate was the slowest since the Tang dynasty. I’d like to suggest another perspective.
China’s growth has been decelerating gradually for over a decade, but the size of the economy (the base) has expanded quite a bit. GDP growth was 9.4% a decade ago, but the base for last year’s 6.1% GDP growth was 188% larger than the base 10 years ago, meaning the incremental expansion in the size of China’s economy in 2019 was 145% bigger than it was at the faster growth rate a decade ago. In other words, there was a greater opportunity last year for Chinese companies selling goods and services to Chinese consumers than compared to 10 years ago, when the GDP growth rate was much faster.
I expect that the YoY growth rates of most aspects of the Chinese economy will continue to decelerate, and as long as that deceleration continues to be gradual, I do not expect panic from the Chinese government, or from investors.
Modest easing of monetary policy
A clear sign that the government has been relatively comfortable with the health of the economy is that there has been only modest easing of monetary policy. I expect that approach to continue in 2020. The focus will be on stabilizing growth in response to slower global demand, not an effort to reaccelerate growth.
As was the case last year, aggregate credit outstanding (augmented Total Social Finance) will likely expand just a bit faster than nominal GDP growth, but not to the extent in past years.
Derisking to continue
I also anticipate that the government will continue to take steps to reduce financial sector risks this year. As I wrote last month, I expect further consolidation of smaller banks. I also expect a continuation of last year’s experiments of selected defaults by state-owned and private firms, in an effort to push investors to price risk. I do not expect the government to relax their tight controls over off-balance-sheet (shadow) financial activity.
Likely to remain the world’s best consumer story
China’s consumers drove economic growth again in 2019, and I expect that to continue in 2020. Last year was the eight consecutive year in which the consumer and services (or tertiary) part of GDP was the largest part, and consumption accounted for 58% of GDP growth.
Strong income growth continues to fuel the consumer story. Nominal per capita disposable income rose 9.1% in 4Q19, up from 8.5% a year earlier and 9% two years ago.
Household consumption spending rose 9.4% YoY in 4Q19, compared to 8% a year earlier and 6.1% two years ago. This metric for consumer spending, which is published quarterly, includes a wider range of services compared to the retail sales data. Services now account for about 46% of household consumption.
Pork prices should ease, so inflation shouldn’t be a big problem
An outbreak of African Swine Fever decimated China’s hog population last year, which pushed up the price of pork—the country’s primary protein source. Headline CPI rose to 4.5% last month and will remain elevated this year, driven entirely by pork. The disease seems to be fading and pork prices stabilized recently, although there is likely to be another spike in January, as the Lunar New Year holiday boosts demand. Core inflation, which was 1.4% YoY in December, should remain low, and I do not expect inflation to have a significant impact on consumer sentiment.
Modest improvement in CapEx likely
Investment spending by private firms was weak last year, largely due to uncertainty resulting from the Trump tariff dispute. The signing on Wednesday of the trade deal is likely to reduce that uncertainty, leading to a modest pickup in CapEx spending. Only modest, because the risk of a return to higher U.S. — China tensions in 2021 remains.
Bernardo González Rosas, courtesy photo. Amafore" Esperamos que la primera inversión en fondos mutuos internacionales ocurra en las siguientes semanas"
2019 represented a year of challenges and achievements for the Mexican Retirement Savings System (SAR). According to the Mexican Association of Administrators of Retirement Funds (Amafore), “after the turbulence of the financial markets during the last months of 2018, the capital gains accumulated during 2019 were the highest in the history of SAR, as they rose to 486.4 billion pesos. Today, of each peso managed by the system, 41 cents come from the returns generated.” Additionally, Mexico became the first Latin American country to adopt Target Date Funds for the administration of retirement funds.
“The migration of resources to these new funds was carried out successfully in mid-December, facilitating greater capitalization of workers’ returns and, something that surely, will contribute to improving the pensions of Mexicans,” added Amafore.
However, the association notes that there are still pending issues.
For Bernardo González Rosas, president of the institution, “time is up” to approve a pension reform. Although González would like to see a complete reform to improve the pensions of workers in Mexico, he is aware that this is difficult to achieve, so “we believe that we should start with an indispensable minimum reform: that the mandatory contribution be increased from 6.5% to 15%, which is the indispensable minimum,” he says.
He also considers that “it is very important that the investment reform, which is pending in the Chamber of Deputies, be approved as soon as possible so that we can better invest and diversify the resources of the workers. If we invest part of resources in other countries when Mexico is not doing as well as we would like or does not grow at the rates we would like, we can invest in other countries where such growth is taking place… What is important is to generate the greatest return to the workers.” He emphasized.
Regarding the use of international mutual funds in Afores’ portfolios, González Rosas told Funds Society that although “we still don’t have investments in these funds, we expect it to happen in the following weeks.”
Last September, Amafore highlighted 42 international mutual funds from 11 fund managers so that Afores can consider for their investments. As confirmed by Álvaro Meléndez Martínez, technical vice president of Amafore, the list, which is updated every month, already includes 70 funds from 14 administrators, ten funds and one more manager (JPMorgan) since the last update.
Pixabay CC0 Public Domain. UBS ha sido la gestora extranjera con mayor flujo de entrada por parte de las AFPs chilenas durante 2019
Investments in foreign funds by the Chilean AFPs registered net outflows of 1.8 billion dollars during 2019, according to the monthly report issued by HMC Capital. At the end of December, total AUM of foreign funds were of 84.3 billion dollars, which represent 29% of the pension fund portfolios.
Outflows were registered mostly during the second half of the year. While the first 2 quarters of the year registered positive inflows for an amount of 2.5 billion, and 411.7 million dollars respectively, these were offset by net outflows of 3.6 and 1.1 billion dollars during the third and fourth quarter of 2019.
It is important to highlight than since the social protests started in Chile on October it is not possible to distinguish a clear trend in the direction of flows as the last three months of the year have shown different behaviour. During the month of October 760.8 million dollars net inflows were recorded, 1.6 billion in November while outflows of 3.4 billion dollars were registered in December.
Significant outflows in equity funds
In terms of management style, active funds have registered outflows of 2.1 billion dollars versus net inflows in passively managed funds and 73.7 million dollars in money market.
By asset class, the AFPs have shown preference for fixed income funds during 2019 with a net inflow of 424.7 million dollars during the year, versus equity funds that have registered outflows of 2.3 billion dollars during the same period of time. In accumulated terms, equity funds represent 72% of foreign funds invested in Chilean pension funds portfolios, versus 27% in fixed income and 1% in money market.
Specifically, in fixed income, net inflows during the year have been invested in financial bonds funds (+595.2 million dollars), emerging market debt in hard currency ( +427.5 million dollars), US High Yield ( +399.5 million dollars) and convertible bonds in euro (+245.1 million dollars).
On the other side, the Chilean pension funds have reduced their exposure to, among others, emerging market debt in local currency (-409.3 million dollars), flexible bonds ( -243.1 million dollars) and Latinoamerican emerging market debt (-206.1 million dollars).
In equity markets, there has been significant flow of funds directed towards strategies that invest in China ( +1.77 billion dollars) and to a leaser extend to Korean and Asian equity markets with net inflows of 305.5 and 230.4 million dollars respectively. In contrast, there has been signifcant outflows in Japan large Cap asset class of 1.116 billion dollars, German equity (-962.4 million dollars), Asia ex Japan (-788.0 million dollars), Hong Kong ( -764.1 million dollars) and India ( -664.9 million dollars).
Asset manager ranking
Five have been the foreign asset managers that have succeeded in registering inflows over 500 million dollars. UBS leads the annual ranking with net inflows of 1.281 billion dollars, followed by Aberdeen (900.1 million dollars) and JP Morgan ( 737.5 million dollars). Lord Abbet and Pimco occupy the fourth and fifth position with net inflows of 663.5 million dollars and 541.7 million dollars respectively.
On the opposite side, seven asset managers have register net outflows over 500 million dollars during the year. GAM and Matthews overpass the 1 billion mark with net outflows of 2.070 and 1.016 billion dollars respectively. These two are followed by: Invesco ( -937 million dollars), Schroders (-826.9 million dollars), Fidelity ( -788.8 million dollars), NN Investments ( -752.4 million dollars), DWS ( -702.9 million dollars) and BlackRock ( -522.2 million dollars).
In terms of total AUM as of end 2019, in both active and passive funds, BlackRock iShares leads the raking with an amount of 8.19 billion dollars as of end December 2019, followed by Investec and Schroders with a total aum of 7.5 and 6.99 billion dollars respectively.
The chart bellows shows the ranking of asset manager with a total AUM over 1.000 million dollars as of the end of 2019.
Funds with largest inflows and outflows during the year
Regarding the funds that have recorded the largest inflows, the funds AMUNDI FUNDS EMERGING MARKETS BONDS, ABERDEEN GLOBAL CHINA A SHARE EQUITY FUND and UBS CHINA OPPORTUNITY (USD) stand out with inflows of 1.5 billion dollars, 1.3 billion dollars and 887.2 million dollars respectively.
On the contrary, between the 10 funds that have registered the largest outflows during the year, JULIUS BAER -LOCAL EMERGING BOND FUND: AMUNDI FUNDS EMERGING MARKETS BONDS and DWS DEUTSCHLAND IC stand out with outflows of 1.4 billion dollars,1.4 billion dollars and 958.8 million dollars respectively.
Lastly, as a side note, we must point out that the fund AMUNDI Emerging debt and HSBC Global Liquidity in dollars with inflows and outflows are funds with different ISIN code but that seem to follow similar investment strategies.
Ignacio Rodriguez Añino has been appointed Head of Distribution for the Americas at M&G Investments. He will bebased in Miami.
According to a press release, Rodriguez will be tasked with the responsibility to deepen and grow M&G’s wholesale and institutional client base in the region, helping customers access investment solutions which draw on M&G’s strong capabilities across fixed income, equities, private debt and real estate asset classes.
Ignacio joined M&G in 2005 as Country Head for Iberia, adding Latin America to his remit in 2012. He will continue to report to Jonathan Willcocks, Global Head of Distribution at M&G.
Of the appointment, Willcocks comments: “I am delighted to announce that Ignacio Rodriguez will lead our American business. With over 30 years’ experience in the industry and 15 years working at M&G, Ignacio has extensive expertise across different areas of asset management and great knowledge of our business. This appointment is the latest step in M&G’s strategy to invest in global locations and markets offering client development opportunities and scope for future growth.”
Ignacio’s appointment follows the opening of two M&G offices in New York and Miami in 2018, covering the US institutional and offshore Latin American markets respectively. M&G has over $352 billion in assets under management.
Jack Bogle, Vanguard. One Year After His Passing, Jack Bogle’s Legacy is Still Strong
A first-of-its-kind opinion survey released by the Institute for the Fiduciary Standard reveals how much the trailblazing index fund entrepreneur and Vanguard founder, Jack Bogle, influenced investors.
Bogle’s investing principles and index funds are fixed in the American mind; his reputation stands alongside giants in American business.
The survey, designed to commemorate his passing on January 16, 2019, notes that:
Among business and finance leaders Warren Buffett, Bill Gates, Steve Jobs, Chuck Schwab, Michael Bloomberg and Mark Zuckerberg — and former Senator John McCain, the reputations of Bogle, Buffett and Gates are far on top with ratings of 51.7%, 51.3% and 51.0%. Bloomberg and Zuckerberg bring up the rear with ratings of 26% and 19%.
How is Jack Bogle remembered? “Investing in the entire market with low cost index funds is better than stock picking” and “Made investing understandable” are two top phrases that investors choose to describe him.
Investing for the long term and diversifying are two principles Bogle championed that are important to investors (57, 53%). Vanguard investors agree, more so (70, 64%).
A majority of the investing public reports being knowledgeable (somewhat, very, extremely) with index funds (59%); Vanguard investors are more familiar (75%).
The investing public rates Vanguard highly (41%) compared to Charles Schwab (32%) and Merrill Lynch (25%). Berkshire Hathaway rates at 47%. Vanguard investors rate Vanguard (73%) far above Berkshire Hathaway (43%), Charles Schwab (22%) and Merrill Lynch (16%).
Knut A. Rostad, president of the Institute for the Fiduciary Standard, said: “After exiting Vanguard, Jack Bogle spoke and wrote volumes on investing and serving investors first for 19 years. His voice resonated with many, including former President Bill Clinton, former Federal Reserve Board Chairman, Paul Volcker, and Warren Buffett. Scholars and regulators embrace his principles and applaud his investor advocacy. This survey shows that many ordinary investors do too.”
The survey was conducted by Rockland Dutton Research for the ‘Friends of Jack Bogle’, and polled 500 Vanguard investors and 500 non-Vanguard investors with $100,000 or more in investable assets.
Chip Roame, Tiburon Strategic Advisors chief and consultant to financial services executives notes, “I was particularly struck by the increased focus of 40% of general investors who recognize the value of minimizing costs as the number one driver of long-term performance. Among investors who knew Jack, it’s 67%. This is legacy impact.”
Jeff Rosen, President & CEO of the National Constitution Center says, “Jack Bogle was revered by so many who followed or worked with him. It’s wonderful to see how brightly his legacy shines among the millions of investors who also knew him. “Made investing understandable” is just one phrase that Americans associate with Jack. His calm and steady wisdom will continue to guide investors for generations to come.”
On December 5, Colombian plastic artist Sabrina Yanguas delighted 200 guests with thirteen pieces in a private Pre-Art Basel event, in Miami’s THE ROADS neighborhood.
During the event, Sabrina shared the story of each of the thirteen pieces on display. The event was supported by nine Asset Managers: Amundi Pioneer, Lord Abbett, Natixis, Capital Group, The AMCS Group / Merian, Axa IM, Schroders, Compass / Wellington and Robeco.
The artist told Funds Society: “It makes me proud to see so many representatives of the financial industry joining forces to support art. I am pleased to see that my pieces are a tool that inspires other industries, through my talents I have always wanted to help make a better world.”
Sabrina began her artistic career painting helmets from professional race car drivers from Indy Car in Indianapolis and Formula E, in Miami. In 2017, Ducati, reached out to her for an event during Art Basel that year and she was also asked to pain two motorcycles. That same year, Indy 500 race car driver, Sebastian Saavedra asked Sabrina to paint his helmet. Knowing how important it is to give back, Sabrina collaborated with Give To Colombia, a non-profit organization that helps the less fortunate in her native Colombia, her art piece was auctioned and sold for $35,000.
To close 2017, Sabrina was commissioned by VH1 to collaborate with JBalvin to paint a guitar for Save the Music a movement to help Children suffering from cancer. That same year another of painted guitars was selected to appear in one of Rihanna’s & Dj Khaled music videos.
In 2018, her strong belief in building and helping community drove her to donate another piece for Sashamama Foundation’s Green Gala. Sabrina is currently collaborating with Voices For Children on different projects and Nutrinfantil foundation in Colombia. Recently she was commissioned to paint a portrait for Colombia’s president, Mr. Ivan Duque. To close up she joins Buchanan’s for a collaboration with Jbalvin, Mijares, Flores & Bad Bunny for a period of a year.
You can also watch a video from the party by following this link.
Neil Dwane, Global Strategist at Allianz Global Investors, courtesy photo. Neil Dwane (Allianz GI): “Los tipos bajos han provocado que la gente ahorre más e invierta menos”
The global economy will continue to slow in 2020, but the risk of a recession remains higher than priced into markets. This view is according to Neil Dwane, Global Strategist at Allianz Global Investors. Dwane sees several key factors shaping the market narrative in the year ahead, including the US-China trade war, the evolution of the economic cycle in the US and the positioning of central banks.
“Wehope China will continue the process of transforming its economy and that its contribution at the global level will continue to be supportive. There will also be good forces driving the global economy from Indonesia and India, which are going through a different phase of their economic cycles and are engaged in major structural reforms. Europe can also surprise positively if policymakers manage to move the European Union (EU) in the right direction,” he explains.
In the UK, Dwane sees Brexit as one of the more important issues facing the greater EU in the coming year. “In most scenarios, we expect the UK to leave the EU at the end of January. We will see some fiscal stimulus from the UK, which may reduce the chances of a recession. This may allow the UK to contribute to global growth, which did not happen in 2019.”
Keys to 2020
Dwane sees central banks remaining relevant next year, maintaining their accommodative stance. “We may see interest rate cuts at central banks around the world,” he says. They will continue to support the global economy, but he warns that the real debate will be “to what extent monetary policy will continue to be useful.”
That is why he considers the return of fiscal spending to be one of the key economic drivers in 2020. “Investors should decide whether or not fiscal spending made by governments will be supportive of economic growth. Fiscal stimulus can lengthen the cycle, but what will be relevant is the breadth and scope of the stimulus. One of the conclusions I draw for 2020 is that both the UK and the US would likely not cut their interest rates to negative levels if they were forced to fight an economic recession.”
In the US, Dwane points out that a key factor will be the next presidential election at the beginning of November, but caveats that we are at a somewhat uncertain starting point. “We won’t know what will happen between Democrats and Republicans until June 2020. We have several open fronts, the first of which is what happens with President Trump’s impeachment. Secondly, there is the ongoing trade war with China, which has become something of a geopolitical tool for both sides.”
Investment opportunities
Dwane believes that the way to navigate this market, marked by a long period of low rates, is for investors to accept that “if they don’t take risks, they won’t get satisfactory returns.” In his view, fixed income investors have to think a lot about how to position their portfolios because the underlying assets often offer very little return or have a lot of risk. “Fortunately, investors have become much more realistic with their expectations of return and risk,” he says.
Dwane sees select opportunities in the high-yield market but reminds investors that they have to be aware of the risk they face. Leaving aside the opportunities offered by US Treasuries, which are often used to hedge other risk exposures, he prefers US and Asian high yield. “In the case of Asian assets, it should be remembered that they are more sensitive to economic cyclicality, and for emerging markets, it is better to focus on countries that are carrying out structural reforms such as India or Indonesia. On the other hand, we are more cautious toward Brazil, Mexico and Chile.”
Looking ahead, Dwane believes that if investors want attractive returns, they will have to allocate some of their portfolios to equities. That’s why he says it’s time to consider thematic investments that capitalize on “any trend that will work globally in the future.” Mr. Dwane highlights investments linked to sustainability, climate change, infrastructure, renewable energy, technology, artificial intelligence (AI) and robotics, as well as specific trends related to consumption and the tastes of younger generations, particularly millennials.
Pixabay CC0 Public Domain. Amizut termina el año con el mejor resultado de su historia y eleva su objetivo para 2020
Based on the first preliminary results on the Group’s activities and the first forecasts on 2019, Azimut expects to close 2019 with the best consolidated net profit in the history of the Group, ranging between 360 and 370 million euros.
The cumulative dividends distributed to shareholders over the 5 years of the plan, including what will be proposed to the BoD convened for March 5, 2020, will be at least 7,8 euros per share. As a consequence, the average payout throughout the plan will be greater than 90%, well above the envisaged target, resulting in a cumulative average yield of 44%. With this latest result, all targets indicated in the 5 year business plan have been achieved for the third consecutive time since 2004.
In 2019 the Group recorded 4.600 million euros of Net Inflows, bringing total assets to exceed 59.000 million euros (vs. the 50.000 million euros plan and + 16% compared to the end of 2018). Furthermore, the target set for International AuM at the end of the plan has also been fully achieved and exceeded.
In fact, at the end of 2019, the AuM from non-domestic businesses reached 29% of Total, against the 15% budgeted in the plan. EBITDA from the international operations in 2019 is estimated to be between 50 and 55 million euros (ca. + 53% compared to 2018).
Thanks also to the above results, the Group estimates under normal market conditions, to achieve a net profit of at least 300 million euros in 2020, raising its initial range of 250-300 million euros indicated during the Investor Day of June 4, 2019. This positive delta is expected to be reached thanks to growth across all business lines: distribution in Italy, alternatives and International activities.
The alternatives project continues to progress well. After the success of the largest Italian event dedicated to private markets (Azimut Libera Impresa EXPO), net inflows on products launched in the last quarter of 2019 stands at c. 450 million euros, bringing the total AuM in the private markets space to exceed 1.000 million euros.
Pietro Giuliani, Chairman of the Group, comments: “In 2019 we generated a net weighted average performance to clients of c.+ 8.5%, above the Italian industry. There is no better way to celebrate Azimut’s 30 year anniversary: all targets of our latest five-year business plan have been successfully completed for the third consecutive time.
We expect 2019 to close with a net profit between 360 and 370 million euros, marking a new historical record for the Group. Also our share price closed 2019 with a record: + 128% performance during the year, making Azimut the best performing stock amongst FTSE MIB members. The trust we receive every day from customers and shareholders makes us confident to continue with the same pace also in 2020, and achieve a net profit of at least 300 million euros.
Our international business has seen another sharp increase in 2019, with AuM accounting for almost 30% of total assets and an expected EBITDA of 50 to 55 million euros. Lastly, we are satisfied with the launch of the first products in the private markets area, democratizing this asset class and allowing us in just a few months to exceed € 1 billion of AUM in this segment.”
Photo: Pxfuel. ¿Cómo pinta el 2020 para el sudeste asiático?
According to Sriyan Pietersz, Investment Strategist at Matthews Asia, looking at the 2020 Outlook for Southeast Asia, “the best environment would be moderate U.S. growth, a sideways U.S. market and a weaker U.S. dollar.”
In his opinion, global risk appetite is rising again. This comes following a developing U.S.—China trade truce, easing Brexit worries, expectations of a long pause by the U.S. Federal Reserve, a turn in the semiconductor cycle and a stabilizing Chinese renminbi. “The Fed’s pause, validating a “no recession” outlook, and the potential for a rise in emerging market (EM) growth and earnings relative to developed markets suggest the onset of a positive impetus for both EM equities and currencies.” He mentions.
Pietersz believes the main risks to the outlook are a reversal of progress in trade negotiations, a resurgence of recession fears in the U.S. economy and, importantly, the wild card of U.S. Democratic primaries in the first quarter of 2020 “that could affect risk perceptions negatively just as the global economy is lifting. This could affect a large swath of the U.S. equity market, especially the technology and banking sectors. A negative U.S. market likely would drag down global markets; we believe the best environment for EM and Asian equities is moderate U.S. growth, a sideways U.S. market and a weaker U.S. dollar”.
Within EM, he is convinced that Asia looks to be the biggest beneficiary of an easing trade conflict, a turn in the semiconductor cycle and a firming renminbi.
“Within Asia, we believe the more open and tech-oriented North Asian economies such as Japan, South Korea, Taiwan and China, may outperform as Southeast Asian markets in general are not as big a beneficiary of a U.S.—China trade resolution and have little tech exposure. While the just-concluded Phase One trade deal could improve the overall global trade climate, China’s commitments to increase agricultural and tech imports from the U.S. in the near term could divert some demand away from countries such as Vietnam, Malaysia, Singapore and Thailand. That said, the trend of global supply-chain relocation will likely continue on labor cost and geopolitical risk diversification considerations, and we believe this will benefit Southeast Asia and India in the medium term.”
On a per country outlook Pietersz says:
Vietnam should continue its secular uptrend, supported by continuing production relocation investment out of China. The start of a new political cycle in 2020 should also add renewed policy impetus, while the Euro-Vietnam free-trade agreement is likely to support export growth. An International Monetary Fund-supported revaluation of historical GDP by 25% will improve public debt and fiscal headroom, allowing increased public spending on infrastructure to support future growth. Adding to this economic tailwind, reforms such as passage of a new securities law and improving regulation on foreign-ownership limits, the upcoming launch of “Diamond ETFs” (funds that circumvent foreign-ownership limits, and help to address the issues of access to Vietnam’s stock market) and the improving prospects of Vietnamese banks should draw new money into a wider range of listed stocks. We believe these changes should also help to pave the way for Vietnam’s ultimate inclusion in the MSCI EM index. The moderate valuation for the Vietnam Ho Chi Minh Stock Index (VN-Index)—13.2x Bloomberg consensus 2020 price/earnings ratio—is supported by strong forecast earnings growth of 20%.
Singapore, as the chief beneficiary in Southeast Asia of an improved trade environment, will also likely receive a boost from a more expansionary budget as the government tilts toward a general election. In the equity market, earnings growth may have bottomed after multiple quarters of downgrades, and given FTSE Straits Times Index constituents’ exposure to global demand recovery, risk is biased to the upside. Valuations are inexpensive (Bloomberg consensus 2020 price/earnings ratio of 12.5x), trading near the 10-year average, and investor positioning is light, positioning the market to benefit from a recovery in investor interest. Shares of banks, technology, real estate and select crude palm oil (CPO) companies are well-positioned to outperform, in our view.THE PHILIPPINES
Among the rest, the Philippines should lead the pack as growth re-accelerates back into the 6% to 7% range and renewed impetus in credit growth fueled by interest rate and reserve requirement ratio (RRR) cuts drive interest rate-sensitive sectors such as banks and property. Infrastructure stocks and consumer durables should also benefit from a ramp up of President Duterte’s ‹Build, Build, Build’ program and the personal income tax cuts in last year’s tax reform package (and stable Overseas Filipino Worker flows). The Philippine stock market’s valuation, however, is trading well below its 10-year average of 18.8x (Bloomberg consensus 2020 price/earnings ratio of 15x), triggered by a potential shift in the regulatory environment with implications for sanctity of public contracts and banks’ asset quality. This has led to foreign fund outflows, and it is to be hoped that clarification of the issues by the government will allow the positive macro momentum to drive the market forward in 2020.
Malaysia is likely to continue to move sideways, despite having languished since the 2018 general election. Factors in its favor are its underowned status, a relatively undervalued MYR that will augment its heavy trade exposure, and a potential rise in oil prices as global trade and growth dynamics improve (Malaysia is the only net Asian oil exporter and higher oil will fund increased domestic stimulus). However, the slowdown in private consumption should offset near-term tailwinds from external demand. Further, rising political risk is leading to policy implementation paralysis, which may affect the outlook for an anticipated rise in infrastructure spending. The Malaysian ringgit is also among the currencies most exposed to potential volatility in the Chinese renminbi resulting from any setback in U.S.—China trade relations. Banks, tech and export plays are better-positioned sectors, in our view.
Indonesia has the benefit of value as it has given up all of its year-to-date gains in the recent (and traditional) new government-related sell-off. Bank stocks and diverse large caps have pulled back on recent pronouncements by the president and various cabinet members regarding the need for lower interest rates and energy prices. That said, the new government appears constructive and reform-oriented and committed to deliver on labor and omnibus laws within the first quarter of 2020. If achieved, we believe this would drive a re-rating of the market against a backdrop of a modest but steady improvement in growth in 2020, while laying the foundations for a pickup in foreign direct investment (FDI) in the medium term. Higher FDI, in turn, would improve stability of capital flows and allow Indonesia to pursue a more growth-oriented policy mix.
The Thai economy was not immune to the global economic slowdown and GDP growth has slowed sharply on the back of weak exports and delays in government spending. While fiscal activity and public infrastructure spending are expected to rise in 2020, the prospects for growth remain muted as private domestic demand will be constrained by a slowdown in housing construction and relatively high household debt levels, which will drag on personal consumption. Thailand, as a safe-haven play, is likely to underperform the region, lacking economic momentum and tech exposure. A large cyclical/value contingent led by the energy sector and select large banks, however, could outperform in a local-market context as excess domestic liquidity continues to flow into the capital markets. We see the Thai market as a defensive hedge against a reversal in U.S.—China trade relations or a sharp change in the U.S. outlook.
