Foto cedida. Apoya a Bahamas asisitiendo a una plática con Gustavo Zerbino, sobreviviente del accidente de los Andes
Andes survivor, Gustavo Zerbino, will share how embracing adversity changed his life forever in a conference, to be held in Spanish, where proceeds will help support the Hurricane Dorian Response Fund.
The event will take place on Tuesday, October 29th at 7pm. It will be held at the St. Agnes Academy Auditorium, located on 122 Harbor Dr, Key Biscayne, FL 33149.
Key Rats Rugby Club, has offered to assist the Freeport Rugby Football Club, in the center of the Bahamas, by accepting donations on their behalf. All donations made by U.S. residents could be tax deductible, since both Key Rats Rugby Club and Freeport Rugby Football Club are qualified not- for-profit institutions.
Entry to the conference is $100 per person, and can be paid using this link.
In case you cannot go to the conference but are willing to help, please use this link.
Foto: PxHere CC0. La Amafore destaca otros cinco fondos mutuos internacionales para inversiones de las afores
More investing options for the Mexican Pension funds translates to more opportunities for workers. With this in mind, Amafore continues to evaluate funds to, in a monthly basis, include in the list of international mutual the afores an choose from for diversification purposes.
This month, five new funds were added to the list, which was created last month and now includes 47 international mutual funds from which Afores can choose.
The new list includes, via two Franklin Templeton strategies, funds with exposure to China and India, “two regions where, despite the global economic slowdown, one can still find stories of structural growth that make a case for equity investments in the region.”
Hugo Petricioli, Country Head for Mexico and Central America told Funds Society: “In Franklin Templeton we are very optimistic about the evolution of the Afores, since 1997 the system has experienced a continuous improvement, charging less and less to its customers, modernizing constantly and giving workers better and more options to be able to achieve a decent retirement, it is really a great system. I would very much like to see more workers get interested and involved with this part of their heritage as well as looking for options to increase their complementary savings. We have been investing in Mexico since the 80’s. We believe in Mexico, we believe in bringing quality products and giving more investment options to all Mexicans.”
The list of authorized managers consists of:
AllianceBernstein
Amundi
AXA
BlackRock
Franklin Templeton
Investec
Janus Henderson
Morgan Stanley
Natixis
Schroders
Vanguard
Gio Onate, Head of Mexico Institutional Business at BlackRock, toldFunds Society: “At BlackRock, we value the long-term relationship we have built with Mexican Afores since 2005, starting with ETFs and evolving into active mandates, our technology and risk platform Aladdin and now, international mutual funds. We look forward to continuing our work as the Mexican pension fund industry evolves, always keeping in mind our purpose of helping more and more people experience financial well-being.”
Courtesy photo. Glovista Investments Hosts Executive Briefing on Global Macro Outlook & Themes
Glovista Investments presented its views on the global macro cycle and highlighted key themes and opportunities for members of the private wealth community on October 8th, 2019, at the JW Marriott Miami, featuring the firm’s founders, Chief Investment Officer Carlos Asilis and Deputy CIO Darshan Bhatt, along with Ignacio Gil, Strategic Advisor for the firm.
“Today, investor concerns range from the potential of further global economic deceleration resulting from a late cycle US economy – with recession risks looming in the horizon – to the ongoing reversal of the market-friendly trade globalization dynamics that defined the post-1990 period and the potential for increased tax pressure in the developed world over the coming years. Today more than ever, we believe a tactical global investment approach is to be favored so as to navigate such treacherous investment waters,” said Asilis.
The discussion included Glovista’s 10 year performance outlook for major asset classes and the investment case for emerging market equities both in absolute and relative terms versus developed peers in light of secular trends that are transforming the investment landscape. The firm also spoke about its opportunity to drive positive change in the regions where it invests via the strategic use of corporate philanthropy.
“The greatest value that I took away from the presentation is simplicity, especially in the Emerging Markets area laden with factors not easily digested by an average investor. Dr. Asilis capably simplified what otherwise is a rather complex topic. Our firm emphasizes a minimalistic approach to investing, that is, a straightforward assessment of binary investment return payoffs that either work or don’t work. This presentation helped clarify for me how to choose the right targets while avoiding traps that exist in these complex markets,” said Eli Butnaru, Chief Executive Officer, Boreal Capital Management.
“I appreciated the quality of the presentations. Dr. Asilis and Mr. Bhatt shared detailed market views on the global asset classes including the emerging markets universe,” commented Ricardo de la Serna, Partner, Alvarium.
Glovista Investments is an SEC-registered and GIPS-compliant investment advisory firm with offices in New Jersey, Miami and the San Francisco Bay area. Glovista specializes in emerging market equities and multi-asset investment strategies for institutional and high net worth clients.
Brazil is a country full of contrasts. The biggest Latin American country is not only known for its sunny beaches, vast Amazon jungle, samba and passion for football, but also for poverty and social inequality, mostly seen in places like the country’s famous favelas.
The Brazilian economy has long benefited from the world’s, and particularly China’s, strong appetite for Brazil’s abundant natural resources, such as soya, oil and iron ore. The commodity boom led to strong economic growth. From 2000 to 2012, brazil was one of the fastest-growing major economies in the world with an average annual GDP growth of over 5%. However, the economy started to slow down in 2013 and entered a recession in late 2014 that lasted until 2016, driven by an economic slowdown in China that caused a sharp decline in commodity prices. The Brazilian economy shrank by more than 7% in two years, which made it the longest and deepest recession in its history.
The recovery process after the recession has been desperately slow, held back by political uncertainties, corruption scandals and external shocks (crisis in Argentina, global trade war). However, the current president, Jair Bolsonaro, has started to push through an ambitious reform agenda that should improve structural growth in Brazil. More importantly, there is still a lot of overcapacity and slack in the economy, which has helped to keep inflation under control. The central bank’s policy rate has come down from 14.25% in 2016 to 5.5%, and additional cuts are likely. Structurally lower rates and economic reforms should improve Brazil’s competitiveness and stimulate economic growth.
Investors can get access to Brazil via its stock market, the Bovespa. But investing in Brazilian stocks has proven to be a very volatile ride with massive ups and downs, and typically concentrated exposures to some large stocks with political influences, such as Petrobras, Itaú Unibanco, Bradesco, AmBev and Vale.
But there is a much more conservative way to invest in Brazil via receivables-backed funds called Fundo de Investimento em Direitos Creditórios (FIDCs). FIDCs are mutual investment funds that apply the majority of their financial resources in receivables. They offer relatively high yields and huge diversification benefits. Brazil is a fantastic example for the deficiency of the traditional banking sector with a concentration of almost 80% amongst the top four banks. These banks tend to focus on mortgages and long-term loans for larger corporates. Small- and medium-sized enterprises (SMEs) are often struggling to get access to traditional sources of funding. Also, bank spreads in Brazil are much larger than in any other major country. While interest rates have come down, banks are still widely lending at rates above 30%.
Alternative financing options, such as accounts receivable factoring, may provide the working capital SMEs need. Accounts receivable factoring is financing that comes from a business selling its accounts receivable to a factoring company. Given the lack of lending provided by traditional banks, the Brazilian authorities implemented an investor friendly regulation for the factoring industry. In Brazil, FIDC are fully regulated and monitored by the Brazilian Securities Commission (CVM). The concept was first introduced in 2001 but since then, the transparency and accountability has been improved significantly. Today, FIDCs must comply with a number of rules that guarantee strong governance and independent controls through regulated fund administrators, independent auditors, registered managers, custodians, etc., which gives investors a very high level of transparency and accountability. Brazil is probably the country with the highest standards in terms of the regulation of the factoring industry, a real factory paradise, and definitely a positive aspect to be added to the list of contrasts. The strong regulatory framework that protects the interest of investors paved the way for sizable capital inflows, that helped to meet the strong demand from SMEs. Currently, there are around 800 different FIDCs with a total asset size of around B$ 120 billion (around USD 30 bn).
Investors have many advantages if they invest in FIDCs compared to corporate bonds or equities, for example. First, receivables portfolios usually contain receivables from a diverse group of debtors, which means that there is much less concentration compared to traditional corporate bond or equities portfolios. Second, investors mainly face the credit risk of the buyer (obligor), which tends to be a bigger, more established company, typically multinationals, that have a much lower credit risk. What is more, the credit risk of the obligors can be insured against default at relatively low costs. Third, FIDCs can also get guarantees from the suppliers, such as real estate and personal guarantees of key executives. This gives a strong incentive for suppliers to buy back the receivables in the rare case that the buyer does not pay the invoice to the factor. Therefore, expected default rates are below 2% and expected loss rates (after renegotiation and recovery) are below 1% in the Brazilian factoring industry. Interestingly, loss rates remained below 1% even during the deep recession of 2015/2016, which has been an excellent stress test of the resilience of the Brazilian factoring industry. And last but not least, the expected performance for international investors is highly attractive. Even if we deduct hedging costs (that have come down a lot thanks to the lower rates in Brazil) and any other costs related to the origination, management and administration, net returns for USD investors should be in the 8-10% range.
Opinion by Pascal Rohner, CIO at Katch Investment Group
Foto cedidaFoto: Andrés Valdivieso director de distribución global de Participant Capital . Foto: Andrés Valdivieso director de distribución global de Participant Capital
Participant Capital, a leading South Florida private equity real estate investment firm, with over US$2.5B in projects under development, has announced today the promotion of Andres Valdivieso to Director of Global Distribution. With over 15 years of experience in international real estate sales and team management of seasoned distributors and real estate international brokers, Andres will focus on strengthening relationships with strategic partners and expanding the firm’s global distribution capabilities.
Participant Capital currently runs over 40 distributors operating throughout Latin America, Asia, Europe, and the Middle East. Its investment portfolio continues to expand with new world-class developments in South Florida and beyond.
“As we bolster our global presence and seize new opportunities of untapped markets, our focus is to bring uniquely positioned real estate assets to all of the investors worldwide – individuals and smaller institutions – that have historically lacked access to leading alternative investments,” said Claudio Izquierdo, Chief Operating Officer. “I believe Andres, with the support of our highly dedicated team, will allow us to drive growth in key distribution channels and deliver our products with high-quality deal execution, transparency, and accuracy.”
Prior to Participant Capital, Andres Valdivieso worked with Fortune International Group, where he was recognized as a top real estate producer for three consecutive years. In 2012, Andres moved to New York City to manage the exclusive sales for a luxury condo-hotel. He was once again named a top-producing executive in the region for his efforts in coaching a team of real estate salesassociates and international real estate brokers to provide high-quality client service.
“I am excited to be part of Participant Capital and contribute to the firm’s international expansion,” said Andres Valdivieso. “Our experienced distribution team, decades of expertise in real estate development and local market knowledge, give us an exceptional advantage in terms of sourcing new opportunities to diversify an investment portfolio in a strong currency.”
. Natixis IM refuerza su equipo con dos nuevos fichajes
Natixis appoints Joseph Pinto as Chief Operating Officer of Natixis Investment ManagersandPhilippe Setbon as Chief Executive Officer of Ostrum Asset Management.
Joseph and Philippe will both be members of the Natixis Executive Committee and of the Natixis Investment Managers Management Committee.The creation of the COO role for Natixis Investment Managers and the appointment of Joseph Pinto–who will take up his role in the coming months –reinforce Natixis Investment Managers’management team and enhance its operational efficiency.
Joseph Pinto will report to Jean Raby, CEO of Natixis Investment Managers, member of the Senior Management Committee of Natixis in charge of Asset and Wealth Management.
Philippe will replace Matthieu Duncan who has resigned from his role as Chief Executive Officer of Ostrum Asset Managementin order to pursue other interests. Philippe will take up his role at the end of November, until which time Matthieu will remain in his role.
François Riahi, Chief Executive Officer of Natixis said: “With Philippe Setbon and Joseph Pinto, we welcome to the Natixis Executive Committee two leading asset management professionals. Joseph Pinto, whose international background perfectly fits with our setup, will bring significant added–value to our multi–affiliate business model at a truly transformative moment for the industry. Philippe Setbon will lead one of our key strategic initiatives; the creation and development with La Banque Postale Asset Management of a European leader focused on insurance–related euro fixed income.”
Jean Raby said: “Joseph and Philippe’s recognized experience and expertise will bolster Natixis IM and Ostrum AM’s growth and operational efficiency and will contribute to further power the continued developmentof our business. I thank Matthieu Duncan for his contribution to the successful transformation and repositioning of Ostrum AM that he has overseen over the past three years.”
Joseph Pintobegan his career in 1992 with Crédit Lyonnais, working in the securitization business in New York before moving to Lehman Brothers in London in the Corporate Finance division. From 1998 to 2001, Joseph was Project Manager at McKinsey & Cie in Paris. From 2001 to 2006, he was Deputy CEO and member of the Board of Directors of Banque Privée Fideuram Wargny. He joined AXA IM in January 2007 as Head of Business Development for France, South Europe and Middle East. He then took the leadership of the Markets and Investment Strategy Department in 2011 and became Chief Operating Officer in 2014, also serving as a member of AXA IM’s Management Board.
Philippe Setbonbegan his career in 1990 as a financial analyst at Barclays Bank in Paris. Between 1993 and 2003, Philippe was with Groupe AZUR–GMF, first as a portfolio manager for European stocks, then as Head of Asset Management. He then moved to Rothschild & Cie Gestion as Head of Equity portfolio management before joining Generali Group in 2004 where he held a succession of senior roles including CEO of Generali Investments France,CEO of Generali Investments Europe Sgr and CIO of Generali Group. He joined Groupama in 2013 as CEO of Groupama Asset Management.Philippe serves as vice president of the French Asset Management Association (AFG).
CC-BY-SA-2.0, FlickrRockefeller Center in New York, home to one of WE Family Offices' locations. . ,,
WE Family Offices strengthens its investment team with the hiring of Sam Sudame and Matt Farrell. Sudame joins as Senior Investment Associate and will be responsible for Public Markets, Asset Allocation, Portfolio Construction and Risk Management. Farrell joins as Senior Investments Manager and will be responsible for Private Markets.
Joe Gutierrez will continue to be responsible for Macro and Santiago Ulloa remains as the firm’s CIO.
Ferrell has more than 15 years of experience in the financial services industry. Before joining WE, Matt worked for nine years at Credit Suisse as an alternative investment specialist, and before that, he worked several years in investment banking where he advised clients on mergers and acquisitions, capital increases and strategic initiatives.
He received his bachelor’s degree from North Carolina State University and earned his MBA from the University of North Carolina at Chapel Hill. He holds the Chartered Alternative Investment Analyst (CAIA) certification and has approved Level 1 of the Chartered Financial Analyst (CFA) program.
Sam Sudame has more than 25 years of experience in both traditional and alternative assets. He holds the CFA, CAIA and CFP designations, a BA from Oberlin College and an MBA from Thunderbird International Graduate School.
Before joining WE Family Offices, Sam was the Director of Research at Singer Xenos Wealth Management in Coral Gables, FL. Prior to this he lived and worked in Asia for over a decade and held investment banking roles at Bayerische Hypovereins Bank (HVB) and Lehman Brothers.
Pixabay CC0 Public Domain. Crisis de liquidez en el mercado estadounidense de repos
September 2019 saw a ‘liquidity crisis’ in the US repo market, a market principally operated by private banks. This liquidity stress led to a spike in funding costs. As a response, the Federal Reserve intervened through cash injections to restore an operational normality to this market.
The last time this event occurred was in 2008 at the height of the financial crisis. Back then, two main causes for this malfunction had been identified: a mistrust between commercial banks in their interbank lending operations and a growing discomfort on the collateral proposed for repo transactions (especially collateral backed by real estate loan portfolios. The US property market was in turmoil in 2008).
The September 2019 funding stress was a surprise to many. Present-day economic conditions are a far cry from the subprime meltdown eleven years before. In addition, Fed policy had been recently adjusted with the end of ‘Quantitative Tightening’ program in August. Yet despite this preemptive monetary action, the liquidity made available as a result seems to have been grossly inadequate.
New York Fed’s ex-President Bill Dudley provided his account of the current repo situation. He pointed to the corporate tax payment season and recent treasury auctions as having dried up market liquidity. These explanations have left many perplexed. Why could such liquidity flows not have been anticipated by the Fed? What other reason would eventually lie behind the present funding crisis in the repo market?
To delve deeper into this phenomenon, certain analysts have put forward structural arguments, based on recent world Central Bank policy, as well as other cyclical events. The first structural issue concerns the collateral used in the repo market. Traditionally, this kind of financial transaction uses US government bonds as collateral because they are considered to be the best quality instrument available. Since 2008, Central Bank interventions have progressively soaked up government debt making them more difficult to come by.
As a result, more and more corporate bonds are being put up as collateral in repo transactions instead. However, corporate debt is considered to be of lower quality by dealers in this market place. Following recent economic data showing a downturn in world activity, corporate bonds are being increasingly perceived as carrying a higher risk than in previous months. This has led to a rise in their risk premium and by extension the funding cost for those who use them as collateral.
The second structural issue involves around bank reserves. American Banks have been encouraged through regulation and the remuneration of their deposits to park their excess liquidity as reserves with the Fed rather than make it available as funding for the repo market.
In sum, the US repo market has been exposed to decreasing collateral quality and uncertain funding flows for its large banking liquidity providers. To top it all, additional cyclical factors have come into play.
International demand has been increasing for US dollar cash and fixed income assets, over the last few months. Geopolitical uncertainty in Hong Kong and the Middle East, rising bond prices on the back of lower US interest rates, plus international investment capital desperately seeking yield, have combined to disrupt the traditional bond and liquidity flows associated with the repo market. All these structural and cyclical elements seem to have come to a head in September 2019.
In a recent interview, Jeffrey Gundlach from DoubleLine described how the repo market has been under pressure since the end of 2018. He believes this situation could last for a while longer and he views the recent Fed liquidity injections to be on the road to fresh asset purchases by the American central bank.
Michael Howell of Crossborder Capital brings a different perspective to this liquidity crisis. For him, monetary accommodation in Europe, China and Japan must be viewed in the context of a currency war against the US dollar. He anticipates the Trump administration and the Fed will not be able to allow the current liquidity stress to last for any period of time. He believes the Fed will have to react at some point by opening up more aggressively the liquidity channels, notably for the US repo market.
Column by Steven Groslin, executive board member and portfolio manager at ASG Capital
Pixabay CC0 Public Domain. El atractivo de las A-shares chinas
After its first approach to the chinese equities, in this second and last instalment, Aberdeen Standard Investments reflects its growing comfort with A-shares, from the earliest reservations to the expectations for future growth.
In the early 1990s the onshore market was isolated, accessible only to domestic investors. Gradually China has opened its stock exchanges to overseas investors with initiatives like the Qualified Foreign Institutional Investor (QFII) scheme in 2002 or the Stock Connect of 2014 and 2016. Most recently, there has been an inclusion of A-shares in MSCI’s mainstream benchmarks. These “deregulations” have facilitated the journey of the asset manager from observer to investor in China’s A-share market.
Getting comfortable
For years, global investors seeking access to China’s economic growth predominantly invested in stocks listed in Hong Kong. However, the domestic A-share market is far deeper and more liquid and its range of companies and sectors more varied.
“Our challenge was identifying firms that met our strict quality criteria“: a strong balance sheet, sustainable earnings, progressive management and good governance, reveals ASI. “We could see that A-share companies had plenty of work to do on improving their financial transparency and strengthening investor protections” and typically “they had too short an operating history for us to gain comfort in their track record”.
The asset manager especially wary of political interference in commercial decision-making, but, as they familiarised themselves with the inner workings of companies, their views became less rigid. “Some of the biggest state-owned enterprises have sound management teams, operate internationally and enjoy pseudo-monopolies at home” so “we learned to appreciate these strengths”.
ASI researched the A-share universe for more than a decade before their first investment in 2011. In the five years following, they carried out some 500 company meetings, they engaged with management teams and campaigned for better capital management practices.
“We observed incremental improvements, such as enhanced board and management composition; increased dividend pay-outs and share buy-backs; and improved transparency in reporting”, but “it wasn’t always plain sailing”. The asset manager gas had to divest stakes in companies that continued to invest heavily in non-core assets; where infighting among board directors led to dysfunction; and where firms pressed ahead with privatisation plans despite depressed valuations and dissenting voices.
“As more companies confer rights of ownership on outside shareholders, our comfort with the A-share market will continue to grow”, assures ASI, which, after extensive due diligence and analysis, was able to build up a list of companies with the highest standards in the market. This enabled to launch a dedicated A-share Fund in March 2015. Out of the present universe of about 3,500 A-shares, ASI holds a little over 30. “Generally these are well-run, industry-leading companies which enjoy a sustainable competitive advantage”.
Finantial evolution
The past five years have seen the introduction two Stock Connect schemes, creating a trading loop directly linking the exchanges of Hong Kong with Shanghai and Shenzhen. Broadly this addressed foreign investor concerns about lack of direct market access and was instrumental in global index provider MSCI agreeing to admit A-shares to its mainstream benchmarks incrementally.
For the asset manager, that will accelerate capital flows from foreign institutions tracking these indices passively. “We see this broadening of the shareholder base as a good thing: some A-share companies have told us they want more foreign institutions as shareholders because they invest for the long term. This remains a volatile market driven by retail investor speculation, after all”.
MSCI’s inclusion of A-shares into its indices has no practical application for ASI as a fundamental investor: it doesn’t affect its view of whether a company is good or bad, nor does it feel any need to adjust portfolios. “The real significance is what it says about China’s financial evolution. Over time the A-share market is becoming more institutional, more professional and more international. It’s the beginning of huge financial change”.
But Stock Connect was about more than raising foreign participation. China no longer needs its financial system to finance rapid economic growth; it needs it to provide pension income for a rapidly ageing society. According to ASI, it means the quality of financial assets matter more now than ever and Chinese pension funds need to invest sustainably.
“Over the long term, China’s structural growth will be driven by domestic consumption and a rising middle class. We believe the key to unlocking shareholder value is identifying companies which can tap into these growing disposable incomes”, says the asset manager, who has found companies with good long-term growth prospects in segments such as internet technology, travel and health care”.
Photo: PxHere CC0. Equities in September Closed on a High Note, but Long-Term Rates are Still Low...
In a notable display of resiliency, U.S. stocks closed September near all-time highs against a very uncertain investment backdrop and finished the month and the third quarter with a gain and with a double-digit return for the nine months. Stock prices gyrated as they interfaced with diverse news headlines and world events. A partial list of topics includes the China/U.S. trade war, Brexit, Saudi oil field drone attack, central bank easing, yield curve inversion, negative interest rates, U.S. recession concerns, and relatively slow growth in China and Europe.
Top trade negotiators for the U.S. and China are set to square off on October 10-11 in Washington, as both sides seem more willing to resolve some issues. The U.S. economy, though starting to show some trade war related stress in the industrial sector, is still expected to grow about two percent in the third quarter. Employment, housing and a record $113.5 trillion household net worth are key.
During the post FOMC Statement Press Conference Q&A on September 18, Chairman Powell asked a timely rhetorical question: “But why are long-term rates low? There can be a signal about expectations about growth there for sure, but there can also just be low term premiums. For example, it can just be that there’s this large quantity of negative yielding and very low yielding sovereign debt around the world, and inevitably that’s exerting downward pressure on U.S. sovereign rates without really necessarily having an independent signal.”
Corporate earnings, as measured by the S&P 500, are currently projected to rise 4.1 percent in Q4 2019 and be up 11.2 percent in 2020 based on IBES data. Though global M&A activity declined in the third quarter due to trade war fears, a September 30 NIKKEI Asian Review headline – Japan eyes tax breaks to steer idle cash into M&A deals – Companies hoarding profits miss out on innovation, ruling party tax chief says – sets up new deals for merger arbitrage.
GAMCO continues to research new investment opportunities in the North American equipment rental market for infrastructure replacement and new structures for highways, bridges, buildings, energy and water. Public drinking water systems are projected to need about a trillion dollars in upgrades and new systems over the next 25 years.
Column by Gabelli Funds, written by Michael Gabelli
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GAMCO MERGER ARBITRAGE
GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.
Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.
Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.
Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.
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GAMCO 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.
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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.
