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Robeco Gathers 130 Industry Professionals at its Annual ‘2018 Kick-Off Masterclass Seminar’ in Palm Beach

On the 1^st and 2^ndof February, Robeco held its annual ‘2018 Kick-Off Master class Seminar’ at the Four Seasons Hotel in Palm Beach. The meeting was attended by about 130 industry professionals, mainly from the US Offshore business, based in Florida, California, Texas and New York, but also directly from Latin American countries, namely, Colombia, Uruguay, Panama and Peru. A total of 15 companies from the wealth management, private banking, institutional clients, and pension plans sectors participated, including Citibank, UBS, Santander, Morgan Stanley and BBVA.

Welcoming attendees to the event, Jimmy Ly, Head of the Americas Sales team (US Offshore and LatAm), opened the conference. Next, Michael Mullaney, Director of Global Market Research at Boston Partners, reviewed the macroeconomic outlook: “Global economic growth has been very remarkable. The United States has reached its tenth year of recovery since the financial crisis broke out in 2008; however, many countries are still in the early stages of the cycle. That would be the case of emerging markets, which are presented as favorites, and it is probably an intelligent decision to seek exposure to them. According to the OECD, such good growth data had not been seen since 2006, basically all of the 45 countries studied by the OECD are currently undergoing an expansion point. While data from the International Monetary Fund, which studies192 countries, indicates that only four of them anticipate a contraction in 2019. It is the minimum number of countries in anticipation of a recession recorded in a single year,” he said.

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According to the expert from Robeco Boston Partners, China and India are the growth giants in global terms. China is decelerating its growth rate, transitioning from being an export-based economy with debt-based investment to a consumer economy, taking a more western profile. “We will not see a growth of 9% or 10% like that of a few years ago, but it will go from the present 6.5% to 5% in the coming years, being much more stable. However, growth in India is accelerating and will most likely become the next biggest contributor to GDP growth,” he said.

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Another indicator which points to good growth prospects is the Purchasing Managers Index (PMIs), which is somewhat below 50, a value that determines if an economy is contracting, only in Indonesia and South Korea, showing an extraordinary strength globally in terms of production. Likewise, the PMI service index and the Citigroup economic surprise index indicate that the global economy as a whole shows strong signs of recovery, expecting an overall growth of GDP between 3.5% and 4%.

In turn, the withdrawal of accommodative economic policy programs could be a risk factor for equity markets, the rise of which benefited in recent years from the excess liquidity injected by central banks. “The real interest rate of federal funds globally is currently 30 basis points. The United States has never entered recession with a real interest rate of federal funds at levels near or below zero, which is exactly where we are now. The prospects for recession are very low,” he said.
Meanwhile, inflation, which continues at very benign levels, has risen slightly with the rise in oil prices. On the other hand, if we take core inflation into account, discounting food and energy prices, it is still below the 2% that most central banks usually aim for to fight against deflation, a problem that has historically remained.

Regarding salaries and employment levels, the overall situation has improved markedly, from 9% unemployment in 2009 to 5.5% today. Despite this, salaries have been very poor. “In the United States there are three reasons why wages have not experienced a significant rise. First, the most senior workers have retired and have been replaced by younger workers with lower wages. Secondly, globalization has caused companies to look for production centers with lower costs, causing something similar to the “Amazon effect”, which seeks a low-cost solution. Finally, technology is replacing many of the tasks, reducing the cost structure for many countries. In particular, Japan is among the most advanced economies when it comes to integrating robotics into its economy,” he added.

Finally, referring to the fall of the dollar, Mullaney mentioned the purchasing power parity index, according to which the Euro remains relatively cheap with respect to the dollar, and the current account deficit, which in the United States is at a -3% and in Europe at + 4%. In addition, Europe also shows a better fiscal balance than the United States, reasons that favor a weaker dollar.

Subordinated debt of financial institutions

Next, David Hawa, Client Portfolio Manager, explained the reasons why it may be a good time to invest in subordinated debt of financial institutions, the so-called contingent convertible bonds (CoCo’s), as their conversion is subject to certain conditions established at the time of issue and in relation to certain levels of capital. “The economic outlook in Europe is more favorable, benefiting from the solid growth enjoyed by the global economy. Growth in Europe remains strong and enjoys a broad base, while the credit cycle in the United States is much more mature. Against this backdrop, European financial companies continue to offer value. Credit spreads are not as generous as they used to be, but the valuations of financial companies are still attractive,” he said.

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In that regard, the strategy dedicated to financial institutions’ bonds has the potential to achieve attractive spreads with an investment grade issuer risk. Spreads of subordinated financial debt are usually attractive compared to the rest of corporate debt, including high-yield debt. “Issuers of financial bonds tend to be predominantly corporate issuers with a high-grade rating within the investment grade. In addition, this type of asset serves as implicit hedging against rising interest rates, since it has a very low or low correlation with US Treasury bonds,” said Hawa.

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During his presentation, he pointed out the capabilities of the Robeco Credit Investment team: “Since the 70s, Robeco has a specialized credit team, in which each member has an average experience of 17 years and includes about 4 financial analysts working on a full-time basis. They also differentiate between the responsibilities of portfolio managers and those of the credit analysts; displaying a profound knowledge of the financial sector and equity securities. They select the best subordinated bonds for each category, with a higher risk-return binomial and use an internally developed risk model to monitor both the portfolio and the issuer risk”.

Trends Investment

At the following lecture, dedicated to investing in trends, Ed Verstappen, Client Portfolio Manager, reviewed the performance of growth stocks, after a year in which the FANG shares (Facebook, Amazon, Netflix and Google), together with their Eastern version, the BAT (Baidu, Alibaba and Tencent) have dominated the markets.

“The ‘winner-takes-it-all’ effect, in which a group of companies generate most of the market’s profits, is becoming stronger, accelerating even profit growth. Facebook generated an increase of 50% in revenue for 18 consecutive quarters. While Netflix obtained growth of 35% in more than 20 quarters. For its part, Google achieved 31 quarters with organic revenue growth of 20%. And, Amazon reached 60 quarters with 20% growth in the retail sector. It is estimated that, by 2025, it will be the first US retail company to sell $ 1 trillion annually in products and services, when the company reaches 30 years’ history. Finally, the AppStore achieved a new record on New Year’s Day, when users made purchases worth 300 million dollars in purchases,” commented Verstappen.

To avoid taking unnecessary risks, the Global Consumer Trends strategy team evaluates risks with a strategic approach and considers the impact of regulation and the increase in capital intensity. In addition, they continue to reduce exposure to major US technology firms to start betting on equivalent names in China.

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“This strategy identifies secular global trends with strong growth from the consumer’s perspective, such as the digital consumer, the emerging consumer, and the consolidated brands. Having a preference for investment in structural winners within each industry, with a focus on the 50-70 most attractive stocks, which offer higher quality and a higher growth profile,” he said.
Verstappen was also optimistic about the state of the economy: “The market is anticipating an improvement. The increase in consumer spending should benefit from low unemployment, higher wages, and high consumer confidence. It is expected that also in 2018, the markets will be driven by solid growth. The fundamental perspectives for large digital platforms (Google, Facebook and Amazon … etc.), are still very good. Emerging market shares can benefit from the prospects of improving global growth,” he added.

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Robeco has specialized in analyzing trends, which are understood to be a disruptive change that displaces the previous ‘status-quo’ and with a visible effect in the long term. Thus, a new trend would result in new challenges for players already present and opportunities for challengers.

This global management company of Dutch origin offers strategies based on the analysis of trends, from the consumer angle, from the financial angle, from the production side, and from a total perspective: “It is an attempt to anticipate the future. We believe in the power of disruption from the demographic, technological and regulatory changes. It is a commitment to the long term, because short-term horizons lead to a lower estimate of secular growth trends creating high-conviction portfolios that are agnostic with respect to their benchmark,” he explained.

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Concluding the morning conferences, Henk Grootveld, Managing Director of Trends Investment, explained the scope of the digitization of the financial sector. “In the next 10 years, payments made online will be adopted mostly, cash will become an exception. The digitization of the financial sector will allow 2 billion people to manage their assets; both China and India will establish themselves as the biggest players in FinTech, surpassing the rest of the world combined. Failure in the cyber security issue in the financial world means being out of the FinTech business,” he concluded.

Ann Steele (Columbia Threadneedle Investments): “There is a pocket of excellence in European technology”

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With synchronized global growth expected to continue for the rest of the year, there should be no reason why 2018 should not be a good year for European equities, says Ann Steele, senior portfolio manager of the Threadneedle Pan European strategy from Columbia Threadneedle Investments.

During the last business cycle, European shares achieved lower returns compared to the rest of the global equities because they suffered the sovereign debt crisis in addition to the global financial crisis, delaying its recovery. On the European continent, the healing process did not really start until 2015, but there are several reasons to be optimistic. According to Steele, the market consensus expects that GDP growth for Europe will be between 2.5% and 2.6%. In addition, long-term unemployment in Europe is around 9%, while today the unemployment figure is 7% and in some countries, such as Germany it is around 3%. “The labor market has fueled the recovery, this is a positive issue for the world and certainly for Europe,” says Steele. “We had political problems, banking problems, but we feel that 2018 is going to be a good year for European equities. We can see a 12% to 15% increase in earnings growth, and European equities trade on P/E ratios of 14x and dividend yields of 3,2x, being cheaper than the multiples of other global areas. That’s why we think investors should overweight Europe.”

In recent published data, the PMI indicator (Purchasing Manager’s Index) reached levels of 58.6. Typically, cyclicals tend to overperform in a market in which the PMI indicators are raising until they reach levels of 60, and after that they stop outperforming. “We believe that there is still a lot of headroom for growth. We do not believe that a salary increase in Europe will be a massive problem in the region. In fact, in the United Kingdom, there is practically no salary increase. Although inflation is starting to increase, it will be a gradual and slow increase, because there is still capacity within the system. Until this excess capacity disappears, rampant inflation will not be seen,” she adds.

Positive on cyclical sectors

Given the current scenario of positive benefits, Steele believes that the cyclical sectors will continue to be very attractive and that they will continue to outperform. “I have the ability to run a portfolio with about 50 positions. This allows me to be quite aggressive in exposure to sectors within the strategy. Currently, the portfolio has 52 shares, with a strong position towards cyclical stocks. To begin with, we have an overweight in the whole financial sector, including banks, insurers and diversified financial companies. We believe that financial balances have improved significantly. Bank lending has started to pick up and with every cyclical recovery the financial sector will benefit.”

“In another area where we have an overweight position are industrials, which clearly are a play on a cyclical rally. Within this category would be, for example, companies such as Volvo. However, I have a more neutral position in energy, increasing the weight in the technological sector. There is a pocket of excellence in the European technology sector. For quite some time, I owned Arm Holdings in the portfolio, a semiconductor and software design multinational that was purchased by SoftBank Group,” she says.

According to Steele, one must be careful in the selection of growth companies in Europe, because they will not be bought up by the American technological giants. “We can see growth in stocks such as SAP or ASML Holding, which based in the Netherlands and is a chip supplier company. Among its main clients are Intel, Samsung or TSMC. The growth in the next three years will be spectacular for this company. If I can find real conviction ideas, they will be included in the portfolio. Specifically, ASML is the fourth largest position in my portfolio.”

The gap between Europe and the United States

European equities are about 25% cheaper than US equities and the business cycle is considerably lagging. The continuity of momentum in the United States cycle will depend on the infrastructure spending program of the Trump administration. “After the recent statements made in Davos, the dollar suddenly depreciated and the euro appreciated slightly. In fact, the Fed is raising rates in the United States, while the European Central Bank continues to maintain its program of quantitative easing. We believe that the dollar is overvalued and that it should return a bit. “

If the euro came to appreciate strongly this could be a problem for Europe, which is mainly an exporting area. “Draghi will remain the president of the European monetary authority until the end of 2019. The ECB is very pragmatic, if there was a threat to economic growth in Europe, which remains very fragile, he would most likely intervene with a supportive monetary policy.”

The political risks

One issue that could affect the performance of European equities is the political uncertainty that the region is still exposed to. “On March 4 there will be elections in Italy. There are parties that are very anti-Europe, which do not represent an immediate threat, but which will promise more generous pensions and greater spending to mobilize the vote and that is precisely what we do not want governments to do. We must be careful with overpromising and overdelivering.”

In addition, Angela Merkel continues to have problems forming a government. And, although the SPD party has sent the message that they will be happy to form a grand coalition, what happens now is that the votes will depend more on young people who recently joined the party, that are usually against that great coalition. “There may be an agreement before Easter and if they do not reach it, there will be new elections in Germany,” she says.

Of course, the Brexit negotiations will continue to create background noise. “In last year’s elections they did not win a clear mandate, going from hard Brexit stands to a soft Brexit stands, something that, in my opinion, will be better for the United Kingdom and Europe. The two parties should be more flexible. It will take between four and six years to negotiate the terms of business, so this discussion will go on for many years”.

As for Spain, Steele believes that the country is doing phenomenally well. “The problem in Catalonia is a noise that grumbles on the background, but at the end of the day people vote with their wallet. Being one of the main industrial areas, they need to keep their jobs, no matter how passionate they may feel about independence. When a crisis happens again, they will be happy to be part of largest Spain, ” she concludes.

CFA Institute and CFA Society Brazil celebrate their “2018 Latin America Investment Conference” in Rio de Janeiro

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Investors with exposure to Latin American assets have a must-attend event at the “2018 Latin America Investment Conference” in Rio de Janeiro. On the 1^st and 2^nd of March, at the Belmond Copacabana Palace, CFA Institute, the Global Association of Investment Professionals, together with CFA Society Brazil, will welcome internationally acclaimed speakers who will address a wide range of topics and perspectives to shape investment strategies in Latin American markets.

The event is comprised of several practitioner-oriented educational conferences that will focus on Latin American economies and capital markets, as well as on global issues relevant to investors worldwide to discuss macroeconomic trends, innovations affecting financial services, and investment opportunities in the region.

The conference will be opened by the welcoming remarks and opening address of Andrew T. Campbell, CFA, Conference Chair, followed by Mauro Miranda, CFA, President at CFA Society Brazil, and Bjorn Forfang, Deputy CEO at CFA Institute. It will continue with a panel on Brazilian pension funds, with the participation of Fábio Coelho, Managing Director for PREVIC “Superintendência Nacional de Previdência Complementar”.

Finally, Marcelo Barbosa, Chairman of the Securities and Exchange Commission of Brazil, will close the first day’s events.

On the second day, Zeina Latif, Chief Economist at XP Investments, will talk about the challenges facing economic policy in Brazil in the short and medium term. Next, a first panel comprised by Daniel Cancel, Managing Editor for Latin America at Bloomberg, Andrea Murta, Director of Business US for the JOTA publication, and Matias Spektor, Associate Professor of International Relations at FGV “Fundação Getulio Vargas,” will discuss the implications for investors of the political situation in Latin America;to be followed by a second panel comprised by Alberto J. Bernal-León, Chief Strategist at XP Securities, Carl Ross, Sovereign Analyst for Emerging Country Debt at GMO, and Lisa M. Schineller, Managing Director of Sovereign and International Public Finance Ratings at S&P Global Ratings.

Following lunch, Roberto Rigobon, Professor of Applied Economics at the Sloan School of Management at MIT, will talk about how Big Data can affect the region’s future.
In the afternoon, Mary Bobbitt, Director of Society Advocacy Engagement for the Americas region at CFA Institute, will review the regulatory scenario in Latin America; to be followed by a new panel on trends in debt markets in Latin America, in which Daniel R. Kastholm, CFA, Regional Group Head for Latin American Corporate Ratings at Fitch Ratings, Alexei G. Remizov, Managing Director at HSBC Securities USA, Marianna Waltz, CFA, Managing Director and Regional Head of the Latin American Corporate Finance Team at Moody’s Investor Services, and Flavio Papelbaum, CFA, Manager for the Capital Markets Division at BNDES will participate.

Next, Axel Christensen, Managing Director and Chief Investment Officer and Portfolio Manager at Onyx Equity Management, and Sonia Villalobos, CFA, Founding Partner of Villalobos Consultoria Ltda, will discuss the opportunities and challenges when investing in Latin America.

In the afternoon, Brian D. Singer, CFA, Partner and Head of Dynamic Allocation strategies at William Blair & Company, will explain how to implement dynamic allocation strategies and the evolution of top-down investment. Carlos Viana de Carvalho from the Central Bank of Brazil will be the closing keynote. The conference will close with a farewell reception.

For further information, please visit this link.

Funds Society Organizes its Fifth Investments & Golf Summit

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Funds Society is proud to announce that it will host its Investments & Golf Summit 2018 on April 12th and 13th at the Trump National Doral in Miami.

Sponsors include Janus Henderson Investors, RWC Partners, Thornburg Investment Management, Vontobel Asset Management, GAM Investments and AXA Investment Managers.

On April 12th, at the Investment day, sponsored also by Schroders Investment Management, Columbia Threadneedle Investments and MFS Investment Management, participants will be able to take the opportunity to discuss about Global Markets as well as the latest portfolio management strategies and investment ideas from top-performing Asset Managers from the nine sponsors, followed by a networking reception. If desired, we are providing complementary accommodation at the Trump National Hotel.

Funds Society’s V Golf Tournament will take place at the Blue Monster in Trump National Doral Club Golf, host of the prestigious PGA TOUR events for the past 55 years. The famous 18th hole was ranked by GOLF Magazine as one of the Top 100 Holes in the World.

Spots are limited for the Tournament so please register at your earliest convenience. Non-player guests can learn golf in our clinic or simply enjoy the academic day and dinner.

Big Sur Partners and NYU Stern University Invite Professor Scott Galloway to Talk About the Corporate Culture of Technological Giants

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On Wednesday, February 7th, in an effort to bring the best investment ideas to its clients, Big Sur Partners, the multi-family office founded in 2007 and headquartered in Miami, together with NYU Stern University, will hold a reception cocktail and the subsequent presentation of the book “The Four: The Hidden DNA of Amazon, Apple, Facebook and Google”, by its author, Professor Scott Galloway.

The event will be the first of a series of presentations in which Big Sur Partners will present some of the best academics, experts and leaders in different segments and industries.

“We are honored to co-host this event with NYU Stern given our commitment to collaborating with the greatest minds across our network. We internally created the “BigSur Intelligence Unit”, in which we strive to find the best ideas throughout academia, industry experts, leading family offices and other stakeholders across financial markets. We believe it is important to always look at the world from different points of view and to listen closely to innovative thinkers,” said Ignacio Pakciarz, Economist, Founder and CEO at Big Sur Parnters.

Scott Galloway is a Professor of Marketing at NYU Stern University, where he teaches Brand Strategy and Digital Marketing to second-year MBA students. In addition, he is the author of the Digital IQ index, a global ranking of prestige brands’ digital competence. He is also a writer and entrepreneur, founding L2, Red Envelop and Phrophet; and has participated in the boards of Eddie Bauer, The New York Times Company, Gateway Computer, and Berkeley’s Haas School of Business. He received a BA from UCLA and an MBA from UC Berkeley.

“We are excited about this event given that we consider Professor Galloway’s thoughts on regulation to be very interesting, and perhaps even radical for a technologist and advocate of free markets. His idea on regulation as the only means to protect innovation is an interesting stand on the argument. As investors in the creative economy, we believe this event is valuable for understanding the cultures of these tech giants and how they operate, as well as the implications regulation may have on both the equity and Venture capital markets”, concluded Ignacio Pakciarz.

Michel Fryszman Joins BNPP AM as Head of Structured Finance

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Michel Fryszman has been appointed as Head of Structured Finance within BNPP AM‘s Private Debt & Real Asset Group. He is based in Paris and reports to Laurent Gueunier, Head of Real Assets, SME Lending & Structured Finance.

He joined on 15 January and in this new role, he is responsible for the management of BNPP AM’s structured finance team, composed of five professionals. In a memo Funds Society had access to, Gueunier asked her team to “join me in welcoming Michel to BNPP AM and in wishing him the best of success in his new position”, and mentioned that “he will supervise the design and implementation of European private securitisation strategies and speciality finance assets including consumer loans, residential mortgage loans and trade finance”.

Fryszman’s professional experience spans mortgage finance, asset management and securitisation. He joined BNPP AM from AXA Investment Managers where he had worked since 2005, initially as an ABS portfolio manager, before becoming Head of ABS Investments in 2008 and Head of Mortgages & Specialty Finance in 2014. His previous roles include being a securitisation specialist at Groupe GTI and portfolio manager at Crédit Foncier. He has also acted as a securitisation consultant to the World Bank.

Why Should the Spanish Equity Stand Out in 2018?

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With the beginning of the year comes the process of scrutinising equities, one of the most common classes of assets. This scrutiny is a fundamental exercise for any analyst, manager, financial intermediary or investor. The analysis of the cycle, expected profits, dividend yields and the interpretation of multiples. In absolute and relative terms, these are some of the instruments we use to try to decipher the intrinsic value of a company or market.

So, while cautious of falling into what in 1991 was named “home bias” by French and Poterba (upon determining that share portfolios of American investors were comprised of 94% American companies despite the fact that the US represented just 48% of the global equities market at that time), if we analyse the Ibex for a moment, we can say that 2018 may be the year for looking out “from behind closed doors”.

The Ibex is beginning a new season after a relatively poor performance and in spite of market expectations, which paves the way for attractive valuations (12-month forward P/E relative to Eurostoxx 50 below 25 year average).
With ROEs on a par with European companies, the low yield on the Spanish market compared with the Eurostoxx does not respond to fundamentals. In other words, Spain offers the same level of ROE as the European market (approximately 8%) at a much lower price to book value.
The correlation between expected 12-month profits and the performance of the Ibex has been practically at an all-time low since the summer (when political uncertainty was more influential). This could cause an anticipated re-rating, which we may see with publication of business earnings in the fourth quarter.
Despite the good momentum of businesses and generalised deleveraging, profits per share on the Ibex remain below pre-crisis levels, which demonstrates the vast amount of ground still to be made up in terms of the valuations of Spanish companies.
The negative impact suffered by Spanish companies due to currency movements in 2017, which was an unquestionably strong year for the euro, is not expected to be repeated to such an extent in 2018.
Expected dividend yield for the current year is only exceeded by the FTSE100 (based on European indices, the S&P500 and the Nikkei225).

Although the negative impact of political uncertainty in the Spanish market was undeniable in 2017 and even though these concerns have not dissipated, the current scenario of recovery for the Spanish economy is obvious and it is gaining traction. This should act to soften the blow in the event of renewed mistrust that may manifest itself as falls in the market:

1) Growth prospects for the coming years are the highest in the Eurozone. Furthermore, growth is now healthier and more balanced, as the construction sector is losing weight and tilting the commercial scales towards tourism and an increasingly thriving domestic demand.

2) The competitiveness of the Spanish economy is demonstrated by the harmonised growth of net exports since 2010. This has been possible thanks to the containment of unit labour costs and the normalisation of availability and credit cost at similar rates to Germany and France (Fitch indicated in October that credit to businesses had stopped falling for the first time in six years).

3) The positive dynamic in employment creation, which still has a long way to go, demonstrates the still considerable potential for growth in internal demand.

4) Catalonia, which represents over 20% of Spanish GDP, drops 4 decimals per quarter since the political uncertainty began. This represents a reduction of the national GDP of 20% of this 1.6% in annual loss. In spite of this not insignificant figure, the negative impact of the tension seems to be under control nationally.

Alongside all of these factors, if we also consider the tailwind from greater confidence in the recovery of the Eurozone – which we are now seeing in yields on bonds and the euro, the macroeconomic policies underpinning growth that are still clearly in place and expansion in step with global economic principles (let’s not forget that 36% of Ibex revenue comes from emerging countries) – the domestic market is satisfying many of the requirements to perform adequately in 2018.

Column by Pilar Arroyo, a manager of funds and multi-asset SICAVs at Banco Alcalá, Crèdit Andorrà Financial Group Research.

Mark Mobius Announces Plans to Retire from Franklin Templeton Investments

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Franklin Templeton Investments announced that after more than 30 years with Franklin Templeton, Mark Mobius, Ph.D. has announced his plans to retire from the company on January 31, 2018.

“There is no single individual who is more synonymous with emerging markets investing than Mark Mobius. My colleagues and I are deeply grateful to have had the opportunity to work alongside a legend, and we thank Mark for his many years of dedicated service and tremendous contributions to the firm,” said Chairman and CEO Greg Johnson.

“Mark has been an investor through historically transformational times in emerging markets and later frontier markets. Over the last three decades, Mark has built a team of talented research analysts and portfolio managers around the world, and has generously shared his experiences with an audience that spans the globe. We wish him all the very best in his future endeavors, as we do not expect retirement will slow him down very much,” Johnson continued.

Mobius has spent more than 40 years working in emerging markets all over the world. He was hired by the late Sir John Templeton in 1987 to launch one of the first mutual funds dedicated to emerging markets.

Mobius oversaw Templeton’s emerging markets team from 1987 to 2016.

Mobius commented, “I feel very fortunate to have spent most of my career at Franklin Templeton Investments. I have had the great privilege of working with an emerging markets team that includes some of the most talented and passionate people in the business, a number of whom have been with me for decades. I leave with great confidence in the Templeton Emerging Markets team and leadership at Franklin Templeton.”

Over the past several years, Franklin Templeton has evolved its emerging markets equity investment team structure, and succession planning for Templeton Emerging Markets Group (TEMG) has been a key component in that process. In early 2016, Stephen Dover, CFA was named chief investment officer of TEMG. Mobius transitioned the day-to-day management of the group to Dover and day-to-day management of the funds to other senior members of TEMG.

As Mobius transitioned away from managing the team and management of the funds over the past couple of years, he has continued to share his insights and perspectives with the Templeton team and the market at large. Most recently, Mobius’ primary responsibility has been focused on serving as an external spokesperson for the group, sharing macro views on emerging markets.

“Mark was instrumental in building the very experienced bench of investment talent within our emerging markets team, and he is leaving the various emerging markets funds and strategies launched under his leadership in very capable hands,” said Dover. “We do not expect Mark’s retirement to cause any disruption to our clients, and Templeton Emerging Market Group’s time-tested philosophy and disciplined approach will remain the same.” Templeton Emerging Markets Group has approximately 50 experienced investment professionals in 20 offices and over US$28 billion in assets under management as of September 30, 2017

Campbell Fleming (Aberdeen Standard Investments): “The LatAm and US Offshore business is a strategic priority”

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Five months after the completion of the merger between Aberdeen Asset Management and Standard Life plc, an operation that has created a giant in the investment sector and which has probably been the largest in Europe in recent years, Aberdeen Standard Investments, with the help of Campbell Fleming, the firm’s Global Head of Distribution, and Menno de Vreeze, Head of Business Development of International Wealth Management, gathered about 70 industry professionals at the Mandarin Oriental Hotel in Miami to discuss investment opportunities in emerging markets.

The event was attended by Brett Diment, Head of Global Emerging Market Debt, and Nick Robison, Senior Investment Manager of Global Emerging Market Equities Investments. In addition, given investors’ growing interest in the renegotiations of the NAFTA agreement, Dr. Rogelio Ramírez De la O, President to Ecanal, and an expert on the subject, explained his vision.

Interview with Campbell Fleming

In an interview with Funds Society, Campbell Fleming, Global Head of Distribution, who has more than 20 years of experience in the LatAm market, shared the details of the merger and the management company’s new plans for the region.
With about 593 billion pounds, approximately 775 billion dollars in assets under management, the new firm is now the twenty-fifth largest asset management company worldwide, the first in the United Kingdom and the second in Europe. An operation that the market perceived as defensive, something with which Campbell Fleming agrees, as in an environment with an incessant consolidation in the industry, the two management companies thought it was a better strategy to become one of the biggest players in the market.

“With the merger, the firm has expanded all of its capabilities in the six main asset classes, including equities, fixed income, real estate, investment solutions, alternative assets, and private markets. In each of them we are acquiring a significant size. In the equity franchise we have reached 159 billion pounds, in fixed income we exceeded 160 billion, and in the investment solutions franchise close to 150. Prior to the merger, Aberdeen had always questioned whether it was too focused on the equity business. While Standard Life was more focused on the investment solutions business and absolute return strategies. There is a minimum overlap between the initial offers of each of the management companies, being a highly complementary offer when consolidated. In addition, only 4.5% of our worldwide clients overlap.Obviously, the opportunity is based on presenting Aberdeen products to Standard Life clients or Standard Life products to Aberdeen clients. A great opportunity for us, as we can now combine the capabilities of the two firms and become a solid global company,” says Campbell.

After the consolidation, the new firm has more than 1,000 investment professionals worldwide, investment managers in 24 different offices, offers client support in 50 locations and conducts business in 80 countries. A massive presence in order to be a management company that offers a complete service and more solutions and products to investment platforms.

“The new firm has been established very quickly, soon the sales teams and the client structure were formed, and gradually the announcements of who will lead the investment teams are being made.”
According to Campbell, the US business represents 11% of the assets under management, about 82 billion dollars and about 100 professionals dedicated to the distribution of funds.

“We manage around 100 billion dollars in the United States, and we will be able to develop more business in the country with greater authority than we have in the past. We are interested in the growth of US business, both on the domestic and international sides; with the combined resources of both firms we now have enough people to do business in the US more thoroughly than we have ever done before.The LatAm and US Offshore businesses in particular, are a strategic priority for us in the medium-long term. In the United States we have offices in Philadelphia, Boston, Stamford and New York and soon we will have someone permanently based in Miami for the US Offshore team. We manage over 4 billion in this business directly, with the help of Menno de Vreeze who is responsible for the US Offshore business and Linda Cartusciello, who is in charge of the institutional side of the business in Latin America. And, indirectly, we probably manage a larger amount via other booking centres. “

Under Menno’s leadership, the private banking business and the US Offshore distribution channels have grown very fast. “We are delighted to see growth in Latin America and how investors in the region are diversifying with investments abroad. We have received a great deal of interest from frontier-market debt funds or Indian fixed-income funds, as well as equity funds, which are of great interest to all those clients who wish to diversify.”

With the regulatory changes in transparency, business has decreased in Switzerland and elsewhere in terms of client identification and bank secrecy, increasing outflows, something that Campbell perceives as an opportunity for growth in the US offshore business.

Meanwhile, in Latin America they have increased their visits particurlarly to Uruguay and Santiago to channel more business development. They also have an office in Brazil, so they are covering practically the most important points in the region. “There is not a single model for the region. Some countries are more advanced institutionally, while others are beginning to build good wholesale and private banking relationships.”

With regards to the goals that have been set for the region, Campbell says that they want to double the assets in terms of their current market share. “At this moment, between the two firms we could reach that volume and we should get it. If we could globally double the assets within the next three to five years we would be looking very healthy.”

Lastly, in the Allfunds fund platform, Aberdeen Standard Investments has experienced continuous growth, managing close to 5 billion dollars from its relations with global banks and the business of institutions and consultants. “A lot of these assets are concentrated in Europe, particularly in Spain, but the platform is starting to build in Latin America and Asia,” concludes Campbell.

The event’s agenda

The event was attended by Brett Diment, Head of Global Emerging Market Debt, who described how the macroeconomic stability of emerging markets has improved significantly in terms of nominal gross domestic product growth, the deleveraging of the private sector, the recovery in the current account balance and the moderation of inflation. He also explained how the opportunities in traditional emerging debt are in Argentina, where economic recovery supports fiscal reform, in Brazil, where economic growth is about to return after a severe crisis, in India, where India’s Reserve Bank is expected to keep interest rates at lower levels, and in Russia, where disinflation paves the way for further cuts in rates. While in frontier markets, opportunities are centered in Egypt, where government reforms have significantly reduced the primary deficit, in Ghana, where interest rates have fallen due to lower inflation, in Sri Lanka, where the increase in tourism supports the commercial account, and in Ecuador, which offers attractive valuation levels compared to other competitors in emerging markets. However, according to Diment, the greatest investment opportunities come from the Asian giant: China is narrowing its research and development spending gap with respect to the most innovative economies, Japan, Germany, the United States, and the United Kingdom. China has changed its investment structure towards a more technologically intensive one, aggressively closing the IT investment gap it has with the United States. In addition, the local Chinese debt market, the third largest debt market worldwide, is open to international investors.

Next, Nick Robison, Senior Investment Manager of Global Emerging Market Equities, recommended some caution in the short term, although the asset class continues to offer attractive valuations and seems to be enjoying a recovery in economic terms and profits. The two main reasons for raising caution in this type of assets are the normalization process of the Fed’s policy and that of the rest of the central banks, which is expected to be gradual, but may still mean a risk for the region; and the fall of growth momentum in China.

Closing the presentations, Dr. Rogelio Ramírez De la O, President of Ecanal, explained the economic repercussions for Mexico of the renegotiation of the NAFTA treaty. After 24 years of the treaty, Mexico has not been able to develop a long-term development policy to achieve a significant advantage with the signing of the treaty. In these years, the wage spread between the US and Mexico has not diminished because Mexico has not managed to increase the domestic added value in its exports to the United States. While manufacturing exports have multiplied sevenfold in the period from 1993 to 2017, the value added in production has increased only 1.8 times, there being a disconnection between the NAFTA treaty and GDP growth.

Since the NAFTA treaty is a pillar of macroeconomic stability and an indirect guarantee for investment, it is very likely that Mexico will have to make substantial concessions to the demands of the United States, as Mexico has a greater dependence on the treaty and very little margin of leverage. If Mexico makes these concessions, the peso will most likely stabilize and continue to grow after the negotiations. The main obstacle is the pace of negotiations, since there are presidential elections in Mexico in July and elections in the US Congress in November 2018.

Charitable Giving to Maximize Your Tax Benefits

| For Gabriela Huerta | 0 Comentarios

According to Raymond James & Associates SVP Lisa Detanna, the process of estate planning when it involves a gifting strategy is to give what you want, to whom you want, when you want, and how you want and if possible save on taxes and expenses.

Financial planners and investment advisors help families develop an estate plan with the client’s trusted accountant and estate lawyer that utilizes current gifting laws to be efficient when passing assets to the next generation and the charities that the individual or families are dear to.

Generally, they start with a cash flow model and retirement plan whereby they determine if the client and their family have enough to live like their highest earning income years throughout retirement. Then, they run these future cash flow models out to age 110 with rich assumptions on the expense side of the ledger and conservative assumptions on the asset to err on the side of caution.

When there is a surplus, they work with a client and their families to identify if there are heirs that the family wishes to inherit the wealth at their passing and how much. It is not an “all or none” answer and is different for every person with no right or wrong answers. If there are not for profits or charities that are important to the client, they then look at developing a gifting strategy that fits into the client’s wishes and maximizes the tax efficient benefits under current gifting laws.

There are 3 options in estate tax: Avoid the tax: give assets away before death; Pay the tax: sell assets or transfer assets; and Insure the tax: use discounted dollars to pay the tax, preserve assets and estate.

Like the slogan “death and taxes are inevitable,” estate taxes are due in cash within nine months of death and they are progressive.

Currently, one can gift US$14,000 maximum per beneficiary per year (called annual gift) without filing a gift tax return or it eating into one’s lifetime gift credit or estate tax exemption at death. In addition, one can pay educational expenses or medical expenses if directly paid to the provider. This is the simplest way to make a gift and many charities will accept highly appreciated stocks, bonds or real estate which can be tax friendly to the grantor.

If one is fortunate enough to have over the exemption gifting amount, this is where the estate planning begins. One can gift to bonafide 501(c)(3) charities the overage of the exemption amounts and if they utilize some estate planning techniques they may be able to get some tax benefits on those gift that they can benefit from while they are still alive. Of course one can also gift with any level of wealth and these gifts can be tax efficient. Always consult your accountant, financial advisor and attorney prior to making the gift so there can be a discussion on how best to do it.

“Charitable giving is important within wealthy families as it instills the concept of giving back as assets are passed from one generation to the next and helps prepare heirs to be good stewards of wealth. Involving heirs early on to prepare them to be able to handle how to help others and utilize the wealth as well as finding purpose in life by helping others through philanthropic efforts is key for a family in creating a meaningful legacy. In fact, there are a wealth of gifting strategies and changes in tax laws or regulations may occur at any time. Be sure to discuss any tax or legal matters with the appropriate professional. ” Detanna concludes.