According to the latest research from Cerulli Associates, a global analytics firm, in certain instances, women have different investment strategies and viewpoints than their male counterparts.
“There is opportunity for providers willing to commit resources to target this unique demographic,” states Shaun Quirk, senior analyst at Cerulli. “Especially as females play more prominent roles in the financial planning process.”
“We explore investor portfolio involvement in relation to gender,” Quirk explains. “Fewer than one-third of women believe they ‘need very little advice’ when investing, compared with nearly half (49%) of male respondents. This data can help providers develop strategies to market products and services tailored to meet the evolving needs of female investors.”
“There is a popular belief that men tend to be more involved in the investment process than women,” Quirk continues. “According to our data, almost 60% of male investors surveyed indicate a desire to be actively involved in the day-to-day management of their portfolio, versus just 42% of women.”
“Some industry professionals suggest that women are more likely to implement long-term, goal-oriented investment strategies that do not require day-to-day trading,” Quirk says. “With this in mind, providers can position planning tools and holistic wealth management solutions that align with their female clients’ views on portfolio management.”
There is still relatively little differentiation across firm products and platforms to target female investors. Cerulli believes that financial services providers can objectively analyze the differences between the two cohorts for perspective on how to communicate and market products to these two distinct segments in relation to investing and planning for retirement.
Cerulli’s third quarter 2016 issue of The Cerulli Edge – U.S. Retail Investor Edition explores what drives female investors, how women can successfully plan for retirement, and the unique challenges the wage gap presents for women.
CC-BY-SA-2.0, FlickrFoto: Melges Rocks / Vimeo. Operando entre la multitud
Risk-on sentiment has dominated markets in a post-Brexit world characterized by expectations for lower-for-longer interest rates. The result? Certain investments have become very popular, and investors will want to tread carefully and be selective.
The chart below shows where the crowds are, based on an analysis of fund flows, fund positioning and price momentum. Postions with scores between 1 and 2 (and -1 and -2) are considered as popular, and those with scores above 2 (and below -2) as very popular. The higher the score, the more popular the overweight is. The lower the score, the more popular the underweight is. The most popular investments today: overweight U.K. government bonds (gilts), emerging market (EM) sovereign debt, developed market credit and gold, as well as underweight eurozone equities.
Managing risk is key
Investment popularity does not tell us much about the direction of returns over the long run (i.e. the next 12 months). In fact, many of today’s consensus trades could be long-term winners as low economic growth and low interest rates persist.
Yet some popular positions are approaching extreme levels (scores above 2 or below -2), which can be seen as an important signal of short-term risk. These positions may be vulnerable to a market shock or rising volatility, especially when combined with high valuations. It’s crucial to manage this risk by being selective.
Reducing popular positions where prices have moved beyond fundamentals (examples are gilts and bond-proxies such as utility stocks) may be beneficial. Resisting taking contrarian positions in sectors facing big structural challenges (e.g. European banks) may also be productive. But popular overweights with supportive fundamentals and valuations (such as EM debt and U.S. credit) are still worth considering, and gold can offer portfolio diversification benefits. More than $8 billion has flowed into dividend equities since the Brexit vote, according to EPFR, and we prefer dividend growth over dividend yield. An overweight EM equity position doesn’t appear popular despite recent inflows into the asset class.
Bottom line: Be mindful of the short-term risks embedded in consensus trades, and look for potential opportunities the crowds haven’t yet reached.
Build on Insight, by BlackRock written by Richard Turnill
CC-BY-SA-2.0, FlickrFoto: Morton2905, Flickr, Creative Commons. Amundi se convierte en accionista mayoritario de KBI tras comprar un 87,5% a Oddo & Cie
As announced on 23rd May 2016, Amundi has finalised the acquisition from Oddo & Cie of Kleinwort Benson Investors (“KBI”). KBI now becomes part of the Amundi group which takes a majority shareholding of 87.5% with the KBI management team acquiring the remaining 12.5%.
In light of the acquisition, KBI will now trade as KBI Global Investors (“KBIGI”), a brand that underlines the rich heritage of the company and identifies it clearly in international markets.
KBI Global Investors is a fast-growing fund management firm specializing in equity capabilities. Based in Dublin (Ireland), with offices in Boston and New York, it employs 62 people. Its highly experienced management teams manage 8.1 billion euros of assets at 31st July 2016, mainly in global equity strategies. KBI Global Investors recorded excellent performance in recent years, and dynamic growth in assets under management: up 28% on average per year between 2011 and 2015.
Amundi and KBI Global Investors are highly complementary in terms of products and geographical focus: KBI Global Investors’ expertise in global equities will significantly strengthen Amundi’s equity management offering; in return, KBI Global Investors will leverage Amundi’s strong retail and institutional presence in Europe, Asia and the Middle East.
Yves Perrier, Chief Executive Officer of Amundi, commented, “We are delighted to welcome the KBI Global Investors team to the Amundi Group. This acquisition is part of our strategy to offer the most effective investment solutions to our retail and institutional clients. KBI Global Investors will also significantly strengthen our offering in the equity asset class.”
Sean Hawkshaw, Chief Executive Officer of KBI Global Investors, adds, “As part of the Amundi group we have the ideal platform from which to grow. We are deeply grateful to our clients, to our friends in the consulting community, and of course our employees, for their unwavering support over the past six months. Our assets under management have increased over this period, with additional flows from our existing clients as well as some significant new mandates; that has given us a great deal of encouragement.”
Prudential’s Asian investment branch, Eastspring Investments, has promoted Phil Stockwell to Chief Executive Officer of its Singapore business effective as of September 1st. Stockwell had been the Chief Operating Officer of Eastspring Investments, company he joined in September 2014.
He will report to Guy Strapp, Eastspring Investments chief executive, and will be responsible for the operations of the largest of Eastspring’s 10 Asia offices. He is also responsible for the environment around their portfolio managers in Singapore so they can focus on alpha generating activities.
Prior to joining Eastspring Investments, Phil was COO of BT Investment Management in Australia, a publically listed fund manager and part of Westpac Banking Corporation. In his role, Phil was responsible for the leadership of product development, product management, client services, dealing, investment operations, IT, risk and compliance, and company secretarial and legal. Phil has also been a strategy consultant with McKinsey & Company, and with KPMG Consulting. Phil has over 13 years of investment industry experience.
Phil holds an MBA from Australian Graduate School of Management (AGSM), UNSW, Sydney and a Bachelor of Economics and a Bachelor of Commerce from University of Queensland, Brisbane. He is a Fellow of the Institute of Chartered Accountants in Australia.
UCITS compliant absolute return funds have outperformed hedge funds over the past five years, according to a study conducted by independent asset manager Lupus Alpha.
The research, conducted among a universe of 564 alternative absolute return funds, revealed that over a five-year time period, UCITS regulated absolute return funds offered an average return of 2.72% per year, whereas hedge funds lost an average of -0.46% per year.
Over a one-year time scale, the picture was even gloomier with less than 30% of funds offering positive returns, ironically due to the high level of volatility at the beginning of the year. Added to that was a relatively high level of European equity exposure among most funds, which further dragged down performance throughout 2016.
Overall, absolute return funds offered an average return of -3.55% over the past five years, with unregulated hedge fund vehicles at the bottom-end of the scale, offering -5.63%. However, they still outperformed the European equity universe, with the Euro Stoxx 50 index falling by -13.89% throughout the same period.
Independent of average returns, the survey concluded that profitability varied greatly depending on the provider, with some asset managers offering returns of 20.56% over the past years, while others reported losses of -23.63%.
Ralf Lochmüller, founding partner and spokesperson for Lupus Alpha comments: “The performance of individual absolute return funds can vary greatly, we have noticed clear difference in terms of quality. Our research highlight that manager selection should remain a key priority for investors in order to achieve stable returns independent of the market phase.”
CC-BY-SA-2.0, FlickrFoto: charlemange / Pixabay. Algunas fundaciones y fondos están reevaluando el uso de los hedge funds
NEPC, one of the industry’s largest independent, full-service investment consulting firms to endowments and foundations, recently published the results of its Q2 2016 NEPC Endowment and Foundation Poll, a measure of endowment and foundation confidence and sentiment related to the economy, investing and market performance. The Q2 Poll included a special focus on how endowments and foundations view hedge funds. Respondents cited strong concerns about high fees, underperformance and transparency.
“While hedge funds play an important role in many institutional portfolios, the last several years have been difficult for the industry and investors are starting to look very closely at how hedge funds can work for them,” said Cathy Konicki, Partner and Head of NEPC’s Endowment & Foundation Practice Group. “These survey results are by no means indicating a mass exodus from hedge funds, but they do point to greater pressure being felt by the industry as a whole.”
According to the survey, twenty-four percent of respondents cited having zero exposure to hedge funds, which is a significant increase from the Q2 2014 NEPC Endowment and Foundation Poll, when only two percent of respondents reported having no exposure. And while 39% of respondents in the Q2 2014 Poll had 11-20% of their portfolio allocated towards hedge funds, in the Q2 2016 survey only 23% had the same allocation.
Another concern cited by endowments and foundations was hedge fund fees. A quarter of survey respondents have asked for reduced fees or been offered reduced fees by their hedge fund managers within the past six months. When asked about the biggest challenges they face with their hedge fund investments right now, High Fees was the second highest response (54%), topped only by Low/Disappointing Returns (80%). Rounding out the top concerns was Transparency (37%).
Despite these concerns, the survey did highlight some positive findings for the hedge fund community. While 28% of endowments and foundations said they’ve either reduced or were considering reducing their allocation to hedge funds, 55% are not actively discussing this with their investment committee, and nearly a fifth of respondents (17%) have either increased or were considering increasing their allocation to hedge funds.
As for which hedge fund strategies respondents are most bullish on, 36% think Multi-Strategy hedge funds will generate the highest returns over the next three to five years. Other top results to this question include Long/Short Equity (33%), Global Macro (25%) and Credit (22%).
“This survey tells us that endowments and foundations are frustrated with hedge funds but they’re not giving up on them, and with several global concerns on the horizon, many investors may be looking towards hedge funds to protect their portfolios,” said Konicki.
Other top findings include:
50% say the US economy is in a worse place now than it was this time last year
52% say a Slowdown in Global Growth poses the greatest near term threat to their portfolios
Rising Interest Rates were the second most cited concern (16%)
Potential for overseas conflict was third (13%)
Presidential Conundrum: 70% of respondents think Hillary Clinton will win the upcoming Presidential Election, but are split on who would have a more positive impact on US markets and their portfolio.
According to companies’ survey in Germany and in France the economic activity was marginally down in August. German’s companies were a little more pessimistic for the 6 month period to come.
Even if levels are different we perceive in the following graph that there is a kind of stability in economic activity during the last twelve months. This synchronization of the business cycle suggest that France and Germany cannot really expect a stronger growth momentum in the short run. In other words, it seems that German and French economic activity are not able to accelerate from their current level. It’s not worrisome for Germany as its unemployment rate is low but it is problematic for France as its unemployment rate is just below 10%. As there is no impulse from outside as world trade trend is flat, it means that the impulse must come from inside. The ECB has done the job so we must expect a more proactive fiscal policy in order to jump on a higher trajectory.
For Germany, the main source of weakness is a slowdown in expectations. The index is back to 100.1 which is marginally below its historical average (100.3). The current condition index (112.8) is weaker but at a level way above its historical average (103.2).
In France, the Personal Outlook index on Production is shifting downward in the industrial sector. There is, both Germany and France, the perception by companies that the economic activity will not have the necessary impulses that could provoke an acceleration in the economic momentum. This can be linked with Brexit and its consequences or by the fact that the global situation is at risks and not only on economic side. We see political risks almost everywhere (elections in the US, in France, referendum in Italy, Brexit,…) and this could be a drag for economic growth.
The detail of each survey shows that internal demand has been weaker in August. This can be seen on the German graph below. There is a deep drop in retailing and in wholesaling in August.
In France the main source of concern is the weaker momentum in the industry. All indices are close to their historical level (except construction) and there is no source of rapid improvement. The industrial sector was perceived as stronger 3 to 6 months ago but this is no longer the case and its recent momentum is problematic. This means that we can have a rebound in the third quarter for GDP (after 0 in Q2) but the government target growth of 1.5% for 2016 will not be reached.
Pershing, a BNY Mellon company, has announced the launch of new mutual fund and exchange-traded fund solutions, offered by its affiliate, Lockwood Advisors. These will meet the needs of investors starting to build wealth and help registered reps navigate the Department of Labor’s (DOL) fiduciary rule requirements.
Pershing’s new Lockwood WealthStart Portfolios mutual fund and ETF offering, along with new solutions provided by third-party providers, both feature a diverse range of asset allocation strategies and a minimum balance of $10,000.
These portfolios include a number of asset allocation strategies targeted at investors with varying risk profiles. The strategies can be accessed through diversified risk-based model portfolios from some of the industry’s leading firms, including Pershing affiliate Lockwood.
“These flexible mutual fund and ETF solutions demonstrate our ongoing commitment to providing financial professionals with the tools they need to navigate the evolving regulatory landscape and grow their business,” said Joel Hempel, chief operating officer of Lockwood. “They may also assist registered reps who are considering a transition from a commission-based brokerage model to fee-based advisory relationships.”
The new offering is fully integrated into Pershing’s flagship NetX360 professional platform, and advisors can access them through Lockwood’s turnkey managed account solution, Managed360 or by using Pershing’s managed investments platform.
“Emerging and mass-affluent investors can now have greater access to professionally managed investment solutions,” said Hempel. “These investors represent a large, often underserved market. By offering a suite of diversified risk-based portfolios to this segment, advisors and registered reps can serve new clients and take advantage of cross-generational opportunities.”
Looking ahead, Lockwood will continue to evaluate managers to participate in its third-party offerings to provide more opportunity for financial professionals to grow their business and for investors to accumulate wealth.
It’s no surprise when markets take a break in August. Too many people are on the beach during the “dog days” of summer for important decisions to be made. Even so, August 2016 will go down as an exceptionally sleepy month.
Markets Barely Moved in August
Leading up to the meeting of central bankers in Jackson Hole last week, the S&P 500 Index went through 34 trading sessions without a 1% one-day move, up or down. It only broke 0.5% six times. That made it the least volatile 30 days in more than 20 years. Similarly, Bloomberg reports that the August trading range for the 10-year U.S. Treasury was the tightest for any month in a decade.
Moreover, investors appear to believe that these conditions will persist for some time. Not only has the VIX Index of one-month implied volatility in the S&P 500 been sinking since its spike after the Brexit vote, but according to Bank of America Merrill Lynch, there is now a record level of shorts in the VIX futures markets—bets that the index will fall even further.
Remarkably, this has happened before a Jackson Hole symposium in a year when central banks have been the only game in town. Janet Yellen’s speech there was one of only three she has made this year (the other two were in Philadelphia in June and New York in March). In 2015 she made 11 appearances and on average Fed chairs have given almost 20 addresses per year—so this ought to have been a hotly-anticipated event, especially as a number of Fed Presidents made notably hawkish noises leading up to it.
Is This Fatigue, or Complacency?
After the excitement of the global growth scare in January, the central-bank innovations of the spring, and the Brexit vote in June, perhaps markets needed some particularly “doggy” dog days to recover.
The more worrying conclusion is that they have grown complacent. One can understand why. Brexit turned out not to be the end of the world; U.S. jobs data is back on track; Europe’s economic data continues to improve; bond yields have fallen and corporate earnings have disappointed, but stocks keep climbing; rate hikes keep getting postponed; and opinion polls started to favor the more predictable U.S. Presidential candidate.
Low Volatility Can Heighten Market Vulnerability
But complacency is unwise—and not just because all of this could flip around by mid-September. In financial markets, complacency itself can store up danger, increasing vulnerability to unexpected changes in conditions.
A driver on a perfectly straight highway can be tempted to take his eyes off the road and put his foot on the gas, and investors often behave in a similar way. As “risk” appears to diminish, they add leverage or take bigger bets to use up their risk budgets. They become less inclined to hedge against downside losses, even as the premiums to do so get cheaper—hence the low level of the VIX. That makes for a harder crash when a tire blows out.
Market volatility reverts to its mean, but even taking this into account, periods of unusually low volatility have often preceded bouts of unusually high volatility. Volatility was low just before the dollar came off the gold standard in August 1971, for example; it was low at the beginning of 2007 just before the financial crisis began to unfold; and it was low early in 2011 before the Eurozone crisis erupted. Low volatility didn’t predict events like these, of course, but it created the vulnerability that explains some of the unusually high volatility when those events occurred.
When the Dog Days Are Over, Be Prepared
Given that a lot could happen this fall to reveal how complacent and vulnerable markets have become—from an inflation or rates shock to another twist in the U.S. elections or a geopolitical tire blow-out—investors should make sure their seatbelts are fastened.
The old proverb advises us to let sleeping dogs lie: prodding them awake can result in a nasty bite. Markets have slumbered deeply during the dog days of August. Investors should be prepared for when they rouse again.
CC-BY-SA-2.0, FlickrFoto: fancycrave1 / Pixabay. La clase media-alta de Reino Unido se decanta por la banca online
Research by financial services research and insight firm Verdict Financial has found that the UK’s mass affluents, compared to non-mass affluents, are heavier users of online and mobile banking, are more likely to favor these channels for routine activities, and are more satisfied with the performance of digital banking channels.
The company’s latest report finds that among those who use online banking, 89% of mass affluents accessed this channel at least once a week, compared to 83% of non-mass affluents. For mobile banking, the equivalent weekly usage figures were 83% and 79%, respectively.
Furthermore, mass affluents are slightly more inclined to use digital channels to carry out activities such as checking their balance, paying bills, and managing their direct debits.
Daoud Fakhri, Principal Analyst for Retail Banking at Verdict Financial, states: “Mass affluents are more confident about financial management than other consumers, finding it easier, for example, to keep track of their day-to-day spending. As such, they are more at home using digital self-service channels and less reliant on speaking to bank staff, whether in-branch or in a call center.”
Verdict Financial’s report also found that mass affluents were more satisfied than other consumers with the functionality, usability, and security of digital channels, especially mobile. For example, while only 36% of non-mass affluents were very satisfied with mobile banking security, this rose to 45% of mass affluents.
Fakhri continues: “The high level of enthusiasm for digital banking among mass affluents is good news for the banking industry. Banks are trying hard to migrate their customers to their online and mobile banking platforms, which incur far lower operational costs than branch networks and call centers, and it appears that mass affluents are happier than non-mass affluents to go along with this.
“Given that mass affluents are a highly attractive demographic in terms of their revenue-generating potential, there is clearly a strong incentive for banks to continue developing their digital channels by adding new functionality and improving ease of use.”
