Institutional investors across Europe are steadily increasing proportional investment exposure via mutual funds, even where mandates could be demanded, according to the latest issue of The Cerulli Edge – Global Edition.
Cerulli Associates, a global analytics firm, says statistics suggest that, while insurers are leading the way, the trend in Europe is pan-institutional. For example, German pensions’ proportional exposure via funds rose from 41.3% in 2011 to 50.1% in 2015.
“In the search for better investments, insurers are turning to less familiar asset classes–prompting the use of funds rather than segregated accounts to make their investments. There is clearly a greater willingness to have commingled investments,” says David Walker, director European institutional research at Cerulli.
He notes that early allocations to less well-trodden asset classes will be smaller, and therefore the volumes involved may not justify, in either the insurer’s or asset manager’s eyes, a separate account. That said, even in some of the more familiar yield classes–for instance high yield and emerging market debt–certain insurers prefer funds as these are easier to enter and exit compared with being in a segregated account.
“One manager Cerulli interviewed uses geography to split his insurer clientele’s preference for commingled/pooled structures, or investing via mandates. He has mutual funds more generally in France, Germany, Italy, and Spain, but mandates typically in the UK and Europe’s north,” says Walker.
He notes that some institutions are not willing to forfeit the influence over the strategy/risk exposures and the briefings that are part and parcel of a mandate-based relationship. For some institutions, not knowing the identity of the other coinvestors in a broader pooling vehicle is a step too far.
“Some insurers seeking prize investment assets such as buildings or infrastructure projects in this yield-starved environment argue that they lose competitive edge by ‘sharing’ them with rivals in a pooled structure,” says Walker.
BNY Mellon said its U.S. Investor Solutions Group has launched a real-time service to deliver net asset values (NAV) and daily dividend accrual rates for mutual funds.
The firm provides the data on behalf of its asset manager clients to intermediaries such as broker-dealers via The Depository Trust & Clearing Corporation’s (DTCC)Mutual Fund Profile Services (MFPS)by utilizing IBM MQ real time transmission methodology. The technology conveys information more quickly than the batch transmission technology it replaced. BNY Mellon is the first transfer agent to leverage the technology utilized by DTCC to deliver NAV data.
“Our first-to-market MQ technology delivery service enables asset managers to accelerate the delivery of key data—such as NAVs and daily dividend accrual rates—to intermediaries, thereby increasing their ability to meet critical nightly processing windows,” said Christine Gill, head of Investor Solutions Group. “The value of this improved turnaround time flows end-to-end to all stakeholders, not only to intermediaries, but in turn to the clients they serve, and ultimately to shareholders.”
The importance of providing timely data to broker-dealers has been increasing as these intermediaries have gathered a growing percentage of mutual fund assets on their platforms, according to the company. BNY Mellon’s U.S. Investor Solutions Group comprises its transfer agency and subaccounting businesses. As of March 31, 2016, BNY Mellon supported over $2.6 trillion in assets globally on its transfer agency platform and over 165 million accounts with assets of more than $2.6 trillion on its subaccounting platform and is ranked as the largest third party provider of subaccounting services and the second largest provider of transfer agency services (based on accounts) in the U.S., per the 2016 Mutual Fund Service Guide.
Concluded Gill, “We remain committed to investing in technological innovations that improve our clients’ experience and underscore our leadership position as the investments company for the world.”
The European Fund and Asset Management Association (EFAMA) in its latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS from 28 associations representing more than 99% of total UCITS and AIF assets, highlights that for May 2016, net inflows into UCITS and AIF totaled EUR 52 billion, compared to EUR 65 billion in April.
According to EFAMA, the decrease in UCITS net sales was caused by lower net sales of bond funds. Long-term UCITS (UCITS excluding money market funds) recorded net inflows of EUR 24 billion, compared to EUR 33 billion in April.
Equity funds experienced a turnaround in flows, increasing from net outflows of EUR 1 billion in April to net inflows of EUR 3 billion in May.
Net inflows into bond funds decreased to EUR 14 billion from EUR 23 billion in April.
Multi-asset funds recorded net sales of EUR 5 billion, compared to EUR 6 billion in April.
Meanwhile, net sales of UCITS money market funds increased to EUR 17 billion, from EUR 11 billion in April and AIF recorded net inflows of EUR 11 billion, compared to EUR 21 billion in April.
Overall, total net assets of European investment funds increased by 1.8% in May to stand at EUR 13,519 billion at the end of the month. Net assets of UCITS increased by 1.9% in May to EUR 8,290 billion, and AIF net assets increased by 1.6% to EUR 5,229 billion.
Bernard Delbecque, Senior director for Economics and Research at EFAMA commented: “After three months of negative outflows, equity funds achieved again positive net sales in May”.
According to Mike Amey, Head of Sterling Portfolios at PIMCO, with its first policy move in four years and first interest rate move in seven years, the Bank of England’s Monetary Policy Committee has very much embraced the view that if you decide to ease, then be aggressive. “When your economy is approaching the zero lower bound on interest rates and intermediate gilt yields are already well below 1%, it makes sense to use what modest monetary scope you have as decisively as you can. Thursday’s four policy moves – to cut interest rates to 0.25%, restart quantitative easing, initiate a corporate bond buying programme and provide financing support to the banking system – certainly constitute a decisive and comprehensive package. Now the two critical questions are will it work, and what are the investment implications?” He writes.
Amey believes that whether it is likely to work is best explained by looking at the BOE’s growth and inflation forecasts, which are very similar to PIMCO’s. UK growth is expected to fall to just above zero for the next twelve months, and then rise back up to 2% by 2018–2019. Headline inflation is expected to rise to 2.5% and fall back slowly to the 2% target thereafter. “This represents a relatively benign outlook, and assuming the new Chancellor announces some reversal of the previous plan to further tighten fiscal policy, there looks to be a good chance that these forecasts will be realised. Given the speed of deterioration in the Purchasing Managers’ Index and other surveys released post the Brexit vote, there are clearly risks to the outlook, but the new policy measures should go some way to negating those risks.” He adds.
The BOE’s asset purchase programme will take six months to complete and the corporate bond purchase programme is intended to be completed over an 18-month period. In amey’s words, this suggests monetary policy will remain highly accommodative for much of the cyclical horizon, keeping the damper on shorter- to medium-term UK sovereign yields despite the fact that many are already hitting new lows. In relative terms, longer-dated (30-year) gilts yielding around 1.5% are becoming more attractive versus shorter maturities, where yields are around 0.1% on the two-year and 0.7% on the 10-year. Meanwhile the British pound has been weak, but is still at levels above those seen in the last month.
“In summary, we expect longer-term gilt yields should be supported by the BOE policy moves and the broader economic environment, whilst the British pound looks to have scope to go lower.” He concludes.
Foto: LinksmanJD . Panamá recibirá el Latin Private Wealth Management Summit en septiembre
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Foto: Instituto Siglo XXI
. Estados Unidos ocupa la decimocuarta posición en seguridad para la jubilación
The United States ranks 14th for retirement security, according to the 2016 Global Retirement Index, released by Natixis Global Asset Management. The index examines key factors that drive retirement security and provides a comparison tool for best practices in retirement policy across 43 countries.
Among the leading countries for retirement security identified by the Index, Northern Europe dominates the top 10, including Norway at No. 1, followed by Switzerland, Iceland, Sweden, Germany, The Netherlands and Austria. They are joined by New Zealand (No. 4), Australia (No. 6) and Canada (No. 10).
“Retirement used to be simple: Individuals worked and saved, employers provided a pension, and payroll taxes funded government benefits, resulting in a predictable income stream for a financially secure retirement,” said John Hailer, CEO of Natixis Global Asset Management in the Americas and Asia. “Demographics and economics have rendered the old model unsustainable, but the leaders in our index are finding innovative ways to adapt to the new reality and provide a blueprint for the rest of the world.”
The Natixis Global Retirement Index, introduced in 2013, creates an overall retirement security score based on four factors that affect the lives of retirees. Finances in retirement are an important component, but three other sub-indices that gauge material wellbeing, health, and quality of life are included to provide a more holistic view. With this year’s edition, Natixis has focused on a smaller number of countries than in the past, mainly developed economies where retirement is a pressing social and economic issue.
Despite many positives, warning signs clear for the U.S.
The U.S. ranking benefits from high per capita income, the stability of its financial institutions and its low rate of inflation, according to index data compiled by Natixis. In addition, the nation’s unemployment rate has moved lower, continuing a long-term trend.
In contrast to these positive factors, the U.S. also has one of the highest levels of income inequality among developed nations, putting the goal of retirement savings beyond the reach of millions. The U.S. also has a growing ratio of retirees to employment-age adults, which means there are fewer workers to support programs such as Social Security and Medicare, putting increasing pressure on those government resources over time. That trend, combined with the broader shift from defined-benefit to defined-contribution employer retirement plans, is transferring the burden of retirement financing to individuals.
Americans recognize the shift in funding responsibility
American investors are acutely aware of increasing the need for individuals to fund a greater share of retirement. In a survey of investors conducted by the firm earlier this year, 75% said this responsibility increasingly lands on their shoulders.
However, many Americans may be underestimating how much money they need to save in order to retire comfortably. Investors estimate they will need to replace only 63% of their current income when they retire, well short of the 75% to 80% generally assumed by planning professionals.
In addition, a large segment of Americans simply doesn’t have access to employer-sponsored savings programs such as 401(k) plans. The U.S. Department of Labor estimates that one-third of the nation’s workforce doesn’t have access to a retirement plan. A separate survey of participants in defined-contribution plans found that, even when they have access to a plan, four in 10 contribute less than 5% of their annual salary.
U.S. investors see clear hurdles to financial security in retirement, identifying their three greatest challenges as long-term care and healthcare costs, not saving enough, and outliving their assets. When asked how they would make up for an income shortfall, two-thirds of U.S. investors say they will continue to work in retirement.
“Americans must come to grips with their increasing responsibility for their own retirement security,” said Ed Farrington, Executive Vice President of Retirement Services for the asset management firm. “The leading nations in our research are developing effective solutions, but we also need greater commitment by decision makers, engagement by individuals and a willingness to learn from the experiences of other countries around the world.”
In a market update webcast, Western Asset Management Chief Investment Officer Ken Leech described a global economy rife with problems – yet one that continues to grow, especially in the United States, even if slowly and with evident risks.
“We expect steady, unspectacular U.S. and global growth,” Leech said adding: “That’s been our basic message: slow but sustainable growth globally. The fear the market had in the first quarter, that the slow growth rate might actually fall, is what got the markets in pretty dire straits.”
During that first quarter, Western Asset did not believe the global growth situation was going to develop into a global recession, (a prediction that has so far proven correct), but it has warranted exceptional monetary accommodation.
“Policymakers have to be attentive to downside risks, especially in an environment where U.S. and global inflation remain exceptionally subdued,” Leech said. “Fortunately, central bank accommodation is aggressive, and increasing. That means U.S. Treasury bonds and sovereign bonds will be underpinned by these low policy rates, which will continue around the world.”
As for the U.S. Federal Reserve, which Leech said has made “a dovish pivot,” he concluded, “The Fed is going to be very cautious, and is unlikely to be moving rates up any time soon.”
Leech continues to see strong opportunity ahead in investment grade (IG) corporate bonds. Regarding Europe, the recent Brexit vote injected a high level of uncertainty into the outlook. He expects that the European Central Bank (ECB) will expand its QE program, both in length of the program and the size. Addressing emerging markets, Leech reported a generally positive outlook. “There’s a real case to be made for emerging markets, both in local currency and dollar-denominated bonds,” he said. “That’s an area we are focusing on even more meaningfully than coming into the year. The yield spread between EMs and developed has reached crisis wide. When you think about valuations and people needing yield, this is where yield is abundant… The two positions we’ve liked structurally have been Mexico and India. Over the course of the year we have been opportunistically investing in a number of others. One I’d highlight is Brazil.”
“Another point highlighted by the World Bank is the bumpy adjustment in China,” he added. “China’s growth is going to be slow. We need to be very thoughtful about it, but the policy adjustment in China was so aggressive that they could avoid a hard landing.”
“Global headwinds are straightforward. When you look at world GDP, we have been in the camp that a 3 percent growth rate, very slow by historical standards, can be maintained. A low bar, and it’s going to take a lot of policy help. Fortunately, we’ve had that, which truncated some of the downside risk. But the major headwind of growth over time is the enormity of the debt burden around the world. It’s going to take time, low interest rates and a continuation of policy support.” He concluded.
You can watch the replay of the webcast in the following link.
Fidelity Investments has announced the national launch of Fidelity Go, an advisory solution designed for investors seeking a trusted team to manage their money through a simple and efficient digital experience.
The platform was developed in collaboration with younger, digitally-savvy investors, and is a unique combination of a professionally managed portfolio, an easy-to-use digital dashboard, integration with Fidelity’s broader investment tools and services, and an all-in cost that is among the lowest in the industry.
“Fidelity Go makes professionally managed portfolios broadly accessible by helping people move from saving to investing quickly and efficiently, with costs starting at approximately $20 a year,” said Rich Compson, head of managed accounts at Fidelity. “Our goal is to help people meet their lifetime financial needs, and Fidelity Go is a new way for Fidelity to help digital-first investors and those just getting started.”
Investors also benefit from Fidelity’s broader capabilities, including integration with its online financial planning tools, ongoing monitoring with Fidelity mobile apps including Apple Watch alerts, and the ability to direct the unlimited 2% cash back from the new Fidelity Rewards Visa Signature Card into their Fidelity Go accounts. “Integration with Fidelity’s broader experience can help customers both enhance and simplify their financial lives,” said Compson.
Foto: Jeff Gunn
. El New England College of Business lanza una especialización en Global Finance Trading
New England College of Business launched a new concentration in its Master of Science in Finance (MSF) degree in Global Finance Trading. The new concentration is being offered in response to a growing worldwide demand for graduates trained in practical financial knowledge and an understanding of the processes and technologies of global trading.
The new Global Finance Trading concentration was developed through collaboration between New England College of Business and London Academy of Trading.
The Global Finance Trading concentration helps students adopt the strategies of maximizing trading gains while minimizing risks, learn to utilize fundamental analysis and technical indicators, and also acquire an understanding of trading psychology and risk management.
Dr. Ned Gandevani, New England College of Business, Graduate Finance Program Chair, indicated that research shows that some students lack training in asset management, and this new concentration stresses real-world scenarios to help students fill this gap in skill sets. “In addition to classroom training and theoretical learning, students manage assets through simulations,” Gandevani said.
In addition to acquiring practical skills, students also become familiar with processes and technologies used by finance professionals throughout the world. The program covers such areas as Foreign Exchange (Forex), commodities and stock indices.
Foto: U.S. Army
. Los asesores independientes están más satisfechos que los que trabajan por cuenta ajena
The J.D. Power 2016 U.S. Financial Advisor Satisfaction Study recently released reveals that overall satisfaction averages 722 among employee advisors, up 21 points from 701 in 2015, and 755 among independents, down 18 points from 773 last year.
The study measures satisfaction among both employee advisors (those who are employed by an investment services firm) and independent advisors (those who are affiliated with a broker-dealer but operate independently) based on seven key factors (in alphabetical order): client support; compensation; firm leadership; operational support; problem resolution; professional development support; and technology support. Satisfaction is measured on a 1,000-point scale.
“No doubt, the wealth management industry is in the eye of the storm right now, and the implications are far-reaching for firms that have been rooted in the traditional financial advisory services business model,” said Mike Foy, director of the wealth management practice at J.D. Power. “Financial advisors will obviously still be a critical part of the future of the business. However, key industry trends—such as the availability of low-cost robo-advice; the rise of so called “validators” who want to make more of their own financial decisions even while supported by an advisor; and the new fiduciary rules putting clients’ best interests ahead of an advisor’s own profit—set the stage for fewer and different kinds of advisors and an increasingly exclusive focus on the high net worth segment where FAs can add the most value.”
The study finds that large scale retirement is a reality with nearly one-third (31%) of advisors poised to retire in the next 10 years. Between 2014 and 2016, the number of advisors indicating they plan to retire in the next 1-2 years has risen to 3% from 2%.
Also that many advisors are moving to independent RIA shops, switching firms.The number of employee advisors indicating they will likely go independent in the next 1-2 years doubled from 6% in 2014 to 12% in 2016 Another 12% of advisors say they are likely to join or start an independent registered investment advisor (RIA) practice in the next 1-2 years, up from 7%.
The study reveals that there are billions in losses at stake. At the current expected rate of attrition due to retirement and firm switching, a firm with 10,000 financial advisors may have more than half a billion (approximately $585 million) in annual revenue at risk during the next 1-2 years, highlighting the critical need to retain top producers and to effectively manage succession planning to transition assets to newer advisors.
Finally, the work shows investment firms must figure out how to satisfy their advisors because the stakes are so high. Among employee advisors who are highly satisfied (overall satisfaction scores of 900 and above), only 1% say they “definitely will” or “probably will” leave their firm in the next 1-2 years, compared with 46% of dissatisfied employee advisors (scores of 600 and below) who say the same. The same trend holds true for independent advisors (2% and 45%, respectively).
“These changing dynamics in the advisory business create new challenges for firms to focus retention efforts on top producers; attract new talent with skills aligned with the direction the business is heading; and create or refine hybrid business models that incorporate more technology and self-service options into their offerings,” Foy added.
