Foto: media.digest
. Más de la mitad de los activos de los grandes patrimonios se gestiona de forma discrecional
When approaching wealth managers for investment management, high net worth (HNW) individuals are more likely to opt for discretionary mandates over other services, according Verdict Financial’s 2016 Global Wealth Managers Survey, the company’s latestreport that analyzes the demand for discretionary asset management of HNW investors in 17 countries.
Although 52% of millionaires’ investable assets are managed on a discretionary basis globally, the level of interest in such services varies significantly between markets.
Bartosz Golba, Acting Head of Wealth Management at Verdict Financial, states: “HNW individuals in Singapore, the UK, and the US have an average of more than 70% of their portfolios placed in discretionary mandates – the highest share across the globe. These are all developed markets, where the uptake of discretionary asset management is generally higher than in emerging economies.
“Such services are a perfect match for clients lacking the time and expertise to manage their investments, both major factors driving demand for discretionary mandates. However, trust plays an important role as well. Investors will be skeptical about giving up control over the investment decisions to advisors they do not know well and do not have a relationship with.”
According to Golba, established wealth managers will try to leverage their relationships with existing clients to increase mandates penetration: “Discretionary services offer higher profit margins than advisory propositions. In this way, growing mandates penetration is at the center of many providers’ strategies, one example being Citi Private Bank, particularly in the Asia-Pacific region. For players with large client books, moving assets to mandated services might prove an easier way to grow revenue than competing for new clients.”
Verdict Financial’s research shows that discretionary portfolio managers will also experience competition from digital providers, which have traditionally been conceived as appealing mostly to self-directed investors.
Golba continues: “Wealth managers in developed markets have started to lean towards the view that digital players no longer compete only for execution-only business. Indeed, in Europe many providers dubbed ‘robo-advisors’ offer a discretionary investment management service. They have clear fee structures which appeal to price-sensitive clients, though the lack of a recognized brand remains their primary handicap.”
As Bob Dylan wrote way back when, “The Times They Are A-Changin’.” With the election of Donald Trump to the White House, they surely have. But perhaps not quite as dramatically as some commentators believe. If I look back over the CIO Weekly Perspectives written by myself and my colleagues over the past nine months, many of the current market trends were in plain view. In fact, much of what just happened in the U.S. is simply the amplification of a series of global trends that were already in place.
For evidence, look at the central banks piece written back in March: Central Banks Just Pulled Back from the Abyss. This described the growing recognition that central banks had reached the limits of policy intervention. And, as a result, the consensus was moving away from the aggressive pursuit of negative rates in the realization that central banks had done all they could, and that the burden of lifting growth and opportunity needed to shift to political leaders and legislators.
As the summer unfolded, my colleague, Joe Amato, President and Chief Investment Officer – Equities, wrote a piece on infrastructure entitled The World Turned Upside Down. Joe’s piece also referred to the end of central bank dominance and the need for political leadership to embrace the concept of structural reform and pro-growth policies. In some ways, Joe’s words back in July were prophetic: “The more unified the political control [in the U.S.] and the worse the economy is doing, the more likely we are to see a deal [on infrastructure].”
Turning Japanese
This August, I wrote about Japan in a piece entitled Lost in Translation.
This examined Prime Minister Shinzo Abe’s latest economic stimulus package and how it was focused on fundamental labor market reform. His proposals included increasing wages for educators, changing the laws to encourage two-earner households, and improving the economics and availability of childcare. I concluded that some of the policies that Abe was pursuing would be emulated by other parts of the developed world.
Markets have been reflecting these changes for a while. Forward inflation indicators and interest rates bottomed in July and have been moving up for the past four months. Since July, bank stocks have outperformed utilities by nearly 50%, with nearly half the gain taking place through October. Commodities turned the corner even earlier, bottoming out in February.
This change in sentiment partly reflects the better growth story, but it also lends support to how fearful the market had become over the prospect of even lower rates. Indeed, the corrosive economic effects of negative interest rates probably won’t be fully appreciated for some years.
End of an Era?
Back to the present. The rapid lift in interest rates following the U.S. election has of course coincided with a much more optimistic re-pricing of risk assets in the U.S., namely stocks and credit spreads. We believe it reflects a dramatic shift in the markets’ views with respect to growth and inflation. It has happened fast and is barely reflected in any economists’ forecasts at this point. As such, it may be the “dynamite” required to blow up the log jam of the lingering aftereffects of zero interest rate policy. It provides the U.S. Federal Reserve the air cover they seem to need to continue raising rates. “ZIRP” has lost its punch, just as former Fed Chairman Ben Bernanke long ago predicted it would, and it needs to be left behind. We believe this is the beginning of the end of an era.
It may seem odd to hear a career bond man crowing about rising rates but remember, over the long term, bond market returns are all about income and, more importantly, about real income. We’ve spent a number of years struggling to find either in the higher quality bond markets. We believe the persistence of negative real rates in short to intermediate high grade fixed income is simply a recipe for losing money. For a long-term investor, the end of this era is coming none too soon.
Lombard Odier Investment Managers has appointed Jerry Devlin as head of UK Third-Party Distribution.
Devlin was previously head of UK Distribution at Amundi for three and a half years. At Amundi, Jerry was responsible for implementing a distribution strategy in the UK with an emphasis on global distribution accounts.
Prior to this, he was head of UK Wholesale at Macquarie Group, and has also held head of Sales roles at Castlestone Management and Barings.
Following the departure of Dominick Peasley, head of UK Third-Party Distribution, to pursue other opportunities within financial services, Devlin will join Lombard Odier on 3 January 2017.
“Unprecedented negative rates and direct intervention of key central banks has created a number of unintended consequences for investors to contend with. At Lombard Odier we seek to re-evaluate and rethink the world around us, to build an innovative and specialist investment offering that helps investors face these challenges. We are pleased to welcome Jerry, who brings a wealth of experience and insight that will be valuable as we grow our distribution business in the UK,” said Carolina Minio-Paluello, global head of Sales and Solutions at Lombard Odier.
“We would also like to take this opportunity to wish Dominick well in his future endeavours and thank him for the work he has done during his time with Lombard Odier,” she added.
Wikimedia CommonsFoto: Hollingsworth John and Karen, U.S. Fish and Wildlife Service. Los inversores globales siguen reduciendo sus exposiciones a efectivo
The BofA Merrill Lynch December Fund Manager Survey shows Wall Street is bullish as cash levels continue to drop.
“Fund managers have pushed pause on a risk rally, with cash balances falling sharply over the past two months,” said Michael Hartnett, chief investment strategist. “With expectations of growth, inflation and corporate profits at multi-year highs, Wall Street is sending a strong signal that it is bullish.”
Manish Kabra, European equity quantitative strategist, added that, “Despite the improved outlook on European economic growth and inflation, global investors continue to shun European stocks amid concerns of further EU disintegration or bank defaults.”
Other highlights include:
Investor expectations of global growth jump to 19-month highs (net 57% from net 35% in November), while expectations of global inflation are at the second highest percentage level in over 12 years (net 84% from net 85% last month).
With a net 56% of investors thinking global profits will improve in the next 12 months, fund managers are the most optimistic about corporate profit expectations in 6.5 years.
Cash levels continue to fall to 4.8% in December from 5.0% in November and 5.8% in October.
Allocation to banks jumps to record highs (net 31% overweight from net 25% last month); the current reading is far above its long-term average.
Over one-third of investors surveyed name Long USD as the most crowded trade.
Investors identify EU disintegration and a bond crash as the two most commonly cited tail risks, corroborated by light EU and bond positioning.
On corporate investment, a record number of investors (net 74%) think companies are currently under-investing.
54% of investors, up from 44% last month, think the rotation to cyclical styles and inflationary sectors will continue well into 2017, supported by a strong USD and higher rates.
Allocation to US equities improves to 2-year highs of net 15% overweight from net 4% overweight in November.
Allocation to Japanese equities jumps to 10-month highs, from net 5% underweight in November to net 21% overweight in December; this is the biggest month-over-month jump in FMS history.
Investors are underweight Eurozone equities for the first time in 5 months, at net 1% underweight in December from net 4% overweight last month.
Eurozone inflation in November was confirmed at 0.6% y-o-y in the final reading, one notch higher than in October (0.5%). Energy deflation intensified slightly (from -0.9% to -1.1%) as pump prices declined over the month. According to Fabio Balboni, European Economist at HSBC, this was offset by slightly higher food prices, particularly unprocessed food (from 0.2% to 0.7%), albeit still at very low levels. Core (0.8%) and services (1.1%) inflation remained flat for the fourth consecutive month. And core industrial goods inflation was also stable at 0.3% for the fourth consecutive month, down from a local peak of 0.7% in January 2015, suggesting that the impact of previous EUR depreciations might already be waning.
Across countries, the harmonised inflation rate remained stable in Germany (0.7%) and Spain (0.5%), but it increased in France (from 0.5% to 0.7%). HICP finally moved into positive territory in Italy, from -0.1% in October, to 0.1%, although it is still lagging behind the other Big 4 members. In November, there were only four countries still in deflation in the eurozone: Slovakia, Greece and Ireland (-0.2%) and Cyprus (-0.8%).
“In the coming months, with the base effects from energy fading, the oil price up 15% the past month, and the EUR having fallen below 1.05 against the USD, we expect inflation to rise fast. Pump prices were already 2% higher in the first half of December and are likely to rise further in the second half, benefiting from the festive season. We could also see a reversal of the recent slowdown in core industrial goods prices, with the latest PMIs pointing to output prices finally starting to rise. These elements could push eurozone inflation to 1% y-o-y in December. We then expect it to continue to rise, peaking at 1.8% in February, and possibly above 2% in Spain also thanks to some tax increases on alcohol and tobacco agreed by the government.” He says.
All of this, Balboni believes, could cause a bit of a headache for ECB Governing Council in the coming months, with inflation peaking in some countries at close to (or even above) 2%. However, the need to continue to provide fiscal support in countries where the output gap is still wide, and where wage growth is still slowing (the latest print was 1.2% in Q3 for the eurozone) are likely to keep underlying inflationary pressures muted. “We won’t have to worry about a possible early tapering of QE already next year. In December, ECB’s head Mario Draghi was quick to accept the offer on the table of a nine-month extension – albeit at a slower pace – still slowing until the end of 2017. This should allow the ECB to look through the inflation peak in the first half of next year before having to make a decision on a possible further extension of QE.” He concludes.
Pixabay CC0 Public DomainFoto: Kai Stachowiak, Public DomainPhotos. Los temas y riesgos que darán forma a los mercados en 2017
Each year BlackRock strategists and portfolio team members assemble to discuss the outlook for the coming 12 months. The major takeaway from our discussions this year: We believe three major themes—and a few key risks—are poised to shape markets in 2017, as we write in our new Global Investment Outlook 2017.
Theme 1: Reflation
We expect U.S.-led reflation—rising nominal growth, wages and inflation—to accelerate. Yield curves globally are liable to recalibrate to reflect this “reflationary” dynamic, and we see steeper yield curves and higher long-term yields ahead in 2017. We believe we have seen the low in bond yields—barring any big shock. Steepening yield curves suggest investors should consider pivoting toward shorter-duration bonds less sensitive to rising rates.
Expectations for global reflation are also driving a rotation within equities. See the chart below. Bond-like equities such as utilities dramatically undershot the broader market in the second half of 2016. Global banks, by contrast, have outperformed along with other value equities on expectations that steeper yield curves might boost their net interest margins—the gap between lending and deposit rates. We see this trend running further in the medium term, albeit with the potential for short-term pullbacks. We could see beneficiaries of the post-crisis low-rate environment—bond proxies and low-volatility shares—underperforming. We see dividend growers—companies with sustainable free cash flow and the ability to raise their payouts over time—as most resilient in a rising-rate environment. Our research suggests they perform well when inflation drives rates higher.
We see structural changes to the global economy—aging populations, weak productivity and excess savings—limiting growth and capping rate rises. Still-low rates and a relatively subdued economic growth trend are taking a toll on prospective asset returns, especially for government bonds.
This is one reason we believe investors need to have a global mindset and consider moving further out on the risk spectrum into equities, credit and alternative asset classes. U.S.-dollar-based investors should consider owning more non-U.S. equities and emerging market (EM) assets over a five-year time horizon while reducing exposure to government bonds, our work suggests.
Theme 3: Dispersion
The gap between winners and losers in the stock market is likely to widen from the depressed levels of recent years as the baton is passed from monetary to fiscal policy. Under extraordinary monetary easing during the post-crisis years, a rising tide lifted all boats. Fiscal and regulatory changes, by contrast, are likely to favor some sectors at the expense of others. The dispersion of S&P 500 weekly stock returns—the gap between the top and bottom quartile—recently hit its highest level since 2008. Other markets are likely to mirror the U.S. trend as major central banks approach the limits of monetary easing. Rising asset price dispersion creates opportunities for security selection. Yet the risk of sharp and sudden momentum reversals in sector leadership highlights the need to be nimble while staying focused on long-term goals.
At the same time, we are seeing a regime change in cross-asset correlations that challenges traditional diversification. Long-held relationships between asset classes appear to be breaking down as rising yields have led to a shakeup across asset classes. Bond prices are no longer moving as reliably in the opposite direction of equity prices. Similarly, asset pairs that have historically moved in near lockstep—U.S. equities and oil, for example—have become less correlated. This means traditional methods of portfolio diversification, which use historical correlations and returns to derive an optimum asset mix, may be less effective. Bonds are still useful portfolio buffers against “risk-off” market movements, we believe. Yet we see an increasing role for equities, style factors and alternatives such as private markets in portfolio diversification.
Key risks
2017 is dotted with political and policy risks that have the potential to shake up longstanding economic and security arrangements. There is uncertainty about U.S. President-elect Donald Trump’s agenda, its implementation and the timing. The UK has vowed to trigger its exit from the European Union (EU) by the end of March, while elections in the Netherlands, France and Germany will show to what extent populist forces hostile to the EU and euro are gaining sway. At the same time, expectations are building for the Federal Reserve to step up the pace of rate increases after a stop-and-go-slow start, and China’s Communist Party will hold its 19th National Congress, at which Xi is expected to consolidate power.
China’s capital outflows and falling yuan are also worries, as the trade-weighted U.S. dollar’s surge to near-record highs raises the risk of tighter global financial conditions. Rapid dollar gains tend to cause EM currency depreciation, apply downward pressure on commodity prices and raise the risk of capital outflows from China.
For more on these themes and risks, as well as a detailed outlook for sovereign debt, credit and equity markets, read the full Global Investment Outlook 2017 in the following link.
Build on Insight, by BlackRock, written by Richard Turnill
Although the investment-linked product (ILP) business is stagnating in Singapore and Hong Kong, other Asian markets such as Indonesia, China, Taiwan, and Thailand are offering better prospects, says Cerulli Associates.
Indonesia has the highest growth potential among the four countries stated. According to fund managers Cerulli spoke to, the growth momentum remains strong even though the first ILPs were launched more than a decade ago.
Banks and insurance agents are pushing ILPs more, as compared to mutual funds, because of higher fee incentives. Banks typically have exclusive arrangements with insurance firms to sell their products, but there are no such partnerships with asset managers to distribute mutual funds.
However, if the country’s regulator, Financial Services Authority (OJK) decides to scrap upfront fees and exclusivity in bancassurance partnerships, growth prospects might be limited.
At the same time, OJK has raised the cap on overseas Shariah investments from 15% to at least 51% since November 2015. Cerulli notes that this may present an opportunity for fund managers to offer foreign-invested Shariah-compliant funds on ILP platforms, if regulators allow it.
Managers Cerulli surveyed for the Asset Management in Southeast Asia 2016 report ranked insurers as the channel they would increase their use of the most in the coming three years. Various reforms introduced in the past few years are likely to help boost fund distribution through this channel. Banks will also continue to push bancassurance sales, which significantly involve unit-linked products.
Foto: Pexels. La industria de fondos irlandesa se prepara para crecer gracias al acceso al mercado chino
An agreement between the People’s Bank of China and Ireland means that funds domiciled in the country now can tap into a RMB 50bn (roughly €7bn) quota under the Renminbi Qualified Foreign Institutional Investor regime.
The quota means Irish funds can buy securities on local Chinese markets.
The news follows confirmation that the Central Bank of Ireland is able to accept applications from Ireland domiciled Ucits and AIFs to invest through the Shenzen-Hong Kong Stock Connect, notes Irish Funds, the body representing the cross border investment funds industry in Ireland. This adds to the existing agreement on the Shanghai-Hong Kong Stock Connect.
Looking ahead, Irish Funds adds that there are expectations of another boost for the Irish funds industry as and when indices start to include Chinese shares, which will mean Ireland domiciled ETFs will also be able to benefit from foreign investor interest in accessing Chinese assets.
Taken together, these developments affecting both active and passive funds are expected to increase the number of Chinese and international fund managers establishing funds in Ireland, according to Irish Funds.
Pat Lardner, chief executive of Irish Funds said market data suggests the country is already home to 4.9% of global fund assets and 14.6% of European fund assets.
The CAIA Association and SharingAlpha will run a fund selector’s asset allocation competition open to all investment professionals globally. Competitors will use their skill to construct a virtual fund of funds, starting February 1st 2017, and will be ranked based on their performance till November 31st 2017 (assessed as portfolio total return, minus maximum portfolio drawdown during the period).
The CAIA Association will offer scholarship awards of over US$5,000 to the podium winners, including a full scholarship to the CAIA Charter programme for the winner. Sign up on www.SharingAlpha.com by 31st January 2017.
Laura Merlini, MD EMEA of the CAIA Association said: “CAIA is very excited to support SharingAlpha in its mission to create a community of fund selection professionals. The CAIA Charter is the most relevant designation for asset allocators tasked with selecting and allocating to uncorrelated assets, and this competition will showcase that skill set. We wish the best of luck to all competitors”.
Oren Kaplan, CEO and co-founder of SharingAlpha, said: “Our vision is to offer the investment community a better way to select winning funds and at the same time to offer fund selectors and investment advisers the option of building their own proven long term track record. It’s about time that funds are rated on the basis of parameters that have been proven to work and fund selectors and investment advisers will be judged according to their ability to add value to investors. We strongly believe that the cooperation with the CAIA Association will help us in exposing a larger audience to our unique platform.”
Foto: Geralt. La mayoría de los inversores consideran razonables sus fees y no están preocupados de que los incentivos de ventas presenten un conflicto de interés
The FINRA Investor Education Foundation (FINRA Foundation) recently announced the results of its “Investors in the United States 2016” report. More than half of respondents (56 percent) report using a financial professional—such as a broker or advisor—primarily to improve investment performance (81 percent), avoid losses (78 percent) and learn about investments (63 percent). Survey results indicate that knowledge of investment concepts is low—particularly among women.
“On a 10-question investor literacy quiz, on average, men answered 4.9 questions correctly compared to 3.8 for women. Interestingly, both genders got the same number of questions wrong: 3.4,” said FINRA Foundation President Gerri Walsh. “But women were significantly more likely to say they did not know the answer to a question compared to men, perhaps pointing to differences in investor confidence by gender.”
Seventy-four percent of households surveyed report owning individual stocks and 64 percent report owning mutual funds. Individual bonds are held by 35 percent of the population and annuities by 33 percent. Fewer respondents report holding investments in exchange-traded Funds (22 percent), REITS, options, private placements, or structured notes (15 percent) and commodities or futures (12 percent).
The majority of investors (70 percent) feel that the fees they pay for their investment accounts are reasonable (5 to 7 on a 7-point scale). And fewer than half (43 percent) of investors who use a financial professional are worried that sales incentives present a conflict of interest.
Only 10 percent of the respondents who took a 10-question investor literacy quiz could answer eight or more questions correctly. The majority (56 percent) were able to answer fewer than half of the questions correctly.
Regarding generational differences the survey found that thirty-eight percent of investors between the ages of 18 and 34 have used “robo-advisors,” compared to only four percent for those ages 55 and over.
Crowdfunding remains a mystery to those ages 55 and up, as only 22 percent had heard of the concept. However, 58 percent of investors between the ages of 18 and 34 were aware of such investments.
A greater percentage (61 percent) of younger investors between the ages of 18 and 34 are worried about being victimized by investment fraud, compared to 28 percent of those ages 55 and older.
This Investor survey provides a detailed analysis of 2,000 survey respondents from across the United States who hold investments in non-retirement accounts. It is a new component of the FINRA Foundation’s National Financial Capability Study (NFCS), and one of the largest and most comprehensive financial capability studies in the country. In July 2015 (several weeks after the 2015 NFCS data had been collected), NFCS respondents who identified themselves as owning investments outside of retirement accounts were contacted and asked a battery of questions intended to provide the Foundation and researchers with a better understanding of how and why investors make investment decisions.
In a series of follow-up interviews, researchers explored topics such as investors’ relationships with financial professionals, understanding and perceptions of fees charged for investment services, usage of investment information sources, attitudes towards investing and investor literacy.
