The European Fund and Asset Management Association (EFAMA) has published its latest Investment Funds Industry Fact Sheet, which provides net sales of UCITS and non-UCITS for April 2016 from 28 associations representing more than 99 percent of total UCITS and AIF assets’ net sales data.
The main developments in April 2016 can be summarized as follows:
Net inflows into UCITS and AIF increased to EUR 65 billion, up from EUR 26 billion in March.
Net inflows into UCITS amounted to EUR 44 billion, considerably higher than the EUR 8 billion recorded in March.
The increase in UCITS net sales was driven by stronger net sales of long-term UCITS and money market funds.
Long-term UCITS (UCITS excluding money market funds) recorded net inflows of EUR 33 billion, compared to EUR 18 billion in March.
Net inflows into bond funds increased to EUR 24 billion, from EUR 11 billion in March.
Multi-asset funds recorded net sales of EUR 6 billion, same as in March.
On the other hand, equity funds continued to experience net outflows, albeit lower than in March (EUR 2 billion).
Net sales of UCITS money market funds rebounded to EUR 11 billion, from net outflows of EUR 10 billion in March.
AIF recorded net inflows of EUR 21 billion, compared to EUR 19 billion in March.
Net assets of UCITS increased by 1.4% in April to EUR 8,104 billion, and AIF net assets increased by 0.7% to EUR 5,148 billion.
Overall, total net assets of European investment funds increased by 1.1% in April to stand at EUR 13,252 billion at the end of the month.
Bernard Delbecque, director of Economics and Research at EFAMA commented: “The accommodative monetary policy and the stimulus still in the pipeline supported the demand for bond and multi-assets funds in April, whereas weak economic growth and downside risks continued to weigh on equity funds.”
You can read the EFAMA Investment Funds Industry Fact Sheet in the following link.
CC-BY-SA-2.0, FlickrFoto: Unsplash / Pixabay. John DeVoy regresa a Loomis, Sayles & Company
Loomis, Sayles & Company announced that John DeVoy, CFA, returned to the company as a dedicated credit strategist for the flagship full discretion team. Simultaneously, Brian Kennedy and Todd Vandam, CFA, assume full-time portfolio management roles on the full discretion team and will transition their credit strategist responsibilities (investment grade and high yield respectively) to John. Todd, Brian and John will report to Elaine Stokes and Matt Eagan, co-heads of the full discretion team.
“The complexity of global fixed income markets continues to expand as does investor demand across the full discretion product suite. We are pleased that John is back on board to dedicate his full efforts to providing insight on credit trends,” said Elaine Stokes. “Additionally, John’s role allows Brian and Todd the time to focus exclusively on portfolio management. Their promotions are reflective of the excellent work they have done managing various full discretion strategies to date.”
As a dedicated resource for the full discretion team, John’s responsibilities will include:
Providing insight into cyclical and secular credit trends affecting the investment environment for the full discretion portfolio management team
Partnering with the firm’s various credit analysts and sector teams to form opinions of investment opportunities
Providing team portfolio managers with specific investment and trade recommendations in the corporate sector across the full discretion product line
As co-portfolio manager on the Loomis Sayles full discretion team, Brian joins veteran fixed income managers Dan Fuss, Elaine Stokes and Matt Eagan on the full suite of Loomis Sayles multisector funds and strategies, which includes the Loomis Sayles Bond Fund and Loomis Sayles Strategic Income Fund. In February 2013, Brian was named co-portfolio manager of the Loomis Sayles Investment Grade Bond and Loomis Sayles Investment Grade Fixed Income funds.
Todd is one of the founding co-portfolio managers of the Loomis Sayles strategic alpha strategy that launched in 2010, which currently has $4.4 billion in assets under management. Additionally, Todd is a co-portfolio manager of the Loomis Sayles US high yield strategy (currently $3.5 billion) and Loomis Sayles global high yield strategy ($290 million).
Nick Langley - Foto cedida
. RARE Infrastructure (filial de Legg Mason): ¿Por qué son interesantes las inversiones en infraestructuras?
One of the first things that you realise when you start looking into the infrastructure asset class is that everyone’s definition of what ‘infrastructure’ is varies. Our view of infrastructure is as follows; we are looking for hard assets that provide an essential service to an economy, and which have a degree of price certainty built in so that we know the asset provider is going to get paid for providing the service. It is this approach that forms the basis of our thinking, says Nick Langley, co-CEO & co-CIO, RARE Infrastructure, when asked about investment types in listed infrastructure investing.
The infrastructure universe can be broadly separated into four main asset types: community and social assets, regulated assets, user pay assets, and competitive assets. You can split the universe in this manner because of the different types of assets that fall within each group, and their different characteristics as investments. It is important to do so because you’re going to get very different types of risk and return profiles based on the type of infrastructure assets that you hold, he adds.
The first group, community and social assets, is those assets that many people will mention when you ask them to name infrastructure; schools, hospitals, and prisons are some of the main examples. These are assets which have traditionally been funded with public sector involvement, and which have a clearly visible beneficial impact on society, although for investors may offer low returns with limited growth potential.
The second group is regulated assets. These are assets that operate in a regulated environment; their operations, and therefore return profiles, are impacted by the regulator of their particular industry. The key examples here are energy companies (e.g. gas and electricity utilities which manage the gas and electricity networks) and water utilities. These companies are regulated because they typically operate in markets that tend to be natural monopolies. For example, the UK, like most countries, only has one national electrical transmission network which is managed and operated by National Grid.
The third group, user pay assets, are assets that are involved with moving people or goods around an economy. For example, companies that operate road and rail networks, airports, and ports. These companies are not regulated, however they often operate with concession-based contracts; for example, a company may hold the lease to operate a particular toll road for a certain amount of time. User pay assets are more exposed to growth than regulated assets, as their revenues are typically linked to economic or population growth.
The final group consists of assets that operate in competitive markets, with exposure to wholesale prices, and typically without the security of regulation or concession contracts. An example here is energy generation and retail companies – rather than managing the energy networks, these are companies that create energy and sell energy to the end user. They are therefore subject to supply and demand risk, and potentially commodity price risk.
Which are the most interesting investments?
We focus on investing in the regulated assets and user pay assets. We do so due to the fact that these companies operate either within a defined regulatory framework or with long-term contracts in place, which underpins the return profiles of these companies. The cash flows of these companies typically stretch out decades into the future (i.e. they have a long duration), and the frameworks that they operate in means that with the appropriate expertise it is possible to estimate these cash flows, and therefore the intrinsic value of the companies, with some degree of accuracy.
This means that the main types of assets we invest in include the regulated gas, water, and electricity companies in the regulated assets space, and then toll road, rail, port, and airport companies in the user pay space.
Why are investments in infrastructure interesting?
Infrastructure has a number of characteristics that are often attractive to investors, including a strong and stable risk/return profile, inflation protection, income, lower correlation to traditional asset classes, and defensive qualities such as generally lower drawdown in falling equity markets.
Stable risk return profile and inflation protection – as infrastructure companies are typically involved in the provision of an essential service (often over a long time period), backed by hard assets, whilst having a degree of price certainty (e.g. a regulatory framework or long-term contract), we see the risk/return profiles on offer in the sector being stable over time. Whilst any return will involve some degree of risk, the nature of the asset class means that skilled investors can achieve a return that more than compensates for the risk incurred. In addition, given underlying infrastructure assets typically have some degree of inflation-linkage built in through these regulatory frameworks or long-term contracts, infrastructure provides good protection against changes in inflation. We estimate that 70% of the cashflows of companies invested in within our flagship Value strategy are either directly or indirectly linked to inflation.
Income – As discussed in more detail below, infrastructure typically provide an attractive income over time, given the recurring and growing dividends paid by many companies within the opportunity set.
Lower correlation to traditional asset classes – infrastructure can act as a good diversifier in a portfolio, given its lower correlation to asset classes such as equities and bonds. This is a result of the underlying return streams of infrastructure companies being strongly linked to the regulatory or contractual frameworks in place, rather than typical drivers of equity and bond returns. Even more importantly, we frequently see this diversification benefit increase in times of market stress, meaning that infrastructure can provide protection through diversification exactly when it is needed the most.
What yields could you expect from these investments?
The type of listed infrastructure companies we invest in provide an attractive (typically high single digit) return, whilst achieving this in a relatively low risk manner. We also see listed infrastructure providing favourable up- and down-market performance characteristics, participating in returns in up markets, but providing protection in down markets. This is a result of the defensively natured (and often income paying) regulated assets providing protection in times of market stress.
The yield on the assets we invest in varies – in the user pay assets we typically see a lower yield, however in the regulated assets we see significant and growing dividend yields over time, with figures in the 5% – 10% p.a. range not uncommon. Bringing these two asset types together, we would expect to see a yield of say 3.5% to 5.5% in a portfolio which maintained a 50:50 weighting between user pay assets and regulated assets.
Foto: Rich Brooks. Bill Gross recomienda a los banqueros centrales recordar los principios del Monopoly
In his July’s letter to investors, Bill Gross states that if “Fed Governors and Presidents understood a little bit more about Monopoly, and a tad less about outdated historical models such as the Taylor Rule and the Phillips Curve, then our economy and its future prospects might be a little better off.”
Without forgetting of other effects such as Brexit, the growing Populist movement and the possibility of what he calls de-globalization (less trade, immigration and economic growth), he highlights the $200 you get when passing go, mentioning it is like new credit, “responsible for the ongoing health of our finance-based economy. Without new credit, economic growth moves in reverse and individual player “bankruptcies” become more probable.”
He also explains how at the beginning of the game when “the bank”- which he compares to private banking, gives out the initial $1,500 growth is strong but eventually it starts to decelerate.
After explaining that money supply or “credit” growth is not the only determinant of GDP but the velocity of that money or credit is important too and that today’s “contribution of velocity to GDP growth is coming to an end and may even be creating negative growth,” he goes on to warn about that this means that “at best, a ceiling on risk asset prices (stocks, high yield bonds, private equity, real estate) and at worst, minus signs at year’s end that force investors to abandon hope for future returns compared to historic examples. Worry for now about the return “of” your money, not the return “on” it. Our Monopoly-based economy requires credit creation and if it stays low, the future losers will grow in number.” He concludes.
You can read the full letter in the following link.
Over 2000 people gathered in Atibaia during the 24th, 25th, and 26th of June to attend XP Investimentos’sixth national convention, one of the largest events held in Latin America for investment professionals. The Expert 2016 event was attended by such international fund management companies with a local presence as Franklin Templeton, BlackRock, JP Morgan AM, BNP Paribas AM, Deutsche Bank, BNY Mellon, and Mirae Assets; local fund managers with a prominent role in Brazilian and Latin American markets such as the Group’s own fund manager, XP Gestão de Recursos, thefund management companies within the Azimut Group, Questy AZ and AZ Legan, BTG Pactual, Bozano Investimentos, Votorantim Asset, and Valora Gestão de Investimentos, amongst others. In addition, banks and insurance companies such as Porto Seguro, Prudential, Sulamérica Investimentos, and Icatú Seguros, as well as the fund distributor and custodian platform, Allfunds Bank, also participated.
During this financial industry trade fair, there was also time for conferences, training sessions and presentation of awards. The event kicked off with a welcome to all attendees by Guilherme Benchimol, XP Investimentos President and Founding Partner of XP Group. Benchimol recalled the company’s beginnings, reviewing its development from the outset. Gabriel Leal, a partner at XP Group and the company’s Retail Business Director, spoke about the current situation in the markets and the future of XP Group.
Next, Abilio Diniz, current President of the Board of Directors at Península Participaçoes, spoke about the challenges currently faced by Brazil. Diniz recommended trying to understand the country’s current crisis by using the example of the ideograms that make up the word “crisis” in Mandarin Chinese: “danger” and “opportunity”. Thus, he informed of the need for: survival spirit, monitoring costs closely, assessing the crisis as a whole, avoiding to blame the crisis, looking in the mirror rather than out of the window, and anticipating, all in order to exit the crisis stronger. Abilio Diniz, who along with his father Valentim, was responsible for developing one of the country’s largest retail distribution networks, Grupo Pão de Açúcar, is also Chairman of the Board at BRF, and member of the board of directors for the Carrefour Group in Brazil.
Later, Martin Escobari, entrepreneurial and private equity investor partner in charge of General Atlantic’s operations in Latin America, shared his three rules for investing even in times of low visibility. For Escobari, the first rule is to look to the future, something relatively easy to do in markets such as Brazil which, to a certain extent, lag behind more developed markets. As an example, he mentioned the mutual funds retail distribution market in the US during the seventies, in which 80% of the funds were distributed through banks and 20% by independent firms, and its evolution to the present, in which 98% of investment funds are distributed by independent entities; while the Brazilian funds’ distribution market is almost entirely in the hands of banks, which portends a trend in the migration of savings towards independent channels. As a second rule, he recommended reacting quickly to market conditions, and finally, as a third rule, looking for resistance by investing in companies that do not depend on the country’s situation.
During his presentation, José Gallo, Director and President at Lojas Renner, spoke of the need to ‘enchant’ the client, the importance of developing an emotional attachment to the construction of a brand, and simplifying the management process as much as possible.
Finally, one of the most exciting moments of the day was when the audience stood to welcome the ‘Eternal President’, Fernando Henrique Cardoso, President of Brazil for two consecutive terms, from 1995 to 2003. Cardoso gave an overview of the extremism currently present in global politics, with the very recent Brexit results and the US presidential elections before the end of the year. With regard to the economic crisis currently faced by Latin America’s largest economy, Cardoso referred to the years of the global financial crisis and the performance of the financial team under Lula’s government, during which there was an increase in public spending, credit, and consumption, without an increase in investment, which in his opinion is a “Recipe for Disaster.” The former president also spoke of the need to reform the Brazilian political system, in which the more than 30 parties participating in Congress prevent setting a course for implementing the political agenda, he therefore commented on the need to return from cohabitation presidentialism to coalition presidentialism. As for the future of Brazil, Cardoso believes that the country reached a turning point where the Lava-Jato operation was a necessary and positive step for advancement. His only fear is the possible emergence of “backward” political demagogues who do not culturally perceive the need for what needs to be done. At the economic level, he trusts the dynamism of Brazilian industry and agriculture as a force to recover the path to growth. When asked if he would be willing to return to the forefront of politics, the former president’s felt honored by the request, but declined politely, joking that at 85 years of age, a return to politics would shorten his life significantly.
PIMCO, a leading global investment management firm, has hired Gene Frieda as Executive Vice President and Global Strategist for the firm’s emerging markets and global strategies and Yacov Arnopolin as Executive Vice President and Emerging Markets Portfolio Manager. They will both be based in PIMCO’s London office.
Frieda, who will work primarily with the emerging markets team but will also contribute to other global, country and sector strategies, will report to Andrew Balls, Managing Director and Chief Investment Officer – Global Fixed Income. Arnopolin, who will focus primarily on emerging markets external debt strategies, will report to Michael Gomez, Managing Director and Head of the Emerging Markets Portfolio Management team.
“Gene and Yacov are two tremendous additions to our global macroeconomic and emerging markets portfolio management expertise, as their deep experience will bolster PIMCO’s investment process and tap the investment opportunities we see for clients in emerging markets,” said Dan Ivascyn, Managing Director and PIMCO’s Group Chief Investment Officer. He added: “PIMCO will continue to use its considerable resources to hire the best industry talent globally. Already this year, we have hired more than 130 new employees, including 14 portfolio managers and 20 more investment professionals across many areas including alternatives, client analytics, mortgages, real estate and macroeconomics.”
Frieda joins PIMCO from Moore Capital Management where he was a Partner and Senior Global Strategist. Prior to that, he was the Global Head of Emerging Markets Research and Strategy at the Royal Bank of Scotland. Prior to joining PIMCO, Arnopolin was a Managing Director and Portfolio Manager at Goldman Sachs Asset Management in New York where he helped oversee emerging market portfolios for institutional clients such as pension funds, insurance companies and sovereign wealth funds.
“Gene and Yacov bring nearly 40 years of combined investment experience and complement other specialized resources we have added in recent years, including in emerging markets corporates and local markets,” said Gomez.
“As the adverse global backdrop of lower commodity prices and a stronger dollar give way to a more constructive picture for emerging markets, now is an exciting time to be adding two such talented investment professionals as Gene and Yacov to the PIMCO team,” said Balls.
According to new research from Cerulli Associates, digital advice could offer a solution for U.S. consumers with portfolios too small to attract the attention of financial advisors.
“The mass market and the lower end of the middle market are underserved by financial advisors,” states Tom O’Shea, associate director at Cerulli. “A vast majority of consumers do not possess the assets necessary to merit attention from financial advisors.”
“Digital advice innovation presents an opportunity to enhance the efficiency of advisors servicing small accounts,” O’Shea adds. “Combining human and digital advice can strengthen the fiduciary foundation of the client recommendations. This combination also allows an advisor to scale their practice in such a way that he or she can profitably manage the smaller accounts of mass-market consumers.”
“Almost 90 million U.S. households have investable assets of less than $100,000,” O’Shea explains. “Yet, only 8% of financial advisors treat this segment as their core market. The overwhelming majority of advisors target clients with higher levels of investable assets.”
“It is not that advisors are unwilling to help small investors,” O’Shea continues. “Rather, they cannot figure out how to make money when working with them, leaving investors to go it alone or rely on guidance provided by direct-to-consumer firms.”
Zurich headquartered GAM, the industry’s third-biggest provider of liquid alternative UCITS funds, announced the acquisition of Cantab Capital Partners, an industry-leading, multi-strategy systematic manager based in Cambridge, UK. Cantab manages USD 4.0 billion in assets for institutional clients worldwide.
At the same time, GAM launches GAM Systematic, a new investment platform dedicated to systematic products and solutions across liquid alternatives and long-only traditional asset classes including equities, debt and multi asset. Cantab will form the cornerstone of GAM Systematic.
By moving into the growing segment of scalable systematic investing, GAM takes an important step to deliver on its long-term objective to expand and diversify its active asset management business. Leading systematic strategies are attracting substantial allocations from investors globally due to their compelling returns and their rigorous, disciplined investment processes.
According to a press release, “GAM Systematic will complement GAM’s successful active discretionary investment offering. It will also serve as the Group’s innovation hub for the development of new technologies, investment ideas and approaches for systematic strategies and products.”
Alexander S. Friedman, Group Chief Executive Officer of GAM, said: “We have been evaluating how best to enter the systematic space for the past 18 months because we believe it represents an important capability for an active investment firm in the current environment and in the decades to come. GAM Systematic will offer our clients a compelling range of unique products complementary to our strong discretionary product range at a time when the investment industry is challenged to provide cost-efficient, liquid and diversified sources of returns.”
“The market turmoil following the UK referendum last week has only reinforced our determination to pursue, and deliver on, our strategy of diversification and long-term growth. In Cantab we are acquiring industry-leading intellectual capital, a highly distinguished decade-long investment performance track record, and a profitable and scalable business. In combination with GAM’s global distribution reach, I am convinced that this business is well positioned for significant growth.” He concluded.
Foto: Global Panorama
. BNP Paribas crea un holding para agrupar sus filiales en Estados Unidos
BNP Paribas has announced the creation of an Intermediate Holding Company (IHC), BNP Paribas USA, Inc., effective 1 July 2016. This decision signals the bank’s commitment to the US market, its largest market-by commitments as of 12/31/15- outside Europe and a region that is central to its businesses and development plans.
As a large Foreign Banking Organization, the bank is required by new regulation to place all its controlled US subsidiaries under a US holding company. BNP Paribas USA will hold the retail subsidiary ‘BancWest’ and the Corporate and Institutional Banking’s (CIB) and asset management subsidiaries in the United States.
The wholesale and retail businesses in the United States have seen significant growth over the past couple of years: in 2015 CIB and Retail Banking & Servicesincreased their revenues in North America by, respectively, 15% and 5% (in USD) vs 2014. Today the Group employs over 16,000 people in the country.
Michael Shepherd becomes Chairman of the new holding and retains his chairmanship of BancWest. And Jean-Yves Fillion, Head of CIB Americas becomes its CEO.
Early “Brexit” impact was localized, but tail risk persists.
When the U.K. voted to leave the European Union, I happened to be in the thick of it, on a business visit to London. When I turned in on the night of 23 June, the opinion polls showed the race to be neck-and-neck, but financial markets were increasingly confident that a “Remain” vote would be returned. The comment we published the next morning was not the one we’d anticipated.
You had to be there to get a good sense of the shock the “Leave” vote caused. It has set off the U.K.’s biggest political and constitutional upheaval in 70 years. But what do markets make of it all?
Large-Cap Equities Erase Losses Our initial response was to convey our view that fears of a “Lehman moment” were overblown. The vote hadn’t changed the fact that we are in a slow-growth, low-inflation, low-interest rate environment. Sure enough, the FTSE 100 Index powered back through its pre-Brexit level at the end of last week. The S&P 500 Index has also been reversing its losses. Global risk assets were recovering even before Bank of England Governor Mark Carney boosted them by hinting, last Thursday, at “some monetary policy easing” over the summer. It looks like our first instinct was a good one.
We have now experienced a handful of these V-shaped moves in markets over the past two years, over which time both the price and the earnings of the S&P 500 have remained virtually unchanged. Indeed, it’s the “slow, low, low” background that is both stagnating earnings and allowing specific or localized shocks to cause outsized short-term volatility; it makes the margin of error for investors so thin.
And there is no shortage of additional potential shocks coming our way. The U.S. still has to choose between two (at least publicly) anti-trade Presidential candidates in November, and Spain’s latest general election kicked off an 18-month cycle that will include Germany, France, Italy and the Netherlands. But as long as the underlying fundamentals remain unchanged, volatility from these events can create opportunity, which is why we stress the importance of focusing on fundamentals rather than news headlines. Amid the noise of last week, for example, the Atlanta Fed raised its forecast for U.S. Q2 real GDP growth to 2.7%, while the Eurozone printed a positive headline inflation number and its lowest unemployment in five years.
The Impact Has Been Localized This is not to say that the vote hasn’t inflicted damage. At the end of last week, the FTSE 250 Index, which better represents the U.K. economy than the global, often U.S. dollar-earning companies of the FTSE 100, was still some 5% short of pre-Brexit levels. European stocks remained down by a similar amount. This is as challenging for the E.U. as for the U.K. itself: Standard & Poor’s downgraded both entities last week.
And then of course there is the pound sterling. Its 8% one-day drop against the U.S. dollar on 24 June was the biggest since the end of Bretton Woods. A recovery last week was stopped in its tracks by those comments from Mark Carney.
So far, so rational. Global markets in general have recovered, with those most exposed to the longer-term implications of “Brexit” re-priced for weaker performance.
Still “Slow, Low, Low”—But More So Where the vote has had a broader impact, it’s “more of the same”. “Brexit” hasn’t changed the “slow, low, low” dynamic, but may have amplified it. Fed Funds futures now forecast that the U.S. central bank will be on hold at least into next year. The prospect of monetary tightening disappearing over the horizon has driven bond yields lower. The two-year U.K. Gilt yield went negative for the first time last week, the entire Swiss curve is dipping in and out of negative territory and the German Bund yield has sunk to uncharted depths. And now the 10-year U.S. Treasury yield is also flirting with historic lows.
This puts banking-sector profits under more pressure: at the end of last week European banks were still down 15%-20% since the vote, but U.S. banks remained down 4%-5%, too. But does it forecast similar gloom for non-financial corporate earnings? This is something Joe Amato discussed a couple of weeks ago, and we still think bonds are being pushed by technical pressures rather than fear of an outright collapse in growth and earnings—and so far equity markets appear to agree.
Nonetheless, we believe this is a time for caution, not complacency. If the U.K.’s voters have articulated a cry of rage against trade and globalization that is heard and echoed further afield, we could see more than a localized effect on growth prospects. In Spain a week ago the electorate responded to “Brexit” by moving back towards the center, but there are still many more occasions for political risks to spill into global economic fundamentals—and for markets to hit bumps that are much harder to overcome.
Neuberger Berman’s CIO insight column by Erik L. Knutzen
