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UCITS Funds See 10 Billion Net Outflows While AIF Funds’ Net Sales Increase in June

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 for June 2016. 28 associations representing more than 99 percent of total UCITS and AIF assets provided us with net sales data, highlights that:

Net inflows into UCITS and AIF totaled EUR 14 billion, compared to EUR 52 billion in May.
UCITS experienced net outflows of EUR 10 billion, down from net inflows of EUR 41 billion in May.

Long-term UCITS (UCITS excluding money market funds) recorded net outflows of EUR 10 billion, compared to net inflows of EUR 24 billion in May. Equity funds experienced a turnaround in net flows, from net inflows of EUR 3 billion in May to net outflows of EUR 21 billion in June. Net inflows into bond funds decreased from EUR 14 billion in May to EUR 8 billion in June. Multi-asset funds also recorded lower net sales in June: EUR 2 billion compared to EUR 5 billion in May.
UCITS money market funds experienced net outflows of 0.5 billion in June, compared to net inflows of EUR 17 billion in May. Cyclical end-of-quarter withdrawals of money market funds explain this development.

AIF recorded net inflows of EUR 24 billion, compared to EUR 11 billion in May, with all AIF categories recording the same or higher levels of net sales.
Net assets of UCITS decreased by 1.9% to EUR 8,135 billion in June, and AIF net assets decreased by 0.1% to EUR 5,224 billion. Overall, total net assets of European investment funds decreased by 1.2% in June to stand at EUR 13,358 billion at the end of the month.

Bernard Delbecque, Senior director for Economics and Research at EFAMA commented: “UCITS equity funds suffered a severe drop in net sales in June due to the uncertainty created by the UK’s Brexit vote. Interestingly, AIF equity funds and practically all AIF categories saw their net sales increase in June.”

BlackRock’s Funds are Now Allowed to Lend Money to Each Other

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The U.S. Securities and Exchange Commission has allowed BlackRock‘s mutual funds and money-market funds to borrow up to a third of their assets in total – or up to 10 percent of assets without posting collateral.

BlackRock’s “InterFund Program” is an internal program in which funds with excess client redemptions could temporarily borrow money from other BlackRock funds with extra cash.

Other firms such as Vanguard Group and Fidelity Investments have already been allowed to use similar schemes. Besides providing more flexibility, the firm explains that borrowing through the program could be less expensive than using credit lines for the borrowing fund and give higher returns than money market instruments to the lending fund.

In its June application, BlackRock noted that “At any particular time, those Funds with uninvested cash may, in effect, lend money to banks or other entities by entering into repurchase agreements or purchasing other short-term money market instruments. At the same time, other Funds may need to borrow money from the same or similar banks for temporary purposes, to cover unanticipated cash shortfalls such as a trade “fail” or for other temporary purposes.” Specifying that “certain Funds may borrow for investment purposes; however, such Funds will not borrow from the InterFund Program for the purposes of leverage.”

Lord Abbett also filed an application for interfund lending in 2015.

Steve Georgala, CEO at Maitland: “Growing Demand From our LatAm Client Base Has Provided an Opportunity for us to Open Up our First LatAm Office”

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With four decades of experience and a presence in 12 countries, Maitland is familiar with the global advisory and fund management needs of private and institutional clients. As its business dedicated to Latin American clients grew, the need to provide a regional base for the team composed by Benjamin Reid, Head of Business Development and Client Management for Latin America, and the Client Relationship Managers Camila Saraiva and Pedro Olmo, became apparent.

In May, the company opened its first office in Miami, a perfect candidate as headquarters for its Latin American business, as many of Maitland’s Latin American clients have some kind of presence or connection with that city.

Next 15^th of September, there will be a cocktail reception to celebrate the opening of the new office and give an opportunity to meet the team behind Maitland. The event will be attended by Steve Georgala, the group’s CEO, who will travel from London to attend the evening.

Steve joined Maitland in 1985 in Luxembourg, after completing his law studies in South Africa and starting his career with Webber Wentzel law firm in Johannesburg. In December 1996, he moved to the Paris office, where he remained until he moved to the London office in 2009. Since 1987, he has been a partner of the firm, and the CEO since 2006. In an exclusive interview with Funds Society, Steve talks about the challenges of the industry and how to prepare to face them.

What sets Maitland apart from other providers in your space?

Firstly, Maitland is a private company owned and run by management and staff – making us truly independent. We are not controlled by any parent and equally we do not have any controlling interest in a bank or prime brokerage business. Secondly, all of our many global operating companies are integrated to provide a single operating platform. This ‘one-firm’ approach solution across all of our service lines permits us to deliver comprehensive solutions to our diverse client base.

Forty years ago, we started out as a small law firm in Luxembourg advising international private, corporate and fund clients. Our growth over the decades has been largely organic – accommodating for our clients’ developing needs. For example, many of our high-net-worth private client relationships are with directors of corporates for which we did structuring work, who approached us to assist them in their personal capacity.

We’ve kept our business tightly aligned with client needs so that any acquisition made has been carefully considered from a strategic and resources point of view, rather than growth for growth’s sake.

Second, our people set us apart. We are a family of over 1,300 employees globally, representing legal, accounting, administration and technology professionals throughout multiple jurisdictions. Some who have been with Maitland from the start are still serving the same clients or later generations of early clients.

In the case of the Maitland LatAm team, Benjamin Reid has been with Maitland for almost four years serving our Brazilian and LatAm client base – both private client and institutional. Prior to joining Maitland, Benjamin was involved in the set-up and roll-out of LatAm desks at BOA Merrill Lynch, RBC and HSBC. At Maitland, Benjamin has built out the LatAm business methodically; hiring native Brazilians Camila Saraiva and Pedro Olmo who as a result of their legal backgrounds fully understand our clients’ offshore multi-jurisdictional requirements.

Tell me more, why now? Why did you open an office in Miami in 2016?

As the LatAm business grew it soon became obvious that Benjamin needed to relocate to be closer to our clients. Many of our LatAm clients have some form of presence in or connection with Miami.

Benjamin, Pedro and Camila have made sure our offering is properly tailored and relevant to the LatAm market. Take for example our institutional and private client accounting product for companies and funds which was developed specifically using local knowledge. Our teams across the globe (USA, Canada, London, Luxembourg and South Africa) understand the cultural differences and nuances that make LatAm clients different to those from North America, Europe and Africa.

As we have built the products needed by our clients, firmed up staffing needs and shored up our operational platforms, 2016 proved to be the perfect time to launch our presence in this part of the globe.

What are the challenges and how are you prepared to handle them?

Challenges we face are the same as the rest of the industry – stricter and frequent regulatory changes, the need to keep up to speed with technology that supports such regulatory changes and ensuring we are always ahead of the curve. As a mid-size provider with a niche advisory and fund administration focus, we have made our mark by investing in best-in-breed technologies and top talent to provide tailored solutions and swift turn-around times.

Two challenges that became an opportunity to apply our knowledge and expertise are FATCA and CRS (the OECD’s Common Reporting Standard). Our comprehensive FATCA offering encompasses responsibilities starting with our advisory team recommending the most favorable FATCA registration strategy through to tax authority reporting. Working closely with clients to identify their individual and unique situations is what Maitland does best. For example, certain structures may give rise to surprising or unnecessary reporting. We help identify the correct classifications that may impact the way in which and by whom entities are managed or operate. This in turn can impact the reporting which upon review may make room for choices that also address the client’s legitimate concerns about their privacy. Our comprehensive CRS solution is similar to the FATCA solution.

How do you see Maitland fitting in and what are your long-term goals?

Our mission is to be the go-to firm for clients who want a partner that has firm roots, a strong understanding of LatAm and provides a conduit to tailored solutions and multi-jurisdictional offerings through Cayman, BVI and Luxembourg, for example.

Our long-term goals have not changed over 40 years – we embrace complex situations to provide simple solutions. We work as teams to build long-term relationships with our clients.

With the Maitland team now here in Miami to serve clients directly and provide them with access to our worldwide, ‘one-firm’ expertise, we are happy to call Miami another corner of our home.

Eric Varvel appointed President and CEO of Credit Suisse Holdings USA

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Credit Suisse Group announced recently that Eric Varvel is appointed President and CEO of Credit Suisse Holdings (USA), in addition to his current responsibilities as Global Head of Asset Management. The bank also announced that Tim O’Hara will be succeeded by Brian Chin, currently Co-Head of Credit, as CEO of Global Markets. Brian Chin will join the Executive Board of Credit Suisse Group AG. These changes are effective immediately.

Urs Rohner, Chairman of the Board of Credit Suisse said: “Eric Varvel will provide critical continuity at Credit Suisse Holdings (USA), with his extensive background in investment banking and his proven leadership skills in various key roles as a former member of the Executive Board.”

Tidjane Thiam, CEO of Credit Suisse said: “I welcome Eric Varvel to the role of President and CEO of Credit Suisse Holdings (USA). Eric is one of the firm’s most accomplished professionals, adding considerable experience and expertise to the role. Over his 25-year career at Credit Suisse, Eric has held a number of senior positions including: CEO of Asia Pacific, CEO of the Investment Bank, and CEO of Europe, Middle East and Africa. He also served on the Executive Board for six years from February 2008 to October 2014. Eric will continue to lead our Global Asset Management activities in addition to this new role. I look to Eric to provide our bank with leadership, insight, governance and accountability as we develop our franchise in the United States, maximize its potential and deliver significant value to our clients.”

“I am confident that these management changes that I have proposed and that have been approved by the Board of Directors of Credit Suisse Group AG will drive a continued improvement in the performance of our bank.”

Hedge Fund Industry Sees Net Outflows of $34bn Through H1 2016

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Using data from its Hedge Fund Online product, Preqin estimates that there were net outflows of $34bn over the first half of 2016; the majority of outflows ($20bn) occurred in Q2 2016. As a result, as of 30th June 2016 the hedge fund industry represented a total of $3.11tn in assets under management, down from $3.14tn at the end of 2015.

Among leading hedge fund strategies, credit and equity strategy funds suffered the greatest outflows in H1, totalling $26bn and $25bn respectively. By contrast, CTAs increased their AUM by 11% over the first half of the year, recording the greatest inflows of any strategy ($17bn). Additionally, a surge of investor capital committed to multi-strategy funds in Q1 helped the strategy offset small net outflows in Q2, to register overall H1 inflows of $11bn. Other Key H1 2016 Asset Flow Facts:

Investor Appetite: 17% of investors plan to increase their exposure to discretionary CTAs in H2 2016, the highest proportion of any strategy, while just 3% plan to invest more in event driven strategies and funds of hedge funds. Only 9% of investors plan to cut their exposure to activist funds, the lowest of any strategy.
Impact of 2015 Performance: Those funds that performed better in 2015 were more likely to see inflows in Q2 2016; 43% of funds that made gains of more than 5.00% in 2015 recorded Q2 inflows, compared to less than a quarter (23%) of those that suffered losses of 5.00% or more through the year.
Asset Flows by Fund Size: A higher proportion of hedge funds larger than $1bn recorded inflows (35%), than those smaller funds (32%). However, a higher proportion of larger funds also recorded outflows, with 44% recording losses compared to 40% of smaller funds.
Asset Flows by Location: The greatest proportion of funds based in Europe saw inflows over Q2, with 35% seeing net inflows and 38% recording outflows. In contrast, only a quarter of firms based in North America registered inflows, while 44% saw net outflows of investor capital.

According to Amy Bensted, Head of Hedge Fund Products at Preqin “Growing concern from investors regarding the recent performance of the hedge fund sector has manifested as two consecutive quarters of net outflows, taking the total size of the industry to approximately $3.1tn as of the end of H1 2016. Despite most leading hedge fund strategies witnessing outflows over the course of the first half of 2016, there were some bright spots, notably CTAs and multi-strategy funds, indicating that investors are seeing value in some areas of their hedge fund holdings in 2016. Performance, along with fees, looks set to be a key driver of change in the industry over the rest of 2016. Managers will be hoping that the recent run of better performance from March -July 2016 may help win back the favour of investors, and help the industry gain fresh capital inflows in the second half of the year.”

You can read their report in the following link.

True Potential and UBS AM Partner for Multi-Asset Fund Range Launch

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London based boutique True Potential Investments has partnered with UBS Asset Management to launch five new multi-asset funds, in its wealth strategy fund range.

The five True Potential UBS Funds have fees of 0.60%, with a minimum investment of just £50 and include profiles such as Defensive, Cautious, Balanced, Growth and Aggressive.

Each fund will be actively managed within its risk banding to navigate changing markets, seeking to manage volatility and capitalise on opportunities for growth.

UBS is to provide investment expertise to sub-manage the funds.

Mark Henderson, senior partner at True Potential Investments, said: “We are excited to have partnered with UBS to build a fund range that can quickly adapt to the challenges and opportunities that global markets present. Our aim is to put clients first in every decision we make and we believe that long-term investing in multi-asset funds may put clients in a better position to reach their investment goals.

“By using the investment expertise, precision and heritage of UBS, alongside our philosophy of providing low-cost funds with low minimum investment amounts, we have produced a range of funds that adapt to the market, always seeking to get the best returns for investors.”

Richard Lloyd, head of Portfolio Management, Research & Risk, Investment Solutions at UBS Asset Management said: “The True Potential UBS fund range will be fully diversified across multiple asset classes, geographic regions, industries and currencies to enable us to capture opportunities from a wide range of sources.

“We will make use of a wide spectrum of investments including a range of ‘next generation’ smart beta passive funds. Our investment strategy uses agile, active asset allocation to target optimal performance in all market conditions.”

Global Investors Drawn to U.S. Credit Markets

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In many ways, 2016 has been the year of bonds, at least so far: Global aggregate bond markets have outperformed global equity markets year to date. That leaves many investors wondering if bonds still offer value, given their low yields.

According to Mark Kiesel, CIO Global Credit at PIMCO, though investors may need to get used to lower returns on bonds, this does not mean they should give up on them; “we believe there are still many bond market sectors and securities offering attractive return potential as well as diversification benefits. However, the current environment of lower bond yields means investors need to be more selective and also need to consider reducing interest rate risk. The U.S. corporate bond market continues to be one of the main areas offering much-needed yield, especially given our long-term outlook for continued global demand for income-producing assets – a tailwind likely to help support prices.”

The search for yield amid this appetite for income is complicated by the reality that almost $12 trillion in bonds in the Barclays Global Aggregate Index are now at negative yields, including more than 80% of Japanese and German government bonds.

As the European Central Bank and the Bank of Japan continue with ever-increasing unconventional policies, such as negative interest rates and large-scale asset purchases, local investors are faced with the challenge of finding income in a world of negative-yielding government bonds and low-yielding corporate bonds in their home markets. They are consequently looking further afield, and this has resulted in a wave of investment into U.S. corporate bonds, according to the expert.

“Even after this year’s rally, we believe investors can still seek potential yields of 3%–6% in the U.S. credit markets by investing in investment-grade and select high yield corporate bonds, bank loans and non-agency mortgages. Among major developed markets, Japan and Europe are barely growing, but the U.S. should be able to grow at roughly 2% over the coming year. Therefore, from a fundamental perspective, we are favoring the U.S. credit market, along with U.S. domestically-focused businesses.”

While they have reduced exposure to select credits in the U.S., they are maintaining overweights to U.S. credit across most portfolios. “We remain very constructive on housing and many consumer-related sectors, such as cable, telecom, healthcare and gaming. And even though there’s a lot of pressure on banks at the moment, U.S. bank bonds are actually very attractive. We also like energy: We added to our energy positions back in January near the market lows, and we still like pipelines at current levels.”

Kiesel believes that the positive outlook for the U.S. bodes well for credit assets in industries and sectors supported by high barriers to entry, above-trend growth and pricing power, in addition to companies with management teams that act in the best interest of bondholders. “With a large credit research and analytics team, we can still seek and find many companies with these characteristics – and these days, many of them are in the U.S.” He concludes.

Old Mutual Global Investors Appoints Cristiano Busnardo as Country Head, Italy

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Old Mutual Global Investors (OMGI), part of Old Mutual Wealth, today announces the appointment of Cristiano Busnardo, who joined the company on 1 September, in the newly created position of country head, Italy. He will report to Allan MacLeod, head of international distribution.

Based in OMGI’s new Milan branch, which is subject to regulatory approval, Cristiano will be responsible for driving OMGI’s growth within Italy. Since its formation in 2012, OMGI has steadily developed a European presence and now manages GBP 3.9bn for clients across Europe (ex UK) with GBP 106.8m on behalf of Italian investors. Cristiano is tasked with nurturing OMGI’s established Italian client base, as well as developing relationships with new investors. He will service clients across a spectrum of financial institutions, including wealth managers, private banks, family offices, pension funds, insurance and asset management companies.

Cristiano has over 20 years’ experience working in the financial services industry in sales and marketing roles. His previous position was deputy general manager, head of sales for Allfunds Bank S.A., Italian branch, based in Milan, a role he held since September 2011. Prior to this he has worked in a number of senior sales and distribution positions in Italy, including two years at Prima SGR and nine years as country manager at Societe Generale Asset Management Italia SIM. He started his career in 1992 at ING group.

A key part of OMGI’s growth strategy is to significantly increase its international distribution capability, including developing its visibility throughout Europe. This appointment completes the European sales team and represents OMGI’s second on-the-ground presence in mainland Europe. In addition to Italy, the team oversees distribution within the following regions: DACH, the Nordics, Benelux, France and Iberia.

Allan MacLeod, head of international distribution, commented: “European distribution continues to be a core growth area for OMGI. Appointing dedicated specialists to each region reflects our ambitious growth plans for our international business and our desire to focus on the particular needs of clients in each region. We are known to a number of clients in Italy already, but are keen to broaden our presence in the region and I am confident that Cristiano joining us will enable OMGI to intensify its efforts. I look forward to working with him, and welcome him to the team.”

Cristiano added: “I am excited at the opportunity to work for and represent an ambitious and dynamic company; one that I know reflects my professionalism and aspirations. Looking at the last quarter of 2016, and ahead into 2017, financial markets look set to be in for a bumpy ride, with Italian investors in particular facing an ambiguous macro-economic environment. However, these challenges present opportunities, which I look forward to tackling head on, armed with OMGI’s innovative and flexible investment solutions.”

This Past Year Has Been a Lesson and a Test of BTG Pactual’s Strength; They See Opportunities in Chile and Peru

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Until the end of November 2015, not content with being the largest independent investment bank in Latin America, BTG Pactual had ambitious plans for global expansion. All this changed overnight, the bank was forced to redesign its structure and strategy, divest part of its assets, and lay off some of its employees. BTG Pactual is now smaller, but is focused on those business areas and markets where it can stand out from its competitors. Marcos Pimentel, responsible for overall sales in the area of fixed income and managing partner in BTG Pactual, acknowledged in an exclusive interview with Funds Society that the last 10 months have been difficult for the entity, but in the end, it has served as a lesson, helping to demonstrate its strength to the market and to its clients.

The new bank has a more local than global flavor. In the past, the company had dreamt of becoming a global bank within the Wealth Management and Asset Management sectors, but these plans have been interrupted in the short term, because BTG Pactual prefers to concentrate its efforts in the areas of business and markets where the company has a competitive advantage.

“While in the past BTG Pactual had a broader business portfolio, the company now has a more concentrated and defined portfolio, having chosen to focus on those business areas where the company clearly stands out from the competition: Sales and Trading, Wealth Management, Asset Management and Investment Banking. Focusing on markets where we have a strong local presence: Brazil, Chile, Peru, Argentina, Colombia, and Mexico, where we will continue to be a benchmark,” said Marcos Pimentel.

Pimentel knows the company well, as he joined Banco Pactual in 1992 as part of the IT team, working his way towards the sales and trading area by 1994. From 1999 to 2009, he worked for other institutions such as Bank of America, Standard Bank, and Credit Suisse, where he held various positions as head of sales and global markets. Educated in Rio de Janeiro, Marcos Pimentel holds a degree in Business Administration from the Federal University of Rio de Janeiro and an MBA from IBMEC.

For Marcos Pimentel, the company’s partnership culture has been instrumental in, not only overcoming the crisis, but in emerging even stronger: “BTG stands out from other financial institutions in the region because it consists of partners, the partnership owns around 80% of bank capital, when the crisis made its appearance, partners and company executives worked hard to strengthen the company and to establish a clear definition of the business areas in which we would like to grow.”

Pimentel points out that the capital structure was strengthened, especially in matters of corporate governance, where the main changes to make the company more accessible to investors were made, the crisis was used to implement reforms, making the bank a better institution. “It’s smaller, we have significantly reduced the number of employees, we sold several non-core lines of business, for example, BSI, the private banking unit in Switzerland; we are now smaller, but we are focused on those business areas in which we want to be, being the leading investment bank in the region,” he adds.

In Brazil, the bank is currently attracting assets for two funds in which the company holds an exclusive distribution mandate. One is focused on private equity and the other in absolute return, which according to Marcos Pimentel, have had tremendous success among investors. The company, which has allocated considerable resources and efforts in Peru, Chile, Brazil and Colombia, also has professionals who understand the product and know the needs of both fund managers and local clients, approaching clients differently. Given the company’s experience in Latin America, BTG now seeks to build a portfolio of 4 or 5 fund managers for distribution within the region as a single package.

The funds’ distribution business managed by third parties

While the funds’ distribution business managed by third parties is more like managing a specialty boutique rather than a supermarket, fund management companies wanting to come to Latin America will be better positioned if they do so through a partner that offers a solution throughout the entire region. This is one of BTG Pactual’s main advantages, the fact of having a platform within the region’s major economies and providing access to international managers to solutions developed internally by the bank, such as fund services, legal services, technology and compliance. “As a bank, we can use the capabilities developed by BTG Pactual to help with the distribution of funds managed by third parties when selling products in the region. Having a local legal advice department in every country in which we operate helps tremendously, because each country has its own regulations. Being prepared, supported by local professionals and a structure in each of these countries is very important when you’re trying to sell a product that is not standard. We are the only platform in the region covering all points of fund distribution managed by third parties; in fact, it is a key business area for BTG. We have a long history in this business; we want to grow in it, which is why we are investing greatly. We just hired Ignacio Pedrosa, a great professional in this area. I believe that it is quite obvious to fund managers and clients, who are the potential investors in these funds, that we have the experience and that we are diversified, and they know that we are good enough to serve both of those parties.”

Differences in the distribution of international funds in Latin American markets

For Marcos Pimentel, Chile is a highly consolidated market, local investors have been investing in international funds for years, they have developed the technology to do so, and therefore it is the most competitive market in the region. Chile is the country with the largest number of assets allocated to offshore funds; about 22% of total assets under management are managed outside the country. It is a more mature market, but if you want to be in the business of funds’ distribution managed by third parties in Latin America, you have to start in Chile. “What has happened in Chile, and what we want to do differently than in the past, is that pension funds have become the largest investors in international funds, investing about 39% of their assets in foreign funds. There are more opportunities if you invest with asset managers, wealth management companies and insurers, these investors do not have such a high share of foreign investment; overall, only 8% of the assets of all of these institutions are invested in international funds. Most distributors are focusing on offering their products through the AFPs. At BTG, we think that there is room for distributors to have access to other distribution channels: asset managers, wealth management companies, and insurers,” he says.

With regards to Peru, Pimentel believes that this market offers good growth opportunity. It is the second market in terms of development in foreign investment funds in the region. Peruvian pension funds have been able to develop client sophistication; they understand funds and are prepared to invest abroad. “It’s a small market, roughly half the Chilean market, but it’s a market in which regulation is good, there are several competitors, but as it still isn’t a mature market, we think it has potential for growth.”

Colombia’s case is very different; this is a market which has yet to develop. Although changes are happening gradually, pension funds are not investing as much in international funds as are Chilean or Peruvian fund managers. Local regulation allows pension funds to invest in international equity funds, but is very limited about investments in international fixed income funds. According to Marcos Pimentel, this market still needs to grow in sophistication, far from being a growth market as in Peru’s case, or mature as in Chile’s. But the opportunity might lie in that, in as far as investing abroad is concerned, they are at the beginning of the process, and the total of AuM´s of institutional clients is relevant”.

In this banking institution’s country of origin, until there is a reform in the regulation of the Brazilian market, local pension funds will continue to have many restrictions for investing abroad, which greatly reduces the channeling of investment towards international funds, because pension funds are the largest investors in the country. Meanwhile, family offices and certain individuals have more opportunities to invest abroad than do pension funds. “Brazil has many peculiarities, its law and compliance with that law is not easy for foreign professionals who don’t know how to conduct business in the country. I think, especially in Brazil, BTG is the leading institution for the distribution of third party funds, since there isn’t any other player as large in the market. Even so, this is a business area that will develop in the medium and long term.”

Finally, Marcos points out that Mexico is a difficult market. It is the second largest market in the region, but regulation is not easy and the competition is tough. Local banks already offer sophisticated services to clients. “For us, it is the most challenging market, we have taken time to understand it and that is why we are lagging a bit behind.”

Market Vision

With respect to the situation of the global economy, Marcos Pimentel is well aware that volatility levels have increased in global markets. Looking towards the second quarter of the year, he clearly sees that as the US presidential election approaches, the greater will be the climate of uncertainty in the stock markets, because the approach of each of the two candidates is diametrically opposed. In the short term, Europe’s economic climate is not optimistic either, since the result of Brexit has added yet more problems to an economy that did not quite show strong signs of recovery.

Regarding the situation in Latin America, the region’s dependence on the prices of raw materials and the economy of the Asian giant, seems to indicate that the evolution of the economies of Latin America will mirror China’s evolution. Focusing on each of those Latin American markets, Marcos Pimentel speaks of different growth cycles. While Argentina shows small signs of improvement in relation to its previous situation, it still has many challenges to face, even though he acknowledges that they are making great strides. For its part, the Chilean economy has suffered greatly due to falling copper prices, as was to be expected from the world’s largest producer of the mineral, although it is a stable economy which should perform well.

“Peru’s case is impressive, it is a small economy, but with an incredibly good performance. Its currency, its growth and its unemployment rate, make the Peruvian economy the most consistent in the region,” he says. “Colombia suffered somewhat, late last year and earlier this year, due to its dependence on the oil barrel price, and now with the slight price rise of crude oil, the economy has returned to its growth path. Mexico is the second largest economy in the region, but has a great dependence on the US economy, so its performance will be linked to the outcome of the US elections.”

Speaking of Brazil, Marcos Pimentel mentions the huge recession hitting the country, which is compounded by the policies implemented by the previous government in the years before the crisis. But he does show some optimism, as the new interim government has managed to restore confidence slightly, and he expects, at least, a slight positive growth by next year. “The economic team appointed by Temer is top notch, I am confident that once the end of the impeachment, they will have the strength to carry out the necessary reforms and make the country regain its trajectory.”

That said, in market terms, he believes the Brazilian rally is over. “The rally began when investors anticipated that there could be an impeachment process in the country, at that time, the Brazilian Real and bonds were very cheap, now that the process is almost over, most likely the rally will end as well. In the short term, inflation in Brazil is increasingly under control, so in the second half of the year, we will very probably see a cut in interest rates, which are currently close to 15%. The economic team is making great efforts to pass the necessary reforms, especially those related to public expenditure and pension plans.”

In a world of low, or even negative, interest rates, Brazil is offering one of the highest rates among emerging countries, once the impeachment process is over, and investors begin to feel more comfortable about Brazil’s political risk, fixed income investments will return. And this will not only happen in Brazil, markets such as Chile, Peru, and Colombia, are smaller in size than Brazil and Mexico, but they will greatly arouse investors’ interest.

Bruno Taillardat Joins Amundi as Head of Smart Beta

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Amundi has announced the appointment of Bruno Taillardat as Head of Smart Beta.

Bruno started his career at BNP Paribas Asset Management where he was Head of Quantitative Research in the International Equity Investments team from 1998 to 2007.

He joined Unigestion in March 2007 as a senior Portfolio manager within the Equity team. He then became Investment Director responsible for the quantitative and fundamental research.

Bruno has a post-graduate degree in Mathematics from the University of Marseille and he also completed executive education programs at the IMD Business School in Lausanne.