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

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.

Should The Fed Consider Income Inequality When Setting Monetary Policy?

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Perhaps the biggest criticism of the Federal Reserve’s response to the recent financial crisis, specifically regarding its asset-purchasing program known as quantitative easing (QE), is that it exacerbated the country’s already historic level of income inequality.

But should the potential widening of the wealth gap be a consideration for central bankers when they set monetary policy?

The answer to that question, if there is one, is less than straightforward, according to an article published by S&P Global, titled “Should The Fed Consider Income Inequality When Setting Monetary Policy?”

“While it’s true that the short-term effects of QE, and the loosening of monetary policy overall, likely helped those at the top more than others, the longer-term benefits have been more widespread,” said S&P Global’s U.S. Chief Economist Beth Ann Bovino. “In fact, we calculate that without the third round of QE that the Fed implemented in the fourth quarter of 2012, about 1.9 million fewer jobs would have been added to the world’s biggest economy, and, using Okun’s Law, U.S. real GDP would have been US$ 350 billion lower.”

“Amid ample evidence that increased wealth concentration may make monetary policy less effective, we don’t believe it’s prudent for the Fed to consider the impact of monetary policy on income inequality, but, rather, that it would be wise for central bankers to consider the impact of income inequality on monetary-policy effectiveness,” said Ms. Bovino.

Because the effects of monetary policy vary, it would be unreasonable to expect a loosening of monetary policy to benefit everyone equally, and the fact that moves such as QE might improve the lot of some more than others is hardly a reason for central banks not to do their basic job of supporting the macro economy.

This could matter, given the Federal Open Market Committee’s lower estimated “neutral rate,” policymakers have less room to use traditional monetary policy during a downturn, suggesting that QE (or another alternative form of easing) may still be in the cards.

Edouard Merette Appointed Chairman of Unigestion Asia

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Unigestion, the boutique asset manager with scale, has announced that Edouard Merette has been appointed as non-executive Chairman of the board of Unigestion Asia.

Based in Singapore, Merette will be instrumental in leading the firm’s strategy for growth in the region, working with the whole of Unigestion’s senior management team.

Merette was previously Managing Director, Asia Pacific, for the Caisse de Depot et Placement du Quebec, one of Canada’s largest fund managers and has over 25 years of corporate management experience in Canada, Europe and Asia Pacific. His track record of building and leading businesses in the professional services sector include seven years as Chief Executive for Aon Hewitt, Asia Pacific and six years as a member of Mercer’s Global Executive Committee, the last year of which he was President, Asia Pacific.

Merette replaces Bill Foo, who served as chairman for five years, but who remains a member of the board.

Bernard Sabrier, Group Chairman of Unigestion said of the appointment: “We are thrilled that Edouard is joining our global family. With our increasing presence in Asia since establishing our office in Singapore in 2007, we see the region as one of long term growth for Unigestion. Edouard’s profile and experience globally, together with his knowledge of the Asian financial markets will help us establish strong relationships with Asian investors.”

Edouard Merette commented: “Unigestion has a compelling proposition for Asian investors, who value sound investment principles based on tailored, risk managed exposure across diversified asset classes. For me, Unigestion is an ideal fit given its global footprint and outlook. I very much look forward to working with my new colleagues to build on Unigestion’s success both in the region and globally.”

Patterns of Behavior That May Warrant Taking A Different Approach with Female Investors

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According to the latest research from Cerulli Associates, a global analytics firm, in certain instances, women have different investment strategies and viewpoints than their male counterparts.

“There is opportunity for providers willing to commit resources to target this unique demographic,” states Shaun Quirk, senior analyst at Cerulli. “Especially as females play more prominent roles in the financial planning process.”

“We explore investor portfolio involvement in relation to gender,” Quirk explains. “Fewer than one-third of women believe they ‘need very little advice’ when investing, compared with nearly half (49%) of male respondents. This data can help providers develop strategies to market products and services tailored to meet the evolving needs of female investors.”

“There is a popular belief that men tend to be more involved in the investment process than women,” Quirk continues. “According to our data, almost 60% of male investors surveyed indicate a desire to be actively involved in the day-to-day management of their portfolio, versus just 42% of women.”

“Some industry professionals suggest that women are more likely to implement long-term, goal-oriented investment strategies that do not require day-to-day trading,” Quirk says. “With this in mind, providers can position planning tools and holistic wealth management solutions that align with their female clients’ views on portfolio management.”

There is still relatively little differentiation across firm products and platforms to target female investors. Cerulli believes that financial services providers can objectively analyze the differences between the two cohorts for perspective on how to communicate and market products to these two distinct segments in relation to investing and planning for retirement.

Cerulli’s third quarter 2016 issue of The Cerulli Edge – U.S. Retail Investor Edition explores what drives female investors, how women can successfully plan for retirement, and the unique challenges the wage gap presents for women.

Maneuvering Through the Crowds

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Risk-on sentiment has dominated markets in a post-Brexit world characterized by expectations for lower-for-longer interest rates. The result? Certain investments have become very popular, and investors will want to tread carefully and be selective.

The chart below shows where the crowds are, based on an analysis of fund flows, fund positioning and price momentum. Postions with scores between 1 and 2 (and -1 and -2) are considered as popular, and those with scores above 2 (and below -2) as very popular. The higher the score, the more popular the overweight is. The lower the score, the more popular the underweight is. The most popular investments today: overweight U.K. government bonds (gilts), emerging market (EM) sovereign debt, developed market credit and gold, as well as underweight eurozone equities.

Managing risk is key

Investment popularity does not tell us much about the direction of returns over the long run (i.e. the next 12 months). In fact, many of today’s consensus trades could be long-term winners as low economic growth and low interest rates persist.

Yet some popular positions are approaching extreme levels (scores above 2 or below -2), which can be seen as an important signal of short-term risk. These positions may be vulnerable to a market shock or rising volatility, especially when combined with high valuations. It’s crucial to manage this risk by being selective.

Reducing popular positions where prices have moved beyond fundamentals (examples are gilts and bond-proxies such as utility stocks) may be beneficial. Resisting taking contrarian positions in sectors facing big structural challenges (e.g. European banks) may also be productive. But popular overweights with supportive fundamentals and valuations (such as EM debt and U.S. credit) are still worth considering, and gold can offer portfolio diversification benefits. More than $8 billion has flowed into dividend equities since the Brexit vote, according to EPFR, and we prefer dividend growth over dividend yield. An overweight EM equity position doesn’t appear popular despite recent inflows into the asset class.

Bottom line: Be mindful of the short-term risks embedded in consensus trades, and look for potential opportunities the crowds haven’t yet reached.

Build on Insight, by BlackRock written by Richard Turnill

Amundi Becomes The Major Shareholder of KBI Following the Acquisition from Oddo & Cie

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As announced on 23rd May 2016, Amundi has finalised the acquisition from Oddo & Cie of Kleinwort Benson Investors (“KBI”). KBI now becomes part of the Amundi group which takes a majority shareholding of 87.5% with the KBI management team acquiring the remaining 12.5%.

In light of the acquisition, KBI will now trade as KBI Global Investors (“KBIGI”), a brand that underlines the rich heritage of the company and identifies it clearly in international markets.

KBI Global Investors is a fast-growing fund management firm specializing in equity capabilities. Based in Dublin (Ireland), with offices in Boston and New York, it employs 62 people. Its highly experienced management teams manage 8.1 billion euros of assets at 31st July 2016, mainly in global equity strategies. KBI Global Investors recorded excellent performance in recent years, and dynamic growth in assets under management: up 28% on average per year between 2011 and 2015.

Amundi and KBI Global Investors are highly complementary in terms of products and geographical focus: KBI Global Investors’ expertise in global equities will significantly strengthen Amundi’s equity management offering; in return, KBI Global Investors will leverage Amundi’s strong retail and institutional presence in Europe, Asia and the Middle East.

Yves Perrier, Chief Executive Officer of Amundi, commented, “We are delighted to welcome the KBI Global Investors team to the Amundi Group. This acquisition is part of our strategy to offer the most effective investment solutions to our retail and institutional clients. KBI Global Investors will also significantly strengthen our offering in the equity asset class.”

Sean Hawkshaw, Chief Executive Officer of KBI Global Investors, adds, “As part of the Amundi group we have the ideal platform from which to grow. We are deeply grateful to our clients, to our friends in the consulting community, and of course our employees, for their unwavering support over the past six months. Our assets under management have increased over this period, with additional flows from our existing clients as well as some significant new mandates; that has given us a great deal of encouragement.”

Phil Stockwell, New CEO of Eastspring Investments in Singapore

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Prudential’s Asian investment branch, Eastspring Investments, has promoted Phil Stockwell to Chief Executive Officer of its Singapore business effective as of September 1st. Stockwell had been the Chief Operating Officer of Eastspring Investments, company he joined in September 2014.

He will report to Guy Strapp, Eastspring Investments chief executive, and will be responsible for the operations of the largest of Eastspring’s 10 Asia offices. He is also responsible for the environment around their portfolio managers in Singapore so they can focus on alpha generating activities.

Prior to joining Eastspring Investments, Phil was COO of BT Investment Management in Australia, a publically listed fund manager and part of Westpac Banking Corporation. In his role, Phil was responsible for the leadership of product development, product management, client services, dealing, investment operations, IT, risk and compliance, and company secretarial and legal. Phil has also been a strategy consultant with McKinsey & Company, and with KPMG Consulting. Phil has over 13 years of investment industry experience.

Phil holds an MBA from Australian Graduate School of Management (AGSM), UNSW, Sydney and a Bachelor of Economics and a Bachelor of Commerce from University of Queensland, Brisbane. He is a Fellow of the Institute of Chartered Accountants in Australia.

UCITS Absolute Return Funds Outperform Hedge Funds

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UCITS compliant absolute return funds have outperformed hedge funds over the past five years, according to a study conducted by independent asset manager Lupus Alpha.

The research, conducted among a universe of 564 alternative absolute return funds, revealed that over a five-year time period, UCITS regulated absolute return funds offered an average return of 2.72% per year, whereas hedge funds lost an average of -0.46% per year.

Over a one-year time scale, the picture was even gloomier with less than 30% of funds offering positive returns, ironically due to the high level of volatility at the beginning of the year. Added to that was a relatively high level of European equity exposure among most funds, which further dragged down performance throughout 2016.

Overall, absolute return funds offered an average return of -3.55% over the past five years, with unregulated hedge fund vehicles at the bottom-end of the scale, offering -5.63%. However, they still outperformed the European equity universe, with the Euro Stoxx 50 index falling by -13.89% throughout the same period.

Independent of average returns, the survey concluded that profitability varied greatly depending on the provider, with some asset managers offering returns of 20.56% over the past years, while others reported losses of -23.63%.

Ralf Lochmüller, founding partner and spokesperson for Lupus Alpha comments: “The performance of individual absolute return funds can vary greatly, we have noticed clear difference in terms of quality. Our research highlight that manager selection should remain a key priority for investors in order to achieve stable returns independent of the market phase.”