Standard Life Investments, a global investment manager, suggests that structural reforms in China will play an important role in determining the trends of global financial markets in 2016. In the January edition of Global Outlook, the manager also shines a spotlight on emerging markets, examines the global economy into 2016, the outlook for US bond markets and sterling, and drivers of global equities.
Alex Wolf, Emerging Markets Economist, Standard Life Investments said: “In China, we expect policymakers to continue walking a tightrope – balancing enough fiscal and monetary stimulus to prevent a sharper growth collapse, while slowly proceeding with supply side reforms to remove excess capacity. Slowing Chinese demand, which we believe was worse than official data reflected, was one of the largest causes of the emerging market trade and output contraction experienced last year. As such we see some room for cyclical upside, as policy measures take effect.
However, our longer-term outlook on China has become increasingly negative. Our own view is that GDP growth is closer to 5% than the 6.9% reported by the Chinese authorities. Although we believe policy makers will avoid a hard landing, it is becoming more likely that Chinese leaders will not enact necessary reforms quickly, especially of state owned enterprises (SOE). SOEs are at the heart of China’s problems, and reforms here would deliver the biggest dividends from a growth and rebalancing perspective, but Beijing has been dragging its feet.”
According to Standard Life Investment, SOE reform plans delivered over recent months were received with optimism, but they believe they failed to address corporate governance issues or the reduction of excess capacity through corporate restructuring and closures.
“Consolidation has been the preferred path, and the government seemed unwilling to sell or reduce state assets in a meaningful way. The plan will lack effectiveness if the focus on addressing loss-making companies and overcapacity is limited to a small number of centrally-owned SOEs, and not the mass of locally-owned SOEs, where most of the overcapacity and inefficiencies lie.
If China growth does disappoint this could drive continued volatility in global markets. Sluggish growth is priced into markets but a hard landing which impacts on currency, capital flows, commodities and social stability is not. This could result in more aggressive domestic monetary easing, forcing the renminbi lower against the dollar, with adverse implications for global inflation and a blow to emerging markets dependent on robust Chinese demand for manufactured goods and commodities.”
Foto: Dani Vázquez
. Hermes IM nombra presidente a David Stewart
Hermes Investment Management has announced the appointment of David Stewart as the new Chairman of the Board effective 1 April 2016. He assumes the position from Paul Spencer, CBE, who has been Chairman since 2011.
David Stewart is currently a Non-Executive Director of Hermes Investment Management since joining the Board in April 2015. He previously spent nine years at Odey Asset Management, initially as Chief Executive and latterly as a Non-Executive Director. He is Chairman of IMM Associates, a Non-Executive Director of the Caledonia Investment Trust, and sits on the Investment Committee of MacMillan Cancer Care.
Saker Nusseibeh, Chief Executive, Hermes Investment Management, says:“Since joining the Board as Chair of the Risk and Compliance Committee, David has quickly established himself as an insightful and trusted advisor. His advice and counsel will be greatly beneficial as we take Hermes through the next stage of its growth.”
David Stewart, Chairman elect,Hermes Investment Management, says:“I look forward to taking up my new role, and working with Saker, the leadership team at Hermes and my fellow Board members to build on the successes Hermes has already achieved. I see Hermes as an asset manager which is fully embedding responsible capitalism at the very heart of its business. This gives the firm a unique advantage, for which it is increasingly being recognized. ”
BBVA Compass and FutureAdvisor are forging an alliance to bring investment management services to a greater slice of the bank’s clients through digital means, making the Sunbelt-based financial institution the first major bank to sign on with FutureAdvisor after the San Francisco firm’s milestone year in which it combined forces with leading asset-management firm BlackRock.
BBVA Compass clients will be able to use the award-winning firm’s automated investment services later in 2016. The bank sees the alliance as a way to make sophisticated tools and guidance available to its digital-savvy clients who aren’t currently taking advantage of its investment services. The alliance demonstrates BBVA Compass’ willingness to align with innovators regarded by some as industry disruptors.
“FutureAdvisor gives us a way to connect more of our clients with convenient, affordable and trusted advice,” said BBVA Compass Chairman and CEO Manolo Sánchez. “The ultimate goal here is to help our clients take greater control of their finances so they can build bright futures.”
The alliance follows a headline-generating year for FutureAdvisor, which was acquired in September by BlackRock Inc., the world’s largest asset manager. FutureAdvisor has managed more than US$ 700 million in client investments since it launched its managed service in 2013.
Its innovative, always-on technology is guided by a proprietary algorithm, and its investment decisions are backed by theory developed by Nobel Prize-winning economists and continuously refined by a council of notable scholars and finance experts.
“We are very pleased to be deepening BlackRock’s longstanding relationship with BBVA through FutureAdvisor’s partnership with BBVA Compass,” said Laurence D. Fink, Chairman and CEO of BlackRock, whose firm has long helped BBVA serve clients in the U.S., Latin America, Spain and Portugal. “The role of technology in our industry continues to evolve as consumers increasingly look to engage with digital-advice platforms. FutureAdvisor powers an entirely new digital client experience for investors, which includes a diverse set of investment products, proprietary retirement technologies and risk analytics.”
BBVA Compass clients will be able to link external investment accounts with FutureAdvisor and receive a customized plan for their portfolios. FutureAdvisor’s investment management service will also be available for clients who want direct management of a portfolio, with the assets being held through the bank’s broker-dealer affiliate BBVA Compass Investment Solutions, a division of BBVA Securities Inc., member FINRA and SIPC. The service will include auto-rebalancing based on market movement and tax loss harvesting to help improve after-tax, risk-adjusted rates of returns.
FutureAdvisor is the latest innovator to join forces with BBVA Compass in the bank’s pursuit to lead the technology-driven transformation of the financial services industry. In 2014, its parent company, BBVA, acquired Simple, a Portland, Oregon-based company that has created a new standard in digital banking, through BBVA Compass. And through its alliance with the all-digital payments network Dwolla, the bank is helping account holders bypass conventional networks to send and receive funds instantly. It also is the latest in a series of BBVA Compass offerings designed to give clients greater control of their finances. In November, via the second release of BBVA Wallet, BBVA Compass became the first major U.S. bank to offer its credit card clients real-time redemption of rewards earned on qualified purchases made at any retailer. And in September, the bank introduced its ClearSpend prepaid card with a mobile budgeting app, a nod to the increasing use of prepaid debit cards across all ages and income levels.
FutureAdvisor was awarded the World Economic Forum’s Technology Pioneer award in 2015, and American Wealth Management Innovator award in 2014.
According to the latest research from global analytics firm Cerulli Associates, the U.S. offshore channel accounts for more than half of the assets raised by cross-border managers in the Latin American region. These findings and more are from Latin American Asset-Gathering Strategies 2016: Cross-Border Distribution to High-Net-Worth and Pension Markets, a newly released report developed in partnership between
Cerulli and Latin Asset Management.
Cerulli and Latin Asset Management consider the wealth management market in Latin America to consist of three channels: The U.S. offshore, Latin American offshore, and Latin American onshore markets. The U.S. offshore market mainly consists of distributors based in financial hubs of South Florida (mostly Miami and Coral Gables), Texas (mostly Houston and San Antonio), New York, and Southern California (mostly San Diego).
“According to our estimates, the overall size of the three asset-gathering segments stands at US$ 105 billion, with the U.S. offshore segment accounting for more than half of the total at US$ 56 billion,” states Thomas V. Ciampi, founder and director of Latin Asset Management.
“A factor that differentiates the market in Latin America is the perceived risk of the home country, in terms of political risk, personal security, and stability of markets and currencies,” explains Ciampi. “For residents of countries who are passing through difficult times, or have volatile leadership unfriendly to foreign companies, such as Argentina or Venezuela, investors are of course eager to shelter their assets from the local banking system. In countries such as Mexico, Chile, Colombia, and (up until recently) Brazil, the wealthy may seek to have some of their savings offshore, but are still comfortable putting their money to work in the local economy or saving in locally domiciled financial instruments.”
Although the U.S. offshore market accounts for half of the assets under management, the Latin American offshore market is growing for a host of reasons. Among them are: sophisticated distribution tactics, enhanced technology offerings of product services, greater client trust in local advisors, and changes in the profile of the typical wealthy investor residing in the region.
Asset gathering from within Latin America has become more critical in recent years and this local growth has come at the expense of U.S. offshore booking centers such as South Florida, Texas, and New York. However, the importance of maintaining a presence in the U.S. offshore market should not be discounted. Asset managers should remain focused on serving clients in key locales such as Miami, which is bustling with activity.
Foto: Simon Cunningham
. Los inversores institucionales estadounidenses ampliarán sus posiciones en ETFs en 2016
U.S. institutions plan to increase their use of ETFs in 2016 according to a new report, “Institutional Investment in ETFs: Versatility Fuels Growth” from Greenwich Associates.
The study, which is in its fifth year and sponsored by BlackRock, found that institutions are increasingly using ETFs for longer-term, strategic allocations as well as cost-effective replacements for bonds and derivatives.
U.S. institutions currently represent approximately 36% of the total $2.1tn in U.S. ETF assets. All of the ETF users in the study invested in equity ETFs, with 36% planning to increase allocations in the year ahead and 35% of those planning to boost allocations by 10% or more. 35% of fixed income ETF users expect to increase allocations this year, and 36% plan to do so by 10% or more.
The firm found that approximately 43% of institutional users invest 10% or more of their overall portfolio in ETFs. Nearly 20% of non-ETF users are considering adding ETFs to their portfolios in the next year.
Matching the exposure needed was the most important factor when selecting an ETF as mentioned by 82% of interviewed investors. Other factors considered when selecting an ETF included liquidity/trading volume (76%), expense ratio (72%) and tracking error of the fund (68%).
The study identified five key trends driving ETF growth in the U.S. institutional market:Existing institutional users are finding new applications for ETFs in their portfolios, and a growing number are using ETFs as a primary vehicle to implement long-term strategies; Fixed income ETF use is expanding; Institutions are using ETFs alongside derivatives; Innovative ETF strategies and approaches are gaining traction among institutions; And Insurance companies are adopting ETFs as a means of investing both surplus and reserve assets
Daniel Gamba, Head of iShares U.S. institutional Business at BlackRock commented: “We expect 2016 will be another record year for the ETF industry, and we look forward to working with our clients as they use ETFs to help achieve their goals.”
Just over a month in his new post, Barclays’ CEO, Jes Staley, has taken an ax at the investment banking arm of the firm cutting around 1,200 jobs and pulling out of several Asian countries.
Barclays said the cutbacks form part of the 19,000 job cuts announced in May 2014 to refocus on the UK, the US and serving clients globally. A memo sent by Barclays’ investment banking chief executive, Tom King mentioned that the U.S. is “one of our two home market franchises, in the world’s largest single pool of capital, our leading U.S. business is another distinct competitive advantage for Barclays.”
The UK bank plans to pull out of countries like Australia, Taiwan, South Korea, Indonesia, Malaysia, Thailand, the Philippines, Brazil, and Russia, offering banking coverage for those countries from other locations.
Barclays plans to keep offices in Hong Kong, China, Japan, Singapore and India.
With increasing concern over China’s growth, investors are significantly less confident in the global economic outlook, according to the BofA Merrill Lynch Fund Manager Survey for January. Allocations to equities have fallen sharply, while cash holdings have risen.
A net 8% of fund managers see the global economy strengthening over the next 12 months, the survey’s lowest reading on this measure since 2012.
Despite this, just 12% believe a global recession will occur in the next 12 months.
Slowdown in China now stands out as the panel’s biggest “tail risk” by far.
More respondents now think global profits will decline over the next 12 months than increase, the first negative reading in over three years.
Over half of respondents expect no more than two Fed hikes in the next 12 months, up from 40% a month ago.
Long U.S. dollar remains the most crowded trade, but bullishness on the currency is waning.
Average cash balances are up to 5.4%, the third-highest reading since 2009. A net 38% of investors are now overweight cash.
Net overweights in equities have halved to a net 21% from December’s net 42%, while bond underweights have retreated.
Bearishness towards Global Emerging Markets equities has increased to a record level. Europe and Japan remain the most favored stock markets.
“Investors are not yet ‘max bearish’. They have yet to accept that we are already well into a normal, cyclical recession/bear market,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“Investors’ bullishness towards Europe remains intact, but conviction is rooted to the floor. The positioning gap between the most and least preferred sectors is the lowest in two years,” said James Barty, head of European equity strategy.
According to the latest Investment Funds Industry Fact Sheet, released by the European Fund and Asset Management Association (EFAMA), the main developments in November 2015 can be summarized as follows:
Net sales of UCITS increased to EUR 55 billion, up from EUR 51 billion in October. The increase in UCITS net sales can be attributed to a rise in net inflows into money market funds.
Long-term UCITS (UCITS excluding money market funds) registered net sales of EUR 27 billion, down from EUR 28 billion in October.
Equity funds registered EUR 17 billion in net sales, down from EUR 19 billion in October.
Bond funds suffered from net outflows of EUR 2 billion, compared to net inflows of EUR 0.3 billion in October.
Multi-asset funds finished the quarter with net sales of EUR 10 billion, up from EUR 8 billion in October.
UCITS money market funds experienced an increase in net inflows to EUR 28 billion, from EUR 23 billion registered in October.
Total AIF registered net inflows of EUR 9.5 billion, down from EUR 12.5 billion in October.
Net assets of UCITS stood at EUR 8,430 billion at end November 2015, an increase of 2.5 percent during the month, while net assets of AIF increased 1.5 percent to stand at EUR 4,467 billion at month end. Overall, total net assets of the European investment fund industry increased 2.2 percent to stand at EUR 12,897 billion at end November 2015.
Bernard Delbecque, Director of Economics and Research at EFAMA, commented: “Net sales of UCITS remained sustained in November, which suggests that investors were still confident about economic outlook late last year.”
Nuveen Investments, announced early January that it has entered into an agreement with Incapital to acquire Incapital’s Unit Investment Trust (UIT or Unit Trust) platform.
Since early 2014, Nuveen Investments has partnered with Incapital to provide marketing and distribution support to several of Incapital’s Unit Trusts for which Nuveen’s boutique investment affiliates have also served as portfolio consultant.This transaction builds on that successful partnership.
The acquisition reinforces Nuveen Investments’ commitment to strengthening its growing leadership position in the retail marketplace by providing investors with access to the investment ideas of premier asset managers recognized for high-quality results in their distinct areas of investment expertise. According to a press release, Incapital’s Unit Trust platform is similar to Nuveen Investments’ multi-boutique model and “is consistent with the firm’s strategy of working with a variety of asset managers to bring highly differentiated and institutional-caliber investment capabilities to clients.” Going forward, Nuveen Investments will sponsor UITs that utilize the portfolio consultant services of unaffiliated asset managers, including those currently involved with Incapital UITs, while also developing new Unit Trust strategies leveraging the expertise of its seven investment affiliates and the capabilities of TIAA Asset Management.
Nuveen Investments will be acquiring Incapital’s Unit Trust distribution platform. Key Incapital personnel currently supporting the Unit Trust platform in the areas of sales, product development and management, marketing, IT and operations will join Nuveen Investments. Together with Nuveen Investments’ own recently enhanced Unit Trust sales and distribution team, the Nuveen Investments Unit Trust platform will have significant and dedicated resources to ensure continuity of coverage for existing broker-dealer and IBD relationships. The Unit Trust team will work closely with Nuveen Investments’ national accounts team to introduce and expand the use of Unit Trusts by dealers not presently doing UIT business with Incapital, yet looking for investment products to address their clients’ particular investment needs.
“We are pleased to formally bring together Nuveen and Incapital’s UIT teams to build on our excellent work together and enhance our ability to deliver quality investment solutions and service to our clients. We are also pleased to add the high-quality investment capabilities of Incapital’s portfolio consultant partners to the investment capabilities of Nuveen’s investment affiliates and TIAA Asset Management that will enable us to offer a compelling array of UIT portfolio strategies,” said William Adams IV, Nuveen Investments Senior Executive Vice President, Global Structured Products.
Inapital Chief Executive Officer John DesPrez added, “As we move forward to focus more sharply on our core business of providing risk-managed investment solutions, we are pleased to partner with Nuveen Investments to transition our dynamic UIT business to their team. Nuveen has been an outstanding partner in building our UIT platform and developing a strong and diversified array of strategies for the benefit of our shared clients. I am also extremely proud of the team we have built. They are experienced professionals with a proven record of success. I am happy for them, too, as they will be joining a firm respected throughout the industry.”
The transaction, while subject to customary closing conditions, is expected to close in the second quarter of 2016. Nuveen was advised by Wells Fargo Securities, LLC. Incapital was advised by Grail Partners. Terms of the transaction were not disclosed.
“We know that large amounts of money all over the world are kept “elsewhere”, or “other where”, and go untaxed as Taxpayers fall short of complying with their tax obligation in their home jurisdictions,” says Foodman CPA’s & Advisors. “We also know that FATCA was established to fight tax evasion from U.S.A. individuals and entities via the use of foreign accounts. FATCA has a long reach and a substantial sign-up sheet.”
However, the U.S.A. is not the only jurisdiction looking for tax evaders. Tax evasion is a global problem. FATCA has served as the catalyst in propelling the Organisation of Economic Cooperation & Development (OECD) to introduce the Common Reporting Standard (CRS). Net net, the CRS will facilitate the automatic exchange of tax information between non-U.S.A. countries, the firm explains. The OECD is known for its quest to promote tax cooperation and improve all forms of information exchange – on request, spontaneous and automatic. Currently, there are 61 signatories that belong to the elite Early Adopters Group, and a total of 94 jurisdictions that have made the commitment to exchange information.
“Under the single global Standard, jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions”. It consists of two components:
the CRS, which contains the reporting and due diligence rules to be imposed on financial institutions; and
the Model Competent Authority Agreement, which contains the detailed rules on the exchange of information.
The new Standard draws extensively on earlier work of the OECD in the area of automatic exchange of information. It incorporates progress made within the European Union, as well as global anti-money laundering standards, with the intergovernmental implementation of FATCA. CRS has been designed to prevent Taxpayer avoidance. It has three fundamental pillars:
The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income), account balances and sales proceeds from financial assets.
The financial institutions that are required to report under the CRS include banks, custodians, brokers, certain collective investment vehicles and certain insurance companies.
Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the Standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.
“It is clear that tax compliance is a global priority. Finding a place to hide is becoming increasingly difficult for those taxpayers that try to outsmart the authorities” says Foodman CPAs and Advisors. FATCA is already 5 years old, alive and kicking. Electronic files have already beenexchanged with the I.R.S. CRS has an implementation timetable of 2017 or 2018.
