CC-BY-SA-2.0, FlickrFoto: charlemange / Pixabay. Algunas fundaciones y fondos están reevaluando el uso de los hedge funds
NEPC, one of the industry’s largest independent, full-service investment consulting firms to endowments and foundations, recently published the results of its Q2 2016 NEPC Endowment and Foundation Poll, a measure of endowment and foundation confidence and sentiment related to the economy, investing and market performance. The Q2 Poll included a special focus on how endowments and foundations view hedge funds. Respondents cited strong concerns about high fees, underperformance and transparency.
“While hedge funds play an important role in many institutional portfolios, the last several years have been difficult for the industry and investors are starting to look very closely at how hedge funds can work for them,” said Cathy Konicki, Partner and Head of NEPC’s Endowment & Foundation Practice Group. “These survey results are by no means indicating a mass exodus from hedge funds, but they do point to greater pressure being felt by the industry as a whole.”
According to the survey, twenty-four percent of respondents cited having zero exposure to hedge funds, which is a significant increase from the Q2 2014 NEPC Endowment and Foundation Poll, when only two percent of respondents reported having no exposure. And while 39% of respondents in the Q2 2014 Poll had 11-20% of their portfolio allocated towards hedge funds, in the Q2 2016 survey only 23% had the same allocation.
Another concern cited by endowments and foundations was hedge fund fees. A quarter of survey respondents have asked for reduced fees or been offered reduced fees by their hedge fund managers within the past six months. When asked about the biggest challenges they face with their hedge fund investments right now, High Fees was the second highest response (54%), topped only by Low/Disappointing Returns (80%). Rounding out the top concerns was Transparency (37%).
Despite these concerns, the survey did highlight some positive findings for the hedge fund community. While 28% of endowments and foundations said they’ve either reduced or were considering reducing their allocation to hedge funds, 55% are not actively discussing this with their investment committee, and nearly a fifth of respondents (17%) have either increased or were considering increasing their allocation to hedge funds.
As for which hedge fund strategies respondents are most bullish on, 36% think Multi-Strategy hedge funds will generate the highest returns over the next three to five years. Other top results to this question include Long/Short Equity (33%), Global Macro (25%) and Credit (22%).
“This survey tells us that endowments and foundations are frustrated with hedge funds but they’re not giving up on them, and with several global concerns on the horizon, many investors may be looking towards hedge funds to protect their portfolios,” said Konicki.
Other top findings include:
50% say the US economy is in a worse place now than it was this time last year
52% say a Slowdown in Global Growth poses the greatest near term threat to their portfolios
Rising Interest Rates were the second most cited concern (16%)
Potential for overseas conflict was third (13%)
Presidential Conundrum: 70% of respondents think Hillary Clinton will win the upcoming Presidential Election, but are split on who would have a more positive impact on US markets and their portfolio.
According to companies’ survey in Germany and in France the economic activity was marginally down in August. German’s companies were a little more pessimistic for the 6 month period to come.
Even if levels are different we perceive in the following graph that there is a kind of stability in economic activity during the last twelve months. This synchronization of the business cycle suggest that France and Germany cannot really expect a stronger growth momentum in the short run. In other words, it seems that German and French economic activity are not able to accelerate from their current level. It’s not worrisome for Germany as its unemployment rate is low but it is problematic for France as its unemployment rate is just below 10%. As there is no impulse from outside as world trade trend is flat, it means that the impulse must come from inside. The ECB has done the job so we must expect a more proactive fiscal policy in order to jump on a higher trajectory.
For Germany, the main source of weakness is a slowdown in expectations. The index is back to 100.1 which is marginally below its historical average (100.3). The current condition index (112.8) is weaker but at a level way above its historical average (103.2).
In France, the Personal Outlook index on Production is shifting downward in the industrial sector. There is, both Germany and France, the perception by companies that the economic activity will not have the necessary impulses that could provoke an acceleration in the economic momentum. This can be linked with Brexit and its consequences or by the fact that the global situation is at risks and not only on economic side. We see political risks almost everywhere (elections in the US, in France, referendum in Italy, Brexit,…) and this could be a drag for economic growth.
The detail of each survey shows that internal demand has been weaker in August. This can be seen on the German graph below. There is a deep drop in retailing and in wholesaling in August.
In France the main source of concern is the weaker momentum in the industry. All indices are close to their historical level (except construction) and there is no source of rapid improvement. The industrial sector was perceived as stronger 3 to 6 months ago but this is no longer the case and its recent momentum is problematic. This means that we can have a rebound in the third quarter for GDP (after 0 in Q2) but the government target growth of 1.5% for 2016 will not be reached.
Pershing, a BNY Mellon company, has announced the launch of new mutual fund and exchange-traded fund solutions, offered by its affiliate, Lockwood Advisors. These will meet the needs of investors starting to build wealth and help registered reps navigate the Department of Labor’s (DOL) fiduciary rule requirements.
Pershing’s new Lockwood WealthStart Portfolios mutual fund and ETF offering, along with new solutions provided by third-party providers, both feature a diverse range of asset allocation strategies and a minimum balance of $10,000.
These portfolios include a number of asset allocation strategies targeted at investors with varying risk profiles. The strategies can be accessed through diversified risk-based model portfolios from some of the industry’s leading firms, including Pershing affiliate Lockwood.
“These flexible mutual fund and ETF solutions demonstrate our ongoing commitment to providing financial professionals with the tools they need to navigate the evolving regulatory landscape and grow their business,” said Joel Hempel, chief operating officer of Lockwood. “They may also assist registered reps who are considering a transition from a commission-based brokerage model to fee-based advisory relationships.”
The new offering is fully integrated into Pershing’s flagship NetX360 professional platform, and advisors can access them through Lockwood’s turnkey managed account solution, Managed360 or by using Pershing’s managed investments platform.
“Emerging and mass-affluent investors can now have greater access to professionally managed investment solutions,” said Hempel. “These investors represent a large, often underserved market. By offering a suite of diversified risk-based portfolios to this segment, advisors and registered reps can serve new clients and take advantage of cross-generational opportunities.”
Looking ahead, Lockwood will continue to evaluate managers to participate in its third-party offerings to provide more opportunity for financial professionals to grow their business and for investors to accumulate wealth.
It’s no surprise when markets take a break in August. Too many people are on the beach during the “dog days” of summer for important decisions to be made. Even so, August 2016 will go down as an exceptionally sleepy month.
Markets Barely Moved in August
Leading up to the meeting of central bankers in Jackson Hole last week, the S&P 500 Index went through 34 trading sessions without a 1% one-day move, up or down. It only broke 0.5% six times. That made it the least volatile 30 days in more than 20 years. Similarly, Bloomberg reports that the August trading range for the 10-year U.S. Treasury was the tightest for any month in a decade.
Moreover, investors appear to believe that these conditions will persist for some time. Not only has the VIX Index of one-month implied volatility in the S&P 500 been sinking since its spike after the Brexit vote, but according to Bank of America Merrill Lynch, there is now a record level of shorts in the VIX futures markets—bets that the index will fall even further.
Remarkably, this has happened before a Jackson Hole symposium in a year when central banks have been the only game in town. Janet Yellen’s speech there was one of only three she has made this year (the other two were in Philadelphia in June and New York in March). In 2015 she made 11 appearances and on average Fed chairs have given almost 20 addresses per year—so this ought to have been a hotly-anticipated event, especially as a number of Fed Presidents made notably hawkish noises leading up to it.
Is This Fatigue, or Complacency?
After the excitement of the global growth scare in January, the central-bank innovations of the spring, and the Brexit vote in June, perhaps markets needed some particularly “doggy” dog days to recover.
The more worrying conclusion is that they have grown complacent. One can understand why. Brexit turned out not to be the end of the world; U.S. jobs data is back on track; Europe’s economic data continues to improve; bond yields have fallen and corporate earnings have disappointed, but stocks keep climbing; rate hikes keep getting postponed; and opinion polls started to favor the more predictable U.S. Presidential candidate.
Low Volatility Can Heighten Market Vulnerability
But complacency is unwise—and not just because all of this could flip around by mid-September. In financial markets, complacency itself can store up danger, increasing vulnerability to unexpected changes in conditions.
A driver on a perfectly straight highway can be tempted to take his eyes off the road and put his foot on the gas, and investors often behave in a similar way. As “risk” appears to diminish, they add leverage or take bigger bets to use up their risk budgets. They become less inclined to hedge against downside losses, even as the premiums to do so get cheaper—hence the low level of the VIX. That makes for a harder crash when a tire blows out.
Market volatility reverts to its mean, but even taking this into account, periods of unusually low volatility have often preceded bouts of unusually high volatility. Volatility was low just before the dollar came off the gold standard in August 1971, for example; it was low at the beginning of 2007 just before the financial crisis began to unfold; and it was low early in 2011 before the Eurozone crisis erupted. Low volatility didn’t predict events like these, of course, but it created the vulnerability that explains some of the unusually high volatility when those events occurred.
When the Dog Days Are Over, Be Prepared
Given that a lot could happen this fall to reveal how complacent and vulnerable markets have become—from an inflation or rates shock to another twist in the U.S. elections or a geopolitical tire blow-out—investors should make sure their seatbelts are fastened.
The old proverb advises us to let sleeping dogs lie: prodding them awake can result in a nasty bite. Markets have slumbered deeply during the dog days of August. Investors should be prepared for when they rouse again.
CC-BY-SA-2.0, FlickrFoto: fancycrave1 / Pixabay. La clase media-alta de Reino Unido se decanta por la banca online
Research by financial services research and insight firm Verdict Financial has found that the UK’s mass affluents, compared to non-mass affluents, are heavier users of online and mobile banking, are more likely to favor these channels for routine activities, and are more satisfied with the performance of digital banking channels.
The company’s latest report finds that among those who use online banking, 89% of mass affluents accessed this channel at least once a week, compared to 83% of non-mass affluents. For mobile banking, the equivalent weekly usage figures were 83% and 79%, respectively.
Furthermore, mass affluents are slightly more inclined to use digital channels to carry out activities such as checking their balance, paying bills, and managing their direct debits.
Daoud Fakhri, Principal Analyst for Retail Banking at Verdict Financial, states: “Mass affluents are more confident about financial management than other consumers, finding it easier, for example, to keep track of their day-to-day spending. As such, they are more at home using digital self-service channels and less reliant on speaking to bank staff, whether in-branch or in a call center.”
Verdict Financial’s report also found that mass affluents were more satisfied than other consumers with the functionality, usability, and security of digital channels, especially mobile. For example, while only 36% of non-mass affluents were very satisfied with mobile banking security, this rose to 45% of mass affluents.
Fakhri continues: “The high level of enthusiasm for digital banking among mass affluents is good news for the banking industry. Banks are trying hard to migrate their customers to their online and mobile banking platforms, which incur far lower operational costs than branch networks and call centers, and it appears that mass affluents are happier than non-mass affluents to go along with this.
“Given that mass affluents are a highly attractive demographic in terms of their revenue-generating potential, there is clearly a strong incentive for banks to continue developing their digital channels by adding new functionality and improving ease of use.”
CC-BY-SA-2.0, FlickrFoto: RonKikuchi, Flickr, Creative Commons. Lombard Odier expande sus capacidades de distribución a través de un acuerdo con Novia
Lombard Odier Investment Management continues to develop its distribution capabilities by making some of its mutual funds available through the Novia Financial and Novia Global Platforms for the first time.
The 17 Lombard Odier IM funds available through Novia Global include some of the group’s most well-known strategies, such as the Convertible Bond fund and Golden Age fund, which invests in equities globally that are expected to benefit as populations grow older.
The inclusion of the 17 funds, many of which are already available on Hargreaves Lansdown’s and Cofunds investment platforms, further builds the group’s distribution footprint.
Novia Global is a multi-currency wealth management service which was launched to the market in October 2015. The platform is available to advisers dealing in the international market, private banks, trust companies and their clients as well as certain other professional investors. Supporting residents (individuals and trusts) based in the Channel Islands, Isle of Man, Switzerland and Europe, Novia Global recently announced the extension of jurisdictions.
“We want to make our diverse range of differentiated funds more readily available to advisers and their clients, and our latest partnership with Novia Group is a reflection of this aim,” said Dominick Peasley, head of Third Party Distribution at Lombard Odier IM.
“We are thrilled to be continually adding to the burgeoning selection of assets on the Global platform and we now offer over 1500 funds on the platform from 67 fund managers and we recently announced the launch of a new DFM service,” said Dave Field, head of Customer Service at Novia Global.
CC-BY-SA-2.0, FlickrFoto: AdamSelwood, Flickr, Creative Commons. La inversión en ETFs de smart beta crecerá un 25% en los próximos tres años
The amount of assets invested in smart-beta ETFs, which are not based on traditional, market capitalization-weighted indexes, could grow by 25% over the next three years, according to new research from Ignites Distribution Research, a Financial Times service.
“Smart beta” (also known as strategic beta, factor-based indexing and other names) has become one of the hottest concepts in asset management, and especially in ETFs. As of mid-2016, the U.S. market featured over $460 billion in assets invested in more than 600 smart-beta ETFs, according to Morningstar.
Of the 740 financial advisors surveyed by Ignites Distribution Research across broker-dealer and registered investment advisor (RIA) channels, 35% are currently using smart-beta ETFs. “That’s significant, but it’s a notably lower percentage than those using traditional ETFs — which suggests plenty of room to grow”, says the report.
“Our growth expectation is based on the fact that once advisors start using smart-beta ETFs they’re very likely to boost allocations to them. Among the smart-beta ETF users we surveyed, 78% of them plan to increase their overall AUM in smart-beta strategies over the next three years. Of the 78% planning an increase, 14% of advisors are considering increasing their overall AUM in smart-beta ETFs by 11% or more. Extrapolating those dollars to the broader advisor universe suggests more than $100 billion in net new flows to smart-beta ETFs over the next three years even if no new advisors start using them”.
However, more advisors are expected to start using smart-beta ETFs. Of the advisors Ignites surveyed who don’t use smart-beta ETFs, 17.5% are considering using them. Meanwhile, 52% of advisors don’t have plans to use smart-beta ETFs but are open to learning more.
Those findings are contained in Ignites Distribution Research’s new report, The Opportunity in Smart-Beta ETFs, which examines not just the potential for smart-beta ETFs but how advisors are using them and how asset managers can best address this burgeoning market.
“The payoff can be big for purveyors of active management because smart-beta ETFs can command significantly higher fees than traditional ETFs. Already a number of fund firms that typically eschew passive products have drawn on their active expertise to enter the smart-beta ETF market,” says Loren Fox, the director of Ignites Distribution Research and a co-author of the report. “As additional firms add to an increasing number of smart-beta ETFs, it becomes more important to understand how advisors are deploying these products and where there are genuine openings in the market.”
One of the key findings of the report is that financial advisors using smart-beta ETFs view the concept — taking a rules-based approach to gain exposure to a single factor, multiple factors, or even a strategy — as somewhere between active and passive management. The report reveals how often advisors use smart-beta ETFs to complement active or passive allocations in portfolios, or to replace active or passive allocations. Ignites Distribution Research found that asset managers aren’t always attuned to advisors’ use of smart-beta ETFs within portfolios, overemphasizing certain aspects of the products.
Ignites Distribution Research surveyed the Financial Times 400 Top Broker-Dealer Advisors, a list of top broker-dealer advisors from across the U.S. managing, on average, $1.7 billion in client assets; the Financial Times 300 Top Registered Investment Advisors, a list of elite, independent RIA firms managing, on average, $2.8 billion in client assets; and midsize financial advisors in the broker-dealer and RIA channels that manage, on average, $300 million in client assets.
CC-BY-SA-2.0, FlickrFoto: AedoPulltrone, Flickr, Creative Commons. Schroders lanza un nuevo fondo en su plataforma GAIA de la mano de Two Sigma Advisers
Schroders is pleased to announce the launch of an externally-managed fund, Schroder GAIA Two Sigma Diversified, on its UCITS platform. The fund will be sub-advised by Two Sigma Advisers, LP, and launches on 24 August 2016.
The strategy, created by Two Sigma Advisers, LP, in collaboration with Schroders, will combine US equity market-neutral and global macro strategies. The fund aims to offer investors portfolio diversification through a liquid alternative strategy that intends to be uncorrelated to traditional equity and bond markets. The strategy will apply a scientific and algorithmic approach to investing across thousands of individual equities and hundreds of macro markets, allocating the majority of the fund to the equity market-neutral strategy.
Two Sigma Advisers, LP was launched in 2009 and together with its affiliates (“Two Sigma”) has built an innovative platform that combines extraordinary computing power, vast amounts of information, and advanced data science to produce breakthroughs in investment management and related fields. Two Sigma employs more than 1000 people, including more than 150 PhDs.
Geoff Duncombe, Chief Investment Officer of Two Sigma Advisers, LP said: “Two Sigma’s platform approach leverages data and technology expertise to create solutions that meet the needs of diverse investor groups. We are thrilled to partner with Schroders, which has built a preeminent UCITS platform, to bring investors portfolio diversifiers that seek to deliver controlled volatility, low correlation to markets, and attractive risk-adjusted returns.”
Eric Bertrand, Head of Schroders GAIA, said: “We continue to see very strong demand for liquid alternative investment strategies, as clients seek to diversify their portfolios. We’re delighted to partner with Two Sigma to launch this newly created strategy specifically tailored to meet these needs, with the aim of delivering alpha. Two Sigma has a strong reputation in the field due to its leading technology expertise and creative, research-driven approach, which allows the firm to design and evolve intelligent systematic strategies.”
GAIA Platforms
Schroder GAIA and Schroder GAIA II combine the strength of Schroders’ renowned asset management expertise and extensive distribution capability with leading hedge fund managers.
Schroder GAIA Two Sigma Diversified will launch on the Schroder GAIA UCITS platform. Schroders now has nine funds on the two GAIA platforms, eight managed by external hedge fund managers (Schroders GAIA Two Sigma Diversified, Schroder GAIA Egerton Equity, Schroder GAIA Sirios US Equity, Schroder GAIA Paulson Merger Arbitrage, Schroder GAIA BSP Credit, Schroder GAIA BlueTrend, Schroder GAIA Indus PacifiChoice and Schroder GAIA II NGA Turnaround) and one managed internally (Schroder GAIA Cat Bond).
Old Mutual Global Investors (OMGI), part of Old Mutual Wealth, has announced that Diego Parrilla joined the business on 8 August, in the newly created role of managing director, commodities.
Based in Singapore, Diego will report into Paul Simpson, investment director at OMGI. He will initially be responsible for promoting and building the GBP 60 million Old Mutual Gold & Silver Fund to the institutional investors in Singapore and other markets in which OMGI operates. He will also be working with OMGI’s management team to identify absolute return strategies across precious metals and commodities that are aligned with the strategic direction of the company, and with client demand and market suitability.
Diego joins the business from Dymon Asia Capital, where he worked from August 2015 having previously held a number of high profile investment and distribution positions during his career, including portfolio manager at BlueCrest Capital Management, from June 2014 to July 2015; managing director and head of commodities, Asia Pacific at Merrill Lynch from 2009 -2011, and managing director and global head of commodity sales at Merrill Lynch from 2005-2009. Prior to this, Diego was an executive director in the commodities division at Goldman Sachs from 2001-2005, and started his career as a precious metals trader at JP Morgan in London in 1998.
He is also a best-selling author having co-written, “The Energy World Is Flat: Opportunities From The End of Peak Oil” in 2015 and “La Madre De Todas Las Batallas in 2014”. He is also a regular contributor to El Mundo and the Financial Times.
“Diego is a highly accomplished and respected investor and commodities economist, and we’re thrilled to welcome him to the team. At OMGI we recognise that precious metals have become an increasingly important asset class as investors look to hedge against the impact of modern monetary policy. We will call upon Diego’s significant experience and knowledge of commodity markets to assess client demand for alternative commodities products in the future,” commented Richard Buxton, CEO, OMGI.
“We are seeing a perfect storm in the gold markets whereby central banks and global markets are testing the limits of monetary policy, credit markets, and fiat currencies, which in my view support a multi-year bull market for precious metals. The Old Mutual Gold & Silver Fund offers a differentiated proposition. I look forward to working with the entire OMGI team to continue to deliver best in class solutions across precious metals and commodities, key components of global macro markets, for our clients.”, added Diego Parrilla.
The Old Mutual Gold & Silver Fund launched in March 2016 and is managed by Ned Naylor-Leyland. It aims to deliver a total return and utilizes a distinctive investment approach, combining indirect exposure to gold and silver bullion with selected precious metals mining equities.
CC-BY-SA-2.0, FlickrFoto: MARCUS NUNES
. Foro de directores de inversión de familias y family offices
2016 FOX Autumn Global Investment Forum, Family Office Exchange´s (FOX) semi-annual family investment-focused gathering, will be taking place on September 15 in New York City.
The Forum is designed to meet the interests and needs of family investment decision-makers who will be in attendance, building a strong community among FOX members who are private investors or responsible for the investments of the families they serve. It will feature expert speakers as well as ample opportunity for networking and peer exchange with fellow top minds in the family office and investment worlds.
“This Forum helps facilitate smart, focused conversations among those responsible for family investment decisions, whether they are private investors or family office executives,” said FOX president Alexandre Monnier.
The program includes a session called “Unleashing your Psychological Capital” with Denise Shull, Founder & CEO of The ReThink Group; a view of Emerging Markets with Nicolas Rohatyn, CEO/CIO of The Rohatyn Group; A luncheron examining “Women and Wealth” with Sallie Krawcheck, Chair of Ellevate and Co-Founder/CEO of Ellevest; A panel of three wealth owners who will communicate their unique perspective and approach to direct investing.
The gathering will also include the first in-person meeting of the new FOX Private Investor Council, a new Council-level FOX membership specifically for successful sophisticated investors who make their own investment decisions and consider different risk and reward dynamics than most other investors (taking place September 14, the day before the Forum).
