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Investec: “In Europe, The Headwind Has Turned To Become a Tailwind”

Investec’s European Equity team is a part of the broader 4Factor investment team, one of seven distinct investment capabilities at Investec Asset Management. The 4Factor team is responsible for between $30-35 billion dollars of client assets. Ken Hsia, Lead Portfolio Manager of the European Equity Fund, summarized this investment process during his recent visit to Miami.

“We believe that equity markets are inefficient by definition, but the level of efficiency varies depending on the headlines,” he explains. Right now, investors are hearing news on the slowdown, the United States’ presidential election, or the referendum in the UK, the type of news that grabs their attention and which has created volatility in recent times, causing major inefficiencies in the markets. “As securities’ selectors, our job is to be able to exploit these inefficiencies.”

Why do these inefficiencies exist? “Due to market participants’ behavior errors; there are certain patterns that, when it comes to investing, cause investors to buy expensive and sell cheap” replies Hsia, adding: “We believe that by doing things right you can achieve better results consistently over time.”

To achieve this objective, they apply− from a benchmark, style, and capitalization agnostic approach− their “4Factor” process, which leads them to analyze four different aspects: high quality− those companies that have created value for their shareholders in the past−, attractive valuation−, those that are cheaper than the average in terms of cash flow return on investment and asset based valuations−; improved operating results−, those that are seeing their profit forecasts revised by analysts−, and increasing attention from investors−those starting an upward trend−.

The first two, both traditional ones, are the ones which help to find high quality corporations at attractive valuations, and the last two, related to behaviors, the ones which help to choose the right moment to take or leave positions and to avoid behavior errors.

Why Europe, and why now?

Corporate revenues and profits will grow, thanks to commodities.

European markets, which Hsia considers to be at an early stage of the profit cycle, have not had any returns in recent months to evidence the start of the recovery to which the fund manager refers, but he explains that the fall in commodity prices during the last 12-to 18 months (e.g. oil has dropped from more than $ 100 a barrel to oscillate between 35 and 45, and iron has dropped from over $ 100 per ton to between $40 and $50) is weighing heavily on the ROEs. And whether or not they appear in his own portfolio, Royal Dutch, Total, BHP Billiton, or other securities with exposure to commodities, weighed on the fund’s benchmark- the MSCI Europe.

“The two most interesting facts are that for 2017 analysts expect an increase in earnings in European corporations of an ample double-digit, and that commodities will shift from curbing their growth, to propelling it,” while during 2014 and 2015, the underlying trend in earnings per share (EPS), excluding commodities, approached 5%, and for 2016 the general consensus places it at between 4 and 6%.

There are signs of recovery.

“We have identified two cyclical sectors that provide some recovery signs”. On the one hand, car sales, which are a clear indicator of the confidence of investors, have been recovering since 2013, and in Europe grew by 8% in the first quarter of this year, although with differences between countries. Although still at a level of 15% below their previous highs, the fund manager is confident that these will once again reach their previous peaks, as car sales have done in the US during this recovery; the other sector with telltale signs is the cement industry. For example, the greatest difference between this product’s peak and lowest consumption rates in Spain was 80%, and 50% in Italy, both of those markets are now in recovery.

Given the slow recovery process−which frustrates some investors− and to provide depth to the study, the team looks at each sector in detail, therefore, Hsia speaks, of commercial real estate, for example, which, especially in southern European countries, is in the hands of private families or insurance companies, which have received no incentive to reinvest. “Energy efficiency in Italy or Spain is not optimal, as only 15% of office complexes obtained the highest (“A”) rating, while in France and Germany more than 30% have achieved that rating, with up to 40% in the United Kingdom, so it is necessary to improve the system” But we’re also seeing actions that will change the sector, such as that regulation in Italy is shifting from favoring property owners to favoring tenants, and the emergence of REITS in Europe, which are facilitating the inflow of capital to carry out these improvements in the sector.

These are just some examples showing recovery, says the fund manager, who admits to having mixed feelings, because, while he wishes improvement for that environment, which in turn favors the whole world, he believes that it’s best for investors if recovery doesn’t come too fast because “when economic growth is very strong there is more competition.”

Balance sheets are growing.

Corporate balance sheets are in recovery and much healthier than in 2008-2009, thanks to improved operating cash flows that the gradual growth of the economy and strengthening demand have brought about, as well as the fact that some companies no longer rely on high future economic growth and are streamlining their costs and cleaning up their balance sheets, which will also create more value. Should we expect more mass layoffs? Not necessarily, says the strategist, cost rationalization can also be achieved by an improvement in the production process, acquisitions, etc. We think that unemployment should fall.

Valuations remain attractive

With a cyclically adjusted P/E ratio 15x earnings and a historical average of between 20 and 21, the opportunity seems clear, and the strategist is confident that it will return to maximum levels. Another favorable factor is the lack of issuance of sovereign bonds by the ECB, which will cause the flow of investment into other types of assets, such as equities.

“In short, there are signs of growth, sometimes frustratingly slow, but that is what increases the difference between winners and losers.”

“In an environment such as this, we see that there are sectors whose indicators improve, such as the industrial, although in our portfolio it remains underweight in relation to the benchmark; in this, we have included Siemens, which is shifting from obsolete businesses to creating a new supply line more tailored to current consumer requirements. Other sectors we like are information technology, the most overweight in our portfolio, and consumer discretionary. Not so with consumer staples, where we don’t see any value, or healthcare.”

Regarding the financial sector, adds Hsia, in which we are overweight by 2% in relation to the benchmark, we are pragmatic about its enormous volatility, but we like FinTech, banks focused on retail business in countries where consolidation has already occurred, such as France, Benelux and the United Kingdom, and not so much in those in which there is still much fragmentation− Germany, Italy and Spain−, because, although we see some consolidation, we can’t see any creation of shareholder value. Nor do we like investment banks in Europe and we are underweight in insurance and real estate.

By country, the UK, which although accounting for 24.7% of its assets− with much diversification−, is 5% underweight; France is 6% overweight, and Germany, by slightly higher than 6%, is the one he likes best. “When we saw the first ECB rate cut, we believed that there would be opportunity in Germany, but then Japan, its largest competitor, lowered rates and this was circumvented. However, we do find good ideas now.

Seizing the opportunity that Hsia lives in London, we asked about the sectors which could be most affected if the referendum to be held in June in UK propels a “disengagement” from the EU. He doesn’t seem worried about this and points out that, large corporations have a “B” plan and perhaps one of the most affected would be agriculture, but neither banks nor other big companies worry him because “they hopefully will have enough time, and have the resources to prepare their structure for an environment which could change.”

Once again, he summarizes: “The biggest driver of European equities will be corporate earnings, as the headwind has turned to become a tailwind”.

The Europe Behind the Headlines

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Factors line up behind corporate Europe.

April was far from the cruelest month for investors. Most will have felt sentiment improve behind equities, high-yield bonds, emerging markets and commodities. But did they also notice how well European assets performed?

Followers of CIO Perspectives will be used to our “show-me-the-money” theme—the difficulty of building conviction on big market exposures until the fundamental picture clarifies. The global economy is in “two steps forward, one step back” mode, and no one region can establish clear leadership. The rising dollar made life tough for companies in the U.S. even as its data strengthened. Now that economic releases appear to be softening, it may be time to look more closely at Europe.

Time to Dig Below Europe’s Headlines
We’ll turn to performance later. For now, let’s acknowledge how easy it is to focus on headlines and imagine Europe is in permanent crisis, awash with geopolitical risk. Dig a little deeper, however, and you can find positives in its economies and favorable positioning among its companies.

Last week saw rare good news around Greece, for example. Its parliament approved reforms with little drama, triggering a bailout review that should release needed funds and potentially open up discussions on debt relief.

A week earlier, Eurozone GDP growth surprised on the upside just as the U.S. posted its slowest quarterly growth for two years. On Friday, Germany gave us a strong GDP print. Manufacturing data out of Europe has been mixed, as it has from the U.S., but it’s encouraging to see Italy and Spain exceeding expectations. Europe’s unemployment problem remains severe, but recent jobless claims, participation rates and non-farm payrolls data remind us it’s not all clear sailing in the U.S., either.

Of course, this is all relative. Europe’s 0.5% growth in Q1 was the same as the U.S.’s. The appetite to restructure Greek debt still isn’t there. Industrial production in Germany, France and the U.K. is weakening. Inflation is nonexistent.

But the European opportunity isn’t really a big macro call. It’s about a series of factors lining up behind the investment case for corporate Europe.

European Companies Appear Well Positioned

European companies tend to benefit from lower oil prices. They have more exposure to emerging markets, where sentiment may be improving. Eurozone money supply has been growing strongly, and there was further stimulus from the ECB this year.

That stimulus included a commitment to buy corporate bonds, which is creating a wave of new euro issuance: Almost €19 billion came to market last Wednesday alone. That leverage could be problematic in the long term, but in the meantime it sends a message that liquidity is abundant and profitable investments may be available.

That would be encouraging because European companies have much more room to improve earnings than their U.S. counterparts. Corporate profits are back where they were in 2010, having never regained pre-crisis levels. By contrast U.S. profits peaked in 2014 and have declined ever since.

Performance in April Was Encouraging

The turnaround isn’t underway yet: With the Q1 earnings season almost done, S&P 500 earnings per share are down just over 5% year-over-year; in Europe, the Stoxx 600 EPS is down 21%, and the consensus for 2016 EPS growth is weakening.

Nonetheless, my equity-focused colleagues are looking beyond the U.S. for good reason. Let’s look at those performance numbers.

Year-to-date, the worst-performing markets still include the Stoxx 600, European banks, and Italian and German equities (alongside China and Japan). But the story was very different in April, when Spain was up 4%, Italy 3%, and the S&P 500 was flat. For U.S. dollar investors, the results were even better—in fact, Spanish equities ended April in positive territory, year-to-date, against the greenback.

In a world where clear opportunities are few and far between, European stocks could well be a source of compelling long-term value—and markets may now be recognizing some of that value.

Neuberger Berman’s CIO insight column by Erik L. Knutzen

In the Wake of the “Panama Papers”, the CRS will Speed up Compliance

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The Common Reporting Standard (CRS) is a new international system for the automatic exchange of tax information promoted by the Organisation for Economic Cooperation and Development (OECD) and modelled on the United States’ Foreign Account Tax Compliance Act (FATCA). For some taxpayers the CRS is already “live”; for others it is imminent.

While FATCA focused, and continues to focus, only on US taxpayers, the CRS potentially involves reporting on residents of any country that has signed up to the CRS where those residents, or an entity deemed “controlled” by them, holds a “financial account” in another country that has also signed up to the CRS.

Approximately 100 countries have signed up so far. The full list can be seen on the OECD website. Approximately 56 of those who have signed up so far are so-called early adopters, which means that financial accounts held with financial institutions in those countries as of 31 December 2015, and new accounts opened after that date, will eventually be the subject of reporting. Although that reporting may only start happening in 2017 with reporting by later adopters starting a year later, residents of participating jurisdictions should already be taking steps to understand what the CRS will mean for them in concrete terms. Residents of countries that have not yet committed to apply the CRS should be considering the impact of their countries’ eventually doing so.

For example, it is noteworthy that despite Brazil not being in the group of Early Adopters, if a Brazilian has assets (bank accounts, investment funds, etc.) held in any jurisdiction of the Early Adopters group, their tax information will be reported in the first half of 2017.

The international political climate has been significantly affected by the revelations arising from the leak of the “Panama Papers”. In this environment, the reality is that every individual who has any international investment in any form and direct or indirect, needs to get to grips with whether or not they may be the subject of reporting and what the consequences would be.

One of the side-effects of the CRS has been the introduction by a number of countries of an amnesty or voluntary disclosure programme so as to enable their taxpayers to regularise their tax or exchange control position in relation to assets in foreign accounts. A number of people have embarked on such a regularisation process in advance of the inevitable flow of tax-related information to their tax authorities. One might be tempted to take the view that, having gone through such a process, or at least having committed to do so, the eventual reporting of financial information to one’s tax authority becomes of secondary importance. Taking such a view would be unwise as the level of reporting may well go beyond what is strictly necessary for purposes of tax compliance and have other consequences for the individuals concerned.

The trigger is the existence of “financial accounts”
As the existence of a “financial account” is the starting point for potential reporting, the critical thing each resident of a CRS jurisdiction must understand is whether one is the holder of, or a person deemed to be controlling, a “financial account”. The term “financial account” is a much wider concept than perhaps one might imagine. Up until now, only US taxpayers have been obliged to get to grips with the full meaning of the term.

Even if a taxpayer successfully completes a particular regularisation process or even if their tax affairs always were entirely compliant, that does not mean that the impact of the CRS ceases to be of further concern. It will not be uncommon for information reported under the CRS to be surprising and irrelevant to a person’s tax affairs.
Thus, in all cases it will be important to understand whether one will be treated as the holder or controller of a “financial account”.

“Financial accounts” in trust structures

It will come as no surprise for individuals holding a bank account or an interest in an investment fund in their own name that they hold a financial account. But individuals with some sort of involvement with a trust may find themselves subject to reporting as, believe it or not, a trust in many cases will be a financial institution and the following people will be regarded as a having a financial account with a trust:
Settlors, even if the trust is irrevocable – and, while we consider the position being taken by the OECD to be incorrect, the value of that account reported against the name of the settlor may be the entire value of the trust. In addition, the OECD has even indicated that it is considering whether a settlor who is dead should continue to be the subject of reporting!
Protectors, where their powers are such as to give them ultimate effective control over the trust, a not uncommon situation. Again, the value of the account reported may be the entire value of the trust, even where the protector is excluded from benefit. Let us consider the case of a person who, while living in the UK, was appointed as protector, and then takes retirement in France while remaining the protector. It is likely that the French tax administration will be very interested in someone who is considered to be in control of a trust that holds significant assets and whose value would give rise to a significant French net wealth tax charge.
Vested beneficiaries and, in the years in which a discretionary award is made, also discretionary beneficiaries. In the latter case, only the value of the award would be reported as the account value.

Underlying companies of trusts – another layer of reporting

The position is more complex where a financial account, such as a bank or investment account, is held by an underlying company of a trust. The existence of this additional financial account may result in another layer of reporting, in addition to the reporting on the trust. This is because the bank or investment fund may well need to identify the controlling persons of the underlying company and that in turn may require an examination of the controlling persons of the trust that is the sole shareholder of the company. The controlling persons are not the same as the financial account holders in the trust. The following are potentially affected:

Settlors – this time the reported amount will be limited to the value of the account of the underlying company in question; but it will mean that both the trust and the bank or fund will be reporting on the same person.
Protectors – this time it is irrelevant what powers of control are given to the protector in question as protectors are, by definition, controlling persons even if they do not exercise control.
Trustees – and if the trustee is a corporate trustee, this will involve a further enquiry as to who the controlling person of the trustee is, which may in turn result in the disclosure of its senior managing official.
Vested beneficiaries and discretionary beneficiaries – but in this case the latter may be treated as controlling persons even if they do not receive an award.
Potentially anybody else that the bank or fund might consider to be the beneficial owner for anti-money laundering purposes.

Bear in mind that the complexities of reporting will increase as the complexity of the structure increases, including where there are multiple trusts involved, as well as trusts with individuals or private trust companies as trustees.

The key for holders of financial accounts, and persons who may be regarded as “controlling persons” of a company, is to recognise well in advance where they may be subject to reporting. Based on that assessment, consideration can be given in good time to dealing with the consequences.

Column by Andrew Knight and Anthony Markham. If you have any queries about this column, please contact Benjamin Reid

Pro-invest Group Signed a Fund Administration Agreement with Apex

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Pro-invest Group, a Private Equity Real Estate investment firm, announced on Monday the signing of a fund administration agreement with global independent fund administrator, Apex Fund Services. The partnership will deliver Pro-invest Group with the specialist private equity real estate fund accounting, regulatory reporting and middle office support services required to provide the required infrastructure and support investments.

Apex’s global presence and breath of service capabilities spanning the full value chain of a fund will ensure Pro-invest is supported by administrative resources that enable them to deliver cross-border services to their clients. With $300m (AUD) in committed capital, Pro-invest’s vision to provide tailored products to clients from Europe, the Middle East, Asia and North America will be reinforced by Apex’s local office presence and expertise in these regions.

Ronald Barrott, Chief Executive Officer, Pro-invest Group said, “Pro-invest Group recently reached a significant milestone through the opening of Australia’s first Holiday Inn Express hotel in March this year. At this important stage in our growth and success, it is essential that we work with an administrator who understands our business model but also more importantly our guiding principles of trust, integrity and commitment. Apex and Pro-invest have a shared vision in this area and Apex’s approach to service provision echoes our core values. As we look to capitalise on unique investment opportunities for our clients, we need flexible service providers who can evolve along with us. This partnership will allow us to confidently focus on our investment mission, whilst being operationally supported by qualified experts to achieve our growth goals.”

Srikumar TE, Managing Director at Apex Fund Services APAC, said: “We are delighted to be working with Pro-invest Group at this time. The flexible nature of Apex’s approach to service provision makes us ideally suited to administer a private equity and real estate fund of this nature. We are fully invested in supporting Pro-invest’s mandate to deliver tailor-made services and investment opportunities to clients. As an independent provider we have the ability to align our solutions and support services to robustly support real estate investments. Apex has experienced 35% growth in private equity and real estate clients over the past year, and we now host eight private equity and real estate centres of excellence across the group. We have built a focused and flexible solution to support Pro-invest with strong internal controls and experienced staff to ensure their commitment to achieving success is continually realised.”

UBS Takes Stake in SigFig And Forms a Strategic Alliance for Technology Development

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UBS Wealth Management Americas (WMA) has made an equity investment in SigFig, an independent San-Francisco-based firm wealth management technology company. Also, they have agreed to form a strategic alliance to develop financial technology for UBS WMA, its financial advisors and their clients. Additionally, both companies will create a joint Advisor Technology Research and Innovation Lab, where the companies will continually collaborate on new wealth management technology tools. The companies envision the lab as a forum where financial advisors, product experts and technologists can join with SigFig’s experts in digital technologies and design to develop leading technology capabilities for UBS WMA and its clients.

As part of this strategic alliance, the WM technology company will create and customize digital tools and services for the America´s division of the swiss bank´s 7,000 advisors that will complement their expertise and enhance their clients’ digital experience. This platform will improve the ability of the advisors to efficiently provide advice on assets held at the bank and other institutions, a critical factor in providing truly personalized financial advice across the complete range of client needs.

Matthew Elderfield, to Become New Head of Group Compliance at Nordea

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50 year old Matthew Elderfield has been appointed Head of Group Compliance and a member of Group Executive Management at Nordea. He will join the company by November, 9th, 2016 at the latest.

“We have set an ambitious target to be best in class regarding regulatory compliance. Continuing to enforce a strong risk and compliance culture and making it an integral part of our business model is key to making these efforts succeed. I’m convinced that Matthew with his extensive international experience will bring Nordea closer to our ambition in leading our increased focus on compliance going forward, says Group CEO Casper von Koskull.

Matthew Elderfield is currently Global Head of Compliance at Lloyds Banking Group where his role covers all business areas, ie Retail, Wholesale and Wealth. The Financial Crime unit is also part of his responsibility.

Prior to Lloyds Banking Group Matthew Elderfield has held a number of senior international regulatory roles, most recently as Deputy Governor of the Central Bank of Ireland when he also served as Deputy Chairman of the European Banking Authority and as a member of the Managing Board of the European Insurance and Occupational Pensions Authority.

Johan Ekwall will stay on as acting Head of Group Compliance until Matthew Elderfield takes up his position.

Helen Driver Joins as Fund Manager, Global Equities, Aviva

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Aviva Investors, the global asset management business of Aviva, has appointed Helen Driver as fund manager in its Global Equities team. She is based in London and reports to Chris Murphy, Global Head of Equities.

In this new role, Helen is focused on identifying high-conviction large-cap global equity ideas for inclusion in both stand-alone global equity portfolios and as a key part of Aviva Investors’ Multi-Strategy proposition.

Helen has 16 years’ investment management experience and joins from Legal & General Investment Management, where she was fund manager on the UK Real Income Builder Fund. Prior to this, she held investment and client servicing roles with Standard Life Investments.

She is a member of the Asset & Liabilities Committee for the Social Investment Business, which provides grants and loans to voluntary sector organisations. In this voluntary role, she helps to review the investment portfolio for the Futurebuilders England & Modernisation Funds.

Chris Murphy, Global Head of Equities, said:

“I am very pleased to welcome Helen to Aviva Investors. She brings strong expertise in building and managing equity portfolios and a proven track record in successful stock selection. I am certain she will make a significant contribution to the team as we continue to develop our global equities proposition.”

XP Investimentos: “We Strongly Believe We Can Break the BRL 100 Billion Mark in Five Years”

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The firm XP Investimentos has dedicated more than 10 years innovating and transforming the way Brazilians invest. They were the first firm that introduced the idea of “financial shopping” in the Brazilian market, aiming to provide more freedom of choice to their clients. The firm has already about BRL 35 billion in assets under management, and is expecting to grow up to BRL 100 billion in the next five years. In an exclusive interview with Funds Society, Beny Podlubny, Head of the Wealth Management division at XP Investimentos, talks about their main areas of development and growth, their international expansion plans, and the Brazilian investors’ preferences.

Since 2008, XP Investimentos has been the largest independent brokerage firm in Brazil, what factors would you say have shaped the success of the firm?

I believe several factors have contributed to our success, the first factor would be the partnership culture in the firm, our firm has attracted several outstanding professionals that act as owners. They are hardworking, committed and top performers. These same professionals will not stop working until reaching our main goal: the highest level of service. Secondly, our main focus are our clients. We do our homework daily and constantly compare ourselves to the best companies in Brazil known for this service. And thirdly, we invest on innovation, and when I say innovation I do not only mean technology, but also how we conduct businesses offering creative solutions and easy access to products and services.

XP Investimentos offers three type of services: Exclusive Advisory (Assesoria Exclusiva), Self-Service (Auto Atendimento), and the service offered through your Partner Network (Rede de Parceiros XP). Which line of business has shown greater growth in the last couple of years? And, which areas are a priority in terms of resource allocation for XP Group?

Since our Advisory Group is the newest line of business in the group and therefore the one with the smallest asset base, this is the one that is growing the most. We are having a tremendous growth in 2016, reaching more than BRL 3 billion on assets under management, up to April. On the retail side, we are also having huge growth, especially in the on line business. We have partnered with Red Ventures, and they are doing a fine job in helping us find new clients through our online platform. On March, we have opened 20,000 accounts and have raised more than BRL 2.1 billion.

What is the current size of the Wealth Management division unit? What are your goals for the next five years?

The XP wealth management platform can be accessed by our internal bankers and also by our partner network. Today we have around 15,000 clients with more than BRL 1million of investments, totaling BRL 15 billion.The wealth management market in Brazil is about BRL 1 trillion, and in five years we strongly believe we can break the BRL 100 billion mark.

When we consider the undeclared wealth held by Brazilians abroad, and the amount expected to bring the undergoing tax amnesty, we are even more confident about reaching this goal. At XP, we know that we are prepared to serve these clients in our Brazilian and US Platforms, as well as in our new European offices.

XP Investimentos has an open fund platform with more than 300 funds listed, are there any preferences on any particular asset management firm from investors?

Brazil has a long history of high interest rates. Therefore, clients are used to investing in bonds and fixed income funds. That is the biggest strategy for any portfolio in Brazil. Here at XP we have a strong due diligence process to select and approve the managers that are in our platform. We also offer market intelligence to our bankers and partners network in order to enable them to better serve their clients. Finally, clients can access our comparison tools to analyze the best risk adjusted returns.

XP Investimentos also distributes funds of XP Gestao de Recursos, being XP Long Short FIC FIM, XP Investor FI Renda Fixa Crédito Privado LP, and XP Referenciado FI Referenciado DI among the funds with larger assets under management, what do these strategies bring to investors?

Even though those funds are managed by XP, they compete in equal terms to any other fund in our platform. Those funds are managed so that they beat different benchmarks and are used by clients to have a diversified portfolio in a totally independent manner. Clients like and trust the XP brand, however, they only invest in those funds after comparing them to all the options they have in our platform.

Group XP has two office branches in the US, one in New York and another one in Miami, through its affiliated company, XP Securities. The firm currently serves institutional clients, are there any future plans of servicing wealth management clients (non-US resident offshore business)?

Actually, we are already serving Latin American clients through our US platform. We also just announced a new group of 10 bankers that are joining us to expand our European business. We aim to have USD 5 billion abroad in less than two years.

Brazilian equity and fixed income markets rallied since the beginning of the year on speculations on politic turmoil, but the Brazilian economy still faces serious challenges, and it is expected that the economy and corporate earnings will suffer from it. Are you increasing exposure to international assets? Which vehicles do you use for that purpose?

Brazil is living a very interesting moment. We are about to live an important political shift that will have major repercussions in society and economy. We can see asset prices move further and we are following the market closely in search for opportunities, constantly doing our homework. We also believe that Brazilian clients should have a diversified portfolio and that also means having US dollar denominated assets. Brazilians can access the offshore market through different vehicles. It all depends on how much money does the client have to invest and what are the client’s goals for that capital. In summary, nowadays there are several funds in Brazil that give exposure to the offshore market. Clients can also wire their money to an offshore platform and invest their money from there.

High inflation and depreciation of the Brazilian real had a great impact last year, how are you protecting portfolios from these events?

The political shift can dramatically change this dynamic. But there are several ways to protect a portfolio from an inflation peak, such as NTN-Bs, Brazilian treasury protected inflation notes. Regarding protecting a portfolio from currency depreciation, there are also many possibilities, one of them is through funds that hold USD based assets, such as equities and global fixed income. As aforementioned, our clients with bigger portfolios also have part of their wealth abroad.

Since the beginning, Grupo XP has put a lot of effort in developing an educational model with courses and conferences for its clients, how is this effort paying back to the firm?

XP’s culture is based on education. Since inception, XP collaborators have trained thousands of investors on how to build a portfolio and trade their money. The results are definitely a consequence of the company’s main beliefs. XP wants its clients to invest better. When clients are investing better, they bring more money and recommend our platform to their friends. I strongly believe that our education culture made us reach the BRL 35 billion mark and explains part of our growth.

Nikko Asset Management and Legal & General Investment Management Announce a Business Cooperation Agreement

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Japanese manager Nikko Asset Management (Nikko AM) and Legal & General Investment Management (LGIM) have signed a business cooperation agreement for the provision of investment management services.

Under the agreement, LGIM and Legal & General Investment Management America (LGIMA) will provide global fixed income products that Nikko Asset Management will distribute to Japanese investors, primarily Japanese insurance companies and banks. The first funds are expected to launch in mid-2016.

LGIM has also agreed to facilitate the marketing and sale of Nikko Asset Management’s products in the UK and other countries.

Takumi Shibata, President & CEO of Nikko Asset Management said: “We are delighted to announce our business cooperation with LGIM. We are sure that this collaboration will truly benefit our clients through the provision of differentiated fixed income investment solutions offered by LGIM.”

Mark Zinkula, Chief Executive of LGIM said: “I am delighted to be working with Nikko Asset Management on this new business agreement. Japan is a key part of our strategy as we continue to build out our global asset management business. We look forward to providing Nikko Asset Management’s clients with access to our high quality range of fixed income products and services”.

Eric Varvel Appointed Global Head of Asset Management at Credit Suisse

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Credit Suisse has announced that Eric Varvel will join the International Wealth Management (IWM) division as Global Head of Asset Management, effective June 1, 2016. From New York, he will succeed Bob Jain, reporting to Iqbal Khan, CEO International Wealth Management, and will be a member of IWM’s Management Committee.

Eric Varvel, who has more than 25 years of experience at Credit Suisse,will spend a significant portion of his time in Switzerland and in various emerging markets, including in the Asia Pacific region, to drive forward the further development of the global Asset Management franchise.

Iqbal Khan, CEO of International Wealth Management, commented: “We are delighted to have such an accomplished senior leader to head our Asset Management business and look forward to working with him in this capacity. We are confident that his global experience, track record and expertise will significantly contribute to the further development of our Asset Management franchise and to the achievement of our ambitious goals. Eric’s strong relationships with many strategic clients will be a great benefit not only to the Asset Management business, but also to the IWM division overall.”

Global Asset Management has a strong US-based Alternative Investments footprint, combined with a leading Swiss-based Core Investments business and a solid foundation in emerging markets. Eric Varvel will be instrumental in growing the firms Alternative Investments franchise, fostering the partnership with the Swiss Universal Bank to further strengthen the bank´s position in Switzerland and accelerating the business’ growth in emerging markets and Europe, he added.

Eric Varvel has more than 25 years of experience at Credit Suisse. He served as a member of the Executive Board from February 2008 to October 2014. During this period, he held senior roles including CEO of the Investment Bank, and CEO of the Asia Pacific and Europe, the Middle East and Africa. Prior to his appointment to the Executive Board, he was the Co-Head of the global Investment Banking division, where he was based in New York. Before that, Eric Varvel spent 15 years building Credit Suisse’s footprint in the Asia Pacific region in a variety of senior roles, including Head of Investment Banking, Head of Emerging Markets Coverage and Head of Fixed Income Sales and Corporate Derivative Sales. During that time, he was based in Tokyo, Jakarta and Singapore. Most recently, Eric Varvel served as Chairman of the Emerging Markets and Sovereign Wealth Funds and a senior advisor to the CEO.