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Manny Roman will Join PIMCO as its New CEO

PIMCO, a leading global investment management firm, announced on Wednesday that the firm’s Managing Directors have appointed Emmanuel (Manny) Roman as PIMCO’s next Chief Executive Officer. PIMCO’s current CEO Douglas Hodge will assume a new role as Managing Director and Senior Advisor when Roman joins PIMCO November 1st.

The announcement of Roman as PIMCO’s CEO is the culmination of a process undertaken by the firm to hire a senior executive who would add leadership and strategic insights combined with a deep appreciation of PIMCO’s diversified global businesses, investment process and focus on superior investment performance and client-service. Roman’s appointment has the full support of the firm’s leadership including Hodge, PIMCO’s President Jay Jacobs, the firm’s Executive Committee and its Managing Directors.

Roman has nearly 30 years of experience in the investment industry, with expertise in fixed income and proven executive leadership, most recently as CEO of Man Group, one of the world’s largest publicly-traded alternative asset managers and leader in liquid, high-alpha investment strategies. Roman worked for more than 18 years at Goldman Sachs, where he was Co-Head of Worldwide Global Securities and Co-Head of the European Services Division. He became Co-Chief Executive Officer at GLG Partners in 2005 and Chief Operating Officer of Man Group in 2010 following the firm’s acquisition of GLG. He was named Man Group’s CEO in 2013. He will help drive PIMCO’s continued evolution as a provider of investment solutions built on the firm’s active management expertise in areas such as core bonds, non-traditional strategies, private credit, distressed debt, equities and real estate, among others. Roman will be based in PIMCO’s headquarters in Newport Beach, California.

“Manny’s deep understanding of global markets, unique skills in investment management and appreciation of PIMCO’s macro-based investment process make him the ideal executive to position the firm for long-term success,” said Daniel Ivascyn, Managing Director and PIMCO’s Group Chief Investment Officer. “Manny’s skills and experience include all of the attributes that are key to delivering value to PIMCO’s clients – investment acumen, intellectual capacity and thought leadership, broad industry experience, executive leadership and an excellent fit with PIMCO’s cultural values.”

Roman said: “It is an honor to be chosen as CEO of PIMCO, a firm which embodies the finest principles of asset management – innovative investment strategies, excellent client service and a deep bench of global talent – which have consistently delivered value to clients over the long-term. I look forward to working with the firm’s talented team to continue to build on PIMCO’s success in what is a rapidly changing industry.”

In his new role as Senior Advisor, Hodge will work with Roman to ensure a smooth transition of executive responsibilities providing continuity for PIMCO’s clients, employees and parent company Allianz SE.

Ivascyn said: “Doug has made a significant contribution to PIMCO with his leadership and professionalism. We are pleased he will remain with PIMCO to provide counsel to the firm and the Managing Directors, leverage his global relationships with our clients and ensure continuity throughout the transition of executive leadership to Manny.”

Hodge said: “PIMCO has become the global leader in active management of fixed income by seeking to provide investors with innovative solutions as the global markets change. As the asset management industry continues to evolve, Manny will bring new perspectives to PIMCO’s leadership team and add his unique talents to our already successful firm and I look forward to working with him.”

The Bond Segment Still Offers Opportunities that Combine Capital Protection, Return and Reduced Volatility

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Jean-Philippe Donge, manager of the BL-Bond Emerging Markets Euro fund talks about the opportunities in bond investments.

Jean-Philippe, do bonds still offer investment opportunities, even at these low interest rates?
Jean-Philippe Donge (JPD): Certainly, although that depends above all on each investor’s specific expectations. Investors looking for quality and wanting to protect themselves against deflationary trends will find protection in paper issued by the most creditworthy borrowers such as Germany and the United States. Investors looking for a better return, and therefore willing to accept higher risk, should look at other markets. Many emerging countries have made enormous progress in terms of growth in recent decades, as is confirmed by various indicators such as rising per capita income and a decline in poverty. That is the case for example of South Korea, where per capita GDP has risen from less than USD 1,000 in 1960 to almost USD 25,000 today, and also Mexico and Indonesia. Much depends therefore on the investor’s particular profile. The fact remains that the bond segment still offers opportunities that combine capital protection, return and reduced volatility.

A cautious investor might nevertheless argue that many countries are facing significant problems and political crises, in spite of relatively interesting returns. How are these countries supposed to manage?
JPD: It is true that some of them are in a precarious position, but these countries have learnt from the crises of recent decades. Take for example the depreciation of the Thai baht and Argentina’s sovereign default. In the wake of these events, the two countries involved reviewed their economic policies and in particular the exchange rate system applied to their economies.

The global financial system has been extremely fragile since the collapse of Lehman Brothers. In this context, international central banks have been set the challenge of saving their respective economies. The resulting measures, at times unconventional, have shored up all asset classes, including emerging market bonds. Some of these countries – more than others – have adopted rescue measures: unpegging their currencies, stockpiling currency reserves and setting inflation targets to name just a few. However, others have opted for the opposite direction, for example Brazil whose interest rate rises are struggling to deal with the fiscal slippage and curb inflationary pressures. As a result, the countries that took these sometimes brave and unpopular decisions are those that have best withstood the shocks.

What does your fund’s investment method involve?
JPD: In the past, managing bond investments was primarily a matter of managing duration, but this approach is less relevant today. Our methodology is determined by a variety of both macroeconomic and geopolitical factors. My principal challenge as a fund manager consists in identifying top quality issuers, as well as the instruments and bond issues available for each of them. As a result we now base our investment decisions on three criteria, namely duration, the currency and the interest rate differential which reflects credit quality. Our analyses are based on the information sent to us by our external analysts, which include ratings agencies and international research organisations. We compare this information with our own convictions and the current situation. We do not track any indices.

BLI’s fund managers always talk of “high quality stocks”. What sort of companies are these exactly? Which sectors do you favour?
JPD: The BL-Bond Emerging Markets Euro fund does not use a benchmark. It tends to adopt an opportunistic approach and tries to fulfil our clients’ expectations. Our preference is for government bonds, followed by corporate bonds. The political environment and the economic context affect our investment choices. We therefore tend to underweight countries such as Brazil and avoid the likes of Venezuela, preferring Romania, Vietnam and Namibia, for example. The countries chosen must meet our expectations and offer a positive outlook.

Has your investment method changed?
JPD: As previously mentioned, our investment management approach has changed to look beyond duration alone and more actively incorporate two new criteria: credit risk and exchange rates. Until about 15 years ago, very little distinction was made between issuers belonging to the same sector or “type”. For example, Greece was on an equal economic footing with Germany, because both countries belonged to the same monetary zone. Although, I admit that may be a bit of an exaggeration. The same was also true for Argentina and Mexico, because we treated emerging countries as a bloc, making no other distinction between them. However, 2001 and 2008 changed things. In 2001, we witnessed the biggest default until that time, namely that of Argentina. A distinction was made within the asset class for the first time and contagion remained limited. In 2008, one more event linked to another player deemed “too big to fail” took place: the Lehman Brothers collapse. Around these two events and over the course of time, significant differences emerged within both the sovereign and corporate bond segments. For example, post-Lehman crisis, the markets understood that General Motors and Ford were not one and the same. The former was declared bankrupt and then nationalised in 2009. Our investment method has incorporated this reality by pursuing further discernment between the various issuers, whatever the sector or economic region under consideration.

You just mentioned corporate debt. Tell us more about this segment and its contribution to your investment management.
JPD: Nowadays the differences are more marked than in the past. Regardless of the quality of the companies identified, it is equally important to focus on issuers that are capable of swimming against the tide during economic cycles when these are in a downturn. I have in mind in particular the telecommunications sector, where certain companies in emerging countries have succeeded in joining the ranks of multinationals. That is the case for example of Hutchison Whampoa in Hong Kong, Singapore Telecommunications in Singapore, Bharti Airtel in India and América Móvil in Mexico. These companies are generally better placed to offer a higher return than the average of their developed country counterparts, which are in some cases highly leveraged. However, I wouldn’t rule out any sector from the outset. In other words, because we include more credit risk, it is fair to say that our investment approach is flexible, opportunistic and responsive.

Do you also invest in currencies other than the portfolio’s reference currency?
JPD: Yes, we do. We have been investing in debt securities denominated in local currencies for over ten years. The local debt market generates better returns than those of most eurozone countries. The challenge lies in identifying markets and currencies that offer a degree of stability over an indefinite period, in addition to a higher return. This approach is obviously opportunistic, even when our decisions are based on firm convictions. That was true for the Brazilian real in the 2000s, and is true today for the Indian rupee. We have suffered a few disappointments, though, especially with the Mexican peso. In all cases our decisions are based on in-depth analysis of the economic and political environment.

The BL-Bond Emerging Markets Euro fund has been in existence for just over two years and has delivered a performance of over 11% since its inception. How do you see its future development?
JPD: The BL-Bond Emerging Markets Euro fund does not represent the 20 best European economies. What it does is exploit the potential offered by over a hundred economies worldwide. As these economies and their political systems have nothing in common, we are talking about a diverse universe that throws up numerous opportunities. Our principal challenge consists in juggling endogenous and exogenous factors, including regional influences.

Are you not concerned that the fund could be hit by a new emerging market crisis? How can you protect the fund from this?
JPD: Not all countries are going to go bankrupt or declare war. Likewise, they are not all oil exporters and often have very different levels of debt and currency reserves. I have therefore set myself the task of relentlessly seeking out any investment opportunities that may come up. What sets us apart from the competition is our consistent interpretation and processing of information relating to each individual country, and the convictions and opinions that we forge for the management of our fund. I believe that this characteristic enables the BL-Bond Emerging Markets Euro fund to stand out in any circumstances.

What is the outlook and how do you expect the fund to develop?
JPD: I am optimistic going forward. There will always be corrections, and no sector is immune. That is why the fund is intended in particular for investors with a medium to long-term investment horizon. Peru, Chile, Vietnam and Senegal are countries that didn’t even appear on the radar of our clients 15 years ago. But they are an integral part of the portfolio now, because they all boast positive growth indices, falling poverty levels and improving education systems, among other indicators. I therefore believe that the BL-Bond Emerging Markets Euro fund, like its twin the BL-Bond Emerging Markets Dollar fund, successfully covers this broad spectrum and is the best adapted to this type of investment. There are nevertheless certain differences between these two portfolios. The first invests in both euro-denominated and local currency issues, whereas the second, launched six months ago, targets a broader basket of sovereign issuers while limiting itself almost exclusively to dollar-denominated debt.

Beamonte Investments’ Venture Academy Fund has its First Closing

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Beamonte Investments a leading private investment firm in Boston, announced the first close of its venture fund, Venture Academy Fund, ( “VAF”) in June 2016 with close to US$6 million in total capital commitments. The fund is looking to raise a similar amount from international LPs with the aim to hold a second close prior to the end of December 2016 and an additional close before the end of February 2017. The current investor base includes family offices from the United States and the region.

VAF will target high-growth startups and ventures that take advantage of market opportunities through online platforms, mobile applications, technology, and others. The fund will focus on Series A investments, as competition is lower in this section of the VC market. “The VC market is at a growth stage were VAF can enter and take advantage of the favorable entrepreneurial ecosystem in Mexico and Colombia to generate returns for investors.” They mention on a press release.

Beamonte Investments is a single-family office located in Boston, Massachusetts. Beamonte has been a pioneer in direct venture capital and private equity investments, credit alternatives, and activist investment campaigns, as well as a pioneer in cross border transactions with Latin America. Since its inception, the firm has executed over $5 billion USD in transactions.

Puerto Rico’s Broken Promise

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According to Philip Villaluz, Head of Municipal Credit Research at Schroders, Puerto Rico’s recent default does not pose a broader contagion risk to the municipal bonds market, but it marks the beginning of a long process to repair the country’s economy.

Puerto Rico defaulted on roughly US$ 900 million in principal and interest due on 1 July, most of which was general obligation (GO) bonds and Commonwealth-guaranteed debt.

Despite this historic default, which is the first state or US territory to default since the State of Arkansas in 1933, the municipal market has taken it in its stride. In fact, prices of Puerto Rico bonds are generally flat (increasing by 3.4% since introduction of legislation in the US House; declining by 2.8% following the default).

While the default had been expected by the market for quite some time and risk premium priced in, Schroders thinks this event marks only the beginning of a long process to restructure debt and repair Puerto Rico’s (also known as the Commonwealth) economy and fiscal house.

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A deteriorating situation has led to a shift in investor base

Puerto Rico has suffered from a recession since 2006; where current unemployment is close to 20%, roughly 50% of the population lives in poverty and hundreds of thousands who have the means have already left the island.

The Commonwealth’s pension fund stands at a less than 1% funded rate, with thousands of retirees who rely on the payments to make ends meet.

Due to a decade of economic and fiscal woes, the Commonwealth amassed US$ 70 billion in debt which was bought by islanders and US municipal bond investors who benefit from triple tax-exemption (income is exempt from federal, state and local taxes).

As Puerto Rico credits drifted into junk bond territory over the past few years, mutual funds sold most of their Puerto Rico bonds; only 125 mutual funds actually hold the bonds, and seven of those funds have more than 50%, according to Morningstar. Opportunistic hedge funds are now the largest holders of Puerto Rico debt.

Decision to break its promise

With liquidity nearly exhausted, Puerto Rico Governor Alejandro Garcia-Padilla announced the Commonwealth’s intention to default on its obligations. He successfully pushed through legislation earlier this year to allow the government to decide whether to make payments on its debt—specifically, its general obligation debt which carries a constitutional guarantee—in order to conserve cash. Puerto Rico itself – like states of the US – does not have the legal authority to declare bankruptcy.

Congress acts

On 30 June, Federal legislation called PROMESA (Spanish for “promise”) was passed, creating an Oversight Board consisting of seven appointed officials, with the “exclusive control” to enact and enforce fiscal plans, so the island attains fiscal solvency and access to the capital markets.

The Board would have ultimate control over all economic and fiscal matters for the government and would have the authority to restructure its debts. It would also have the authority to prevent the execution of legislative acts, executive orders, regulations, rules and contracts that undercut economic growth initiatives or violate the Act, in addition to other powers.

The seven members—appointed by the President with recommendations from leaders in the House and Senate—will likely consist of four Republicans and three Democrats with experience in municipal bond markets, finance, or government operations who cannot be a former or current elected official or candidate for office, among other restrictions.

PROMESA states that any debt restructuring must respect the relative lawful priorities or lawful liens, as may be applicable, in the constitution, other laws, or agreements of a covered territory or covered instrumentality in effect prior to the date of enactment of the Act.

To impose a voluntary restructuring agreement on a specific pool of creditors (i.e., GO bondholders, COFINA bondholders, etc.), a two-thirds vote with at least 50% of the creditor pool voting is needed (based on amount outstanding). This would effectively allow one-third of bondholders to bind the entire group. However, if no agreement is possible, the Oversight Board could then petition a court to force an involuntary restructuring.

It also establishes a firewall between creditors and pensions in the development of fiscal plans. The Board will be terminated when the Commonwealth government: (i) has adequate access to short- and long-term credit markets at reasonable rates; (ii) has four consecutive years’ worth of budgets in accordance with modified accrual accounting standards; and (iii) balances its budget.

Helped to default

According to Schroders, the passage of PROMESA may have facilitated the GO default, because it initiated a stay of litigation against the Commonwealth through February 15, 2017. Hence, PROMESA wouldn’t excuse a default, but gives Puerto Rico cover.

Insured bondholders protected

Investors who hold insured Puerto Rico bonds will be paid their amount owed in full, with bond insurance policies making up the shortfall. Schroders also remains confident that the two bond insurers, Assured Guaranty and MBIA (through National Public Finance), with the largest insured exposures to Puerto Rico will continue to pay as expected.

This is not the end

PROMESA is more the start than the conclusion of the process that will determine outcomes for creditors. The restructuring process is contentious and time-consuming. Furthermore, it forces courts to opine over the power of Puerto Rico’s Constitution and the definition of government resources in determining priority of claims between different bondholders (i.e. GO and COFINA) across a very complex debt structure. Creditors may also challenge the constitutionality of PROMESA, which could delay the process even more.

For comparison, the municipal market has recently witnessed other restructurings, albeit on much smaller scales. These include the City of Detroit’s restructuring which took nearly a year and a half; Jefferson County, Alabama took over two years and San Bernardino, California remains ongoing after almost four years.

Philip Villaluz thinks that the situation remains fluid and not enough is known, particularly with regard to private negotiations and formation of the Oversight Board, to make any confident predictions or take a more constructive view on Puerto Rico’s bonds. However, he emphasizes his belief that Puerto Rico’s crisis does not pose a contagion risk to the broader municipal market.

Brexit’s Impact on Financial Services

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Financial services are possibly the policy area where Brexit will have the strongest impact. The City of London is the largest financial centre in Europe; many financial firms offer their services from their London base, making use of “passporting” rights granted through European legislation, which are now clearly at risk.

As a result of being the financial heart of Europe, the UK has historically been deeply involved in shaping financial markets policies and pushing further financial markets integration, due to their great interest, expertise and resources devoted to this particular area. This is the case in terms of the European legislative work, where the responsible European Commissioner for financial services was the British Commissioner Lord Hill.

The strong British influence is also felt at the regulatory level. The European Supervisory Authorities (European Securities and Markets Authority, European Banking Authority, European Insurance and Occupational Pensions Authority) define the finer details of financial legislation and have grown in relevance since their inception in 2010. The UK plays a strong role in these authorities in terms of their technical input, physical resources and market expertise. Decreasing UK influence in the ESAs as a result of Brexit could have significant effects on the final content of legislation as well as on the way European supervisors agree to apply the rules.

I. Institutional impact

a) Lord Hill resignation: The most immediate institutional impact of Brexit was the resignation of Lord Hill as Commissioner for Financial Services, along with his Cabinet (political advisers), who will be replaced by Vice-President Valdis Dombrovskis, the former Latvian Prime Minister, Finance Minister and MEP.

b) European Supervisory Authorities:

Funding:

The three European Supervisory Authorities (ESAs) are funded through the EU budget and contributions from Member States, in accordance with their size. The UK leaving the EU means that a significant contribution to the budgets of the ESAs will disappear.

This could accelerate ongoing discussions on ESA funding in the context of the ESA review. The UK was one of the fiercest opponents of increasing the proportion of funding from the EU budget (as it would lead to a greater grip of the European Commission (EC) on the activities of the ESAs). Without UK opposition, this shift towards greater EC influence could become areality.

Negotiations:

Within the ESAs, Member State authorities negotiate policy and draft implementing legislation just like Member States do in the EU Council. Although the UK will remain a full member of the ESAs for at least the next two years, the UK NCAs could refrain from active participation which will mean that ESA outcomes will inevitably change as although all Member States have equal voting in the ESAs, members with larger financial markets are far more active and influential.

European Banking Authority (EBA):

The EBA, currently based in London, will need to be relocated to another Member State. Italy, Germany, Netherlands and Poland have already expressed interest in hosting the EBA and other Member States might follow.

Of more importance than the physical location of EBA is that Brexit could reduce the EBA’s influence. The EBA’s current role as a bridge between Eurozone and non-Eurozone banks risks being significantly diminished when the UK leaves. The European Central Bank (ECB) is the single supervisor for the Eurozone banks. The main counterweight to the ECB is the Bank of England.

With the UK exiting the EU, the ECB will progressively become more important for the entire banking sector and the EBA’s role in adopting technical standards for the single rulebook will be reduced.

A further post-Brexit supervisory effect is likely to impact those banks of EU Member States not in the Eurozone, and therefore not supervised by the ECB. These will face greater scrutiny as international investors might consider their supervision less strong and therefore the banks less stable. Brexit could lead to non-Eurozone member states opting in to the Banking Union at a faster pace than previously expected.

European Securities and Markets Authority (ESMA):

The UK has been a driving force in ESMA, which has been active in implementing legislation and coordination of supervision for capital markets and the UK expertise is undeniable. Staff at the UK’s Financial Conduct Authority (FCA) have been seconded to ESMA, and task forces and standing committees have regularly been chaired by FCA personnel. This has contributed greatly to the reputation of ESMA as a knowledgeable and credible supervisor at international level. Without UK membership, ESMA could lose considerable expertise.

ESMA’s powers might well increase; the UK, supported by Germany, was a fierce opponent of more direct supervisory powers for ESMA. For example, CCPs are now still supervised by colleges of national competent authorities instead of by ESMA directly; this might change. In the context of Capital Markets Union, the European Commission did not go as far as to propose a European supervisory mandate for the capital markets for ESMA.This, too, might change.

European Insurance and Occupational PensionsAuthority (EIOPA):

EIOPA is currently leading the joint committee of the ESAs, which devotes much attention to consumer protection and product governance standards. In this area, the UK is clearly ahead of the curve in Europe. This has meant the UK has been very much involved in developing European standards from within EIOPA.

Without the UK, it is very possible that this work stream will slow down within the joint committee.

c) EU in international Bodies(FSB, IOSCO, BIS)

The position of the EU in international supervisory bodies has been strengthened by the UK’s contribution to EU policy. Although there was not always full alignment, European cooperation has smoothed over the major differences, strengthening the overall European position. With the UK exiting the EU, the chances increase that the Bank of England (in Basel) and FCA (in IOSCO) will no longer discuss their respective positions ahead of international negotiations, making for increased differences of views within these fora. This will enhance the relative weight of non-European supervisors meaning that European interests could suffer. The UK has stressed the importance of sticking to international agreements, whereas some Member States feel less pressure to apply Basel agreements unaltered. Post Brexit, and without such pressure by the UK, it is more likely that the European Commission could consider deviating from the Basel Committee outcomes to the advantage of European banks.

II. Ongoing financial services policy discussions

The general assumption is that the Capital Markets Union project will suffer due to the departure of two of the powerful drivers of the project, the UK and Commissioner Hill. However, there is a broad consensus amongst Member States on the benefits of CMU.

Perceptions that CMU was purely beneficial to the UK may have hindered progress to date; without the UK, other Member States might feel more inclined to support the project.

There were even concerns that CMU would not go far enough, especially as the EU did not propose creating a Pan-European supervisor for financial markets. Without the UK, this idea to centralize supervision of European financial markets might well return.

III. UK industry and political motivations

A state of inertia between businesses and politics is occurring with both perspectives looking to see what issues the other will prioritize first. Fortune will favor businesses and industries that are able to do their thinking quickly and put it to the UK government and the EU as a priority negotiation position. While financial services may be headquartered in the UK, they are global by nature and therefore have a stake in other European markets. UK policy makers are cognizant of this and will look for businesses to make the case to other European capitals to explain why the UK’s negotiating position for financial services is mutually beneficial for EU Member States.

Financial services will be a priority for the UK negotiation team due to its political status, tax revenue and global interconnectivity. During the negotiation period, UK representatives will try to find a balance between:

1) giving their EU counterparts some appeasement wins (likely to be status orientated);

2) retaining the eminent position in real terms (as opposed to physical locality) of London as the location in Europe for ‘hubbing’ financial transactions;

3) ensuring there is parity of regulation so that transactions can occur seamlessly with Europe, but also;

4) ensuring the UK is able to competitively differentiate itself outside of the EU.

These are important criteria for financial services businesses to consider during Brexit negotiations. Access to the Digital Single Market and CMU will be prioritised by UK policy makers and the financial industry, and the bulk of existing financial services legislation is likely to be grandfathered. However, UK policy makers are looking for financial services to decide, firstly, which of the ongoing EU legislative briefs are a priority and, secondly, which existing legislation can be disregarded. This should be the starting point of any financial services industry dealing with the Brexit hangover. Throughout this process the role of trade bodies will be essential and we are likely to see a renewed interest by UK and EU policy makers in their significance – especially those such as the BBA, ABI, AFME and IMA. During the period of negotiation, trade bodies will be viewed by UK and EU policy makers as providing an element of much needed consensus and it would be wise for financial services industries to stick close to their peers.

TIAA buys the Wealth Management Tech Provider, MyVest

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TIAA has announced that it has acquired MyVest, an holistic wealth management technology company. This acquisition underscores the firm´s commitment to help individuals navigate their financial lives in a clear, simple and efficient way. Terms of the deal were not disclosed.

Headquartered in San Francisco, MyVest provides scalable, customized wealth management services on a single unified platform for financial institutions. It will now operate as a subsidiary of TIAA that focuses on emerging technologies and will report to its Chief Digital Officer, Scott Blandford.

Both companies have collaborated since 2009 to help provide customized discretionary investment and tax management services for individuals. This acquisition will advance TIAA´s efforts to deliver a full suite of digital advice capabilities in addition to its in-person and phone-based services.

Following this acquisition, the firms will continue to work together to deliver simplified advice and planning technology across TIAA’s portfolio of financial services products, from retirement plans to IRAs and banking products.

MyVest employs a team of experienced technology, investment management and services operations professionals and will continue to serve its current client base.

“We remain committed to serving our clients and continuing to provide the tools advisors need to prepare their clients for the future,” said MyVest CEO Anton Honikman.

FINRA Board of Governors Elects Vanguard´s Brennan as Chairman

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The Financial Industry Regulatory Authority (FINRA) Board of Governors on Friday unanimously elected John J. “Jack” Brennan, Vanguard Group Chairman Emeritus and Senior Advisor, as FINRA Chairman effective Aug. 15, 2016.

Brennan has served as FINRA’s Lead Governor since 2011 and succeeds Richard G. Ketchum as Chairman. His term will be effective upon Ketchum’s previously announced retirement. In June, FINRA announced that Robert W. Cook will become FINRA’s new chief executive in the second half of 2016; his expected start date is Aug. 15. It was also announced at that time that FINRA would move to a non-executive chair structure for its board governance.

Brennan joined the Board of Governors of the National Association of Securities Dealers (NASD) and remained on the Board following the merger of the NASD and New York Stock Exchange Regulation in 2007, a combination that gave rise to FINRA as the largest independent regulator for all securities firms doing business in the United States.

“Throughout his tenure on the boards of FINRA and its predecessor, as well as his many years leading Vanguard, Jack has been a tireless advocate for individual investors and liquid, fair markets,” said Ketchum. “During my tenure at FINRA, Jack has been a trusted adviser and partner, helping us develop a number of important programs to support our mission.”

“FINRA plays such a critical role in safeguarding and educating investors, while upholding the integrity of the most robust capital markets in the world,” said Brennan. “The entire Board and I look forward to working with Robert and all of FINRA’s constituents to accomplish FINRA’s mission.”

“Jack is widely respected throughout financial and regulatory circles as a champion of the individual investor with a commitment to fair, transparent and efficient markets,” Cook said. “He has an unwavering dedication to FINRA and its mission of investor protection and market integrity. I’m looking forward to a productive partnership with Jack and the entire Board of Governors.”

BCP and Apex Sign a Fund Administration Services Partnership

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This Monday, BCP Asset Management and Apex Fund Services jointly announced their partnership for fund administration services.

As part of the recent acquisition of four High Street buildings in a prime Dublin 2 location by BCP and Meyer Bergman, BCP announced the successful launch of two new funds with global independent administrator Apex Fund Services; The Kells Investment Fund I and Kells Investment Fund II. The BCP acquisition was in partnership with Meyer Bergman and is valued in excess of EUR€100 million.

BCP, one of the leading independently owned investment managers in the Irish market, boasts over EUR€2 billion in assets under management and has an exceptionally strong track record in commercial property. Apex Fund Services is one of the world’s largest independent administrators, with local offices in both Dublin and Cork, and a total AuA of $45bn USD.

John Calvert, CEO of BCP, said, “BCP has chosen to partner with Apex to deliver our fund administration requirements as they demonstrate an exceptional knowledge and capability of service in the private equity and property funds space in particular. They combined commerciality with strong technical support and compliance knowledge. We required an expert administrator that could deliver a cost effective solution for our 3 existing funds, with further funds planned. Having completed the required infrastructure, Apex continues to work closely and effectively with our internal operations and administration teams”.

John Bohan, Managing Director for Apex EMEA and Apex Ireland, said, “We are delighted to be able to provide BCP with the specific solution they require to support this important part of their investment portfolio. We have a great deal of experience administering regulated funds, both liquid and illiquid, and can add true value to support the already robust internal infrastructure at BCP. Apex is committed to delivering relationship based service and unrivalled experienced resource to our clients and will support BCP’s real estate investments locally, via our Dublin office.”

The World Turned Upside Down

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Four days before the Brexit vote, I wrote about how strange it was to see Germany’s 10-year bond yield go negative at the same time as U.S. equities were just 2.5% off their all-time highs.

Well, last week U.S. equity indices broke through those highs, and interest rates have gone even lower. Germany actually issued a Bund at a negative yield. On July 8, as the U.S. reported the creation of almost 300,000 jobs in June, the 10-year U.S. Treasury yield, paradoxically, fell to an all-time low of just under 1.36% and in the Netherlands the 10-year yield slipped below zero for the first time in 500 years.

We’ve all become somewhat used to bad news in the economy translating into good news for equities, as investors anticipate that rates will be kept low and unconventional monetary stimulus will be maintained. This seems to have reached a new pitch of intensity following Brexit, however. It truly feels as though the world has been turned upside down—politically as well as economically.

Politicians Have a Pro-Growth Role to Play
Indeed, should the U.K.’s referendum prove a lastingly important moment for the global economy, it may be because it marked the point at which the political overtook the fundamental as the primary driver of economic and monetary policy. Central banks seem to be running out of ammunition, but politicians haven’t appeared to care until now. When voters start delivering painful election results, however, it becomes much more difficult for them to ignore the role they have to play in growth and job creation.

Much attention has been directed at the dangers of populism, particularly of the anti-trade and anti-immigrant kinds. But there is also the potential for today’s political energies to be translated into pro-growth policies.

Brad Tank floated a similar suggestion last week. Riskier assets recovered from Brexit thanks to reassuring words from central banks, he observed. But one of the few tools they have left is “helicopter money”—putting new money directly into the hands of consumers, or using new money to finance fiscal spending. Implementing that requires government cooperation, Brad noted, which might in turn move governments toward structural reform of things like tax codes and regulation, possibly starting in Japan.

Infrastructure Spending Could Be on the Agenda
Politics may simply be too polarized for that. What we might see, however, is some momentum behind the idea that central bank stimulus should be augmented with fiscal stimulus, particularly infrastructure spending. Both left and right can get behind that because it’s good for jobs and business.

We have now seen Japanese Prime Minister Shinzo Abe’s ruling coalition consolidate its position after last weekend’s elections. Abe took this as a mandate to “accelerate Abenomics,” and there has been widespread speculation about a stimulus package worth perhaps 2%-4% of GDP. Japanese equities rallied in response.

Similarly, in the U.K. Brexit has been followed by the surprisingly quick succession of Prime Minister Theresa May and her new cabinet, also eager to test its mandate. While May has appointed a somewhat hawkish chancellor, her own rhetoric marks a significant shift away from the austerity associated with the Cameron-Osborne administration.

Obstacles Remain but Momentum Is Building
There is a long way to go before we see realization of fiscal stimulus—and even longer before we can speak of a globally coordinated infrastructure spending program. Could we see such a thing in the U.S., for example? The need is clear enough. But to my mind, this initiative would be in danger of getting caught up with other political footballs, such as corporate tax reform. The likelihood of an infrastructure deal being done will depend on a number of factors, such as control of Congress and the White House, and the state of the economy: The more unified the political control and the worse the economy is doing, the more likely we are to see a deal.

What might this mean for corporate earnings? We’ve been concerned about this through a number of our CIO Perspectives, thinking about the catalysts that might end the current earnings recession. Firmer oil prices, a weaker dollar and some stability out of China helped set the foundations. Concerted action on infrastructure spending would certainly build upon them. And while these are early days and big obstacles remain, voters may be reminding governments that they cannot leave the business of growth and job creation to central banks alone.

Neuberger Berman’s CIO insight by Joe Amato

Marsh McLennan, Russell and BlackRock, the Most Successful in Fund Launching

| For Gabriela Huerta | 0 Comentarios

The first three years are the most critical period in a fund’s lifetime for attracting asset flows, according to the MackayWilliams Product Innovation Perspectives report.

While the investment industry may be dedicated to encouraging saving for the long-term, perversely, a fifth of industry assets are invested in funds that are less than five years old.

The analysis revealed that sales tend to tail off rapidly and turn negative within just a couple of years of their heyday. “If you have a winning product today by all means make the most of it – but plan for a scenario where, by 2018, it may well have fallen off the podium. Even in uncertain times, like the post-Brexit vote, asset managers must fight the temptation to freeze budgets and halt product innovations. Maintaining a new product pipeline is vital for companies wanting to protect their future asset gathering potential” says Chris Chancellor, partner, MackayWilliams.

Also highlighted in the report are the most successful companies for overall fund launches and the factors behind their success. Topping the table in Gold and Silver positions, in the latest six monthly update, were Marsh McLennan and the Russell Group where their strength with institutional clients underpinned their high success rate. Commenting on changes in the top ten over the six-month period to 31/03/2016, Chris Chancellor said: “Many of these groups are very close in terms of their launch success rates with relatively small changes leading to notable shifts in rankings. Fidelity is an important beneficiary; in the latest five-year window we have measured it has just three more successful funds than six months ago, but this has propelled it up 12 places.” It’s not a level playing field across all asset classes, though. Scaling the heights of success even to meet the relatively low minimum threshold of €100m is much more difficult to achieve in the mixed asset arena than in fixed income. Fixed income success rates of fund launches are roughly 50:50. Whereas in the highly competitive mixed asset category, 78% of fund launches failed to achieve the €100m grade.