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“Investing in a Low-Carbon Economy”: New Mirova Publication Encourages Investors to Become Actively Involved in COP21

Mirova, the Responsible Investment division of Natixis Asset Management, has published “Investing in a low-carbon economy”, a guide for investors to become COP21 compliant. Mirova’s study provides an in-depth analysis highlighting the challenges of climate change and presents methods for investors to effectively measure their carbon footprint. Mirova offers a unique range of investment solutions promoting energy transition across all asset classes.

COP21: mobilising private investors is a necessity

To maintain the economy in a “2 degree” trajectory, it is vital to redirect savings towards companies and projects promoting energy transition.

Philippe Zaouati, Head of Mirova explains: “The energy transition can only succeed if we manage to mobilise private investors’ savings. The success of COP21 therefore also depends on the ability of asset management firms to propose solutions in response to the climate challenge, whilst delivering the returns expected by investors”.

Accurately measuring your carbon footprint

In response to growing demands on investors to make greener investments, Mirova, in partnership with the leading carbon strategy specialist consultant Carbone 4, has developed an innovative methodology to measure the carbon footprint of an investment portfolio. This decision-making tool assesses a company’s contribution to the reduction of global greenhouse gas emissions (GGE).

Hervé Guez, Head of Mirova Responsible Investing, comments: “Measuring the overall impact of a business on the environment is an essential step towards acting against global warming. Assessing the carbon footprint is therefore a indispensable stage in the construction of portfolios contributing to energy transition”.

Low-carbon investments across all asset classes

In order to redirect capital towards investments promoting energy transition, Mirova is proposing solutions involving all asset classes:

Renewable energy infrastructures: 100% low carbon allocation. For more than 10 years now, Mirova has provided European institutions with access to investments in project companies based on renewable energy assets in France and Europe. Mirova’s renewable energies funds have generated 730 MW of new production capacity and contributed to avoiding 1.4 million of CO2 emissions.
Green bonds: a direct link between financing and projects: Mirova was one of the first asset management firms in the world to launch a green bond product. By financing tangible assets and ensuring transparency regarding the deployment of the capital raised, green bonds enable issuers to diversify their investor bases, while enabling investors to actively participate in financing the energy transition.
Listed equities: committed theme-based asset management: Mirova proposes fundamental conviction-based asset management covering European and global equities, focusing on companies providing sustainable development solutions.

Where Are the Opportunities in Commodities?

| For Gabriela Huerta | 0 Comentarios

During the past year, commodities have been the most challenged asset class. A slower global growth, lower inflation expectations and a strong dollar are some of the factors that have affected their price. Excess supply in many commodities is also contributing to the weakness. Given that most of these factors are likely to remain in place through the remainder of this year, prices may need to move even lower. Alternatively, fundamentals need to start to improve before the asset class becomes a genuine bargain. Many investors are conflicted about what their next move should be.

Amongst commodities, cyclical ones such as oil and industrial metals, have suffered the most. In the energy sector supply has played a key role in these losses. Today, the United States produces roughly 700,000 barrels per day more than one year ago. Meanwhile, following the tentative nuclear accord with Iran, many Gulf States are ramping up their own production. According to the International Energy Agency (IEA), which México has just recently requested to enter, oil inventories in developed countries have expanded to a record of almost 3 billion barrels because of massive supplies from both non-OPEC and OPEC producers. So, without a sharp reduction in production it is hard to imagine a strong rebound in the short run; however, for longer term investors, some bargains are beginning to emerge.

When looking to gain commodity exposure, one has to be very selective. Nowadays most commodity-related sectors look cheap, but in many instances the plunge in valuations merely tracks the drop in earnings and profitability. How can an investor assess if commodity companies are cheap or cheap for a reason?

Historically, valuations track profitability as measured by return-on- equity (ROE). At the energy and materials sector levels, data suggests that the fall in stock prices is generally in line with the drop in profitability. However, digging deeper at the industry level, opportunities might be appearing: while it appears storage and transport companies are still overvalued relative to the drop in equity, drillers and integrated companies look somewhat cheap (see chart below).

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Looking next at materials, there are fewer obvious industries where valuations depart significantly from profitability, but metal and mining companies are starting to show more value.

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However, one must not forget that the uncertainty surrounding market bottoms, particularly in a sector prone to volatility and abrupt changes in supply and demand, makes it hard to confirm the bottom has been reached. Furthermore, in the current scenario, low inflation expectations also make forecasting returns more difficult as many investors view commodities as a hedge against inflation.

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Although the near-term outlook for most commodities remains modest, if the futures curve is correct, at some point, arguably in the next year or so, rising demand will start to bring markets back into balance. Until then, it is still probably too early to call a bottom.

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This material is for educational purposes only and does not constitute investment advice nor an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator in any Latin American and Iberian country and thus might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein.

RMB Could Very Well Join the IMF’s Special Drawing Right Basket This Year

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While the International Monetary Fund will decide later this month if the Renminbi (RMB) joins their Special Drawing Right (SDR) basket this year, Axa Investment Management’s Aidan Yao and Jason Pang think the Chinese currency stands a very high chance (80%) of being included in it, making the RMB the fifth reserve currency.

According to the analysts, “this will trigger a direct rebalancing of the SDR portfolio, but we think the seal of approval by the IMF on the RMB’s reserve currency status will also affect the investment decisions of other investors.” They estimate, subject to significant uncertainties, and contingent on the unfolding of their baseline case of economic soft-landing without large scale financial crisis, that inclusion would trigger an aggregate inflow of up to $600 billion from supranational, official and private investors over the next five years. Averaging $120 billion per year starting from 2016.

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Pang and Yao believe that the capital inflows will likely have an important impact on China’s currency, money and bond markets in the coming years. In regards to currency they anticipate that in the short run, the RMB will maintain some degree of stability in normal market conditions and that in the longer run, there is a chance the exchange rate will mutate from the semi-crawling peg to a managed float as the end-game. While when it ocmes to the Bond Market, the analysts’ base-case scenario is a constructive outlook for the bond market, driven by increased demand from the SDR inclusion, and supported by lower GDP growth and policy easing.

The IMF’s executive board will vote on inclusion on November 30.

You can read the full report in the following link.

Salaries at Private Equity Firms Increase as Bonuses Rise

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Preqin’s 2016 Private Equity Compensation and Employment Review found that 74% of private equity fund managers have made firm-wide increases in base salary from 2014 to 2015. The average increase in salary was 7%, with 14% of firms increasing base salaries by more than 10%.

Almost half (46%) of firms increased their performance-related cash bonus pay-outs in 2014, up from 26% of firms that increased bonuses in the previous year. The median bonus pay-out increase in 2014 was 20%, while only 16% of firms reported a decrease in the levels of cash bonuses paid to employees.

From 2015 to 2016,76% of surveyed firms plan to increase their firm-wide base salary, while 22% predict no change in pay rates. Only 2% of firms anticipate reducing base salaries next year.

Other findings of the survey include that private equity firms in the Asia-Pacific region have the highest median proportion of women, at 40% of total staff. Women represent a median 35% and 33% of staff respectively at Europe- and US-based firms, while at South America-based firms women comprise a median of only 15% of total staff.

“2015 seems to have been a good year for employees of private equity firms, with salaries and cash bonuses both increasing. At more senior levels, the largest firms will vie to attract top talent by offering rates of compensation that smaller firms may struggle to match. Similarly, the location, structure and strategy of a firm can all affect the available pool of talent and the number of opportunities available. With many firms planning to increase their staff numbers and base salaries again in 2016, competition for talent looks set to continue, as firms seek to attract new recruits while retaining current staff.”  said Selina Sy, Manager – Premium Publications.

625 new fund managers entered the private equity market with a 2015 vintage fund, the highest number ever. There are now over 7,400 active private equity firms tracked by Preqin, including over 600 private debt firms. Altogether, private equity fund managers employ an estimated 145,000 people worldwide. Buyout, venture capital and real estate firms comprise 68% of that total. Firms with $10bn or more in AUM have an average of 160 staff, while firms with less than $250mn AUM have an average of 14.  

Total fundraising for private equity firms in 2015 YTD stood at $362bn at the end of Q3 and seems broadly on track to match the $552bn raised globally in 2014. The record year for private equity fundraising is still 2008, when funds closed raised an aggregate $688bn in capital commitments.

Preqin’s 2016 Private Equity Compensation and Employment Review surveyed almost 200 private equity firms to gather key trends and figures in levels of pay and staffing in the industry.

Standard Life Investments Sells Portuguese Office Asset

| For Alicia Miguel | 0 Comentarios

The Standard Life Investments European Property Growth Fund (“EPGF”) has completed the sale of Torre Zen, an office building in the Parque das Nacoes “Expo” area of Lisbon. The disposal is part of a strategic rebalancing of the fund’s portfolio, and proceeds of the sale will be reinvested in other European real estate markets where the economic recovery is increasing occupier demand and rents.

Torre Zen is a modern 11,400 sq m office building, acquired by the fund in 2003. It has 13 floors of offices plus three retail units on the ground floor. Current tenants include Danone, Upstar Communications, UHU, TNT and A Padaria Portuguesa.

Veronica Gallo-Alvarez, Fund Manager of the Standard Life Investments European Property Growth Fund, said: “This meets our current strategy to dispose of assets in non-core markets in order to invest in prime assets within recovery markets, such as The Netherlands, Spain and Ireland, where we can deliver strong returns for investors.”

BofA Merrill Lynch Fund Manager Survey Finds Investors Regaining Risk Appetite

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Investors have regained some appetite for risk with a strong consensus over a U.S. rate rise next month, according to the BofA Merrill Lynch Fund Manager Survey for November. With growth and inflation expectations notably higher after new U.S. payroll data, they have cut cash holdings and increased exposure to equities, real estate and alternative investments.

The percentage of asset allocators overweight equities rose significantly by 17 points to a net 43 percent, while lowering cash overweights to their lowest level since July.

Four-fifths of panelists now expect the U.S. Federal Reserve to raise rates during the current quarter.

Confidence in the global economy rebounds, with net expectations of it strengthening in the next 12 months up 22 percentage points from October.

Concerns over a slowdown in China abate: local fund managers turn neutral on the country’s growth outlook–their most positive reading in more than a year.

Eurozone and Japan strengthen as the most favored equity markets globally, reflecting deeper consensus on the U.S. dollar. A net 67 percent now expect the currency to appreciate in the next year.

Real estate and alternative investment overweights rise to their second-highest readings in the survey’s history. In contrast, aggressive underweights on commodities and Global Emerging Markets are maintained.

“With consensus very clustered in QE and strong dollar trades, asset price upside appears limited until an ‘event’ curtails the Fed hiking cycle, as in 1994,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

“While European equities are loved by global investors and the ECB has created some excitement about growth, sector positioning shows local asset managers are lacking conviction and hugging their benchmarks,” said Manish Kabra, head of European quantitative strategy.

An overall total of 201 panelists with US$576 billion of assets under management participated in the survey from 6 November to 12 November 2015. A total of 164 managers, managing US$465 billion, participated in the global survey. A total of 92 managers, managing US$213 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.

China’s Two Child Policy: Investors Should Focus Indirectly

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China’s Fifth Plenum in October reemphasize the need to support economic growth while also pushing forward measures aimed at increasing the country’s competitive landscape. Among the surprised announcements was Beijing’s decision to loosen its three decade-old single child program and allow all couples to have a second. Children-focused consumer goods, such as milk and paper companies, rallied after the announcement, but have seen gains quickly returned; suggesting that the best direct investment strategy for the two-child policy is limited. “Instead, we believe investors should focus indirectly, and consider investments that reflect the need to loosen the single child restriction instead of the pending result.” Says Christopher Chu, Union Bancaire Privée.

“Though it may sound counter intuitive, a better thematic for the two-child policy would be healthcare and insurance sectors -continues the analyst-. Allowing families to now have two children reflects changing demographic profiles in China, where according to official data, the percentage of those over the age of 60 rises to 39% in 2050, compared with 15% currently. Beijing’s push to increase the nation’s fertility rate is to offset a decreasing labor force and proliferating aging population. As incomes rise, demand for higher quality life moves in tandem. This should lead to a greater ability to spend on healthcare and medical services, where penetration rates are low and only compete with inadequate public coverage and quality.”

UBP thinks the financial sector would also be a beneficiary, as the key towards promoting reform and efficiency would be to further liberalize the renminbi and channel credit to more productive sectors. Before the Plenum, the firm explains, Beijing removed a ceiling on deposit rates, allowing greater competition among the banks while also improving incomes for household savings. If loans were to further channel into less productive sectors, overcapacity issues would ensure China’s vulnerabilities to external price shocks. “These steps to internationalize the renminbi also act as a prelude to the International Monetary Fund’s decision to include the yuan into its Special Drawing Rights consideration.” He adds.

Direct child investments such as baby formula, education, and paper companies are beneficiaries of general population growth and improving household incomes. “But with a current estimate of 20 million births per year in China, this number is still below that of the 1980s when the country experienced an estimated 26 million births annually. With fewer joining the current generation, the median age of 35 in 2010 will rise to 49 in 2050, and also lift the dependency ratio (the ratio of those over the age of 65 by those aged 15 to 64) from a current level of 11 to 42 by 2050.”

In the oppinion of UBP, the removal of the single child restriction is an important social advancement but does little to lift productivity in China, which is the economy’s main concern. The caveat to the firm´s analysis is if China’s experience a slight increase in population growth in tandem with waning cultural preference for sons. With sex ratio near 120 boys to 100 girls, this creates another social strain for aging China, and thus, a generation of daughters would be welcomed. Otherwise, China’s population profile will continue to age quickly and not quietly, giving policy makers something to cry about, he concludes.

New Sovereign Wealth Funds, Opportunities For External Managers

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The growing number of resource-rich countries establishing sovereign wealth funds present an ideal opportunity for asset managers not sufficiently specialized or alternative to win mandates from established sovereign wealth funds (SWFs), according to the latest issue of The Cerulli Edge – Global Edition.

Cerulli says that new SWFs are likely to need help in the early stages, even in mainstream asset classes and geographies. It cites, as an example, oil-rich Nigeria, which is in the early stages of a complex three-fund approach to sovereign wealth. The structure comprises: a stabilization fund, an infrastructure fund, and a future generation fund. The latter, which Cerulli likens to a classic sovereign fund, is to receive 40% of oil surpluses, with a target allocation of 80% for growth assets. “It is likely that much of that will need the assistance of external managers,” says Barbara Wall, Europe research director at Cerulli.

The firm notes that while some SWFs are only interested in managers that either provide a specialist alternative that cannot be replicated internally, or a partnership model that opens the door to new investment possibilities, others appear committed to outsourcing the majority of their funds to external managers.

Funds from as far afield as Angola to Kazakhstan, Mongolia to East Timor or Papua New Guinea are potential opportunities. “An increasing number of countries feel they need a sovereign fund in order to diversify assets for the long term. These funds–some of which may grow to have tens of billions of dollars under management–will be lucrative sources of outsourcing mandates in their early years,” adds Wall.

In its review of the changes taking place within the SWF arena, Cerulli notes that established heavyweight Abu Dhabi Investment Authority (ADIA) is bringing more of its assets in-house. “What’s unusual about this move is that instead of bringing passive assets under its own supervision, the management that is being brought back in-house appears to be quite technical and specialist,” says David Walker, who leads Cerulli’s European institutional research practice. “For example, last year, ADIA created two new mandates within its internal equities department: U.S. equities and high conviction. The latter in particular is not normally the sort of mandate that a fund like this would take in-house, not when two-thirds of the fund is still outsourced.”

Walker adds that two of ADIA’s three most significant hires over the past two years have been for internal rather than external asset management: Christof Ruhl as global head of research and John Pandtle as head of the United States in the internal equities department. Other areas of increasing internal expertise include real estate and infrastructure.

BofA Merrill Lynch Fund Manager Survey Finds Investors Regaining Risk Appetite

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Global investors have regained appetite for risk against the backdrop of strong liquidity and a fairly positive economic outlook, according to the BofA Merrill Lynch Fund Manager Survey for June.

A net 66 percent of respondents expect the global economy to strengthen over the next year. This bullish reading is unchanged from last month’s survey. However, concern at the pace of expansion is rising. A net 78 percent now anticipate below-trend growth over the next 12 months. In response, more investors than ever before (63 percent) are calling on companies to increase their capital spending.

Equities are in greater favor than at any time since the start of the year. A net 48 percent of asset allocators report overweights, up 11 percentage points month-on-month, even though a net 15 percent now regard the asset class as over-valued – this measure’s strongest response since 2000. Appetite for real estate has also risen. The net 6 percent overweight reported ranks as the highest in eight years.

In contrast, underweight positions in bonds (now regarded as over-valued by a net 75 percent) have reached their highest level since the end of 2013.

The prospect of debt defaults in China has strengthened as the most significant risk on investors’ horizon. It is now cited by 36 percent of respondents. 20 percent worry most over potential ‘asset mania’ – a new category introduced in the survey this month.

Even so, investors have reduced their cash buffers. Although still somewhat high, average holdings of 4.5 percent are at their lowest since January.

“Although fund inflows and oil prices argue for near-term consolidation, the case for a summer ‘melt-up’ remains stronger than for a meltdown as high liquidity and low growth force investor cash levels down,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

“Europe has been a cheap way to get equity exposure, but investors no longer see Europe as cheap. This together with some uncertainty on the level of growth may be why optimism is starting to wane,” said Obe Ejikeme, European equity and quantitative strategist.

European QE postponed

Investors no longer see quantitative easing by the European Central Bank as imminent. 42 percent of respondents anticipate any ECB program coming in Q4 or even 2015, up from 19 percent last month. A further 22 percent expect no action. Against this background, longer-term conviction towards European equities has started to decline. A net 21 percent now see Europe as the equity market they are most likely to overweight over the next year, down seven percentage points month-on-month.

However, current allocations suggest global investors are not yet ready to give up on the region. Net overweights have risen for the second consecutive month, to a net 43 percent.

Elsewhere, regional fund managers are already showing signs of caution. A net 6 percent of now regard European equities as over-valued – the highest proportion since 2000. As recently as April a net 16 percent viewed the market as under-valued.

Japan picks up

Japanese equities have declined 7 percent this year, underperforming other global markets. The survey shows global investors treating this as a buying opportunity. A net 21 percent are now overweight, up from a net 7 percent in May.

Moreover, a net 10 percent favor overweighting Japan in preference to all other equity markets in the next year.

These changes come as regional fund managers turn significantly more positive on Japan’s outlook than recently. A net 73 percent expect the country’s economy to strengthen over the next 12 months. This represents a 20 percentage point rise in the space of two months.

Dollar dominates

Bullishness on the U.S. dollar has re-emerged strongly. A net 79 percent of respondents now expect the currency to appreciate over the next year. This stands out as one of the strongest readings on this measure in the past 15 years.

In contrast, a net 28 and 48 percent expect the Euro and Japanese yen, respectively, to weaken over the same period. The European currency’s reading has declined seven percentage points month-on-month. This appears to reflect a combination of the ECB’s dovish stance and some weaker European macro data.

An overall total of 223 panelists with US$581 billion of assets under management participated in the survey from 6 June to 12 June 2014. A total of 167 managers, managing US$422 billion, participated in the global survey. A total of 120 managers, managing US$270 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.

BNY Mellon IM Signs Distribution Agreement with Banca Mediolanum and Investment Partnership with Mediolanum Vita

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BNY Mellon Investment Management has announced a new agreement with Banca Mediolanum to distribute funds to their network of retail clients.

The agreement is for Banca Mediolanum’s 4500 financial advisors to distribute UCITS funds and investment solutions available through the BNY Mellon Global Funds, plc SICAV. The range of solutions includes fixed income, equity, dynamic, flexible and absolute return funds, as well as other strategies designed to seek consistent returns in volatile market conditions.

Additionally, four BNY Mellon funds and strategies join the range of collective investments undertakings (CIUs) that can be sold within the Mediolanum MyLife insurance policy, a unit-linked product by Mediolanum Vita that offers investors a selection of high quality investment solutions:

· BNY Mellon Global Real Return Fund, a flexible multi-asset fund which combines capital protection with the search for returns

· BNY Mellon Absolute Return Equity Fund, an absolute return equity fund aiming to achieve positive returns independently from the underlying market direction

· BNY Mellon Global Equity Income Fund, an equity fund that actively selects stocks able to generate high, sustainable dividends over the long-term

· The Newton Asian Income strategy, that aims to capture the growth potential of Asian companies

“The agreement with Banca Mediolanum is part of our ongoing growth strategy in Italy”, states Marco Palacino, Managing Director of BNY Mellon Investment Management in Italy. “We are fully committed to strengthening and extending our relationship with the most important distribution networks in Italy and as a result, become closer to retail investors. Our product range is well suited to the current financial environment, due to advanced, flexible and dynamic strategies capable of providing stable returns while containing market volatility. This is the main goal of our equity and bond absolute return funds, such as the BNY Mellon Absolute Return Equity Fund and BNY Mellon Absolute Return Bond Fund, now available to retail investors also through Banca Mediolanum’s network of financial advisors”.