Have your loved ones, friends or colleagues ever confessed to being workaholics? Perhaps, but I doubt it was viewed as a real addiction; at least, compared to a drug addiction that would warrant an intervention. Yet now that I have faced my demons, I have a completely different perspective on the matter.
We are trained to communicate openly regarding just about everything except our excesses in the workplace. The Japanese are one of few cultures that seem to address the problem of overworking head-on. In Japan, a salaryman, an office warrior, is praised for his achievements but also told to be careful. Working too hard can lead to Karōshi, which in Japanese literally translates to death from overwork.
How do you discuss the topic without getting defensive? How do we know if this is a real problem? Perhaps you are questioning yourself about your work habits while reading this. From personal experience, here are the main areas that have helped me transition into a balanced work style over the past six months, without losing any productivity.
1. Moderate, Don’t Quit
Out of all of the addictions you could potentially have, this may be one you can enjoy with moderation. As a workaholic, chances are you are a top producer at your company. The problem solver, the yes man, the hero in the conference room. Just remember, being proud of your workaholism also means understanding there is a problem. That is the first step in the recovery process.
2. Don’t Isolate Yourself
Talk to your friends, family, and loved ones about all aspects of your job. Understand that it is quite hard for them to understand the day-to-day process and the dedication you have to give to your work, especially if you are a CEO or entrepreneur and the buck stops with you. Communication can help everyone around you understand why you have to stay at the office past nine PM and why sometimes there are last minute deals or negotiations that come up.
3. Enjoy your downtime
Figure out where you can spare an hour or two from work from time to time and dedicate it to a hobby or simply spend that time with friends and family. Do anything but take on a new task at work just to be ahead of schedule.
4. Enjoy your worktime
When there is work to do, put your best effort into it. We all have tough days filled with extra work, and in those you should not have to feel bad about changing plans, about staying late at the office, about having to explain to people why you work so hard. If you have been communicating with everyone around you effectively and you have learned to share your downtime, they will understand when it is worktime.
5. Get to know your work self
Closing new business, pushing deals through gives me a rush and sense of satisfaction. Seeking these amazing feelings at times results in taking on more projects than I can deal with. I have learned to recognize when I am taking on too much at work and discuss it with co-workers and business partners. You have to find the line between success and excess and seek the perfect medium.
6. Get where you want to go
More important than any list, have a vision. Find something that drives you not only at work, but also outside during beautiful day-to-day living. For me right now this means not showing up late to my squash games, spending holidays with my family, and attending birthdays and weddings of loved ones, but at the same time not feeling bad if I have to miss one because a real work emergency comes up.
In the future I hope not to be late when picking up one of my children from school, and I hope to be part of a family whose love and support make us a team.
I love my job but know that Karōshi, won’t serve me, my job, or the people in my life. The Japanese also have a word for those who are able to escape the workaholic world – datsurara. This word used to mean dropout, but today when technology makes it all but impossible to unplug and reconnect to the world, datsura describes a healthy new lifestyle that incorporates both entrepreneurship and balance.
BNY Mellon announced that Alan Flanagan has been appointed to the new role of Global Head of Private Equity and Real Estate (PE&RE) Fund Services. Flanagan will continue to be based in Dublin and report to Frank La Salla, CEO of BNY Mellon’s Alternative Investment Services (AIS) business, in New York.
As a new unit within AIS, PE&RE Fund Services will comprise more than $100 billion in assets under administration and over 150 employees worldwide. Flanagan will be responsible for overseeing global business and driving growth in an area that has seen large recent deals. In February, BNY Mellon and Deutsche Asset & Wealth Management (AWM) announced an agreement where Deutsche will outsource its real estate and infrastructure fund accounting and parts of its reporting functions to BNY Mellon covering more than $45 billion in AUA.
Most recently, Flanagan was global head of product management for Alternative Investment Services. He will be succeeded in that role by Robert Chambers, who joins BNY Mellon from Balestra Capital, where he was managing director, portfolio manager, and member of the operating committee.
“We’re seeing vibrant growth opportunities in this space as investors pursue new strategies and increase allocations to private equity and real estate,” said La Salla. “Alan was instrumental in orchestrating our signature agreement with Deutsche AWM. During his tenure as head of product he led many projects to better serve our hedge fund and PE clients, and I have every confidence he’ll do an outstanding job in this new role.
“Rob Chambers brings a multi-faceted skillset in finance, investment strategy and the alternatives market. I look forward to working closely with him in building out the global capabilities for our alternative manager client base,” La Salla added.
Flanagan serves on a number of executive committees at BNY Mellon, including its European operating committee, Asset Servicing global business risk committee, and is a director of BNY Mellon Trust Company (Ireland). He joined BNY Mellon in 2007 from UBS Fund Services (Cayman) Ltd., where he was head of business development-Americas. Flanagan is a Fellow of the Institute of Chartered Accountants in Ireland.
The term ‘shadow banking’ was first coined in 2007 to describe parts of the financial intermediation process conducted outside of the commercial banking system. It encompasses all non-bank credit intermediation and spans wholesale markets-based finance (such as certain types of investment funds and securitisation vehicles, as well as activities such as securities financing transactions) and alternative lending channels.
The negative connotations associated with the name stem from the role of complex, opaque and lightly regulated financing activities in the 2008 financial crisis. Shadow banking was thus seen as a source of systemic risk that required containment.
Seven years later, the shadow banking debate has changed dramatically: with traditional bank lending constrained by more stringent regulatory capital and liquidity requirements, the focus on shadow banking has shifted from containing risks to enabling capital markets to revive economic growth.
Within this context, a new CFA Institute study on Shadow Banking suggests that nonbank credit in the form of markets-based finance can provide a potential solution to reviving the real economy by helping to channel capital to productive enterprises. However, in order to put shadow banking on a sustainable footing, it is necessary to increase standardisation and simplification of issuance structures, as well as boosting transparency more generally, in order to support investor interests.
The scope of regulation surrounding markets-based finance is already quite broad. In the EU and the US, for example, regulation of investment funds marketed to retail investors is comprehensive, while new rules for money market funds have been established (among other things). In this context, the term ‘shadow banking’ is somewhat misplaced and should not be construed with unregulated activities.
On the other hand, there are other parts of the shadow banking system that are mostly unregulated, such as peer-to-peer lending, microfinance companies, trust-based loan provision, and other alternative lending channels, and it is in this domain that risks to investor protection are most likely to emerge.
The renewed interest in shadow banking coincides with the European Commission’s policy initiative to establish a ‘Capital Markets Union’ (CMU). The objective of CMU is to tackle the barriers to the flow of capital in Europe and diversify sources of finance for companies. The initiative comes against a backdrop of weak economic growth and concomitantly accommodative central bank policies. With constrained bank lending, expanding the pool of capital available to European companies is arguably more important than ever. In this context, shadow banking can play a pivotal role in unlocking capital markets and better connecting investors with the financing needs of the economy.
To realise the potential benefits from shadow banking, policymakers must tackle product and market fragmentation within securitisation markets by incentivising more simplified, standardised issuance structures, as well as implementing a more robust framework regarding the use of collateral associated with securities financing transactions. By doing so, shadow banking can support a variety of investor needs and enhance the efficient functioning of the financial system.
Swiss Life AM has named Mathieu Caillier as head of International Business Development, a division that has been recently created.
Caillier joined Swiss Life AM as a senior relationship manager in 2007. He was hitherto working as head of Wholesale distribution and Swiss Life France network.
Formerly, he worked at HSBC GAM where he has been responsible for the development of wholesale and institutional distribution for France and Switzerland.
Caillier started his career as a broker at Tullett & Tokyo (Futures & traded Options) in Paris.
Swiss Life AM has CHF160bn (€152bn) of assets under management as at the end of 2014.
Photo: Hartwig HKD
. ¿Por qué son soleadas las perspectivas para España?
Spain is in recovery mode, but has not been rewarded for this by equity investors so far in 2015. “The Spanish economy is doing fine and there is a strong cyclical recovery underway.” That is how Robeco’s Chief Economist Léon Cornelissen sums up the current state of the fourth-largest economy in the Eurozone. The country is emerging from a difficult period as a result of the global financial crisis. Economic growth was 1.4% in 2014, but this year it is expected to be more than 3%.
Despite the positive growth figure for 2015, the Spanish stock market is lagging: The IBEX 35 Index has risen 7% this year, while the Euro Stoxx 50 Index is up 11% (as of 5 June 2015). “Economic difficulties in Latin America are a problem for Spanish equities,” explains Cornelissen. “And investors, who already expected a strong economic recovery last year, have now become more cautious.”
Opportunities in equities Despite the investor pessimism, Cornelissen sees opportunities in Spanish equities. “I am moderately optimistic about the rest of the year for two reasons. First, the worst is over for the economies in Latin America. Interest rates in Brazil will fall in 2016, which will stimulate the economy.” Latin America is an important destination for exports and many Spanish companies are active in this region.
“Second, the outlook for corporate earnings will strengthen as the economy improves further,” he continues. “Financials, which represent the biggest component in the IBEX 35 Index, are geared to see an earnings improvement. And the banks have successfully recapitalized by issuing new shares. Moreover, Spanish house prices have risen again, which is very important for mortgage loans.”
Debt levels improve The recovery will lead to improved public finance figures, says Cornelissen. “The figures are not great; a 4.5% government deficit is still too high, as is the current debt-to-GDP ratio of just under 100%. But the direction is positive and the government expects these figures to come down. I agree with the government, given the strong economic recovery. The deficit is expected to go down to the 3% threshold set by the Stability and Growth Pact of the EU.”
Another important factor behind this Spanish renaissance is the country’s increased competitiveness, says Cornelissen. “Spanish exports are doing well. Unit labor costs have come down, which enables companies to lower their costs. This has been helped by labor market reforms, especially a decentralization of wage negotiations. Currently Spain has the strongest growth within the Eurozone.”
Outlook on bonds more subdued He is less optimistic about bonds, because a lot of the good news has already been priced into the market. Government bond yields have gone down over the last two years and are now around 2.2%. “The ECB’s bond buying is set to support Spanish government bonds,” says Cornelissen.
“And ECB President Mario Draghi will continue the program until September 2016, which will keep the lid on any strong rise in interest rates. In addition, Spanish credit worthiness will improve as a result of economic growth. That said, I expect the impact on credit spreads versus German government bonds to be small. These spreads are already low and I do not expect them to tighten much further.”
Elections not a concern Another major theme for the financial markets in 2015 is the national elections. These have to be held before 20 December and are expected to take place at the end of October or in November. Regional elections were held in May and saw the rise of two new political parties: Podemos and Ciudadanos. Podemos (which means ‘We can’) is often compared with Syriza in Greece, while Ciudadanos (which means ‘Citizens’) is liberal and moderate.
Another looming question is Catalan demands for independence. Because of the size of its economy, this region is vital for Spain. Therefore, any talk of secession is a risk to the financial markets. However, Cornelissen is not really worried, and even sees bright spots ahead, once the traditional two-party system has come to an end. “In theory, a Podemos victory is a risk to Spain’s membership of the Eurozone, and any steps towards a Catalan secession could also spook the markets. But it is not going to happen soon. Podemos has peaked in the opinion polls, so I do not fear a situation similar to that of Greece occurring in Spain.”
“The rise of Ciudadanos can be seen as a boon to investors because the party opposes Catalan independence – it forms a useful counterweight to regional nationalism,“ he adds. “All in all, investors should not be too worried by the occasional political storm, but should focus on the country’s sunny fundamentals. Spain can do it,” concludes Cornelissen.
CC-BY-SA-2.0, FlickrFoto: LWYang. Las lecturas de verano que recomiendan los empleados de JP Morgan
Now in its 16th year, the J.P. Morgan Reading List features titles nominated and selected by J.P. Morgan employees across the globe. The List, issued twice a year, spotlights themes that reflect the diverse interests of its clients. Innovation, philanthropy, education and global affairs are frequent themes.
Here is the list for this summer:
Creative Schools. Revolutionizing Education from the Ground Up by Ken Robinson.
In his latest work, Ken Robinson makes the case for tapping our advanced technological capital—and creativity—to foster learning and to revamp public education systems. Creativity, he says, is essential to innovative thinking. Through Creative Schools, he offers persuasive evidence, including stories from education’s frontlines, that students, teachers and societies benefit from a curriculum centered on creativity capability rather than standardized learning and assessment.
Ken Robinson, Ph.D., has worked with governments and education systems internationally, focused on the themes of creativity and innovation. His 2006 TED talk was the most viewed in TED’s history; he was knighted in recognition for his services to the arts and, in America, earned the Imagination Award from the Arthur C. Clarke Foundation and the Peabody Medal.
Deep Down Dark. The Untold Stories of 33 Men Buried in a Chilean Mine, and the Miracle That Set Them Free by Héctor Tobar.
When 33 men were trapped in a mine 2,000 feet underground, they vowed to tell their story together if they survived. Pulitzer Prize–winning journalist Héctor Tobar was selected to write their saga. In Deep Down Dark, he recounts those 69 harrowing days—the miners’ ordeal, the families’ fears, the rescuers’ persistence, and how each person lives with the memory of this experience. With a novelist’s deftness, Tobar depicts the mosaic of human responses to life in danger.
Héctor Tobar is a columnist, journalist and author. He won a Pulitzer Prize in 1992 for his coverage of the Los Angeles riots in the Los Angeles Times. His previous books include The Barbarian Nurseries, Translation Nation and The Tattooed Soldier.
Every Gift Matters. How Your Passion Can Change the World by Carrie Morgridge.
“Giving transforms two lives: the one who receives and the one who gives,” writes Carrie Morgridge, who has worked for 15 years with her husband at the Morgridge Family Foundation. Every Gift Matters shares inspiring tales of those who drive community change through giving. Imbued with Morgridge’s boundless passion and energy, Every Gift Matters reflects her own practice of pairing a gift with personal involvement, making this deeply felt account both moving and practical.
Carrie Morgridge and her husband devote their time to the Morgridge Family Foundation, formally founded in 2008, which focuses on education. She founded Student Support Foundation, offering a model for student giving, and launched Share Fair Nation, a national event that demonstrates how technology can enhance the classroom experience.
How to Fly a Horse. The Secret History of Creation, Invention, and Discovery by Kevin Ashton.
For readers curious about the roots of innovation, Kevin Ashton’s How to Fly a Horse is a conversation starter. An entrepreneur and technology pioneer at MIT, Ashton chronicles the creative ingenuity, persistence and sometimes lonely path creators follow to move from idea to breakthrough. Tracing examples in medicine, science, technology, and more, Ashton argues that creativity and invention are not just the domains of a few and that with focus and determination, we can all be game changers.
Kevin Ashton knows firsthand about invention and creativity. In his diverse career, he co-founded the Auto-ID Center at MIT, which studied radio frequency chips and their packaging potential; coined the term “The Internet of Things;” and worked at three tech startups.
Rain. A Natural and Cultural History by Cynthia Barnett.
Blending science and history—and a dedication to the environment—Cynthia Barnett’s Rain traces the evolution of one of the most common, precious and sometimes destructive forces in nature. Beginning with the primordial showers that created oceans and nurtured life, and moving through time to today’s altered weather patterns, Barnett brings a documentary approach to her subject, riveting the reader with facts and a sense of wonder.
Cynthia Barnett has written about the environment in magazines, newspapers and books for nearly 25 years. Her previous book, Blue Revolution: Unmaking America’s Water Crisis, which called for a water ethic for America, was featured on the Boston Globe’s 2011 list of top 10 science books.
The Resilience Dividend. Being Strong in a World Where Things Go Wrong by Judith Rodin.
The strength of leaders, organizations and communities can often be measured by their ability to bounce back from a crises, observes Judith Rodin, president of The Rockefeller Foundation. In The Resilience Dividend, she offers stories of communities and businesses that have faced catastrophic events—ranging from weather or disease to political or economic crises—and then persevered and come away even stronger. Here’s a fascinating look at what makes leadership enduring.
Judith Rodin has been president of The Rockefeller Foundation since 2005. Her long list of achievements includes serving as the first female president of an Ivy League school (University of Pennsylvania), 19 honorary degrees, and recognition on the Forbes list of 100 Most Powerful Women for three years in a row.
Saturday Night Live by Alison Castle.
Devotees of Saturday Night Live will enjoy celebrating the iconic program’s 40th anniversary with this comprehensive look back. Including more than 2,000 photos (some never before published), season reference guides and an insider’s look at a how a live show comes together, Saturday Night Live: The Book memorializes SNL’s spirit, irreverence and astonishing talent. With 500 pages, this coffee table tribute will be a Best Book among the show’s countless fans.
Alison Castle, photographer and editor, specializes in books related to photography, film and design. Her previous books include Some Like It Hot, The Stanley Kubrick Archives, and Linda McCartney: Life in Photographs. Working onSaturday Night Live: The Book gave her insider access to the 39th season of the show, an exhilarating experience for a lifelong fan.
Where Chefs Eat. A Guide to Chefs’ Favorite Restaurants by Joe Warwick.
Food writer and restaurant critic Joe Warwick presents a guide to more than 3,000 restaurants, based on recommendations from more than 400 of the world’s top chefs. Listed by city, chef favorites range from neighborhood joints to top-flight destinations. With quotes from the chefs, reviews and city maps, Where Chefs Eat is a go-to sourcebook for the curious foodie as well as the well-seasoned traveler.
Joe Warwick’s professional life has centered on food, from waiter to restaurant critic to one of the founders of the World’s 50 Best Restaurants list. Where Chefs Eat is designed to be the opposite of that fine dining list, featuring places for every budget and every eating occasion.
World Order by Henry Kissinger.
Few people in the last century have been closer to the pulse of international politics than Henry Kissinger. The Nobel Peace Prize winner knows firsthand what lies behind recent international accords as well as the global discord that remains.World Order is his call for international harmony and is filled with details that draw from his experience as historian, statesman, observer and friend—an informative and thought-provoking analysis of the challenges ahead.
Henry Kissinger’s distinguished career includes service as National Security Advisor and Secretary of State. For his many achievements, he earned the Presidential Medal of Freedom—the greatest civilian honor in the United States, the Medal of Liberty, and the Nobel Peace Prize. He is the author of more than a dozen books.
The Wright Brothers by David McCullough.
Although with every attempt to fly, Wilbur and Orville Wright risked their lives, the brothers were determined to change history. Two-time Pulitzer Prize–winning historian David McCullough tells the story of their family and childhood, genius and ingenuity, successes and failures. McCullough includes details from private diaries, letters and family scrapbooks, making this a moving personal story as well as a tale of perseverance, history and invention.
David McCullough has won numerous accolades for his books, including the Pulitzer Prize (for both Truman and John Adams) and the National Book Award (for The Path Between the Seas and Mornings on Horseback). His gift for storytelling has been enriched by his diverse career as teacher, television and movie narrator, and public speaker.
Net assets in Irish domiciled funds increased by €317 billion during 2014, it was announced yesterday. Speaking at Irish Funds’ Annual Global Conference in Dublin, Pat Lardner, Chief Executive of Irish Funds, told representatives of the global funds industry that Ireland’s assets of domiciled funds rose by almost 25% during 2014. Mr. Lardner also confirmed that in the first three months of 2015, assets have further grown by €234 billion, representing a rise of 14%. Net assets domiciled in Ireland now stand at nearly €2 trillion.
This year’s Conference was opened by recently appointed Chairman of the Association, Mr. Tadhg Young. Over thirty speakers and panelists addressed topics ranging from the EU’s plans for Capital Markets Union to Ireland’s vision for its International Financial Services Sector and our role in respect of Asia.
Speaking at the Conference, Pat Lardner, Irish Funds Chief Executive said:“These latest figures reflect a record period of growth and represent a significant milestone for the Irish Funds industry. By working closely with the Irish government, the Central Bank of Ireland and the wider funds community, we are together continuing to build one of the most competitive locations for the regulated funds industry in Europe and the world. We will continue to work on behalf of our members and advocate effectively in order to make our infrastructure as attractive as possible and increase the breadth of services and fund structures Ireland can offer the international funds industry. Ireland is well on course to be considered the number one choice for funds globally.”
Also speaking at the Conference, Minister of State at the Department of Finance, Simon Harris TD, added:“The considered and comprehensive programme of this year’s Conference is a credit to Pat and his team. The depth of expert speakers and range of topics is perfectly in keeping with the latest developments in the Funds’ Industry and wider global trends. Funds are and will continue to be a keystone of Ireland’s International Financial Services’ Sector. As Minister with responsibility for this area I will continue to engage with Industry to advance the objectives of the Irish Government’s IFS2020 Strategy.
A robust and resilient Funds’ industry is essential to hi-skill and hi-value employment growth. Government must be attuned and responsive to opportunities that ensure Ireland continues to be a leading international funds’ domicile. I welcome informed proposals that share this goal and look forward to working with Irish Funds and others on a range of projects to do just that.” Regarding Asia, Minister Harris continued, “My message to this conference is clear. We want Ireland to be Asia’s and of course China’s gateway to Europe for financial services investment.”
The year to date has seen a continued rise in assets in Ireland, including a 15% rise in UCITS and 12% rise in QIAIF funds. This brings total domiciled funds to a figure of €1.9 trillion, of which UCITS account for €1.5 trillion and QIAIFs €355 billion.
This follows on from a very strong 2014 during which all domiciled assets grew 24% over the course of 12 months, and a year in which Irish domiciled ETFs accounted for 50% for all European domiciled ETFs and 16% of all UCITS funds. The strength of Ireland in Europe has continued into 2015, as of the end of Q1 there has already been 64 new sub funds launched and €46 billion of inflows to funds.
Key statistics
Ireland hosts the largest hedge fund administration centre in the world, representing over 40% of all global hedge fund assets, and is the European domicile of choice for cross border fund distribution with over 30% of the European cross border market.
As at the end of March 2015:
Value of investment funds domiciled or administered in Ireland: €3.8 trillion
Value of investment funds domiciled in Ireland: €1.9 trillion
Value of UCITS Funds domiciled in Ireland: €1.5 trillion
Over 900 Fund Managers from 50 different countries use Ireland (440 managers have funds domiciled in Ireland)
Total Funds Industry employment 13,000+
Irish Funds has over 100 member companies
80+ Industry companies employ people across 12 counties
Highest automation rates of any international funds centre in Europe
After weeks of continuing turbulence in global bond markets, investors are once again asking themselves “where next for fixed income markets?”There is, even among some seasoned fixed income investors, something of a tendency to see emerging markets in terms that we believe to be too simplistic. Over the last decade we have seen the rating agencies, the markets and now the average person realise that the traditional developed markets are not the bedrock that they historically have been and neither are emerging markets the basket cases that some have characterised them as.
Indeed, the World Bank classifications of low, middle and high income (of which emerging market countries are generally regarded as being in the bottom two, and developed market countries in the top) now place countries such as Chile, Poland, Uruguay and Russia in the high income category. Similarly, from a default risk perspective, the team at Old Mutual has identified over 12 emerging market countries for which the credit default swap (CDS) market indicates a lower risk of default than Spain and Italy.
It is relatively easy, on the face of it, to see why misperceptions about emerging markets have arisen. A good example can be found in a comparison of Italian and Czech government bonds. In the early 1990s, Italian government debt was rated AAA, while Czech debt was rated BBB.
Yet it was not always thus, and in some respects this disparity was an accident of history, with the Czech Republic having found itself on the “wrong” side of the Iron Curtain, a fact that weighed on the country’s sovereign rating long after the fall of Communism in Europe. The onset of the Eurozone crisis saw Italy’s rating steadily deteriorate, so that it is now BBB-, while the Czech Republic’s rating has risen to AA-. The key reason for this exchange of places is illustrated by two simple statistics: Italy’s debt-to-GDP ratio is 134%, while the Czech ratio is 44%.
It is a remarkably similar story for Greece and Turkey, with the later generally viewed as an “emerging” market, while Greece was considered a “developed market”. Greece is now rated CCC+, with 175% debt-to-GDP, while Turkey is BB+ and has a 37% debt-to-GDP ratio.
What may surprise some investors is that these examples are not isolated ones, as borne out by aggregated figures: on average, emerging market countries have a debt-to-GDP ratio of 35%, versus 95% in developed market countries. This pattern only looks likely to become further entrenched, given consensus forecasts for the next five years that indicate emerging market economic growth should outstrip that of developed markets by some 3.5% per annum (Source: Bloomberg: weighted average, net debt, 2013 full-year GDP).
Enlightened investors are increasingly recognising the diversity of the emerging market debt asset class.
There are approximately 190 countries in the world, of which some 25 are developed. This leaves 165 countries that are potential emerging market investments. The picture is similar in the currency markets: there are essentially 12 developed market currencies, and over 80 different emerging market currencies.
A key tenet of investment management is finding different sources of alpha. Given QE in the US, Japan, UK and now Europe, correlations in G7 markets are at very high levels. Emerging markets are generally less correlated due the differing levels of credit quality, monetary stance and political risk.
Indeed, within emerging markets we have seen a significant rotation: China’s economic picture has been deteriorating, although its growth rate still seems attractive on a relative basis. Meanwhile, India’s new reformist government is undertaking significant changes, which in turn are feeding into the economy and inflation expectations. India’s growth rate is likely to overtake China in the near future.
For investors, this only increases the importance of taking idiosyncratic positions. The challenge is to identify the markets that really are attractive, implying that there should be attractive opportunities for active managers to add value.
Aside from arguments about how misunderstood emerging markets are, and how much diversity they offer, perhaps the most persuasive of all from an investor’s perspective is their long-term return prospects.
Since the summer of 2013, emerging market debt has been somewhat out of favour due to expectations of the Federal Reserve’s normalisation of interest rates and its corresponding shock to emerging markets. At the same time, quantitative easing (an extraordinary measure) has led to better returns from developed market bonds than the vast majority of investors had expected.
Looking ahead, we believe monetary stimulus will continue to support developed equity markets, but less so the bond markets. Clearly, the best forecast of future expected return from a bond is the yield. On this measure, we would argue that quantitative easing has made developed market bonds a virtual desert of opportunity for those investors looking for attractive long-term returns from their fixed income portfolios.
By stark contrast, the emerging market debt universe is so full of opportunities, it more closely resembles a complex jungle – potentially very fertile hunting ground, but not without potential pitfalls.
This is not, of course, to suggest that developed market government bonds have no part to play; indeed, their role as a (relative) safe-haven during periods of severe market stress shouldn’t be understated.
Once again, the figures tend to speak for themselves: developed market government bond yields are 1.5%, with an average maturity of 9.25 years. Meanwhile, local currency emerging market yields average 6.5% (external currency emerging market yields average 5.78%), with a 7.2-year average maturity.
To some investors, these figures will come as something of a surprise. Recognition is increasingly widespread, however, that emerging market debt is scarcely the esoteric asset class it was once thought of as being. But for those who might have been put off even considering an allocation to emerging market debt in the past, figures like these only reinforce the case for reappraising the asset class.
All data: source: Bloomberg, as at 03/06/15, unless otherwise indicated.
Investments Views by John Peta, head of emerging market debt, Old Mutual Global Investors
Old Mutual Global Investors (OMGI) has no house market view and opinions expressed are the views of individual fund manager(s) as at the time of writing.
Schroders has announced the launch of its Emerging Multi-Asset Income fund, which is designed to primarily invest in emerging markets.
The launch comes in response to client demand, the manager said, particularly for those seeking to diversify and manage risk.
The portfolio will be managed by the same team running the Schroder ISF Global Multi-Asset Income fund, which has some €5.8bn of assets under management.
Aymeric Forest and Iain Cunningham head the team of some 100. They will target an annual distribution of 5%-6%, using dynamic asset allocation and risk management. Currently the Multi-Asset team manages some €106.8bn for clients globally.
Carlo Trabattoni, head of Pan-European Intermediary Business at Schroders, said: “The launch of the new fund will offer clients multi-asset diversification benefits within emerging markets. Although emerging markets have experienced recent headwinds, it allows investors with a medium to long term outlook to seek opportunities in some of the fastest growing economies in the world.”
Aymeric Forest, head of Multi-Asset Europe and fund manager, said: “We’re very pleased to announce the launch of the new fund. Investors need to be more selective in the current environment among countries and assets. Exchange rates need to be actively managed, as a local bond or equity market may appreciate in price whilst the local currency can depreciate. A multi-asset approach can use the dispersion in asset prices created by diverging monetary and economic cycles among emerging market countries and offer potentially lower drawdown risks compared to single asset classes”
EFG International has recruited Philippe Bruyère to be Head of Private Banking Geneva. He will report to Adrian Kyriazi, CEO, Continental Europe and Head of Private Banking, Switzerland.
Philippe Bruyère will replace Jean-Louis Platteau, who will focus on the development of his own portfolio of clients as well as overseeing the Independent Asset Managers segment.
Philippe Bruyère was formerly at Credit Suisse, where since 2010 he was Market Group Head – Russia, Central Asia, Eastern Europe, Israel and Greece, based in Geneva. An experienced senior executive, he has held finance and business management roles across a number of service sectors, including travel as well as financial services.
EFG International is a global private banking group offering private banking and asset management services, headquartered in Zurich. EFG International’s group of private banking businesses operates in around 30 locations worldwide, with circa 2,000 employees.
