Is the Euro crisis over? What if China slows down? Do liquidity premium exist?
“The future is like a corridor into which we can see only by the light coming from behind.” This quote sums up the hazardous nature of the exercise to try and tell what the future will bring, certainly with respect to the world economy and asset returns. As stated by Robeco in a recently published report on this matter, all we have to go by is what we have seen in the past. So, the outlook2015-2019 presented by Robeco in this video is as much a story about the past, as it is for the future: Robeco assumes that the long-term returns that we have seen in the past will – under normal circumstances – be a good guideline for the future. Interestingly, the further we try to look into the future, decades out, the more we tend to assume that the returns we have seen over the past hundred years will be more or less repeated. The shorter the outlook –and with short in this context Robeco refers to the five-year outlook being presented here– the more emphasis will be put on recent history.
A fair question is why it should be expected to see similar long-term, steady-state returns, even though the past hundred years can in no way be compared to the hundred to come. The simple answer, according to Robeco, is that the past hundred years have seen enough turmoil and volatility to be considered a good sample of possible hurdles that we will face in the next hundred years: wars, (hyper) inflation, natural disasters, booms, busts and financial crises – the world has had our share of turbulence. Yet underlying all this is Robeco’s conviction, which stems from their belief in the ingenuity of human beings, that we will realize equivalent returns. Robeco believes that mankind will continue to overcome complex and threatening situations. They trust that the drive of innovation and productivity gains will persist. Certainly, there will be setbacks as there have been in the past, but generally Robeco believes that growth, and with it returns on financial assets, will continue more or less as before.
You may access an Executive Summary of this report through the pdf file attached, and you may download the full report through this link.
. Bank J. Safra Sarasin anuncia la renuncia de Eric Sarasin por investigaciones en curso
Over recent days, the media has widely reported the ramifications of legal investigations initiated in Germany against a number of people, including Mr. Eric Sarasin. Investigations on behalf of German prosecutors have been carried out in Switzerland, said Bank J. Safra Sarasin in an statement.
“Eric Sarasin categorically denies the accusations made against him and wants to be free and available to organise his own defence. He also wants to ensure that the personal implications for him do not tarnish the image and reputation of the Bank he has served”.
“Eric Sarasin has therefore resigned from his position as Deputy CEO and member of the Bank’s Executive Committee. The Bank has accepted his resignation with regret and thanks Mr. Eric Sarasin for all his efforts and achievements over many years of collaboration”, says the entity.
Foto: JoiseyShowaa, Flickr, Creative Commons. Global X Funds lanza dos nuevos ETFs basados en índices de J.P. Morgan
Global X Funds, the New York-based provider of exchange-traded funds, has launched two ETFs based on indexes developed by J.P. Morgan Corporate and Investment Bank: the Global X | JPMorgan Efficiente Index ETF and the Global X | JPMorgan US Sector Rotator Index ETF.
These new ETFs from Global X enter the market at a time when investors are increasingly interested in products linked to strategies that are designed to help manage against downside risks.
The Global X | JPMorgan Efficiente Index ETF aims to provide investors with superior risk- adjusted returns. The fund rebalances monthly, shifting exposures across five asset classes and thirteen sub-classes, while targeting an annual realized volatility of 10%. The strategy is designed as an alternative investment, seeking to generate low volatility returns across a variety of market conditions.
The Global X | JPMorgan US Sector Rotator Index ETF seeks to provide investors with the ability to participate in market upside while limiting downside exposure. On a monthly basis, the fund will select up to five US sector ETFs which have demonstrated positive recent performance from a pool of 10 possible sectors. The fund may shift up to 100% of its exposure to 1-3 year US treasuries to defend against declining or volatile markets.
“We regularly hear about the need for investment vehicles that manage downside risk”, said Greg King, Executive Vice-President at Global X Funds. “With these new funds, we can now offer two potential solutions to investors who want the liquidity and transparency of an ETF wrapper and a rules-based index approach.”
“We are pleased to see the J.P. Morgan Efficiente and Sector Rotator indexes in ETF form with Global X as the ETF provider,” said Scott Mitchell, Managing Director at J.P. Morgan.
In late October, ING IM’s High Dividend Equity strategy that focusses on the emerging world will be celebrating its three-year anniversary. Many investors are simply ignoring the emerging world now. But Manu Vandenbulck sees attractive valuations, and therefore opportunities.
Manu, you have been managing this strategy for 3 years now – together with your colleague Robert Davis. What are your experiences?
Very positive. I am still pleasantly surprised by the potential of dividend investing in the emerging world. Compared to developed markets, this way of investing in the emerging world is still largely unexplored territory. Asset managers are avoiding this part of the market. New funds in this area are often managed by asset managers that focus on the core markets (and have no specific knowledge of emerging equities) or exclusively focused on the emerging world (and thus lack the broad global focus of ING IM). ING IM has been specialized in dividend investing for 15 years and is a pioneer in this field.
However, a lot of investors pay no attention to dividend investing in the emerging world yet. Why is that?
I think this is largely due to outdated knowledge. A lot of investors primarily associate emerging equities with growth and think that dividend stocks underperform. But dividend stocks often outperform stocks that do not distribute any dividends, even in the emerging world. Additionally, higher growth in the emerging world ultimately translates into higher dividend growth. So dividend investors profit as well, and with a lower average risk! It is important to select the right stocks though: stocks that have the potential to offer robust dividend growth. Also, lots of investors do not know that as many as ninety percent of the shares in the emerging world pay dividends and the average dividend yield is close to 3%. The dividend yield of our strategy exceeds 4%. This is a nice income, given the environment of historically low interest rates.
There are fears of lower growth in China and higher interest rates in the US. What is your view?
There is indeed much talk about the risk of higher rates in the US and the fear that this will have a negative impact on our universe. There are of course parts of the emerging world that we believe will struggle, for example the expensive real estate stocks in Singapore and Hong Kong. In these regions, the debt ratio also has increased significantly in recent years. And so we do not invest in these companies. We believe that growth in China will be lower than in previous years as well, yet we still assume an average growth of 5% for the coming years. Also, the quality of the growth is improving. Some Chinese large banks, for example, are currently so attractively valued that we think it is justified to invest in the Chinese banking sector.
Is now a good time for investors to start dividend investing in the emerging world?
I am convinced it is. The valuation is attractive versus developed markets. The economic growth in the emerging world may not be as high as a few years ago, but it is still higher than in mature markets. That is supportive of earnings growth. Because we have seen a tremendous growth of the number of companies that share profits with their shareholders, this earnings growth will also lead to a gradual increase in dividends. Our focus on dividends and dividend growth also makes our strategy more stable. Dividends simply fluctuate less than profits that are more dependent on the business cycle. As for the macro perspective, we assume a gradual growth of the world economy. In such a situation, increases in interest rates in the US need not be a problem.
What does ING IM offer investors who opt for dividend investing in the emerging world?
First, we offer a lot of experience and proven track records. ING IM has been dividend investing since 1999. We are a pioneer in this field and offer a wide range of equity strategies focused on companies that offer above-average dividends and are able to show dividend growth. Our dividend strategies are managed in a stable team that, day after day, focuses on finding attractively priced companies that fit our approach. Within ING IM, our team can also benefit from the expertise of 25 analysts who are dedicated to their sectors, worldwide. Looking at our performances, this seems to be working well.
The EDF Group, a leader in low carbon energy, and Amundi, the European asset manager, have announced their partnership for the creation of a joint asset management company. The prime purpose of this company will be to raise funds from institutional and retail investors and to manage on behalf of third parties funds intended to finance projects relating to energy transition.
EDF will contribute to this project its privileged access to investment opportunities within the energy sector thanks to its world-renowned expertise in the field. The Group will be a driving force behind investment for project development, implementation and operation. Amundi will provide its investment structuration skills as well as its fund-raising capabilities.
The partnership set up between these two leaders in their relevant scopes of expertise will benefit from the wide range of activities developed by EDF with respect to energy transition, while targeting the critical mass required for streamlined investment solutions. EDF and Amundi intend to offer the market two theme-based specific investment products. The first will be dedicated to renewable energy (wind power, photovoltaic, small hydro, etc.). The second will focus on energy saving strategies for B-to-B (including electro intensive industries). EDF and Amundi have set the fund-raising goal at 1.5 billion euros.
This partnership between an asset manager and an industrial company seeks to develop a new alternative asset class, decorrelated from the volatility of traditional investment markets, in order in particular to draw long term investments for the benefit of the real economy.
The joint asset management company between EDF and Amundi is expected to create in parallel an investment fund based on high yield real estate. This approach could be extended eventually to non-energy related infrastructures.
Yves Perrier, Amundi’s CEO, said: “This partnership with EDF is part of Amundi’s strategy to design innovating investment solutions for its clients whilst addressing investment challenges faced by corporates”.
Thomas Piquemal, EDF Group’s Senior Executive Vice President in charge of Finance, said: “After our inaugural Green Bond issuance in November 2013, a reference in the developing green bond market, this partnership with Amundi demonstrates once again EDF’s ability to innovate for the benefit of energy transition financing.”
. Prudential Financial cierra un acuerdo con ILC para la compra del 40% de AFP Habitat
Prudential Financial announced that it has entered into a memorandum of understanding with Inversiones La Construcción, the investment subsidiary of the Chilean Construction Chamber, to acquire an indirect ownership interest in Administradora de Fondos de Pensiones Habitat, a leading provider of retirement services in Chile that trades under the symbol HABITAT CI on the Santiago Stock Exchange.
Prudential would expect to acquire indirectly between approximately 34 and 40 percent of AFP Habitat from ILC, depending on the results of a pre-closing partial tender offer by ILC to acquire additional shares of AFP Habitat from public shareholders. Prudential would acquire its indirect interest in the AFP Habitat shares from subsidiaries of ILC for 925 Chilean Pesos per share, for a total purchase price of approximately US$530 million to US$620 million at current exchange rates.
It is expected that the transaction would result in equal ownership positions for Prudential and ILC, with a controlling stake in AFP Habitat held through a joint holding company. The transaction, which is subject to certain conditions, including receipt of regulatory approvals, is expected to close in the first half of 2015.
“Upon completion, this strategic partnership with ILC will help Prudential expand its presence in Latin America and participate in the growing Chilean pension market,” said Bill Yates, President of the Latin American region for Prudential. “ILC has a long track record of operating excellence, and shares Prudential’s values and long-term commitment to provide high-quality service to customers. We are pleased to have this opportunity to enter Chile with a distinguished local partner like ILC.”
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with more than $1.1 trillion of assets under management as of June 30, 2014, has operations in the United States, Asia, Europe and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century.
Foto: Verizon Wireless Arena front by ToddC4176. La transformación del sector de las telecomunicaciones y los medios: ¿riesgo u oportunidad?
The telecoms and media market is in a state of flux with convergence and consolidation reshaping the industry. Convergence comes as internet and voice traffic use the same channels, and the need to seamlessly transfer this data across networks in the most efficient way. Many wireless operators are discovering fibre in the ground is needed for this, while fibre operators are discovering the need for content to drive take up of data packages.
Consolidation comes from the need to reverse European Union (EU) policy that has created a fragmented European telecoms market. This landscape has left individual players with insufficient scale to invest in the new high speed data networks required for the latest generation of smartphones and their users. In media, the need for scale in international distribution has also driven a natural need for further geographical diversification.
The synergies generated in consolidation deals so far this year are typically positive for both shareholders and bondholders. Examples include Comcast’s $45bn purchase of Time Warner Cable, Liberty Global’s $14bn purchase of Ziggo and AT&T’s $67.1bn takeover of DirecTV.
Sometimes, anaggressively structured deal can offer bondholders mixed fortunes. Early in 2013, the bonds of Virgin Media fell sharply after Liberty Global announced it was purchasing the UK cable company. In this instance, holders of Virgin Media debt were adversely impacted as the combined entity had substantially higher leverage and the bonds were downgraded from investment grade to high yield status.
Conversely, new debt funding for merger and acquisition (M&A) activity has offered attractive entry points for strong credits with a clear deleveraging profile. Verizon’s record $49bn bond issuance in Q3 2013, to fund the $130bn purchase of Vodafone’s 45% stake in Verizon Wireless, is such an example.
Recent M&A activity has generally been driven by corporates, with most deals to date having clear economic logic that drives achievable synergies. Funding usually comes from a mix of high cash balances and cheap debt, often with an element of equity issuance to maintain a reasonable capital structure for the new entity.
In contrast to recent history, private equity are the clear M&A outsiders so far in this cycle. They have been unable to transact despite the low cost of credit to fund deals, given the high valuations of the firms under consideration and the struggle to achieve the same mutual benefits that the newly combined entities see in terms of lowering margins. That said, many private equity funds are cash rich and looking to deploy funds. Could a bout of aggressive behaviour from these funds stoke the M&A fire?
As a result of this shifting backdrop in the sector it is important to be mindful that not all consolidation is beneficial. Adequate fundamental research is required into the companies’ expected structures following the merger. However, opportunities do exist, and we are monitoring them with interest.
Article by Stephen Thariyan, Global Head of Credit, Henderson Global Investors
These are fund manager views at the time of writing and may differ from those of other Henderson fund managers. The information should not be construed as investment advice. Before entering into an investment agreement please consult a professional investment adviser
Foto: Daniel Foster437, Flickr, Creative Commons. El 73% de los estadounidenses que viven en el extranjero, tentados a renunciar a su ciudadanía por FATCA
73 per cent of Americans who live outside the U.S. are tempted to give up their U.S. passports in response to the introduction of FATCA (Foreign Account Tax Compliance Act), reveals a new survey by one of the world’s largest independent financial advisory organizations.
The findings come as Federal Register data shows that the number of Americans renouncing U.S. citizenship increased by 39 per cent in the three months to September after the new global tax law came into force.
In the global poll, deVere Group recently asked more than 400 of its American expatriate clients: ‘Would you consider voluntarily relinquishing your U.S. citizenship due to the impact of FATCA?’
Cumulatively, 73 per cent of respondents answered that they had ‘actively considered it’, ‘are thinking about it,’ or ‘have explored the options of it.’
16 per cent said they would not consider relinquishing their U.S. citizenship and 11 per cent did not know.
This is an increase of five percentage points from November when deVere Group, which has 80,000 mainly expatriate clients globally, conducted a similar survey.
Purportedly designed as a tool to counteract tax evasion, the Foreign Account Tax Compliance Act has resulted in additional reporting requirements for all U.S. citizens overseas. FATCA opponents argue that it will do little, if anything, to tackle the important international matter of tax evasion.
Nigel Green, founder and chief executive of deVere Group, comments: “It is alarming that nearly three quarters of Americans abroad said that they are going to or have thought about giving up their U.S. citizenship.
“Nationality, especially for an expatriate, is an incredibly important part of one’s identity and typically it’s a very emotional issue too. It is our experience that most Americans are extremely saddened at the prospect of giving up their U.S. citizenship to avoid the harsh implications of a new and utterly flawed tax law.
“However, it should come as little surprise that such a high number are prepared to do so because FATCA’s reporting requirements are excessively onerous, burdensome and expensive. Also many non-U.S. banks and other financial institutions will no longer work with Americans which can make living outside the U.S. achingly complicated.”
With most Americans telling deVere Group that they are loathed to give up their passports, Nigel Green urges them to speak to a financial advisor in the first instance.
He says: “Americans abroad who are being adversely affected by FATCA should explore all the available options to them to mitigate the absurd tax law’s effects with an independent financial advisor with cross border experience before renouncing their citizenship.
“This is especially important as there are certain established federal regulations aimed at discouraging Americans from renouncing their citizenship for tax reasons.
“There are now many vehicles that U.S. expatriates can use to significantly reduce the impact of FATCA, including supplementary overseas pension plans.”
There are an estimated 7.6 million Americans living overseas.
This latest deVere Group survey, carried out in September 2014, polled 416 Americans.
Toronto. Foto: Brian Carson. Natixis GAM adquiere la plataforma de fondos retail canadiense NexGen Financial
Natixis Global Asset Management has announced that it has entered into an agreement to acquire all of the outstanding common shares of NexGen Financial Corporation. NexGen is a Toronto-based asset manager with more than CA$919 million (as of Sept. 30, 2014) in assets under management and a broad distribution platform.
“NexGen is an innovative firm with a strong management team and a solid lineup of retail mutual funds offered through an expansive distribution platform,” said John Hailer, chief executive officer of Natixis in the Americas and Asia. “We are honored to build on the legacy James Hunter established in one of the largest retail markets in the world. Together with NexGen, we will be better positioned to serve the market with our worldwide network of affiliated investment managers.”
Natixis plans to build upon NexGen’s existing mutual fund platform by selectively offering its broad range of asset management strategies into the Canadian retail market.
“We are very pleased to join one of the world’s leading asset managers,” said Abe Goenka, NexGen co-CEO. “It’s exciting to become part of an organization with significant resources and an outstanding group of affiliated asset managers. This gives us greater access to a broad set of investment strategies that will allow us to create new products adding to our already diverse fund offerings, allowing us to better serve current clients and pursue new opportunities.”
Expanding into Canada is part of Natixis’ strategic plan to actively pursue international growth. In June, the firm announced plans to launch a new business development initiative in Canada focused on tapping into the steadily growing Canadian institutional market. In 2013, the firm established its retail platform in the UK, adding personnel and launching several mutual funds registered for the UK.
NexGen is recognized for offering tax-efficient wealth management strategies. Their patent pending proprietary mutual fund structure is designed to achieve a number of tax planning objectives that are not publicly offered by any other Canadian mutual fund company. The firm distributes through more than 1,600 financial advisors and more than 100 dealers throughout Canada.
In keeping with the Natixis multi-affiliate business model, NexGen will operate autonomously with the existing senior management team. There are no immediate plans to make staffing changes or changes to their business model.
Completion of the transaction is subject to customary closing conditions, including Ontario court approvals, a favorable vote of at least two-thirds of the votes cast by NexGen shareholders and applicable regulatory approvals.
Foto: Jay, Flickr, Creative Commons. El estilo de inversión de Jupiter AM en emergentes europeos
Despite ongoing geopolitical turmoil across a range of developing countries and the impending hike in U.S. interest rates that is expected to slow growth in emerging markets, financial advisors remain bullish on emerging markets.
According to a survey of more than 100 financial advisors, registered investment advisors (RIAs) and other investment industry experts, conducted by Aberdeen Asset Management at the Financial Planning Association (FPA) Annual Conference in late-September, sentiment remains positive on both emerging market stocks and bonds over the next 12 months. The vast majority of respondents (88 percent) indicated they have not reduced their clients’ exposure to emerging markets because of recent political turmoil in Eastern Europe, the Middle East and elsewhere.
When presented with a range of asset classes, 41 percent of those surveyed state they are most likely to increase allocations to emerging market equities over the next 12 months. This was higher than U.S. equities (31 percent), alternatives (14 percent) and non-U.S. international developed market equities (14 percent).
“Although recent headlines can cause worry for the markets, advisors recognize that an allocation to emerging market equities over a long period of time is an important component of any growth portfolio,” said Devan Kaloo, Head of Global Emerging Markets at Aberdeen Asset Management, whose team manages a number of Aberdeen’s closed-end funds including the Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. “We believe that emerging market policy makers have learned from past crises and used their experience to strengthen strategies and governance standards.” Kaloo adds, “We believe that closed-end funds represent one of the best ways to invest in emerging markets as their assets can be nimbly deployed to potential opportunities in thinly traded markets.”
Similar to emerging market equities, advisors expect emerging market bonds to offer the most attractive risk adjusted returns over the next 12 months as compared to other asset classes. Nearly 40 percent (38 percent) favor emerging market bonds. This compares to U.S. high-yield bonds (24 percent), U.S. investment grade corporate bonds (23 percent) and international developed market bonds (15 percent).
The survey also found that 60 percent of advisors consider risk tolerance the most important factor when evaluating investment options for clients, to ensure that investors have a realistic understanding of their ability to tolerate large swings in the market. Other important factors considered by advisors when determining asset selection include clients’ investment time horizon (32 percent) and fund expenses and fees (8 percent).
