U.K. investment boutique J O Hambro Capital Management (JOHCM) has announced that it has hired portfolio managers Thorsten Becker, Arun Daniel, and Vincent Rivers and trader Eric Yi to form its new small/mid cap U.S. equity team ahead of the launch of a U.S. small and mid-cap equity strategy later this quarter.
The three portfolio managers and Yi were previously employed with Pyramis Global Advisors, a Fidelity Investments company, where they contributed to the management of a U.S. small/mid cap core equity strategy.
The team will apply a core investment approach, managing a fundamental research-driven best ideas portfolio. Capacity for the strategy has been set at $5 billion. The team will be will be based in Boston, Massachusetts.
“We’re pleased to add this team to our lineup of outstanding money managers,” said Gavin Rochussen, JOHCM CEO. “The appointment of these experienced and proven U.S. equity investors enhances our presence in the United States, a market where we are making considerable inroads. Our success has been founded upon recruiting experienced fund managers with proven investment pedigree. We give those investment professionals the autonomy and incentives that allow them to do what they do best: create alpha in their given strategies.”
The team will also launch a Global small and mid-cap equity strategy in due course.
CC-BY-SA-2.0, FlickrChris Hart, portfolio manager de la estrategia Global Premium Equities de Robeco. Los “tres círculos” llevan a Robeco a identificar más oportunidades entre las mid y large caps
Stock markets that have hit record levels in recent months present a challenge for investors in avoiding the value trap, says award-winning fund manager Chris Hart.
Chris Hart, manager of Robeco Global Premium Equities strategy, warns that chasing those companies which are perceived to be higher growth than others can lead to overpaying for stocks that are already expensive. Instead, Hart prefers a more disciplined approach that is based more on finding those companies that are undervalued relative to their prospects. This avoids simply looking for momentum, where a company is able to grow but much of the potential is already priced in. “A drawback of both the bull market and the low-growth economic environment that we are in is that investors chase growth – and sometimes at a price that isn’t really worth paying. The market is currently paying high prices for momentum, top-line and earnings growth. Small cap stocks globally (under USD 2 billion) seem to be somewhat expensive. The portfolio currently has the smallest percentage of small cap names over the past six years. We’re now finding more opportunity in the mid and large cap range.”
‘A drawback of the bull market is that investors chase growth’
Such is his skill in finding the best stocks that Boston-based Hart has won the Morningstar Awards for the best fund a record nine times in Europe. His fund has consistently outperformed its benchmark, and Hart says this is due to strict adherence to what he calls the ‘three circles’ approach. This targets companies that have a low valuation (relative to peers and company history), positive momentum (the ability to grow) and good fundamentals (the ability to generate free cash flow).
“What we’re really looking for is that dislocation between valuation and fundamentals, and earnings,” says Hart. “Over the last five to six years we have been able to find pockets of opportunity at the industry level – names that were generally cheap. We’re now not really finding pockets any more, but one-off names. For example, advertising as an industry was undervalued for a while. There would be 2-3 advertisers that might be interesting, and now it might be one. So it’s even more security- selection driven because of where we are in the market, and what the market is paying for. Being as disciplined as we are with the application of our three circles philosophy and process, the portfolio will always maintain a quality bias and always own companies that have earnings momentum that is better than the market, with valuation support.” And being strict on principles is key. “We are not going to throw away our discipline and chase momentum and give up our valuation criteria,” says Hart. “The portfolio today has become more value orientated. The level of relative valuation to the universe that we look at is almost as wide as it’s ever been.”
You may access the complete article at Robeco’s Time2Read Magazine
Photo: Shinzō Abe April 2014, Chuck Hagel. It is Dangerous to Assume that Accommodative Monetary Policy Alone Will Cure all Ills
Global equities and global bonds delivered further gains in June 2014, with the MSCI World index up 1.83% in US dollar terms while the JP Morgan Global Government Bond index returned 0.69%, also in dollar terms. Regionally, UK equities were one of the main laggards during the month, as FX-related earnings downgrades weighed on sentiment. By contrast, Japanese equities performed strongly as the recent news that the Government Pension Investment Fund will increase its exposure to equities helped to lift sentiment. The announcement in relation to the GPIF is significant as it has assets of c.$1.2 trillion. Japanese equities were also buoyed by PM Shinzo Abe’s comment in the Financial Times that he is genuinely committed to the ‘third arrow’ of Abenomics (that is, committed to promoting faster rates of economic growth in Japan) rather than focusing solely on monetary and fiscal measures.
For 2014 to date, investors have benefited from low levels of volatility everywhere – which has enabled bonds and equities to rally alongside each other. The question now has to be: how much more peace and quiet can we expect? Recent developments in Portugal, while idiosyncratic rather than systemic in our view, have shown that the banking sector can continue to be a source of unwelcome and unexpected surprises; markets will now await a fuller picture of the health of European banks, which should emerge when the ECB completes its ‘stress tests’ later this year. The geopolitical environment is undeniably worse than it was at the beginning of the year, with ongoing tension between Russia and Ukraine and concerns that Iraq and Syria could be further destabilised by the growing strength of Isis, the jihadist group. In the US, the Fed has signalled that its bond-buying programme will come to an end this year. With the exception of the recent news from Portugal, markets have largely taken all these developments in their stride. While this has suited our pro-equity stance, it has left us somewhat puzzled as the rise in core yields that we expected at that start of 2014 has not materialised.
In terms of where fixed income markets go from here, we still think it is very difficult to be positive on core government markets. The weak Q1 US GDP print may well have provided some support for core bond prices but policy normalisation – albeit at a slow pace – is coming in the US and UK whether fixed income markets like it or not. In our view, corporate credit remains more attractive than government debt but there are clear signs now that non-financial corporates are starting to re-lever their balance sheets. Whilst that is generally positive for high yield (as takeovers often involve a higher-rated firm taking over a lower- rated one) it is not so positive for investment grade. Nonetheless, given the significantly better health of corporate balance sheets when compared to those of sovereign issuers, we still think that credit remains relatively attractive for now.
In equity markets, we remain constructive on the outlook for the remainder of the year, with overweight positions in the UK and Japan in our asset allocation model. UK earnings expectations have faced headwinds recently because of the pound’s strength, but in common currency terms the picture looks more positive. The UK also benefits from an attractive dividend yield, which we believe is likely to remain a favourable characteristic in a low-growth/low-return world. Japanese equities are attractively valued versus developed world equities and the recent comments from Mr. Abe show that he is serious about making Abenomics work. For us, the real challenge will be to ascertain when the valuation re-rating of equities runs out of steam. With the notable exception of the US, earnings growth is simply not coming through fast enough to allow equities to make a lot more progress from current levels. August is traditionally a quiet time for equity markets, due to seasonally low flow and volatility levels, but, as recent events have shown, it is dangerous to assume that accommodative monetary policy alone will cure all ills.
Investment strategy by Mark Burgess, Chief Investment Officer, Threadneedle
Foto: Picharmus, Flickr, Creative Commons.. Casasús: "Lo que estamos viviendo en las bolsas tiene que ver con China y con la propia dinámica del mercado"
Calamos Investments announces the launch of the Calamos Focus Growth ETF one of the industry’s first actively managed equity ETFs.
“Our decision to offer an active equity ETF – particularly at this early juncture in the market’s development – is right in line with our history of anticipating the needs of investors and offering innovative solutions to satisfy those needs. From our convertible strategy launched in 1979 to our market neutral income strategy launched in 1990 and our long/short strategy in 2013, Calamos has always been a leader in developing innovative solutions that help our clients navigate the evolving investment landscape. To that end, we believe actively managed ETFs represent an investment option whose time has come,” said John Calamos, Sr., CEO and Global Co-CIO of Calamos Investments.
“Active equity ETFs are a logical extension of our long-held belief in active management and enable us to serve investors who prefer the ETF product structure and appreciate the benefits of transparency. CFGE offers ETF investors a way to access a similar strategy to that which is available in a mutual fund format, and reflects Calamos’ commitment to the actively managed ETF space,” said Gary Black, Global Co-CIO of Calamos Investments.
The Calamos Focus Growth ETF leverages the firm’s 25-year history investing in growth companies, and features a portfolio consisting of stocks which we believe offer the best opportunities for growth. The portfolio selection process stresses company fundamentals including a global presence, strong revenue and earnings growth, solid returns on invested capital and lower debt-to-capital levels. The fund also utilizes active management, blending investment themes with fundamental research.
BLI – Banque de Luxembourg Investments S.A., the asset management company of Banque de Luxembourg, has reorganised its fund distribution team. Lutz Overlack has been appointed new Head of Sales and Matthieu Boachon will be Sales Manager for Benelux.
With immediate effect, Lutz Overlack (46), previously Sales Director for Germany, Austria and Switzerland, will be Head of Sales for all BLI’s distribution network. The sales team, Simonetta Cristofari (Italy), David Córdoba (Spain) and Matthieu Boachon (Benelux) will report directly to Lutz. “Our objective is to further professionalise our fund distribution: Lutz has a great challenge ahead of him!,” says Guy Wagner, managing director of BLI. “With the support of our local employees we will strengthen our specific target-oriented activities in each distribution country.”
Lutz Overlack adds: “The client will remain at the heart of our day-to-day business – client satisfaction is our priority. I am looking forward this new challenge and to working with my colleagues from different countries.” Prior to joining a German subsidiary of Banque de Luxembourg in 2003, Lutz worked at Bankhaus Lampe and American Express Asset Management Since 2010, he has been Sales Director at BLI.
Matthieu Boachon is new Sales Manager for Benelux
A new member in the distribution team is Matthieu Boachon (28) who will be sales manager for Benelux. To date, the native French worked in BLI’s fund selection team. He joined BLI in summer 2010, after graduating with a Master of Science in Finance from the IESEG School of Management in Lille. „Matthieu is a “homegrown” addition to the sales team – he has the advantage of having started his professional career at BLI right after finishing his studies”, says Lutz Overlack. “Thanks to his experience in fund selection, he has excellent knowledge of the investment methodology and is in close contact with the fund managers and analysts. Furthermore, he is able to transmit our investment approach abroad. Matthieu will now switch his job to start in the area of sales, and we wish him all the best for his new challenge!”
Lyxor builds on the success of a dedicated €275 million European senior debt fund launched in July 2013 and brings to the market a commingled European senior debt fund, the Lyxor European Senior Debt Fund. The fund is an AIFMD-compliant fund (SICAV-SIF) domiciled in Luxembourg.
The fund invests mainly in floating rate senior secured loans issued by European companies to finance acquisitions and corporate growth. The Fund will provide investors with exposure to a market that is characterized by increasing loan issuance numbers so far this year and that continues to feature attractive pricing characteristics and a competitive risk-return profile.
“By investing in European loans, investors get exposure to high yielding debt with a floating rate income profile that ranks at the top of the capital structure of the issuer”, said Thierry de Vergnes, Head of Debt Investments at Lyxor. “The current issuance dynamic of the market will enable Lyxor to build a well-diversified portfolio of European loans.”
The fund will target a return of 3M Euribor + 5.5% to 6.5% per year before fees over 6 to 8 years. This will include quarterly income distributions (targeting 3M Euribor + 4.5% to 5% before fees) for distributing share classes.
Lyxor manages senior debt portfolios for over €600m in assets under management in funds, CLO and advisory mandates.
Foto: Arild Vågen. El FMI alerta de la vulnerabilidad de algunos mercados emergentes a la política monetaria de EE.UU.
Historically, for every 100 basis points (bps) that the interest rates go up in the United States, they increase 40 to 70 in advanced economies and 100-150 in the rest of the world. The IMF forecasts US short-term rates, currently at zero, of 4% in 2018, while long-term rates, now at 2.8%, will reach that year their equilibrium at close to 5%. Therefore, the emerging markets must brace for a significant tightening of their financial conditions.
That is the view of the IMF’s Department of Financial and Monetary Affairs, José Viñals, who spoke in Miami on Monday in the LSE Global Pensions Program, organized by the London School of Economics, Santander Asset Management and Novaster.
Viñals did not hide his worries over the expansion of credit in China and other emerging markets. The former ‘number two’ of Spain’s central bank said that “the fragility of the business sector in Asia and Latin America worries the IMF.” That compounded with the lack of reform in some big emerging markets, such as Brazil.
As long as the exit from the extremely accommodative US monetary policy goes according to the IMF’s ‘central scenario’, serious tensions should be avoided. Viñals reminded (not remembered) the audience -made by one hundred of pension fund managers and government regulators, most of them Latin American- that in fact, the emerging markets managed to avert a crisis last summer, when Ben Bernanke’s bad communications about the ‘tapering’ made “everyone” feel confused and the market had several weeks of high volatility. So the emerging markets’ ability to escape the crisis and fix their problems should not be underestimated.
This time the risks are bigger than in 2014, partly because central banks have had to choose between inflating assets and letting the economies fall into depressions and deflation. The choices were so stark that there is very little to argue against what the central banks have done.
However, those policies’ consequences are clear. With their liquidity injections, “central banks have compressed volatility [in the financial markets] in an extraordinary manner”. The former deputy governor of the Bank of Spain explained that “when interest rates and volatility are low, investors take extraordinary risks.”
Viñals remarked that “everybody who has made investments” in what he called “heterogeneous assets” has “made money” this year, in spite of the fact that the “economic news, the ‘surprises’ have been relatively bad”. To Viñals this is a conundrum: “How is it possible that the financial markets are so optimistic while the economic news that we have had lately are not so good?” As a consequence, volatility has dropped around the world–using the IMF models–to levels not seen since 2007, right before the financial crisis struck.
Getting out of that situation is not impossible, but will require good steering and some luck. Counties that are dependent of foreign capital, have little margin of fiscal maneuver, or have weak financial systems can feel the brunt of the change of the monetary conditions.
CC-BY-SA-2.0, FlickrFoto: Blue and Red Tower Block, Kowloon, por Austronesian Expeditions. Sector inmobiliario en China – Separando la realidad de la ficción
In analyzing China, we often disaggregate numbers for real estate/property and investment. We do this because this reveals that whereas income in China—measured as a percentage of GDP—is keeping pace, consumption appears to be falling when measured by that metric. Another reason to differentiate this analysis is that when most Chinese purchase a residence, they either pay cash or take out a mortgage for less than 50% of the property value. Contrast this with the U.S., where private individuals typically take out mortgages for over 80% of property value.
Unlike in the U.S., where—in the robust pre-crisis real estate market—individuals could secure stated-income, no-doc loans, in China it is not at all easy to obtain a mortgage. Because of this, rising real estate investment usually engenders markedly decreased consumption. So the market movement of house prices has a different economic impact in each country.
When house prices fall in China, the economic impact is felt more through a “negative wealth effect,” whereas in the U.S., the primary impact is usually a credit crunch in which consumers struggle to pay down debt. And Chinese consumers seem able to withstand negative wealth effects well. For example, in recent years, the value of China’s A-share market (A-shares are Shanghai- and Shenzhen-listed equities denominated in renminbi) fell by about 70% from peak to trough as China absorbed the impact of the global financial crisis, thereby “wiping out” some US$2.5 trillion of nominal wealth—in a country with a US$8 trillion GDP.
But this negative wealth effect appears to have had only a minimal effect on consumption. China’s GDP growth has slowed from 10% – 11% to 7% – 8% primarily as a consequence of weak demand in China’s primary export markets in the U.S. and Europe. Today, loans in the banking system are collateralized by land prices, but to get a significant fall in land prices in such a fast-growing economy would seem to require a huge shock to productivity.
This article is part of the report “China—Separating Fact from Fiction”, published by Matthews Asia. You may access the complete report through this link.
Foto: Wheat by Martin Abegglen. ¿Quién sacará mayor provecho a la cosecha record de grano prevista para 2014?
Corn, soybean and wheat prices fell sharply during the second quarter of 2014 as American farmers planted more acres and yield prospects now hold great promise after near-perfect weather over the past few months. Corn prices are now at the same levels as August 2010, shortly after a severe drought hit Russia and large parts of Eastern Europe. Wheat prices are also back to levels of the summer of 2010, although slightly lower prices in January 2014 could be seen, before concerns around South American production drove the market higher.
According to the last Commodity & Resources Indicator by Investec, Mother Nature has assisted with favorable climatic conditions before, during and after plantings, which are expected to result in record yields. Although spring arrived relatively late and therefore shortened the window for pre-planting nutrient application, US Corn Belt farmers have acquired a lot of high speed machinery over the past five years which means faster and more efficient fertilization and pesticide programs.
All in all, we have seen near-perfect weather conditions that could mean record yields. However, the key pollination period is still ahead of us. On the current 14 day forecast, we should have enough daytime heat to support plant growth and enough night-time ‘coolness’ to ensure pollination. Investec believes that US yields per acre of corn harvested can rise surpassing the last record set in 2009.
If achieved, this will be a testimony of the very good climatic growing conditions but also of the technological advances. In this sense, the US is far ahead of the rest of the world and their lead is increasing. The informational advantage that will come with the analysis of ‘Big Data’ in their industry could be significant. Weather, soil and inputs data canbe combined to build yield optimization tools. During the growing season, information about the condition of the crop obtained from pictures and plant samples, gathered by drones, will be used to do corrective pesticide and fertilizer application. This will help farmers to achieve the full potential of the crop on a more regular and consistent basis.
Over the coming months, if things go according to plan and we see the large US grain and oilseed crop harvested in the autumn, the world should be well supplied with key food commodities such as corn, wheat and soybeans. Investec highlights several industries and regions that will benefit from this situation:
Storage will be full and owners of infrastructure assets in the supply chain should be very profitable. Premium pricing should be possible for traders who have silo and port capacity once the glut of product is distributed to domestic and international markets.
In addition, industries that use these commodities as inputs in their production such as the feed industry, animal protein producers, food ingredients and ethanol, should experience a tailwind from reduced costs.
Countries that import grains and oilseeds in regions such as the Far East, the Middle East and North Africa, will benefit from these lower prices. They may look to use the opportunity to replenish their inventory levels, in which case overall demand may be stronger than currently estimated for the next 12 months.
You may access the complete report through this link.
As part of mutual efforts to continue to strengthen business relationships between Luxembourg and China, the Association of the Luxembourg Fund Industry (ALFI) and the Asset Management Association of China (AMAC) have signed a Memorandum of Understanding (MoU) designed to deepen the collaboration between the two associations.
The agreement focuses on developing activities to create mutually beneficial opportunities for the fund industries in both countries. Luxembourg is the second largest investment fund industry in the world after the United States and a valuable partner for the Chinese asset management industry in its strive to diversify internationally.
The agreement was signed in Beijing by Mr Marc Saluzzi, Chairman of ALFI and Sun Jie, Chairman of AMAC on the sidelines of a financial mission to China led by the Luxembourg Minister of Finance, Pierre Gramegna.
The cooperation will focus on three main areas covering regular communication, information sharing and member services and will include:
Exploring the possibility to implement joint programmes, such as meetings, visits and seminars;
Mutual assistance and the exchange of information relating to regulatory frameworks and investor protection practices for the funds industry; and
Exploring opportunities for mutual membership referral and organising professional development events for members.
“We are very pleased to have signed this agreement with AMAC, a true strategic partner for ALFI. We look forward to exchanging details about our expertise and best practices for the benefit of all our and AMAC’s members. In the future, as Chinese asset managers may wish to extend their activity outside of China, Luxembourg will constitute an ideal gateway into and beyond Europe. Luxembourg is indeed the leading worldwide domicile for cross-border asset management activities,” said Mr Marc Saluzzi, Chairman of ALFI.
“This agreement is a win-win for both industry associations and is testimony to the growing ties between Luxembourg and China. This collaboration will ensure that the asset management industry in China has world-class standards,” said Mr Sun Jie, Chairman of AMAC.
