. CONSAR Approves the Funding of the Mandate Awarded by Afore Banamex to Pioneer Investments
CONSAR, the Mexican regulatory authority for pension funds, has given the green light to the funding of US$400mn for the European equity mandate which Afore Banamex awarded to Pioneer Investments in October 2013. The total amount of the mandate, which was also awarded to BlackRock, BNP Paribas, Franklin Templeton, and Schroders, is for US$1bn. As Gustavo Lozano, director of Pioneer Investments in Mexico, confirmed to Fund Pro, the contract between the asset management company and the Afore will be signed this week.
Pioneer Investments is the second firm which obtains the funding of a mandate, after the two Afore Banamex mandates awarded to Schroders, in global and European equities, which have been funded already.
Meanwhile, in a telephone conversation with Funds Society, Gustavo Lozano expressed his great satisfaction at having received authorization for this mandate by the regulator as “that means that a Mexican Afore now has two managers,” adding that “in two to three weeks, once the contract is signed, the transfer of funds will occur.”
CONSAR’s president, Carlos Ramirez Fuentes, has reaffirmed an opinion which he has already stated on other occasions, that the mandates are an important vehicle for diversifying the management of Afore’s assets, but that the process should be more streamlined. In this case, although the mandate was awarded a year ago, they have been unable to fund it until now, so a very significant part of the rally experienced by European equities has been missed. Gustavo Lozano commented to Funds Society in this regard that all parties involved “have learnt a lot from this process and are working in conjunction with authorities, the different funds, and the asset management firms so that these investment projects become more agile and may be funded within a maximum period of six months from time of awarding.”
As was disclosed to Funds Society, certain constraints and problems posed by State Street, the mandate’s trustee and liquidator, have been the main cause of the delay in this particular case. Pioneer Investment was also awarded a global equities mandate by Afore Sura totaling US$700mn, for which BlackRock, Investec AM, and Morgan Stanley Investment Management were also selected.
Julius Baer is the exclusive Global Partner of the new FIA Formula E Championship, the world’s first fully-electric racing series. The inaugural championship, which starts in Beijing on 13 September 2014, includes 10 races in major cities around the globe. For Julius Baer, Formula E with its visionary approach and global reach is an ideal sponsorship platform as it stands for many values Julius Baer shares, such as innovation, sustainability and forward-looking pioneering spirit. The Bank will leverage the sponsorship for high-class client events and a wide range of marketing activities.
The FIA Formula E Championship is the world’s first fully-electric racing series, created by the International Automobile Federation FIA. It represents a vision for the future of the motor industry over the coming decades, serving as a framework for research and development around the electric vehicle, accelerating general interest in these cars and promoting sustainable and innovative technologies.
From September 2014 to June 2015, the championship will compete in the centre of 10 of the world’s leading cities – including Beijing, London, Berlin, Monte Carlo and Buenos Aires – racing around their iconic landmarks. For the inaugural season, 10 teams, each with two drivers, will go head-to-head, including among others former Formula 1 drivers Lucas di Grassi, Nick Heidfeld, Jarno Trulli, Sébastien Buemi, Nelson Piquet Jr and Bruno Senna as well as two female drivers, Michela Cerruti and Katherine Legge. There will be both a drivers’ and a teams’ championship.
All Formula E races will be one-day events on city-centre circuits with practice, qualifying and the race taking place on a single day in order to minimise disruption to the host city. The races will begin by standing start and last for approximately one hour with drivers making one mandatory pit stop in order to change cars. The cars have a maximum speed of 225 km/h and are at top speed slightly louder than an ordinary car.
Starting with the first race in Beijing on 13 September 2014, Julius Baer will be the exclusive Global Partner of Formula E. Its logo will be prominently shown both on the cars and on the race tracks. For the Bank, Formula E with its visionary approach and global reach is an ideal sponsorship platform as the new race series stands for many values Julius Baer shares, such as innovation, sustainability and forward-looking pioneering spirit.
“We are excited to support the FIA Formula E Championship as its exclusive Global Partner. This gives us the unique opportunity to get involved in the world’s first fully-electric racing series which fosters innovation towards more sustainable means of transport. Formula E provides us with a first-rate global platform to share this bold vision with our clients,” said Boris F.J. Collardi, Chief Executive Officer of Julius Baer.
Alejandro Agag, CEO of Formula E, said: “We’re delighted to be welcoming Julius Baer to the Formula E family and to see their commitment and support to clean energy and sustainability. To be able to announce a major global partner of this stature on the eve of the first race is very exciting, and shows the continued strength and momentum of the series.”
Will Miami bankers have to worry soon about their foreign clients’ tax bills abroad?
That certainly seemed to be the shared opinion of a panel of banking regulation experts, including two officials from the U.S. Securities and Exchange Commission, who spoke about tax compliance and money laundering at a conference Tuesday.
Speaking at a wealth management forum sponsored by the Florida International Bankers Association, banker John Ryan suggested attorneys and investment advisers involved in managing money for overseas clients should pay close attention to international guidelines adding criminal sanctions for institutions facilitating foreign tax evasion, according to an article published in the Daily Business Review.
In particular, Ryan said the banking world should take note of the Financial Action Task Force of the nongovernmental Organisation for Economic Cooperation and Development, which in February 2012 recommended “countries apply the crime of money laundering to all serious offenses, with a view to including the widest range of predicate offenses.”
In layman’s terms, the recommendations treat international tax evasion as money laundering, which financial institutions have a responsibility to prevent and report, says the Daily Business Review.
“The question really today is what this new OECD standard could be,” said Ryan, president of Geneva-based CISA Trust Co.
Lourdes Gonzalez, associate chief counsel in the SEC’s division of market regulation, agreed with Ryan, saying that while the OECD recommendations have not been formally adopted, they “influence how U.S. law develops in the anti-money laundering area.”
Ryan reiterated the adoption of the recommendations would be a sea change for the way money managers deal with their foreign clients.
“Not so long ago when a client came to New York or Miami and created an account, very little was taken into account as to what their tax situation was back home,” he said. “If the OECD regulations are adopted here in the U.S., many of these assets will be visible to authorities back home.”
Enforcement of cross-border tax evasion has evolved rapidly in recent years. In the U.S., the Obama administration has pressed for disclosure of offshore tax havens and implementation of the Foreign Account Tax Compliance Law.
The 2010 law forces foreign banks to dig deeper into their records to report any U.S. beneficiaries who might be using foreign banks to shelter themselves from U.S. taxes. The law took effect earlier this year and has prompted other countries to demand “some reciprocity but certainly not symmetry,” Ryan said.
Also on the panel was Eric Bustillo, director of the SEC‘s regional office in Miami. He said his agency is increasingly focused on stemming possible fraud in the EB-5 visas-for-bucks investment program.
Miami recently became a regional investment center that allows city government to facilitate investment initiatives under the program.
“The message that we want to get out there is that investors have to be very careful before investing in one of these,” Bustillo said.
Deutsche Bank today announced that Lilian Camera has joined as Head of Client Development for Multinational Corporates, Latin America.
In this new role, Camera reports to Kika Ricciardi, Head of Global Transaction Banking Latin America and Head of Trade Finance and Cash Management Corporates for Latin America. She is based in Sao Paulo.
“Delivering innovative solutions that anticipate and exceed the complex needs of our clients remains the cornerstone of our Global Transaction Banking strategy and value proposition in Latin America,” said Ricciardi. “Lilian’s decades of experience as a senior relationship manager across a broad range of corporate clients operating in Latin America position her well to further develop our trade finance and cash management offering to multinational corporates in the region.”
Camera joins Deutsche Bank after 14 years at Citigroup where she was most recently the Director and Team Leader of their Global Subsidiaries Group covering corporate clients in the Consumer & Healthcare; Tech, Media & Telecom; and Agrochemicals industries.
Foto: Barcex . Borja Arteaga y Albert Fernández se suman a Blackstone Advisory Partners en Madrid
The Blackstone Group announces that it is expanding and strengthening its international Blackstone Advisory Partners network with the appointment of Borja Arteaga as Senior Managing Director and Albert Fernandez as Managing Director to be based in Madrid. Mr. Arteaga will be heading Blackstone’s restructuring and M&A advisory business in the Iberian Peninsula.
John Studzinski, Global Head of Blackstone Advisory Partners commented: “Borja and Albert have outstanding reputations as advisors in Spain. They understand the corporate landscape and its particular requirements, and have excellent relationships with all the major corporates and investors, having been involved in many high profile situations. We look forward to working closely with them and believe that Spain has excellent prospects for Blackstone both from an advisory and an investing standpoint.”
Martin Gudgeon, Head of Blackstone’s European Restructuring Group, added: “We are very pleased that Borja and Albert have joined Blackstone to lead our advisory offering in the Iberian Peninsula. We know they will be welcomed by our clients in this important strategic development of our business.”
Borja Arteaga has over 20 years of corporate finance advisory experience in the Spanish market. He has been at Rothschild for the past 13 years and most recently was co-heading the Spanish operations. Prior to that, he worked at Goldman Sachs and Santander. He has an MBA from INSEAD and a double major in law and business from ICADE in Madrid.
Albert Fernandez has been at Rothschild for the past eight years and, prior to that, worked at McKinsey and JP Morgan. He has an MBA from Darden and a major in industrial engineering from UPC in Barcelona.
Together, they have led a number of high profile transactions in Spain and focused on M&A, restructuring, equity and refinancing transactions for corporates across a wide range of sectors including consumer, healthcare, retail, media and infrastructure sectors as well as for financial sponsors. Recent transactions in which they have been involved include: the investment of Eurazeo in Desigual; the merger of the Iberian Coca Cola bottlers; the refinancing of Prisa; the public offer for Campofrio; Doughty Hanson’s investments in Quiron, USP and Teknon; and Santander’s investment in Bank of Shanghai.
The team in Madrid will be reinforced with Juan Sierra. Mr. Sierra has been with Blackstone Advisory Partners since 2008 and has already relocated to Madrid. He has advised on a wide range of M&A and restructuring assignments including advising on the sale of Mivisa to Crown Holdings, Actavis on its sale to Watson Pharmaceuticals, Essentra on the acquisition of Contego Healthcare, BAA on its strategic refinancing alternatives, buyVIP! on its sale to Amazon.com and Preem bondholders on the company’s 2012 refinancing.
Foto cedidaIván Sainz de la Mora liderará la firma.. ivan
Willis’s Global Wealth Solutions (GWS) practice, which offers life insurance solutions to High Net Worth Individuals (HNWI), has recently opened a new office in Miami, its first in the Americas.
The city is the regional financial hub for HNWI, and offers access to LatAm, Caribbean and North American clients and prospects.
This is the latest step in the growth story of GWS, which earlier this year acquired specialist broker Charles Monat Limited, and also has teams in Hong Kong, Singapore and Zurich.
The GWS Miami team is made up of three people (see picture), including Alejandro Gil Rivero, Senior Vice President, who has relocated from Zurich. They will share the current Willis office space in Miami.
He said: “There are exciting times ahead. The financial community in Miami is welcoming our value proposition as no other broker in the region can match Willis’s capabilities in terms of total risk management. Our proposition not only includes life and annuity solutions, but through other practices within the Willis Group, private banking clients can access a wider base of risk management solutions such as insurance for superyachts, private aviation, kidnap and ransom, art and jewellery, health and other lines.”
“Our short term strategy is to consolidate existing relationships with some top tier banks, as well as recruiting the best life and wealth advisers in the area. In the long run we aim to become market leader in the ultra-high net worth life insurance segment.”
Roger Lorenzo and Armando Gutierrez are also part of the GWS Miami team, along with Stephanie Adams, who is based in Boston. The teamis offering a wide portfolio of life insurance products, including universal life, term, and variable life, from both US and international providers.
Islamorada. Foto: Cecil Sanders. The Carlyle Group sigue sumando hoteles a su cartera de Los Cayos de Florida
Global alternative asset manager The Carlyle Group has announced the acquisition of two Florida Keys hotels in Islamorada – the Postcard Inn Beach Resort at Holiday Isle and La Siesta Resort. The two hotels join the Islamorada Resort and Pelican Cove Resort & Marina in Carlyle’s Islamorada hotel portfolio. The four properties will form the newly created Islamorada Hotel Company and be managed by Trust Hospitality. Equity for the transactions comes from Carlyle Realty Partners VII, a $2.34 billion U.S. real estate fund.
Postcard Inn is a 151-room resort at Mile Marker 84 in Islamorada. The oceanfront resort is an iconic property featuring eclectic guestrooms, the largest private beach in Islamorada, watersports, two pools, ocean-side marina and a variety of food and beverage options, including the World Famous Tiki Bar. La Siesta is an all-suite beach hotel on six tropical acres on the Oceanside of Islamorada at Mile Marker 80.2. The hotel features cottages with full kitchens and complimentary use of kayaks and bicycles.
The Postcard Inn will undergo renovations beginning with upgrades to guest bathrooms, which are scheduled to begin by the end of the year. Improvements to common areas, the marina, and food and beverage options will begin in 2015. La Siesta’s renovations will start in late 2015 and will also include a refresh of the guestrooms and common areas. In total, Carlyle plans approximately $18 million in renovations to the Postcard Inn and La Siesta.
“As a Miami-based hotel management company, we are thrilled to further expand our portfolio into the Florida Keys,” said Patrick Goddard, president & COO of Trust Hospitality. “We’re eager to bring a new level of service and style to the Postcard Inn and La Siesta Resort while providing guests and locals a new and vibrant way to experience Islamorada. No significant changes to staffing levels are anticipated.”
“These Islamorada properties are in high quality locations and have significant upside potential following renovations and management enhancements,” said Thad Paul, Managing Director at The Carlyle Group. “With the planned changes, we’re confident that guests and the residents of Islamorada will continue to embrace the properties and support tourism efforts on Islamorada.”
Over the last year, The Carlyle Group‘s U.S. realty funds also purchased the Pelican Cove Resort and Islamorada Resort and both properties are currently undergoing major renovations. Pelican Cove Resort & Marina was acquired in September 2013 and began renovations on the 63-room property earlier this year. Major guestroom and common area renovations are scheduled to be completed in November 2014.
Islamorada Resort, previously a Hampton Inn, was acquired by Carlyle in February 2014 and is currently undergoing interior and exterior renovations. The resort will re-launch as a boutique upscale hotel at the end of 2014 under the new name of Amara Cay Resort.
Andy Rothman, estratega de inversión de Matthews Asia. “Los cuentos de miedo sobre burbujas inmobiliarias y ciudades fantasma en China deben contarse alrededor de una fogata, no de un comité de inversión”
China’s housing market is one of the most important parts of its economy—and also one of the most misunderstood. This is important because residential real estate, together with construction, last year accounted directly for about 10% of GDP, 18% of fixed-asset investment, 10% of urban employment and more than 15% of bank loans.
It is also misunderstood because few observers appear to understand the structure of China’s residential market. The last issue of Sinology, a publication designed to provide investors with a framework for understanding the Chinese authored by Andy Rothman, Investment Strategist at Matthews Asia, explores:
The recent development of China’s property market is one of the world’s greatest and least-recognized privatization success stories, taking the home ownership rate to 89%, compared to 66% in the U.S.
New home sales are driven by owner-occupiers, not speculators.
There are more than 150 Chinese cities with a population of at least 1 million (only nine U.S. cities are comparable in size), and these account for the vast majority of home sales.
New home prices rose at an average annual pace of 9% over the last eight years, but nominal urban income rose 13% per year.
There is very low leverage among homeowners: about 15% have paid all cash and for those using a mortgage, the minimum down payment is 30%.
Chinese banks have not been permitted to offer subprime mortgages. There are few asset-backed securities and almost no secondary securitization (such as collateralized debt obligations and collateralized loan obligations).
There are some failed projects, but the “ghost city” story is greatly exaggerated. For residential projects three years post completion, the vacancy rate is 15%, similar to the 14% vacancy rate for U.S. housing units.
Today the market is soft, but it is far from the collapse that many are writing about. Full-year sales volume is likely to be down 7% to 9% year-over-year, compared to a rise of 18% last year, but listed developers are gaining market share and many are having a healthy year.
Median new home prices are softening, but are still up year-over-year and are up strongly over the last eight years.
Andy Rothman points out that the Communist Party leadership does not seem too worried about property; they’ve taken only modest steps to support the market, and have yet to make the policy move that would really boost sales: eliminating the rules that require those seeking a home upgrade to put down 60% cash (vs. 30% for a first-time buyer) and pay a higher interest rate.
The full report, which you may access through this link, concludes that the boom days for the property market are over, but fundamental demand remains healthy. It is sensible to look closely at sales volumes, average selling prices and competitive pressures, but “scary stories about bursting bubbles and ghost cities should be told around campfires, not investment committee meetings”.
The California Public Employees’ Retirement System (CalPERS) has announced that it will eliminate its hedge fund program, known internally as the Absolute Return Strategies (ARS) program, as part of an ongoing effort to reduce complexity and costs in its investment program.
The staff recommendation, supported by the Investment Committee, will exit 24 hedge funds and six hedge fund-of-funds valued at approximately $4 billion.
“We are always examining the portfolio to ensure that we are efficiently and cost-effectively achieving our risk-adjusted return goals,” said Ted Eliopoulos, CalPERS Interim Chief Investment Officer. “Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at CalPERS’ size, the ARS program is no longer warranted.”
Following the 2008 global financial crisis, CalPERS began examining ways to ensure it was less susceptible to future large drawdowns. The System restructured its investment operations, improved its internal oversight and control functions, and refocused some of its investment programs. In February 2014, the CalPERS Board adopted a new asset allocation mix that reduces risk to the portfolio, while still being able to achieve its return goal of 7.5 percent. CalPERS earned 18.4 percent during the 2013-14 Fiscal Year and has averaged a 12.5 percent return for the past five years and an 8.4 percent return for the past 20 years.
In September 2013, the CalPERS Board adopted a set of Investment Beliefs to inform the strategic decision making of the System. Investment Belief 7 states that “CalPERS will take risk only where we have a strong belief we will be rewarded for it.” Investment Belief 8 notes that “Costs matter and need to be effectively managed.”
“The Investment Beliefs exist to provide a compass for the System’s work to achieve its strategic goals,” said Henry Jones, CalPERS Board Member and Chair of the Investment Committee. “While the ARS analysis was no simple matter for CalPERS, the Investment Beliefs provide guidance for a straightforward and principled conclusion that fits our needs.”
CalPERS will spend approximately the next year strategically exiting current investments in a manner that best serves the interests of the portfolio. Existing ARS staff will be reassigned within the Investment Office.
“The staff dedicated to our program have worked diligently and we will ensure that their talent can continue to help CalPERS meet its investment objectives,” said Eliopoulos.
CalPERS is the largest public pension fund in the U.S., with approximately $300 billion in assets. CalPERS administers health and retirement benefits on behalf of 3,090 public school, local agency, and state employers. There are more than 1.6 million members in the CalPERS retirement system and more than 1.3 million in its health plans.
Some strategists have argued that we are in a long-term period of low interest rates. The Fed has an incentive to keep interest rates near zero indefinitely. Unemployment and underemployment rates exceed historical norms. The national debt will keep the United States as a net borrower and gives the government reason to minimize its cost of borrowing. The pundits that have been calling for rising interest rates have erred for two years running. The predictions have been dead wrong. Interest rates have declined, not risen. Aren’t we in a new paradigm of permanently low interest rates? Don’t believe it.
The long-term direction of interest rates is up. The current interest rates for the 10-year Treasury and the 30-year Treasury are 2.37% and 3.12%, down approximately 65 basis points and 85 basis points from 3.02% and 3.97% on January 1st. The interest rates of the 5-year Treasury and short Treasury issues have changed little. The temporary declines in long-term interest rates have resulted from a change in perception, partly because of a harsh winter, which caused a seasonal drop in GDP. At the beginning of the year investors feared that the Federal Reserve would raise the Fed Funds rate in early 2015. The consensus expectation has now moved into the third quarter of 2015. The question is not whether interest rates will rise, but when.
Interest rate forecasts from major investment banks all indicate rising interest rates in 2015 and beyond. Economists surveyed by Bloomberg project the 10-year Treasury will reach 3.46% by the fourth quarter of 2015. Strategists at other investment banks agree. In August economists at Nomura and Barclays both predicted a rate increase by June 2015. Their colleagues at Merrill Lynch cited a similar time frame.
A naive forecast would expect the yield on the 10-year Treasury to at least remain close to 3.46%, if not significantly exceed it, in 2016 and beyond. The reason is that interest rates follow long-term, 25-year to 35-year cycles. We have been in a period of declining interest rates since 1981. Between 1946 and 1981 the yield on the 10-year Treasury rose from 2% to 15%. Between 1920 and 1946 the yield declined from 5% to 2%. As we seem to be at the end of a long-term period of low interest rates, it would be logical to expect interest rates to increase over the next ten years or so.
Within these long-term cycles the Fed manages interest rate policy over the shorter-term economic cycle. The boom-to-bust cycle usually lasts five to seven years. This present recovery is longer than most because of the depth of the 2008-2009 recession and the weakness of the ensuing expansion. Now the economy is finding its legs with GDP growth of4.2% in the second quarter. Once it starts to hike interest rates, the Fed is likely to continue to increase them. This pattern has prevailed throughout its history. No examples exist where the Fed increased interest rates only one time. The probable scenario is for the Fed to increase interest rates for two years or more. Economic necessity requires the Fed to manage inflation and to prevent labor markets and the economy from overheating. The impetus for the Fed to change course from its current zero interest rate policy to a non-zero policy would be a realization that stimulative monetary policy no longer serves the interests of the economy.
After six years of expansion we are close to that inflection point. Forecasts of economic growth and inflation suggest that the Fed will need to be wary. Consensus forecasts show an expanding economy and rising inflation. Economists at Barclays and BNP Paribas forecast that GDP will increase from 2.0% in 2014 to 2.7% and 2.8% respectively in 2015. The median forecasts of GDP growth among 78 economists in a Bloomberg survey are 3.0% in 2015 and 2.9% in 2016. Inflation is likely to increase too. Barclays forecasts the CPI will rise from 1.9% in 2014 to 2.1% in 2015. A strengthening economy and higher costs will put pressure on the Fed to act sooner rather than later.
According to most economists, the recent meeting of the Fed in Jackson Hole marked a turning point in Fed policy. Although her comments were balanced, Janet Yellen’s speech indicated a shift toward policy normalization, an end of the low volatility policy framework, and an emphasis on data dependence. In short, if the economy expands, as most economists expect, the Fed will raise interest rates. The speech also suggests that markets should see increasing volatility in interest rates as the risk of a Fed hike has moved forward in time.
Treasury yields over two-years out have already widened by 10 to 15 basis points in September. I would expect the yield on the 10-year Treasury to keep increasing from now on. Given the recent GDP numbers, the speed at which interest rates will change could surprise people. I could easily envision the 10-year Treasury exceeding 4% by late 2015 and 5% by mid 2016. We have just begun a long, upward march that will continue for the next few years.
What do higher interest rates mean for high yield bonds? Overall, higher interest rates will cause some erosion in value. The effect will depend on what happens to the credit spread – the interest paid to investors for assuming credit risk. If the credit spread narrows, the overall effect may be slight. If it widens, the market could be hit with a double whammy. Historically, the credit spread has narrowed when real interest rates have gone up. This time could be different. Investors in Merrill Lynch’s September 15th Credit Survey expect credit spreads to widen over the next 12 months. That should put pressure on high yield.
Even so, high yield offers a safe harbor versus other fixed income assets. It yields more and reacts less to interest rate movements. Some sectors, however, offer better protection than others. As with investment grade, longer-duration high yield bonds are the most vulnerable. Lower quality bonds are also less interest sensitive than higher quality bonds so that “B” bonds should outperform “BB” bonds. Default rates and inflation should remain muted for the next year or two. The best bet is to target short-duration, lower quality high yield bonds. This sector should remain relatively immune whatever happens to interest rates.
Thomas P. Krasner, CFA – Principal and Portfolio Manager at Concise Capital Management, LP
