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Latin America Sees the Most Significant Growth in the Size of its Billionaire Population

The Wealth-X and UBS Billionaire Census 2014, shows that 155 new billionaires were minted this year, pushing the global population to a record 2,325 – a 7% rise from 2013.

The combined wealth of the world’s billionaires increased by 12% to US$7.3 trillion, which is higher than the combined market capitalisation of all the companies that make up the Dow Jones Industrial Average.

The Wealth-X and UBS Billionaire Census 2014 – the only comprehensive, global study on the composition and dynamics of this top tier of the global ultra high net worth (UHNW) population – shows that Europe, with 775 billionaires, is the region with the most billionaires and billionaire wealth (US$2.37 trillion). North America – the region with the most billionaire wealth in 2013 – was overtaken by Europe in terms of billionaire wealth in this year’s census.

Asia, however, boasted the largest billionaire wealth increase, with the region’s billionaires’ fortunes growing by 18.7% over the past year. The region is responsible for 30% of the net increase in global billionaire wealth in 2014. Asia’s billionaire population grew by 10% in 2014, with 52 new entrants into the billionaire club – 33 are from China.

The United States maintains its position as the world’s top billionaire country with a population of 571 billionaires in 2014, followed by China (190) and the United Kingdom (130), which took the third spot from Germany (123) on the Top 40 Billionaire Countries/Territories list.

Below are other key findings from the Wealth-X and UBS Billionaire Census 2014:

Europe is home to more than a third of the world’s billionaire population.
Latin America and the Caribbean is the region that saw the most significant growth in terms of the size of its billionaire population (37.8%) in 2014, but Asia saw the fastest growth in billionaire wealth (18.7%).
The billionaire population in the Middle East shrank by 1.9%, but total billionaire wealth in the region rose by 16.7%.
The size of Africa’s billionaire population decreased by 4.8%, but the region’s billionaire wealth increased by 12.9%.
There was no change in the billionaire population in the Pacific (34 billionaires), but the region’s total billionaire wealth dropped by 2%.
Nearly 35% of the world’s billionaires are concentrated in 20 cities. Billionaires are transnational. They move from city to city, rather than from country to country.
Only 5% of the world’s billionaires are worth more than US$10 billion.
The average billionaire‘s wealth rose by 4.4% this year to just over US$3.1 billion.
The average age of the typical billionaire is 63, one year older than it was in 2013.
There are 2,039 male billionaires in 2014, accounting for 87.7% of the world’s total billionaire wealth of US$7.3 trillion.
There are 286 female billionaires in 2014, accounting for a 12.3% share of global billionaire wealth.

The census – which looks at the global billionaire population from July 2013 to June 2014 – examines this top-tier wealth segment by geographical location, gender, sources of wealth and personal traits.

“Wealth-X is pleased to partner with UBS for a second consecutive year to produce the Wealth-X and UBS Billionaire Census,” Wealth-X CEO Mykolas Rambus said. “Expert commentary from UBS complements Wealth-X’s global intelligence on the world’s billionaire population, producing a report that demonstrates a true collaboration between the global leader in wealth management and the world’s leading UHNW intelligence provider.”

Download the report at www.billionairecensus.com

Lucelly Dueñas Joins Bessemer Trust’s Miami Office as SVP, Associate Fiduciary Counsel

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Bessemer Trust has announced that Lucelly Dueñas has joined the firm’s Miami office Legacy Planning team as Senior Vice President, Associate Fiduciary Counsel, reporting to Mark R. Parthemer, Managing Director, Senior Fiduciary Counsel for the Southeast region.

Ms. Dueñas is responsible for advising domestic and international ultra-high-net-worth families as they navigate the complexities of wealth. She will specifically focus on cross border and international matters related to legacy planning, family governance, tax minimization strategies, and the implementation of estate plans.

Ms. Dueñas earned an LL.M. in Estate Planning from the University of Miami School of Law in Florida, a J.D. from Indiana University School of Law, and a B.S. in Psychology and a B.A. in Criminology from the University of Florida. She is fluent in Spanish.

Before joining Bessemer, Ms. Dueñas was a wealth advisor at J.P. Morgan Private Bank, where she worked with high- and ultra-high-net-worth Latin American families on the strategic planning of their wealth. Previously, she was an associate at the law firms, Guttenmacher & Bohatch, P.A., and Stephen A. Taylor, P.L.

“Lucelly’s depth and breadth of experience in providing exceptional advice and unparalleled client service will help to strengthen Bessemer’s ties to ultra-high-net-worth families and individuals in South Florida and across Latin America,” said Michael Marquez, Managing Director and Florida Region Head for Bessemer.

Founded in 1907, Bessemer Trust is a privately owned wealth and investment management firm that focuses exclusively on ultra-high-net-worth families and their foundations and endowments. The firm oversees $97.5 billion for approximately 2,200 clients and provides an integrated approach to the investment, trust, estate, tax, and philanthropic needs of its clients.

Deutsche Bank Study Shows Investor Demand Fuelling Dramatic Growth of Hedge Fund Liquid Alternatives

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A Deutsche Bank study revealed the true extent of demand for liquid alternative investments, with the percentage of participating investors allocating to such products up from 28% to 51% year-on-year. The study – From Alternatives to Mainstream (Part Two) – saw almost three quarters of alternative UCITS investors and nearly two thirds of investors into alternative ‘40 Act mutual funds planning to increase their allocations.

Liquid alternative investments are now the fastest growing part of the asset management industry. Alternative UCITS assets have grown over 40% annually since 2008, whilst the hedge fund industry has grown 13% and the wider European UCITS industry only 2%. Alternative mutual funds have grown by 38% annually during this period, compared to 9^%for US mutual fund industry.

Hedge funds have moved into the mainstream marketplace at an accelerated pace, bringing new products to market and driving asset growth.

Key findings of the study, which surveyed both investors and managers, include:

Liquid alternative investments are the fastest growing part of the asset management industry,having experienced a CAGR of roughly 40% since the 2008 financial crisis. Net inflows into liquid alternatives from survey participants are predicted to grow by 44% over the next 12 months, which translates to $49bn in new flows, compared to $34bn over the last 12 months.
In response to investor demand, hedge fund managers are quick to diversify their product offering, with 42% of responding managers currently offering liquid alternative products, up from 27% last year. A further 34% would consider including such products. One quarter of managers plan to launch at least one alternative UCITS product in the coming year, and 29% have similar plans for alternative ’40 Act mutual funds.
The move towards liquid alternatives has been most pronounced among large, well established managers, with more than two thirds with $5bn+ in AUM managing such product for more than three years. A third of these managers plan to launch at least one new liquid alternative product in the next 12 months.
Fundamental equity long/short is the most popular strategy for investors allocating to alternative UCITS and alternative ’40 Act mutual funds, which along with event driven and global macro represent the top three most sought after alternative UCITS strategies over the next 12 months. Fundamental equity long/short, fundamental equity market neutral and event driven are the top three most sought after alternative ’40 Act mutual fund strategies over the next 12 months.

Daniel Caplan, European Head of Global Prime Finance at Deutsche Bank,said: “The growth of liquid alternatives is a very real opportunity for investors who have previously been unable to access hedge fund strategies to do so in a liquid and regulated structure.”

Anita Nemes, Global Head of Capital Introduction at Deutsche Bank, said:Liquid alternatives are the fastest growing segment of the asset management industry. This presents a significant opportunity for investors to access better risk-adjusted returns, and also for hedge fund managers who are increasingly becoming solution providers to their investors.

The study surveyed 212 investor entities worldwide managing more than $804bn in hedge fund assets and 86 global hedge fund managers representing $6tn in firm wide assets.

Investors Are Anticipating Monetary Policy Separation of Fed and ECB

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Sentiment towards Europe has picked up in the wake of recent monetary policy easing by the ECB, while investors are increasingly sure of a rate hike by the Fed in spring 2015, according to the BofA Merrill Lynch Fund Manager Survey for September. An overall total of 202 panelists with US$556 billion of assets under management participated in the survey.

Belief in Europe’s stocks has started to recover after the heavily negative sentiment expressed in August’s survey. In the wake of the decision to lower rates to close to zero, asset allocators have increased exposure to eurozone equities. A net 18 percent are overweight the region, up from a net 13 percent a month ago. Europe is also the region that a net 11 percent of investors most want to overweight in the coming 12 months. Last month, a net 4 percent wanted to underweight Europe.

Global investors are predicting further policy action from the ECB – 42 percent of the panel now expects the ECB to start quantitative easing (QE) by the end of 2014, up from 32 percent expressing that view in August. Furthermore, the proportion saying there will be no QE program has fallen to 19 percent this month from 31 percent last month.

At the same time, expectations of Fed tightening have firmed. Nearly half (48 percent) of investors are expecting the first rate hike in nine years to take place in the second quarter of 2015, up from 38 percent last month. Accordingly, the proportion of respondents backing the U.S. dollar to strengthen against the euro and yen recorded a survey high of a net 86 percent.

“This month’s survey highlights the end of U.S. and European central bank consensus – and as the first Fed rate hike since 2006 draws closer, we’ll see a new U.S. dollar bull market and movement out of bonds,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “While investors welcome the ECB’s actions, the region is still lacking its growth mojo. It will take time for growth to materialize from policy action, and there are no guarantees it will,” said Manish Kabra, European equity and quantitative strategist.

Investors awaiting return of growth mojo

Despite the headline cash level falling, September’s survey indicates that investors are treading water. Average cash balances, which soared a month ago to 5.1 percent of portfolios, have fallen back in line with July’s levels at 4.6 percent. But that does not mean investors are rushing to take on more risk. A net 22 percent of asset allocators say they are still overweight cash (down from a net 24 percent in August).

Allocations to equities ticked up modestly – with a net 47 percent overweight the asset class, up by a net 3 percentage points a month ago. The proportion of allocators underweight bonds fell two percentage points to a net 60 percent. Movements in and out of sectors were limited with Materials and Energy making greatest gains.

The lack of movement perhaps reflects a static outlook on the economy. A net 54 percent of the global panel expects the world economy to strengthen in the coming year. Expectations in profits paint a similar picture with a net 37 percent saying profits will improve in the coming year, down two percentage points month-on-month.

Investors have expressed caution towards use of capital by corporates – the proportion of investors urging companies to increase capital spending has fallen six percentage points to 56 percent. More investors want to see companies return cash to shareholders.

Scottish independence threat deepens troubles for UK equities

As opinion polls indicated the referendum for Scottish independence was too close to call, negativity towards U.K. stocks deepened. The U.K. has entrenched its status as the world’s least popular region among asset allocators this month. A net 16 percent of the panel is underweight U.K. equities.

Looking ahead, the U.K. is the region that global investors most want to underweight in the coming 12 months – with a net 14 percent of those surveyed expressing that view. Furthermore, a net 20 percent say that the U.K. has the least favorable profit outlook, up from a net 12 percent in August. Investors have not markedly changed their view on sterling valuation, however.

PREI Hires James Glen as Portfolio Manager for Core US Real Estate Fund

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Prudential Real Estate Investors has named James Glen a principal and portfolio manager for its core U.S. real estate fund, the company has announced. PREI, among the world’s largest real estate investment management and advisory businesses, is a business of Prudential Financial, Inc.

Glen, whose appointment is effective immediately, joins the fund’s current portfolio management team comprised of Cathy Marcus, managing director and senior portfolio manager; Frank Garcia, managing director and portfolio manager; Joanna Mulford, managing director, portfolio manager and chief financial officer; and Nicole Stagnaro, vice president and assistant portfolio manager.

Glen will focus on asset management oversight and transactions, and will work with the team on fund strategy. He is based in Madison, N.J. and reports to Marcus.

Before joining Prudential, Glen served as global head of research and strategy within BlackRock’s real estate group, responsible for monitoring global real estate markets and formulating investment strategy to support investments across the United States, Europe and Asia Pacific. Previously, he spent more than five years with BlackRock’s portfolio management group where he worked on the core and opportunistic real estate funds in the United States and internationally. Prior to that, Glen was a senior economist at Moody’s Analytics and began his career as an analyst at JP Morgan Chase.

Glen’s hiring comes ahead of Marcus moving into the role of global chief operating officer of PREI in January 2015. At that time, Garcia will become senior portfolio manager with Marcus continuing to dedicate a portion of her time to facilitate a transition of the fund through the end of 2015. Marcus has been with PREI for more than 15 years, the last 10 of which she has spent as a member of the firm’s core U.S. real estate fund. Garcia joined PREI in 2013.

“James’ deep investment experience and extensive strategic analysis of the U.S. and global real estate markets will complement the strengths of our core U.S. real estate fund portfolio management team,” said Kevin R. Smith, head of PREI in the Americas. “With Cathy taking on the role of global chief operating officer of PREI and Frank assuming the senior portfolio manager role in January 2015, we are pleased to have someone of his caliber join the firm.”

Glen earned a bachelor’s degree in economics from the University of North Carolina at Greensboro and a master’s degree in economics from the University of Delaware.

Onshore vs. Offshore: The Latin-American Client Decides

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Onshore vs offshore: el cliente latinoamericano es el que decide — Onshore vs Offshore Forum. Courtesy photo of FIBA. Onshore vs. Offshore: The Latin-American Client Decides

The current reality of high net worth clients in Latin America has little to do with that of 10 or 15 years ago, when, for many of them, political instability and insecurity in their countries, to mention just a few of the issues involved, were reasons to opt for offshore investments before investing their money at home.

This trend has changed, and not because these problems have been resolved in all Latin American countries; they have been resolved in some and diminished in others, while in others they remain the same or are even worse today than they were a few years ago; generally speaking, however, the situation has improved somewhat, although we must understand that the region can never be taken as a whole.

When opting for the onshore versus offshore investment, it is vital to begin with an equity analysis, and to ponder which jurisdictions are best suited to each case in order to always obtain the best performance for each private banking customer’s estate.

These were some of the topics discussed at the conference on Monday: “What is happening in Latin America? Local vs. Offshore? Who are the regional drivers?” The conference was held under FIBA Wealth Management Forum, which took place in Miami this week. The panel was moderated by Federico Muxi, partner and managing director of Boston Consulting Group, with the participation of Claudio Prado Arcirio de Oliveira, general manager of Banco do Brasil; José Ramón Rodriguez, international wealth strategies director for BBVA Compass, as well as Nicolas Bergengruen, managing director of UBS WM Americas International (Miami complex) and CEO of UBS FS (Uruguay), and Cristian Gonzalez Lami, managing director of Credit Suisse Securities (USA) Private Banking Latin America.

Federico Muxi pointed out that 2013 was a very good year for the wealth management industry worldwide, as it was a year in which private banking assets negotiated and held in offshore districts totaled $ 8.9 trillion, an increase of 10.4 % from 2012. In its global wealth annual report, which was submitted mid-year, Boston Consulting estimated that by the end of 2018, offshore wealth will eventually reach 12.4 trillion dollars. Latin America currently accounts for 12% of global wealth in offshore jurisdictions. “Therefore, it is not surprising that the region is so attractive for the wealth management industry,” he said.

For José Ramón Rodríguez of BBVA Compass, the decision on whether to invest locally or abroad must always be linked to the needs of the family and its wealth; furthermore, what should be considered is not so much the debate onshore vs. offshore, but rather where to invest in a more efficient way. “I think there are many opportunities locally, but also abroad. Hence the opportunities in alternative investments such as art, real estate …” Rodriguez believes there are many offshore opportunities and that institutions, being aware of this, create the best solutions for their clients, making it clear that there is no single reason which tips the scale either way on the debate of offshore vs. onshore investing “many Latin American families have both onshore and offshore investments, and that diversification is what drives many of them,” he added.

Nicolas Bergengruen, from UBS WM Americas agrees that diversification is an attraction for the offshore market, as well as political instability, which thanks to some countries in the region shall continue to benefit the sector.

As for Miami’s position as the hub in the offshore market for Latin America, the UBS executive said the city is going through a very sweet moment. “Miami has a great opportunity to leverage its hub status, plus the advantage of being in the same time zone, which translates into an opportunity for US booking centers”.

In this regard, Bergengruen explained that UBS has three booking centers in the country which are benefiting from diversification and their easy access as well: New York, Miami, and the West Coast. What they all agreed on was that the greater the weight of a client, the easier it is for them to opt for the offshore market; the scale is also more inclined to offshore in clients from countries with higher risk, while in the case of smaller clients, the scale tips towards the onshore side. Thus, the manager of BBVA Compass said that the United States is increasingly gaining more weight as a hub for offshore investment for the Latin American client, while they also stressed that transparency will also help to bring business closer to home.

Meanwhile, Gonzalez Lami, of Credit Suisse said the local position which the Spanish banks have reached in Latin America, being amongst the “big players”, is difficult to achieve in terms of organic growth. There is much local competition in the onshore market; hence the move from Credit Suisse strategically arrives for the offshore market. He also referred to cases such as Venezuela and Argentina, where there are investors seeking jurisdictions which respect the law.

As for the trend of local players providing offshore investments via local firms, González Lami was convinced that the future will be governed by synergies that serve both markets and that conform to the needs of each client depending on their wealth.

UCITS V Approved: New Provisions on Depositaries, Remuneration Policies and Sanctions

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On 28 August 2014, the Official Journal of the European Parliament published Directive 2014/91/EU of 23 July 2014 which amends the UCITS Directive for the fifth time and is commonly known as the “UCITS V Directive”. The purpose of the UCITS V Directive is to harmonise the dispositions regarding depositary duties and liability, remuneration policies of management companies and administrative sanctions, explains Isabel Aguilar, a senior associate at the Madrid office of Uría Menéndez*.

With respect to depositaries, the UCITS V Directive sets forth that UCITS may only appoint a single depositary and it has to be evidenced by a written contract. Further, depositaries are entrusted with certain oversight and cash-monitoring functions in addition to the safe-keeping functions, in line with those laid down by the Alternative Investment Fund Managers Directive. In addition, there are specific provisions regulating the delegation of the depositary functions, the liability of the depositary and the entities which may be appointed as such.

With respect to remuneration policies of management companies, these must be consistent with and promote sound and effective risk management and be aligned with the risk profile of the UCITS. Specific principles are established and should be followed depending on the size, organisation, nature, scope and complexity of the activities of the management company. The remuneration policies shall apply to those categories of staff whose professional activities have a material impact on the risk profiles of the management companies or of the UCITS they manage and include senior management, risk takers, control functions and employees with remuneration equivalent to senior management.

With respect to the sanctions regime, Member States will have to approve rules on administrative sanctions in respect of breaches of national provisions implementing the UCITS Directive. For such purpose, a list of specific breaches and sanctions is laid down. The sanctions include, among others, fines of at least EUR 5 million or 10% of total annual turnover, and must be published on the website of the competent authority.

Member States have until the 18^th of March 2016 to implement the UCITS V Directive into their national law.

* Isabel Aguilar is a senior associate at the Madrid office of Uría Menéndez. Her practice is focused on banking and securities market regulations. Among others, she regularly advises on matters related to investment funds and management companies, whether UCITS, alternative investment funds or private equity funds, the rendering of financial services and banking and finance in general.

Liquidity: Size Matters, Remain Nimble

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Generally speaking growth markets are more vulnerable to downturns and changes in the cycle. Emerging market equities are no exception, on average presenting a significantly higher risk than equities in developed countries, as we have seen in previous downturns. Risk therefore should be the most important dimension of any investment process in this universe. RAM Active Investments manages an Emerging Market Equity strategy which is currently on roadshow in Chile, Peru, Brazil and Colombia with its distributor in Latin America, Capital Strategies. These are the views of Emmanuel Hauptmann, Senior Equity Fund Manager, Emerging Equity Markets, RAM Active Investments.

Know your market impact

Liquidity in Emerging markets has developed favourably over the last ten years, at the same time as it dried up in developed markets around the world. Lately, less mature frontier markets saw an even stronger liquidity trend driven by large investor inflows into the space. This improvement of liquidity can give a false sense of security which investors typically pay for in deleveraging phases of the cycle. The volatility of volumes on local stocks, the vulnerability of many Emerging markets still dependent on foreign capital inflows mean we can’t compromise on liquidity management within the portfolio. To tackle this risk and to ensure we don’t give away the alpha generated by our investments through trading costs, we have developed a robust market impact model and portfolio construction process that aims to dynamically adjust and scale positions in our Emerging portfolio based on the recent volatility and volume characteristics of each stock. That process helps us maintain good risk and liquidity control at every point in time, which is crucial in periods of outflows like last summer, and will help prevent investors from being hurt in case of a sudden deleveraging in the future.

Manage your liquidity actively

The temptation is to think that a passive investment help reduce market risk more than an active one, given its usual diversification. Not necessarily if one selects an active strategy with strong risk management. Actually, the issue with market-cap based benchmarks is that they don’t give any attention to stock-specific risk. The bigger the company, the better. That can often lead to a too high concentration of risk on a few names and a sub-optimal allocation of risk in the fund. Overly concentrated equity exposures or insufficiently active liquidity management could make it impossible for an asset manager to provide its investors with cash within a reasonable timeframe or at a respectable price. As investors wishing to withdraw from emerging market equity (and debt) ETFs have unfortunately learned the hard way, the same can happen with passive management strategies if too many requests are received. A healthy selection must pay just as much attention to a position’s liquidity risk as to the fundamental opportunity that it represents or the market risk that it carries. Our philosophy, on daily liquidity funds, is to do everything we can to ensure liquidity to all our investors in a matter of days (not weeks, nor months…).

Emerging market equities still abound with inefficiencies and opportunities but with risks also and it is through a fundamental, disciplined approach to these markets, conscious of all risks incurred, that an investor will maximize his chances of a high return on investment there over the long term.

Article by Emmanuel Hauptmann, Senior Equity Fund Manager, Emerging Equity Markets, RAM Active Investments.

Opportunities Shift From Domestic to Global Europe

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Las nuevas oportunidades: de la Europa doméstica a la Europa global — Photo: Eric Fischer. Opportunities Shift From Domestic to Global Europe

Macro headwinds, but domestic improvement

There have been some tangible signs that confidence is slowly returning to Europe, although recent gross domestic product (GDP) numbers and industrial figures have been lacklustre. The unemployment rate for Europe, while still at elevated levels compared to historical averages, has begun to fall. New car sales are also rising – job security makes a new car purchase a far easier decision. There are, nonetheless, a range of significant hurdles to overcome, not least the consequent impact of the escalating crisis in Ukraine.

Growth still remains fragile in Europe and the European Central Bank (ECB) recently implemented a package of measures aimed at helping to shift growth up a gear. While ECB intervention could stimulate a slow and stuttering recovery, it may not be the ‘silver bullet’ that many commentators are hoping for. Inflation has remained stubbornly low; due in part to the strength of the euro, and this has fuelled fears about the risk of deflation. But Europe is not alone in struggling to address the structural issues that are impeding growth; it is a global problem. The ECB will certainly be hoping to see some currency weakness in the second half of 2014, which would aid exporters.

Fresh opportunities to access global leaders

It is easy for investors, particularly in other parts of the world, to read the news, look at the uncertain macro backdrop and panic about Europe. But we believe that this is the wrong response. Uncertainty creates mispricing in the market, providing an opportunity for active stock pickers, such as ourselves, to generate alpha.

One of Europe’s strengths remains the fact that companies in the region are in many cases global leaders. Such companies include Roche, the Switzerland-based pharmaceuticals company, a leader in oncology and haematology, and German tyre and vehicle components manufacturer Continental, which is benefiting from a long-wave cycle of growing demand for active safety components in cars.

The global reach of European companies and the breadth of their sources of revenue allow European equity portfolios to be adjusted towards companies with exposure to those regions with the most compelling opportunities. Over the past 18 months we have focused more on ‘Domestic Europe’; holding attractively valued companies with more domestically focused operations. Recent economic uncertainty, however, has led some macro investors to cut their exposure to Europe and we believe that this has created a fresh opportunity to invest in global names at appealing prices.

Corporates looking to put cash to work

On the corporate side, we are seeing pressure grow on cash-rich companies to spend capital on merger and acquisition activity, or to return it to investors through dividends. We would not be surprised, in this late-stage, but still very strong bull market, to see a boom in merger and acquisition activity in large-cap stocks. This, combined with the separation of macro and micro, leaves us particularly constructive on the potential for equity markets to move higher in the coming months.

Rewarding environment for stock pickers

Following the financial crisis, Europe saw a rise in the correlation between the performance of the winners and losers of European equity markets. Good stocks and bad stocks moved in unison, largely irrespective of quality or value. This eroded the value that fund managers could add through strong stock selection. Since early 2012, however, as chart 1 here shows, this trend has reversed, with stock pricing correlations falling back towards their longer term average. This has created better conditions for active managers to outperform through good stock selection.

Chart 1: Falling correlation favours stockpickers

Enlarge

Source: BofA Merrill Lynch European Investment Strategy, Thomson Reuters DataStream, as at 13 August 2014. ‘1yrMvgAvg’ refers to a one-year moving average of pricing correlations in Europe.

The lower correlation is understandable. As the crisis recedes, less attention is paid to the macro picture and more focus is given to corporate fundamentals, not the least of which is earnings. The re-rating in European equities has so far been driven by the ‘price’ in the price to earnings (P/E) ratio, but the margin expansion story has largely run its course. We have yet to see the highly anticipated growth in earnings that would justify further gains. Earnings growth was disappointing in 2013 and we expect that market direction will ultimately be driven by whether or not the optimistic estimates for 2014 and 2015 (Citi consensus estimates at 8 per cent and 13 per cent respectively) can be met. While we wait for confirmation, our portfolio remains constructively positioned to try and capitalise on the opportunities provided by ‘global Europe’ and cash-rich corporates.

Opinion columns by John Bennet, Portfolio Manager of the European Selected Opportunities Strategy, Henderson Global Investors.

S&P Dow Jones Indices and the Lima Stock Exchange Announce Indexing Agreement

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S&P Dow Jones Indices y la Bolsa de Valores de Lima anuncian un acuerdo de indexación — Lima Stock Exchange. Photo: Chimi Fotos, Flickr, Creative Commons. S&P Dow Jones Indices and the Lima Stock Exchange Announce Indexing Agreement

S&P Dow Jones Indices have announced that, as part of its strategic growth plan to expand throughout Latin America, it has signed a landmark agreement with the Bolsa de Valores de Lima (BVL) to license, distribute, and govern all of the BVL indices including a new version of their flagship index, IGBVL (Indice General de la Bolsa de Valores de Lima).  

S&P DJI will be responsible for the marketing and commercial licensing of the BVL indices. The agreement also allows S&P DJI to eventually calculate all of the BVL indices, and to jointly create new indices with the Exchange to meet the evolving needs of investors inside and out of Peru. Each of these indices will be designed with an eye toward being liquid enough to serve as the basis for potential investment products.  

“Interest in passive investing through index-based investment products is just beginning to take shape in Latin America,” says Alex Matturri, CEO of S&P Dow Jones Indices. “With more ETF assets based upon our indices than any other index provider in the world, S&P Dow Jones Indices is in a unique position to help facilitate the growth of index-based investing in Peru by offering a deeper and more prolific lineup of benchmarks to its investors. By aligning with one of the premier exchanges in Latin America, the Bolsa de Valores de Lima, international and domestic investors will have the tools necessary to measure and potentially access opportunities in Peru, a country which has witnessed the fastest economic growth in South America over the past decade.”  

Francis Stenning, CEO of the Lima Stock Exchange said: “This strategic alliance of S&P DJI with the Lima Stock Exchange will generate greater worldwide exposure of our stock market. In addition to measuring Peruvian market behavior, this agreement should make the BVL a source of international investment.” He also noted that a new blue chip index will be created for the local market, which shall include leading companies in terms of capitalization and liquidity.  

According to the agreement, the BVL will transition index calculation of its indices to S&P DJI over time to ensure a smooth transition for existing clients. S&P DJI will be responsible for the commercial licensing of the indices, as well as the end-of-day data. In addition, all BVL indices will be co-branded “S&P”.  